West v Jackson McDonald (A Firm)

[2001] WASC 198

WEST & ORS -v- JACKSON MCDONALD (A FIRM) [2001] WASC 198

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2001] WASC 198
Case No:	CIV:2258/1994	Heard:	9 & 10 MAY 2001
Coram:	McKECHNIE J	Delivered:	1/08/01
No of pages:	29	Judgment Part:	1 of 1
Result:	Leave to amend refused Liberty to bring fresh summons to plead breach of fiduciary duty Order for security for costs
Category:	B
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Parties:	STEPHEN MARK WEST DIANNE ELIZABETH WEST EDEN BAY PTY LTD (ACN 009 377 075) JACKSON MCDONALD (A FIRM)
Catchwords:	Abuse of process Proposed statement of claim Whether inconsistent with findings in earlier case Defendant not a party to earlier case Whether issue estoppel Improper purpose Whether evidence required Security for costs Plaintiffs funded by strangers Whether order appropriate
Legislation:	Trade Practices Act 1974 (Cth) Rules of the Supreme Court 1971, O 36 r 10
Case References:	Blair v Curran (1939) 62 CLR 464 Corporate Farming Pty Ltd v Eden Bay Pty Ltd & Ors, unreported; SCt of WA (Murray J); Library No 920019; 28 January 1992 Cox v Journeaux (No 2) (1935) 52 CLR 713 Davey v Ron Farris Real Estate Pty Ltd & Anor [2000] WASCA 58 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 Hunter v Chief Constable of Westlands Midlands Police [1982] AC 529 Jackson v Goldsmith (1950) 81 CLR 664 Knight v FP Special Assets Ltd (1992) 174 CLR 178 McKechnie v Campbell (1996) 17 WAR 62 Port of Melbourne Authority v Anshun Proprietary Limited (1980-81) 147 CLR 589 Printing Telegraph and Construction Company of the Agence Havas Ltd v Drucker [1894] 2 QB 801 R v Storey (1978) 140 CLR 364 Reichel v Magrath [1889] 14 App Cas 665 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Williams v Spautz (1992) 174 CLR 509 Bahr v Nicolay (No 1) (1987) 163 CLR 490 BPM Pty Ltd v HMP Pty Ltd (1996) 14 ACLC 857 Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 District Court of New South Wales (1989) 168 CLR 23 Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431 Fieldrank Ltd v E Stein [1961] 1 WLR 1287 Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 Harpur v Ariadne Ltd (1984) 2 ACLC 356 Jago v Harpur & Ors v Ariadne Australia Ltd & Ors (1984) 2 ACLC 356 Joye v Rehuxo [1999] NSWSC 1064 Kiely v Beneficial Finance Corporation (1991) 6 WAR 521 Knight v F P Special Assets Ltd (1992) 174 CLR 178 Lloyd Steel Co (Aust) Pty Ltd v Jade Shipping SA (1985) 1 NSWLR 212 Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364 Morgan v Banning (1999) 20 WAR 474 Packer v Meagher [1984] 3 NSWLR 486 R v Hall [1973] 1 All ER 1 R v Smith [1995] 1 VR 10 R v Thompson [1982] 1 All ER Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443 Ravi Nominees Pty Ltd & Ors v Phillips Fox (1992) 10 ACLC 1313 Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1992) 45 SASR 180 Shannon v ANZ Banking Group Ltd (No 2) [1994] 2 Qd R 563 Sir Lindsay Parkinson and Co v Triplan Limited [1973] QB 609 South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1 Stewart v The Queen (1921) 29 CLR 234 Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233 Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616 Tune Masters Pty Ltd (In Liq) v Sectam Pty Ltd, unreported; SCt of WA (Sanderson M); Library No 970267; 23 May 1997 Uptown Sydney Development Corporation Pty Ltd v Bank of New Zealand (No 1) (1993) 11 ACLC 862 Weger v Boola Boola Petroleum and Natural Gas Co NL [1923] VLR 570

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : WEST & ORS -v- JACKSON MCDONALD (A FIRM) [2001] WASC 198 CORAM : McKECHNIE J HEARD : 9 & 10 MAY 2001 DELIVERED : 1 AUGUST 2001 FILE NO/S : CIV 2258 of 1994 BETWEEN : STEPHEN MARK WEST

DIANNE ELIZABETH WEST
EDEN BAY PTY LTD (ACN 009 377 075)
Plaintiffs

AND

JACKSON MCDONALD (A FIRM)
Defendant

Catchwords:

Abuse of process - Proposed statement of claim - Whether inconsistent with findings in earlier case - Defendant not a party to earlier case - Whether issue estoppel - Improper purpose - Whether evidence required - Security for costs - Plaintiffs funded by strangers - Whether order appropriate

Legislation:

Trade Practices Act 1974 (Cth)

Rules of the Supreme Court 1971, O 36 r 10

(Page 2)

Result:

Leave to amend refused

Liberty to bring fresh summons to plead breach of fiduciary duty
Order for security for costs

Category: B

Representation:

Counsel:

Plaintiffs : Mr M J Colbran QC & Mr A P Phillips
Defendant : Mr C L Zelestis QC & Mr C B Edmonds

Solicitors:

Plaintiffs : Tottle Christensen
Defendant : Minter Ellison

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

Blair v Curran (1939) 62 CLR 464
Corporate Farming Pty Ltd v Eden Bay Pty Ltd & Ors, unreported; SCt of WA (Murray J); Library No 920019; 28 January 1992
Cox v Journeaux (No 2) (1935) 52 CLR 713
Davey v Ron Farris Real Estate Pty Ltd & Anor [2000] WASCA 58
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404
Hunter v Chief Constable of Westlands Midlands Police [1982] AC 529
Jackson v Goldsmith (1950) 81 CLR 664
Knight v FP Special Assets Ltd (1992) 174 CLR 178
McKechnie v Campbell (1996) 17 WAR 62
Port of Melbourne Authority v Anshun Proprietary Limited (1980-81) 147 CLR 589
Printing Telegraph and Construction Company of the Agence Havas Ltd v Drucker [1894] 2 QB 801
R v Storey (1978) 140 CLR 364
Reichel v Magrath [1889] 14 App Cas 665
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Williams v Spautz (1992) 174 CLR 509




