Williams Pegus Contracting Pty Ltd v Rural Estates
[2011] VCC 1219
•27 July 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-10-06128
| WILLIAMS PEGUS CONTRACTING PTY LTD | Plaintiff |
| (ACN 120 232 831) | |
| v | |
| RURAL ESTATES (ARCADIA) PTY LTD | Defendant |
| (ACN 116 249 560) |
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| JUDGE: | HIS HONOUR JUDGE SHELTON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 13 July 2011 |
| DATE OF JUDGMENT: | 27 July 2011 |
| CASE MAY BE CITED AS: | Williams Pegus Contracting Pty Ltd v Rural Estates (Arcadia) Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2011VCC 1219 |
REASONS FOR JUDGMENT
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Catchwords: Security for Costs application – Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93 – Saint-Gobain RF Pty Ltd v Maax SPA Corporation Pty Ltd [2004] VSC 335 – Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507 – Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 28 – Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 – Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 – Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 – Stratplan Consulting Pty Ltd v Leong [2004] VSC 436 – Excelsior Run Pty Ltd (in liq) v Nelius Pty Ltd & Ors [2001] VSC 161.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Castelan | Nevile & Co |
| For the Defendant | Mr L Brown | Cornwall Stodart |
| HIS HONOUR: |
1 This is an application by the defendant for security for costs. The application is brought pursuant to Order 62 of the County Court Civil Procedure Rules 2008 and/or s.133(5) of the Corporations Act 2001 (Cth).
The Facts
2 Pursuant to two contracts (“the contracts”), each dated 18 February 2008, the plaintiff agreed to carry out irrigation, drainage and laneway construction works for the defendant on two properties at Arcadia.
3 On 2 September 2010, the plaintiff issued a Complaint in the Magistrates’ Court claiming a balance owing under the contracts of $99,581.43.
4 On 20 September 2010, the defendant’s solicitors wrote to the plaintiff’s then solicitors pointing out that the plaintiff had a paid up capital of $100 and that there was a fixed charge over the plaintiff’s assets in favour of ESANDA Finance Corporation Limited, registered 30 August 2008. The letter required the plaintiff to “demonstrate its ability to meet a costs order or alternatively provide security for costs”.
5 On 20 October 2010, the defendant filed a Counterclaim in the sum of $258,778.45 alleging defective and delayed works and damage to property.
6 By letter dated 27 October 2010, the plaintiff’s then solicitors indicated that their client agreed to provide security for costs in the sum of $20,000 “with no admission that security is required”.
7 The matter was transferred to the County Court on 13 December 2010.
8 On 23 March 2011, by consent I set this matter down for trial on 28 November 2011 on an estimate of three sitting days and made other pre-trial orders including the granting of leave to the plaintiff to file and serve an amended statement of claim.
9 On or about 29 March 2001, the plaintiff provided security for costs by way of a bank guarantee in the sum of $20,000.
10 Leneen Veronica Forde, a partner of Cornwall Stodart, solicitors for the defendant, deposes, in paragraph 13 of an affidavit sworn 17 June 2011:
“By Amended Statement of Claim dated 6 May 2011, WPC amended its claim to seek damages in the amount of $288,000.00 in addition to the debt previously claimed. In the particulars subjoined to paragraph 9 of the Amended Statement of Claim, WPC claims that as a result of Arcadia’s failure to pay WPC the alleged debt of $99,581.43:
(a) WPC los the ability to pay a debt in the amount of $64,911.00 that it owed to a third party; (b) Consequently, WPC was unable to obtain credit to purchase further materials; and (c) Consequently, WPC was excluded from participating in tenders and further works.”
11 On 17 May 2011, the defendant’s solicitors wrote to the plaintiff’s solicitors stating that the Amendment to the Statement of Claim raised concerns as to the plaintiff’s current financial state and whether it was trading while insolvent. It requested that a further amount of security of $20,000 be provided. By letter dated 20 May 2011, the plaintiff’s solicitors indicated that their client was not prepared to provide such security, hence this application.