(Page 3)

Case(s) also cited:

Bahr v Nicolay (No 1) (1987) 163 CLR 490
BPM Pty Ltd v HMP Pty Ltd (1996) 14 ACLC 857
Brundza v Robbie & Co (No 2) (1952) 88 CLR 171
Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
District Court of New South Wales (1989) 168 CLR 23
Dye v Griffin Coal Mining Co Pty Ltd (1998) 19 WAR 431
Fieldrank Ltd v E Stein [1961] 1 WLR 1287
Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405
Harpur v Ariadne Ltd (1984) 2 ACLC 356
Jago v Harpur & Ors v Ariadne Australia Ltd & Ors (1984) 2 ACLC 356
Joye v Rehuxo [1999] NSWSC 1064
Kiely v Beneficial Finance Corporation (1991) 6 WAR 521
Knight v F P Special Assets Ltd (1992) 174 CLR 178
Lloyd Steel Co (Aust) Pty Ltd v Jade Shipping SA (1985) 1 NSWLR 212
Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364
Morgan v Banning (1999) 20 WAR 474
Packer v Meagher [1984] 3 NSWLR 486
R v Hall [1973] 1 All ER 1
R v Smith [1995] 1 VR 10
R v Thompson [1982] 1 All ER
Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443
Ravi Nominees Pty Ltd & Ors v Phillips Fox (1992) 10 ACLC 1313
Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1992) 45 SASR 180
Shannon v ANZ Banking Group Ltd (No 2) [1994] 2 Qd R 563
Sir Lindsay Parkinson and Co v Triplan Limited [1973] QB 609
South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1
Stewart v The Queen (1921) 29 CLR 234
Stone James v Pioneer Concrete (WA) Pty Ltd [1985] WAR 233
Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616
Tune Masters Pty Ltd (In Liq) v Sectam Pty Ltd, unreported; SCt of WA (Sanderson M); Library No 970267; 23 May 1997
Uptown Sydney Development Corporation Pty Ltd v Bank of New Zealand (No 1) (1993) 11 ACLC 862
Weger v Boola Boola Petroleum and Natural Gas Co NL [1923] VLR 570

(Page 4)

McKECHNIE J:

Introduction

1 The plaintiffs seek to substitute a fresh statement of claim. The defendant objects on the basis that the action is now an abuse of process.

2 The defendant also seeks an order that the plaintiffs lodge security for costs.

Background to the present proceedings

3 Mr West is a Consultant Hydrologist. His company was Eden Bay Pty Ltd which is now in liquidation.

4 In the late eighties, Mr West developed a method for desalination of lands, particularly farming lands.

5 As a result of a meeting with Mr Shea of Capital Finance Ltd, in December 1988, he entered into discussions whereby the desalination process would be marketed using, as an incentive, the tax advantages of investment in such schemes.

6 Various meetings were held between Mr West, on the one hand, Mr Shea, Mr Pryke and Mr Subramaniam, on the other, representing the companies that were going to raise capital.

7 A company, Corporate Farming Pty Ltd, was formed and it was the intention of the parties to raise a substantial amount of money by way of prospectus.

8 Jackson McDonald is a firm of solicitors in practice in Western Australia. Mr Munro is a solicitor employed by that firm.

9 The firm, and in particular Mr Munro, was engaged by Mr West to attend to the details and in particular to draw up a consultancy agreement between Eden Bay Pty Ltd and the other parties. For a time all seemed hopeful. Mr Shea's companies agreed to underwrite pilot projects on three properties. It was expected that $2 million would be raised by prospectus. The consultancy agreement was indeed prepared by Mr Munro and it went through several drafts before being executed by all parties in June 1990.

10 Unfortunately, a very short time thereafter, the parties fell out and litigation ensued. Corporate Farming Pty Ltd sued Mr West and Eden

(Page 5)

Bay Pty Ltd, who in turn counterclaimed for damages. Both the claim and counterclaim were dismissed by Murray J.

11 Mr West, together with his wife, who was effectively partner in, and a director of, Eden Bay Pty Ltd, lost their home. On 23 December 1994 Mr West and Eden Bay Pty Ltd issued a writ against Jackson McDonald and these proceedings began. This action proceeded at a very leisurely pace. Eventually, it was assigned to the long causes list, and thence to me.

12 The pace has quickened. The defendant lodged an application to strike out the statement of claim as an abuse of process. That application was supported by an affidavit of the defendant's solicitors, Mr Sean Mullins dated 7 September 2000. That application never proceeded. Instead, the plaintiffs recognised the statement of claim was defective. I struck out the statement of claim and gave the plaintiffs liberty to re-plead. The plaintiffs have now lodged a minute of proposed statement of claim and seek leave to have it stand as the statement of claim in the action. The defendant opposes the statement of claim on a number of grounds the chief of which is that it is for one reason or another an abuse of process. The argument is largely based on findings made by Murray J in his judgment in Corporate Farming Pty Ltd v Eden Bay Pty Ltd & Ors, unreported; SCt of WA (Murray J); Library No 920019; 28 January 1992 ("the judgment).

Abuse of process: improper purpose

13 The defendant argues that these proceedings are an abuse of process because they are based upon patently false allegations of fact involving groundless claims of damages and are being pursued for the predominant purpose of inflicting continuing harm on the defendant by damaging its professional reputation with a huge claim for damages and using that harm, rather than the merits of the claim, to seek to extract a settlement.

14 The defendant has other matters, but this is a summary.

15 If litigation is being pursued for collateral purposes or predominantly improper purposes, that may supply a reason for a court to refuse to countenance such use of its processes. Before such a finding can be made, there must be clear evidence of that fact or evidence from which the implication can necessarily be drawn. In Williams v Spautz (1992) 174 CLR 509 the trial Judge had made a finding of fact that the predominant purpose of Dr Spautz in instituting and maintaining the

(Page 6)

criminal proceedings was to exert pressure on the University of Newcastle to reinstate him and/or agree to a favourable settlement of his wrongful dismissal case. That finding had been made after evidence had been given including what was described as a "mass of documentation" (at 516). In McKechnie v Campbell (1996) 17 WAR 62, Owen J found there had been an abuse of process in the defence on the basis of affidavit evidence sworn by the defendant and one other. The defendant has not tendered any evidence. It relies on the pleadings.