The Threshold Issue
12 Rule 62.02(1)(b) provides that where the plaintiff is a corporation:
“… and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so … the Court may … order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.”
13 S.1335(1) of the Corporations Act 2001 (Cth) provides:
“Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.”
14 In Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93, the Court of Appeal (Maxwell P and Buchanan JA) stated, at paragraph 10, that although the wording of these two provisions is not identical, they are in practice so regarded and the same principles apply to each.
15 The Court stated, at paragraph 11:
“The first question to be addressed is whether the threshold condition for
the exercise of the power is satisfied, that is, whether
there is reason to believe that the corporation will be unable to pay the costs of the
defendant if successful.That jurisdictional condition must be satisfied before the discretionary power to order security for costs is enlivened.”
16 Mr Castelan, who appeared for the plaintiff, conceded on the hearing of the application that the threshold condition had been satisfied.
Discretionary Factors
17 Since the threshold condition has been satisfied, my discretionary power to order security for costs is enlivened. This discretion “is unfettered and is to be exercised judicially having regard to all of the circumstances of the case” – see Saint-Gobain RF Pty Ltd v Maax SPA Corporation Pty Ltd [2004] VSC 335, per Habersberger J, at paragraph 29. There is no predisposition or bias either in favour or against the granting of the order for security – see Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507, at 513-4, per Phillips JA (Ormiston and Charles JJA agreeing).
18 I turn to consider relevant matters to be considered by me in determining how to exercise my discretion.
The Plaintiff’s Submissions
19 In Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289, Smart J stated, at 299-300, that factors relevant to the exercise of the discretion are:
“(A) Whether the plaintiff's claim is made bona fide and has reasonable
prospects of success: …(B) Whether the plaintiff's lack of funds has been caused or
contributed to by the conduct of the defendant: …(C) Whether the plaintiff's proceedings are merely a defence against
'self-help' measures taken by the defendant. …(D) … (E) … (F) … (G) … (H) … .”
20 Mr Castelan relied upon these three grounds which I now turn to consider.
(i) Probability of Success 21 Mr Castelan submitted that, at least in respect of the claim for $99,581.43, the plaintiff had reasonable prospects of success. In Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, Peter Gibson LJ stated, at page 540:
“In considering all the circumstances, the court will have regard to the plaintiff company’s prospects of success. But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure … .”
22 In Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, at 514, French J (as he then was) stated:
“Where there is a claim prima facie regular and disclosing a cause of action, I see no reason why the court would, in the absence of evidence, proceed on the basis that the claim was other than bona fide or that it had no reasonable prospect of success.”
23 Christopher Shaun Williams, “a principal and the manager of the plaintiff”, states in an affidavit sworn by him on 10 July 2011 in opposing the application that CAF Consulting Pty Ltd (“CAF”) was the project manager and agent for the defendant and that at no point did the plaintiff deal with the defendant directly. He states, at paragraph 10 of his affidavit:
“It was CAF’s role as project manager to process and verify the work done by WPC on the Projects at the completion of each stage, to vet and authorize our invoices, and to provide these invoices to Arcadia with recommendations for payment.”
24 Williams further deposes that works under the contracts were completed towards the end of August 2009 and that it made a claim for the sum of $6,539.72. CAF responded by letter of 31 August 2009:
“In connection with this claim we confirm the following:
- We are satisfied with the quantity of the materials and workmanship
claimed.- The works in general have been constructed in accordance with the
current drawings, specifications and as directed.- In our opinion the amount being claimed matches the actual works
completed.”
25 CAF, on 1 November 2009, wrote to the plaintiff in respect of each of the contracts:
“Further to our site inspection with Richard on the 1st September 2009, we advise the construction of the Irrigation and Drainage Earthworks, on the Moondyne [and Castlebend] property has now reached the stage of Practical Completion. All outstanding works have now been completed in accordance with the design plans and documentation.”
26 There was no evidence before me of any communication from CAF regarding the matters raised in the Counterclaim. Nor is there any affidavit material before me from the defendant disputing CAF’s opinion.