16 In the present case Mr West has sworn an affidavit in opposition wherein he states at par 4:

"I have read carefully the minutes of the substituted statement of claim of which leave is sought to file herein and state that I fully understand the allegations set out in it and I believe all those allegations to be true and I am in possession of evidence that supports and verifies the allegations and claims made therein."

17 It is true that the scope of the damages claim is very high and depends, in part, on a very favourable view of profit rate and growth in annual new work. However, this is an early stage of the pleadings.

18 On the present material I am not prepared to draw the inference that the litigation is being maintained for an improper purpose or for collateral reasons. The available evidence does not permit the drawing of that adverse inference against the plaintiffs.

Abuse of process by re-litigation of matters determined in earlier proceedings

19 Whether the defendant could have been joined and should have been joined is an issue. On the whole, I consider the failure to join the defendant in the previous proceedings does not amount to an abuse of process in these proceedings. The main action was in the expedited list and the issues now raised were ancillary to that action. There is no certainty that a Judge would have permitted a joint trial.

20 The central issue is whether the previous case, in which of course the present defendant was not a party, has, by the judgment, decided questions necessary for decision in the present case in a manner adverse to Mr West and Eden Bay Pty Ltd.

(Page 7)

21 It is within the inherent jurisdiction of this Court to prevent the consequent abuse of its processes: Reichel v Magrath [1889] 14 App Cas 665.

22 The general approach of a court is conveniently summarised by Templeman J in Davey v Ron Farris Real Estate Pty Ltd & Anor [2000] WASCA 58.

23 In that case the appellant had been sued for specific performance and had lost at trial. He then brought an action against a real estate agent for negligence and breach of contract in failing to advise him about the possibility of terminating the contract.

24 At first instance the Master struck out the second action and his decision was confirmed on appeal.

25 Templeman J applied Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 410-414. He extracted the elements for the case as follows:

"The elements which are to be extracted from Haines' case are these: first, the issue which is to be determined must have been determined in an earlier case in which the party propounding the issue was unsuccessful. Secondly, the issue must be one which was necessarily determined in the earlier case and one of importance to the final result. Thirdly, the issue must have been argued properly. Fourthly, the decision disposing of the issue in the earlier case must have been a final issue; that is, not subject to appeal. That consideration would not be relevant if, notwithstanding the absence of an appeal, it is clear that some earlier decision or binding authority has been overlooked which might have affected the result.

Although those principles were set out by Hunt CJ, he concluded by saying that there could be no definitive statement of the circumstances which would inevitably lead to a finding of an abuse of process."

26 It may be accepted that the court's inherent power to stay proceedings as an abuse of process, a power characterised by Lord Diplock in Hunter v Chief Constable of Westlands Midlands Police [1982] AC 529 at 536 as a duty not a discretion, is exceptional and to be exercised only in the interests of justice.
(Page 8)

27 The judgment of Dixon J in Cox v Journeaux (No 2) (1935) 52 CLR 713 at 720 is germane:

"The inherent jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff. The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped. But the Court is not concluded by the manner in which the litigant formulates his case in his pleadings. It may consider the undisputed facts. Further, it is not limited to cases where there is no dispute of fact."

28 I do not consider that a strict issue estoppel arises in this case: Port of Melbourne Authority v Anshun Proprietary Limited (1980-81) 147 CLR 589.

29 Rather, the litigation may be an abuse if "… notwithstanding the absence of any issue estoppel, a party's attempt to re-litigate against another party an issue which he has already lost may amount to an abuse of process.": Haines v Australian Broadcasting Commission (supra) per Hunt CJ at 410.

30 The parties between them have made reference to numerous authorities, many of which are simply illustrations of the general principle I have outlined.

The use of the transcript of the trial

(a) Evidence of Mr West

31 Before dealing with the judgment I should give reasons on a ruling on evidence during the hearing of the application.
(Page 9)

32 As part of its opposition to the proposed statement of claim, the defendant seeks to rely upon the judgment and also evidence given by Mr West and Mr McLean in the course of the trial.

33 This was objected to by the plaintiffs. I over-ruled the objection but indicated I would give reasons in due course.

34 The objection was based on Printing Telegraph and Construction Company of the Agence Havas Ltd v Drucker [1894] 2 QB 801. That case concerned the provisions of O 37 r 3 of the English orders.

35 The rule is precisely replicated in the Rules of the Supreme Court O 36 r 10.

36 In Printing Telegraph and Construction Company of the Agence Havas Ltd v Drucker an action was brought to recover calls and the defence was that the defendant was induced to become a shareholder by fraud and misrepresentation and the prospectus of the plaintiff. The plaintiffs had brought a similar action against another shareholder. Witnesses had been examined in Paris on behalf of the defendant in that action. The defendant in the action under consideration wanted to examine the same witnesses and it was objected on the part of the plaintiffs that their evidence could be read under O 37 r 3.

37 The Court of Appeal held that the case did not come within O 37 r 3. Lord Esher MR said at 803:

"The parties in the two actions are not the same and the issues are not the same. The issue in each case was not merely whether the statements in the prospectus were false and fraudulent, but whether the defendant was induced by false and fraudulent statements to become a shareholder. The rule does not make that evidence which is not by law evidence and the evidence taken in the former action is not admissible in the present one."

38 Kay LJ held:

"I am clearly of opinion that it is not possible to make that evidence available in this action. The rule as to reading evidence taken in another action was, that the two suits should be virtually between the same parties or their privies. This has been extended to cases where the interests of the parties in the second action were represented in the earlier one to which they

(Page 10)

were not parties, as, for instance, in the case of legatees or tenants in common."

39 AL Smith LJ said at 804:

"The rule was made simply for the purpose of doing away with the necessity for an order to read evidence taken in other actions, and has not in any way altered any question as to the legitimacy of evidence."

40 In my view, Printing Telegraph and Construction Company of the Agence Havas Ltd v Drucker is distinguishable from the present case. The defendant wishes to read certain portions of the evidence of Mr West on the basis that it was sworn evidence as to his state of mind. The defendant does so in support of their general submission that the pleaded case is an abuse of process. They do not seek to use the evidence to prove a case at trial or to avoid calling witnesses.

41 R v Storey (1978) 140 CLR 364 is authority to support the defendant's position. The High Court was there dealing with questions of issue estoppel and its applicability to criminal proceedings. In the course of his reasoning, Gibbs J had cause to examine the question of issue estoppel and the authority of Blair v Curran (1939) 62 CLR 464. He then continued at 378:

"In order to ascertain what issues were necessary to be decided and were in fact decided, in arriving at a judgment, it is permissible to look not only at the judgment and the reasons given for it, but at the pleadings and the evidence and indeed at any material which is relevant: see Jackson v Goldsmith (1950) 81 CLR 664 and Carl Zeiss Stiftung v Raynor & Keeler Ltd (No 2) [1967] 1 AC at 965."

42 In Jackson v Goldsmith (1950) 81 CLR 664 referred to by Gibbs J, Fullagar J said at 467:

"In the second place, it follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for the judgment pronounced are likely to be particularly important for this purpose."

(Page 11)

43 Having regard to the development of the principles of abuse of process, which are no longer seen to be confined simply to questions of issue estoppel, by analogy, on an application such as the present application, it is permissible to examine, in an appropriate case, evidence and a judgment that was given in another case.

44 For these reasons I over-ruled the objection.

Evidence of Mr McLean

45 The defendant also wishes to have regard to the evidence of Mr McLean who was at material times the accountant for Eden Bay Pty Ltd.

46 I indicated that I would receive the evidence and rule on its admissibility later.

47 The particular evidence relates to a crucial meeting on 28 September 1989. While it is true that Mr McLean was the accountant for Eden Bay Pty Ltd and was called on its behalf, nevertheless I am not sure that his evidence has particular relevance in an abuse of process argument where he is not a party. The position of course is different where his evidence is specifically referred to in the judgment.

48 In the end, I have declined to take Mr McLean's evidence into account.

The decision in Corporate Farming v Eden Bay & Anor, (unreported); SCt of WA (Murray J); Library No 920019; 28 January 1992

49 The defendant relies on the judgment, together with evidence which was given by Mr West, to found their argument that the present proceedings are an abuse of process and an affront to justice because the pleadings assert facts which are inconsistent with findings in the judgment.

50 It will therefore be necessary to match the proposed pleadings in the present case with the specific findings in the judgment.

The issues in Corporate Farming Pty Ltd v Eden Bay Pty Ltd

51 The action was a claim by Corporate Farming against Eden Bay Pty Ltd and West relating to confidential information said to be required to be

(Page 12)

delivered up to Corporate Farming Pty Ltd. Those claims were said to arise under various duties. They failed at trial.

52 Of relevance to the present action are the counterclaim by Eden Bay Pty Ltd and West for damages. The judgment summarises these.

53 Reliance was placed upon certain pleaded representations which were said to have been made by Mr Shea and Mr Pryke in their capacities as directors of Corporate Farming so as to constitute conduct or representations as to future conduct which were misleading or deceptive. The representations are:

"On 17 July 1989 the plaintiff by its director, Shea, represented to the first defendant by its director, the second defendant, that:

(a) the amount of moneys to be raised by the prospectus would be $2,000,000;

(b) that the first defendant should identify rural desalination projects of sufficient number and volume to accommodate an investment of this magnitude; and

(c) be willing to increase its capacity or defer other private projects so as to be able to perform work to that value."

54 Murray J noted that the representations were three in number but that the pleading made it clear that they were treated as being component parts of one representation made by Corporate Farming by Shea to Eden Bay by West. The pleadings asserted that the representations were repeated by Shea and Pryke for Corporate Farming to West for Eden Bay on 14 to 28 September 1989 and other meetings at the West Perth office of Security Capital Corporation and finally repeated yet again at the same venue on about 7 May 1990.

55 The judgment made findings as to facts.

Meeting 17 July 1989

56 Murray J found that the minutes of the meeting showed that Messrs Shea, Pryke, Subramaniam and West were all present.

57 The minutes recorded:

"The capacity of Aust-Rural was discussed to try and identify potential investment funds required. SW estimated Aust-Rural

(Page 13)

could handle five projects at separate locations of 1600 acres or three projects of 3000-4000 acres. R Shea said we should target minimum of $2m of investors funds for current year and if necessary Aust-Rural be willing to increase capacity or defer other 'private' projects."

58 The minutes then record that those present agreed a timetable for the current financial year at Mr Pryke's suggestion. First priority was given to work on the prospectus and identifying particular farm projects as well as the organisation of a field trip to introduce potential investors to the scheme. Mr West was recorded as having indicated that Eden Bay could probably carry some of the survey costs "until investors' capital was received in the fourth quarter. … it was agreed that whilst potentially a very profitable enterprise, progress towards agreed goals needed to be carefully monitored."

59 Pryke's role was to evaluate the particular projects which Mr West was to identify. It was also Mr Pryke's function to be primarily responsible for the preparation of the prospectus while Mr Shea and Mr Subramaniam were particularly involved with fundraising processes. That evidence was accepted.

60 Murray J said:

"So according to Mr Shea's evidence, which again I accept, there was in his mind no misunderstanding between the parties as to the plans put in place at, and about the time of, the board meeting of 17 July 1989."