27 The Counterclaim states that the General Conditions of Contract AS-2124- 1992 were incorporated into the contracts. If so, CAF would in fact be the superintendent under the contracts and have an independent certifying role. I have not sighted the contracts. However, if CAF was not formally the superintendent under the contracts, it appears it performed a very similar role.
28 It seems to me that the plaintiff does have “reasonable prospects of success” in respect at least of the claim for $99,581.43.
(ii) The Defendant Caused the Plaintiff’s Impecuniosity 29 Williams deposes that on account of non-payment of the sum of $99,581.43, the plaintiff was unable to pay McCracken’s Water Services Pty Ltd (“McCracken’s”) a debt in the sum of approximately $56,000 and that McCracken’s sued the plaintiff and obtained a judgment against it for this sum. Williams states that McCracken’s was the only major supplier in the area of irrigation pipes which were necessary for its business. He states that McCracken’s are now unwilling to deal with the plaintiff and that this has severely curtailed the plaintiff’s business and restricted its business opportunities.
(iii) The Plaintiff’s Claim is largely “Defensive” in Nature 30 Had the proceeding remained in the Magistrates’ Court, on account of the $100,000 jurisdictional limit there, the plaintiff would not have been able to bring its additional claim for the sum of $288,000. In that event, it appears that there would have been little dispute regarding the plaintiff’s claim and most of the hearing of the proceeding would have been concerned rather with the defendant’s counterclaim.
31 The additional claim was only brought once the defendant had taken “self help” measures by uplifting the matter to the County Court.
32 In Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621, Ormiston J stated, at 627:
“… Principally it would appear necessary to characterise the proceedings in respect of which security is sought. If they are ‘defensive’ proceedings, either directly resisting proceedings already brought or seeking to ‘halt self-help procedures’, it would seem that to require security would be oppressive, or at least would provide serious grounds for refusing to make an order. At the least, it is a factor to be considered in the exercise of the discretion. In particular, it is a basis for reducing the amount of security ordered to a sum related to the costs of those claims which cannot be characterised as defensive: … .”
The Defendant’s Submissions
33 So far as the defendant is concerned, the following matters would appear relevant:
(i) Impecuniosity of the plaintiff The very fact that the plaintiff would be unable to pay the defendant’s costs were the defendants successful – see Ariss, at 513-4, where Phillips JA stated that this could be “even a most significant factor”.
As Balmford J stated in Stratplan Consulting Pty Ltd v Leong [2004] VSC
436, at paragraph 11:“The Court of Appeal held in Ariss v Express Interiors Pty Ltd that, while the court should approach an application for security for costs without any predisposition either in favour of the application or against it, nevertheless the impecuniosity of the plaintiff company is not only the occasion for the exercise of the Court’s discretion, but a factor, and often a most significant factor, in the exercise of that discretion.”
(ii) The fact that $20,000 security has already been lodged by the defendant even though “with no admission the security is required”.
(iii) The promptness of the application.
It is not in issue that the defendant brought this application promptly after
it was advised of the amendment to the plaintiff’s Statement of Claim.(iv) The hearing of the matters alleged in the Amendment to the Statement of Claim will increase the length of the trial.
(v) There is no evidence before me as to the financial position of McCracken’s or the shareholders of the plaintiff who would stand to benefit from the litigation as to whether they can provide security. In Excelsior Run Pty Ltd (in liq) v Nelius Pty Ltd & Ors [2001] VSC 161, at paragraph 32, Warren J (as she then was) suggested this is a relevant factor.
(vi) Mr Brown, who appeared on behalf of the plaintiff, submitted that the evidence that the plaintiff’s impecuniosity was caused by the defendant was somewhat vague and that the plaintiff had not “produced any cogent evidence of its financial position at any time, any particulars of the debt to McCracken’s that led to the judgment and any details of its subsequent arrangement with McCracken’s”.
Conclusion
34 In all the circumstances, in carrying out the appropriate balancing exercise, I have come to the conclusion that in the exercise of my discretion, I should refuse the application seeking that the plaintiff provide further security for costs.
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