61 In the judgment Murray J considered the evidence of Mr West:

"There is no doubt in my mind that Mr West considered himself to have been poorly treated by Messrs Shea, Pryke and Subramaniam, who in Mr West's view allowed the scheme to fall to pieces at the end of June 1990 when, in Mr West's eyes, he, and through him Eden Bay, had for its part performed its obligations in respect of the identification of suitable projects to accommodate an investment of funds which would certainly, having regard to the 10 or 11 projects involved, have well exceeded a value of $2m. …

Against that background, the question which arises with respect to Mr West's testimony, is the accuracy of his perceptions of the nature of the relationship into which Eden Bay had entered with

(Page 14)

Corporate Farming. And the accuracy at some points of Mr West's evidence, was in my view adversely affected by the fact that, as his counsel put it, 'he is not a details man' and 'obviously would rather be in the field than in the office'. I think with respect, that those observations are accurate and Mr West's evidence must be assessed in that light."

62 The issue central to the case proposed against Jackson McDonald is West's understanding whether Eden Bay Pty Ltd was offered an unconditional guarantee. Murray J said:

"At one point in his evidence, Mr West spoke of what he described as guarantees given to Eden Bay to supply $2m worth of projects or work, and that evidence was related to the alleged misrepresentation, although the discussions to which reference was made were said firstly to have been between Mr West and Mr Shea acting for Security Capital Corporation Pty Ltd. However Mr West's evidence, particularly at transcript 694 and pages following, makes it clear that in his mind there would be $2m worth of work in the following financial year for Eden Bay and that when instructed by those speaking for Corporate Farming to, as he put it, gear up and be prepared to undertake work to that value, he considered that to be an affirmation of what in his mind was a guarantee to provide work to that value. …

The concept of the guarantee or the undertaking to underwrite the performance of the work was perhaps most completely summarised in an exchange between the witness and myself at transcript 809-10. However, there is of course no cause of action based on any such binding contractual arrangement pursued in this litigation and I refer to it only because of the apparent relationship between such discussions and those with respect to the figure of $2m, as to which at transcript 818-9, it seemed that Mr West was putting the view that having what he regarded as a guarantee that Eden Bay would be provided with work to the value of $2m, he had no particular interest in what would be raised by the prospectus."

63 The passage in the transcript to which Murray J referred, was as follows:

"MURRAY J: Do I understand clearly, Mr West - is it your evidence that the guarantee was with respect to a specific sum

(Page 15)

of money or - - -?---No, my understanding of the guarantee was for any projects that we were instructed to go and get and have farmers sign contracts up for, not any sum. The thing was that in the consultancy agreement it would then be determined that there was a budget proposal to be put in place. Now, the budget proposal is what refers to the $2,000,000 and the budget proposal was indicated right back in July of the $2,000,000 what we would have to gear up and undertake. From that period of time we worked exactly on that and we were instructed right through until the end of that. The consultancy agreement had been commenced well and truly back - and I think it was supposed to be finished in about October 89 and wasn't completed until mid-June 90, and everything on that basis because the consultancy agreement was constantly changing and there were so many other things going on that nothing ever seemed to come to writing until the end of the day.

But the agreement that you say was made between you and Mr Shea on behalf of Security Capital - - -?---That's correct, right back in - - -

Way back then?---Right back at the beginning in the end of 1988, 89 - that if Security Capital or Aust Rural were to continue in a relationship then they would require 70 per cent of the shareholding of Corporate Farming on the basis that they were undertaking the greater risk because they were the ones who were going to be putting the money up when it was required for guaranteeing and underwriting projects that were to go ahead.

Yes. So that was an agreement entered into prior to the formulation of a budget proposal or any matter of that sort?---No. Yes, that was an agreement that was entered into and I was under no understanding that that position ever changed because the shareholdings of the set-up of Corporate Farming remained the same all the way through. The budget proposal was to indicate the amount that - well, I understood that guarantee would be for that year because that budget proposal was to vary from year to year.

So this agreement was then - in what terms - in these terms, that from year to year during the currency of your relationship

(Page 16)

Security Capital would in fact support by guaranteeing or underwriting all work - - -?---The budget proposal.

See, that is what has confused me?---Sorry.

You say they would guarantee that you could perform or underwrite your capacity to perform all work which you were instructed to obtain pursuant to a budget proposal whether or not in fact the fund-raising met the budget proposal?---That's correct.

It was never, in those circumstances, a matter of particular relevance to you what fund-raising in fact occurred because the security for your forward planning was that Security Capital would fund whatever shortfall there was up to the point of servicing agreements which you were directed to obtain?---That's what my belief was.

Have I got that right?---Yes.

So from Security Capital's point of view, presumably the only, I was going to say 'security' - but the only comfort that is involved in that agreement is to try and set the budget proposal or give instructions to you as to the work which you would obtain at a figure which would realistically match their fund-raising capacity?---I believe so.

So if they made a mistake about that it worked always in your favour, didn't it, that guarantee? It secured your position and left them at risk?---Well, that's the reason for why we had a 70-30 thing. If they had a shortfall in one year it was, I believe, that what had been discussed, that they would pick that up the following year in the raising of funds in the following year.

Yes, I see. Thank you for that. Thank you, Mr Archer. I'm sorry to interrupt. I just want it to be clear."

64 Murray J held that at a meeting on 28 September 1989, the mood conveyed by those present at the meeting was of some confidence that the target of $2 million fundraising could be achieved:

"… It does not in my view, amount to a repetition by Shea and Pryke that the prospectus would indeed achieve a fundraising of $2m and that Eden Bay should proceed upon the basis that work

(Page 17)

to that value would be available and it should be prepared to handle such work. If Mr West thought that was what was being said, then in my view he simply misunderstood. And I think he did misunderstand because of his enthusiasm for his project and because he was keen to believe that work to that value would be forthcoming."

65 After detailing the evidence, Murray J made certain findings:

"The evidence does not support, and I do not find, that the statements pleaded were made. The evidence is indeed to the contrary. And in the final analysis, in my view, all the witnesses were substantially in agreement about this crucial aspect of Eden Bay's case. …"

66 Murray J then dealt with Eden Bay's contractual claim as follows:

"Mr West's evidence was that he thought that was all that was required of him and that the delivery in those terms to the solicitor for Corporate Farming was a delivery to Corporate Farming.

It matters not I think for present purposes whether that belief was genuine. It remains the fact that, in my view, the arrangement between the parties was that projects were to be approved by the board of Corporate Farming and that meant they had to be subject to the scrutiny of the board and perhaps particularly, Mr Pryke, so that approval could be given before the end of the financial year so that invested moneys could be allocated to specific projects. That I think, was understood by all, but as it turns out Mr West found it impossible to meet the deadline involved. I think the need to secure board approval for specific projects was clear as from the meeting of the board of Corporate Farming held on 17 July 1989. All that changed in my view was the timetable which was then agreed."

67 The important finding for present purposes is that Mr West understood that projects had to be approved by the board of Corporate Farming Pty Ltd and that was clear as from 17 July 1989.

The present action: issues raised in the proposed statement of claim

68 The plaintiffs outlined their case as follows:

(Page 18)

"The Plaintiffs' case is that the Defendant had been their long time solicitors, and had comprehensive involvement in the Plaintiffs' commercial and personal affairs. There developed and existed over a period of time prior to July 1989, a strong dependence by the Plaintiffs on the advice and services of the Defendant. Further, this dependence had been actively encouraged by the Defendant through Munro. In short, the Plaintiffs placed great reliance and trust in the Defendant to advise them and protect them in relation to their commercial and personal interests, and the Defendant both knew and encouraged this."

69 Not only did the plaintiffs believe that Munro was implementing their instructions, but that Munro would be actively guarding their interests in their dealings with Security Capital/Corporate Farming."

70 The essence of proposed claim is "timely advice".

71 If Mr Munro had disabused Mr West of his unwarranted belief that Eden Bay Pty Ltd had an unconditional guarantee of payment for all work at an early stage, Mr West would not have proceeded with the venture with Corporate Farming Pty Ltd and the loss would have been avoided.

72 If Mr Munro had prepared the draft consultancy agreements as instructed, and in reasonable time, the draft would have contained the unconditional guarantee. When this draft was presented to Mr Shea he would have raised the matter, a showdown on the issue would have occurred, the venture would have been cancelled and again the loss would have been avoided.

73 The proposed statement of claim speaks for itself and it is not necessary to reproduce it here in full, but for the purposes of these reasons, I should reproduce some critical paragraphs:

"7. In July 1989 the Wests met with Munro ('the July meeting') and informed him, inter alia, in words to the effect that:

(a) he understood that Security Capital and Corporate Farming were happy with the progress of the Thompson Pilot Project and now wished to proceed further with the exploitation of the Desalination Concept;

(Page 19)

(b) that Eden Bay, Corporate Farming and Security Capital had agreed to a proposal ('the Corporate Farming Proposal') whereby:

(i) West, on behalf of Eden Bay, would identify farmers who owned salt-degraded land suitable for desalination and who might enter into contracts with Corporate Farming for the purpose of returning the salt degraded land to a productive state ('the Corporate Farming Agreements');

(ii) Eden Bay would provide professional services to enable Corporate Farming to meet its obligations under the Corporate Farming Agreements and in particular to undertake the tasks of identifying suitable farming properties, carrying out survey works and implementing the desalination works and general farm management consulting; and,

(iii) Security Capital would be responsible for securing or providing the moneys necessary to fund the activities of Corporate Farming and Eden Bay in relation to the Corporate Farming Agreements;


(c) Shea on behalf of Security Capital had asked Mr West on behalf of Eden Bay to source and to undertake new projects similar to the Thompson Pilot Project to the value of $2 million during the 1989/1990 financial year for completion within a period of 13 months commencing 1 July 1990 ('the Desalination Projects');

(d) West understood that Security Capital would unconditionally guarantee payment of Eden Bay's consultancy fees in respect of work carried out by Eden Bay on the desalination Projects and on all such future projects;

(Page 20)

(e) the Wests wished to instruct Mr Munro to prepare a new Consultancy Agreement which would be binding on Corporate Farming, Security Capital and Eden Bay for the purposes of the Desalination Projects and all such future projects;

(f) West would provide further instructions in relation to the matter to Munro in about September 1989 upon his return from overseas.

8. In or about September 1989 West again met with Munro at the offices of the Firm ('the September Meeting') and advised Munro in more detail of his understanding as follows:

(a) that the roles of the various parties in relation to the Desalination Projects were that Corporate Farming would contract with farms in Western Australia who had been identified by Eden Bay as suitable participants in the Desalination Projects, that Eden Bay would act as the consultant to Corporate Farming in performing the necessary works and that Security Capital would underwrite the costs of the desalination projects and guarantee payment of Eden Bay's fees;

(b) that a Consultancy Agreement would govern the relationship between Eden Bay, Corporate Farming and Security Capital in relation to the Desalination Projects and all future similar projects undertaken after July 1989;

…

(f) that under the terms of the Consultancy Agreement Security Capital would underwrite the costs of the Desalination Projects and irrevocably guarantee and indemnify Eden Bay for its fees and expenses for completing the survey works and desalination works in respect of all desalination projects agreed to be undertaken from time to time;

(Page 21)

(g) that the total value of the Desalination Projects (as measured by the cost of Eden Bay's fees for the survey works and the desalination works together with the cost of equipment and the provision of necessary services) to be conducted in the period ending 30 June 1991 was $2 million ('the Budgeted Amount');"

74 It is then pleaded that the defendants breached the terms of their retainer as follows:

"19 In breach of the said terms of the Retainer:

(a) the Firm failed to prepare the Consultancy Agreement in final form for execution by Eden Bay, Corporate Farming and Security Capital as soon as possible or within a reasonable time;

(b) the Firm by Munro omitted to include terms and conditions in the Consultancy Agreement encompassing each of the matters referred to in sub-paragraphs 8(a), (b), (c), (e) and (f) above;

(c) the Firm by Munro failed to ensure as far as was reasonably possible that the interests of Eden Bay and, indirectly of the Wests, were fully and adequately protected under the terms of the Consultancy Agreement;

…

(e) the firm by Munro failed to bring to the Plaintiffs' attention all material changes between the various drafts of the Consultancy Agreement;


…

28 Further, on or about 19 June 1990, and shortly prior to the execution of the Consultancy Agreement by West and Mrs West for Eden Bay, Munro represented to the Plaintiffs as follows:


(a) Eden Bay was fully protected under the terms of the Consultancy Agreement and would have no problems;

(Page 22)

(b) the guarantee that Eden Bay had sought from Security Capital was included in the Consultancy Agreement in the terms of the plaintiffs' instructions;

(c) the terms of the guarantee fully covered the position of Eden Bay in accordance with the Plaintiffs' Instructions.

29 At all material times, the representations referred to in paragraphs 23, 26, 27 and 28 or one or more of them was false in that:

…

(d) as to subparagraph 27(a), the fourth draft Consultancy Agreement contained the following material differences from the third draft Consultancy Agreement:


(i) the fourth draft Consultancy Agreement had been amended to include in paragraph 25.1 a condition that Security Capital would only be obliged to pay Eden Bay's fees for the survey works if the budget proposal had been approved and signed by Security Capital;

(ii) the indemnity provided by Security Capital as provided in clause 25.2 of the third draft Consultancy Agreement had been deleted in the fourth draft Consultancy Agreement;

(iii) the fourth draft Consultancy Agreement had been amended by the addition of a new paragraph 25.3 which removed any obligation of Security Capital to approve or sign any budget proposal.


…

(f) as to paragraphs 28(b) and 28(c), Munro failed to include a form of guarantee in accordance with

(Page 23)

the terms set out in paragraph 8(g) above in the final draft of the Consultancy Agreement."

75 There are formidable difficulties in the way of the pleading in the light of the earlier judgment. A reading of the proposed statement of claim claim par 7 and par 8 suggests that West had an understanding that Security Capital would unconditionally guarantee the Eden Bay Pty Ltd consultancy fee for all projects selected by West. Further, the guarantee would apply to all future survey and desalination works.

76 This accords with Mr West's evidence in the passage at 809 to 910 reproduced above and accords with the findings in the judgment. I have been referred by the plaintiffs to other passages of West's evidence at trial, but do not find that they alter the conclusion just stated.

77 The difficulty in the way of the plaintiff is Murray J's finding set out in this judgment at p 14 is to the effect that no guarantee as to the amount of work would be given and the first few projects would be underwritten. If West had an understanding as pleaded in July, then the effect of the findings of Murray J are that he did not have that understanding after the meeting of 28 September 1989. This was before the draft consultancy agreements. At best there might be support for a loss between July and September but on the evidence of West at the previous trial some projects were underwritten for that period.

78 There is another substantial problem. In the trial, the witness statements of the witnesses stood as their evidence-in-chief.

79 From a reading of Mr West's statement, from par 68 and following, it is clear that Mr West knew that no project could be undertaken by Eden Bay Pty Ltd until it had obtained the approval of the board of Corporate Farming Pty Ltd. For example, at the Directors' Meeting on 28 September 1989, Mr West's evidence was:

"I recollect that I asked Mr Shea whether Corporate Farming were going to proceed with any projects this year."

80 He then gave evidence that Mr Shea had said that Australian Rural deferred some of its private projects "to undertake Corporate Farming work. Security Capital would be happy to underwrite the first few projects up to a predetermined figure." (My italics).

81 In par 77 he said:

(Page 24)

"… I said to Messrs (sic) Mr Shea, Mr Pryke and Mr Subramaniam words to the effect that I needed to know whether and when Aust Rural would get the go-ahead on projects for Corporate Farming as it affected the number of clients that we picked up from field days and as requested we were curtailing private client work."

82 At par 78 he said:

"At Board Meetings of Corporate Farming on 28 September 1989 and 2 November 1989 I asked Mr Shea and Mr Pryke whether I should follow up farmers who were interested in Corporate Farming projects or whether I should carry on with securing Aust Rural's private clients. …"

83 The effect of these passages clearly indicate Mr West's knowledge of the need for board approval, an approval which Murray J found in the passage previously quoted at p 12 and p 13, was clear from the meeting of the board held on 17 July 1989.

84 The evidence and that finding is fundamentally inconsistent with par 7(c) and (d) of the proposed statement of claim. It seems to be acknowledged in par 8 of the proposed statement of claim that Corporate Farming Pty Ltd would be the contracting body with farmers.

85 The plea in par 8(c) that Eden Bay Pty Ltd, and in particular West, would be responsible for identifying farmers and for encouraging them to enter into a Corporate Farming agreement, implicitly acknowledges that West and Eden Bay had no authority to enter into an agreement for desalination which would be underwritten or guaranteed by Security Capital. It is obvious from the plea, from West's evidence in the trial and from the finding in the judgment, that at all times the approval of the Corporate Farming Pty Ltd board was required. A pleaded case of an understanding of an unconditional guarantee is fundamentally inconsistent with the requirement for board approval before works would be undertaken.

Conclusion

86 The events, which are the subject of the proposed statement of claim, arose in 1989, 12 years ago. They relate in part to oral conversations. The writ was issued 7-1/2 years ago.

(Page 25)

87 The length of time is a factor which I take into account in concluding that the proposed statement of claim constitutes an abuse of process. By itself it is not decisive.

88 Coupled with the inconsistencies between the findings of Murray J, the evidence then given, and the proposed statement of claim, I am of opinion that to allow the claim to continue in this form would be an abuse of the processes of this Court.

89 The consultancy agreement continued to be drafted after the meeting of 28 September 1989. After that meeting, on the findings in the judgment, West knew that a guarantee or firm commitment had been refused. That was a finding necessary on the evidence as part of the chain of reasoning used by Murray J to resolve the case. That finding is inconsistent with the pleaded cause of action that effectively it was Munro's failure to advise West of his flawed understanding or to bring about a confrontation with Pryke concerning the guarantee which led to the loss.

90 I would refuse leave to substitute par 1 to par 34 as an abuse of process.

91 Additionally, I would refuse leave to amend by par 30 and par 31. These claims are made under the Trade Practices Act 1974 and are beyond the limitation period for the lodging of such claims. A new cause of action cannot be introduced after the time prescribed has expired: Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514.

Breach of fiduciary duty

92 The proposed statement of claim in par 35 introduces a claim for breach of fiduciary duties. The defendant argues that this is a new claim and it would be oppressive to allow it now. The proposed amended statement of claim filed on 29 February 1996 did, to some degree, seek to agitate the matters now more directly pleaded as a breach of fiduciary duties.

93 The factual basis for that claim is different from the basis which I have held to be an abuse of process.

94 I would not therefore dismiss the claim for breach of fiduciary duties.

(Page 26)

95 It is obvious that if that claim is to proceed, however, it is better that a fresh statement of claim be prepared pleading only the relevant facts which give rise to that claim.

96 The neatest way to deal with it is to dismiss the plaintiffs' summons for leave to amend the statement of claim, but give the plaintiffs leave to bring a further summons to amend the statement of claim to plead the breach of fiduciary duties in the form outlined in the present proposed pleading.

Application for security for costs

97 In the event that the action continues, it is appropriate that I deal with the defendant's application for security for costs.

98 The application is made pursuant to O 25 r 1 and in relation to Eden Bay Pty Ltd pursuant to Corporations Law s 1335 and alternatively or additionally under the inherent jurisdiction of the court. The grounds for the application are:

(a) the plaintiffs' likely inability to pay any costs which may be ordered against them,…

(b) in relation to Eden Bay, it is in liquidation and the plaintiffs' claim is to be funded by undisclosed persons who are not parties to the action."

Affidavit of Ian Russell Locke sworn 18 April 2001

99 Mr Locke deposes that on 18 July 2000 he and Mr John Sheahan were appointed administrators of Eden Bay and on 23 August 2000 Eden Bay was wound up and he and Mr Sheahan were appointed as liquidators. From his investigations into the affairs of Eden Bay, Eden Bay's principal asset is the cause of action here. He then deposes:

"7. Eden Bay is clearly insolvent. Currently, I have an arrangement with Tottle Christensen wherein they will continue acting pending the obtaining by me of funding for the proceedings if that is possible.

8. Based upon my investigations into the affairs of Eden Bay, I prepared a document for provision to funders of litigation (that document is the subject of legal

(Page 27)

professional privilege and in mentioning it I do not waive that privilege).

9. I have been in discussions and correspondence with potential funders and two have shown an active interest in funding these proceedings. I understand from my discussions with officers of those funders that they are prepared to recommend that funding be provided to prosecute the proceedings, however, each have asked me whether or not the Defendant herein are insured, or have any exposure in that regard to 'HIH'. Obviously, I do not have the answer to that and I am informed by Lee Christensen and verily believe that he sent the attached letter (annexure 'IL4') to the Defendant's solicitors. I am informed by Lee Christensen and verily believe that at the date of swearing this Affidavit, he has received no response. Similarly, I am informed by Lee Christensen and verily believe that he has received no response in relation to annexure 'IL1' hereof.

10. To my own knowledge the two proposed funders have sufficient resources to prosecute the proceedings.

11. Eden Bay is without funds at all. However, if a funding arrangement is entered into, it will have sufficient resources to prosecute the action."

100 However, resources to prosecute the action do not equate with resources to pay costs if unsuccessful. In terms of s 1335 it appears by credible testimony that Eden Bay will be unable to pay the costs of the defendant if it is successful in its defence.

Affidavit of Stephen Mark West sworn 7 May 2001

101 Mr West deposes that it is his belief that if the court were to make an order for the provision for security for costs, it would have an effect of frustrating and stultifying the action. He deposes specifically at par 27 and par 28:

"27. Eden Bay is not trading or producing any income and has been placed in liquidation due to the irretrievable damage done to the company resulting from the matters pleaded in the current amended statement of claim.

(Page 28)

28. Neither myself nor my wife have any capacity to provide security for costs."

102 Although the claim might be considered arguable, on the present information it could not be regarded for the purposes of consideration of this application only as a strong case.

103 It is important not to make an order which would effectively prevent a plaintiff from pursuing an action, particularly where the claimed wrong, has brought about the plaintiffs' financial distress.

104 Having regard to the previous case and its findings, a major cause of the financial distress of the plaintiffs would seem to be the result of its relationship with Corporate Farming Pty Ltd and the matters explored in the judgment.

Conclusion on application for security for costs

105 The main reason for ordering security for costs in this case is that it appears there are persons standing to benefit from this action as litigation funders. A costs order might in due course be made against them: Knight v FP Special Assets Ltd (1992) 174 CLR 178.

106 This action is already very protracted. Proceedings were issued in 1994 and by the year 2001 the parties are still arguing over the statement of claim. If the action proceeds to trial the costs on either side will be substantial.

107 If the action is ultimately successful, one would reasonably expect that those who are prepared to fund the litigation will gain a significant return on their investment. I have assumed, for the purposes of this application, that any such funding is legal and not champertous.

108 Even so, the funding of litigation is not simply the commercial purchase of a commodity such as a chose in action and the balancing of the risk against return. The principal purpose of private litigation is to enable a person to assert and claim rights at law, whether under a contract or otherwise. Litigation is always something of a gamble and the outcome can seldom be predicted with certainty. If persons are prepared to take a gamble on the outcome of litigation by funding a plaintiff in the expectation of reward if the plaintiff is successful, they ought also be prepared to take the equal risk of funding a defendant in the event that the litigation is unsuccessful. Otherwise they would be wagering only a fixed sum (that which is advanced to the plaintiff) while the defendant would

(Page 29)

bear all the risk in the event that it obtained judgment and the plaintiff were unable to pay. This does not seem just. The possibility of a costs order against the litigation funder in due course is not certain and in any case does not correct the injustice.

109 I will make an order for security for costs in respect of all plaintiffs. I will hear the parties as to the precise amount and terms.

Results

1. The plaintiff's application to substitute the proposed statement of claim is dismissed with liberty to apply to substitute a statement of claim for a breach of fiduciary duty only.

2. Each plaintiff to provide security for costs in such amounts and in such terms as may be determined. Liberty to apply for such determinations.