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  • Unreported Judgment

Iron Gates Pty Ltd v Richmond River Shire Council

 

[2002] QSC 458

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

HOLMES J

No S9495 of 1999

IRON GATES PTY LTD (IN LIQUIDATION) ACN 058 075 997

First Plaintiff

and

 

GRAEME ANGUS INGLES

Second Plaintiff

and

 

RICHMOND RIVER SHIRE COUNCIL

First Defendant

and

 

WALKER NEWTON PTY LTD ACN 003 815 174

Second Defendant

and

 

LINDSAY WALKER

Third Defendant

and

 

DAVID ARDILL AND ASSOCIATES PTY LTD ACN 002 400 526

Fourth Defendant

and

 

DAVID ARDILL

Fifth Defendant

and

 

W.P. BROWN AND PARTNERS PTY LTD ACN 004 327 164

Sixth Defendant

and

 

GARY D. SPENCE

Seventh Defendant

and

 

KEILAR FOX AND McGHIE PTY LTD ACN 010 162 197

Eighth Defendant

and

 

PAUL RING

Ninth Defendant

and

 

IRON GATES DEVELOPMENTS PTY LTD ACN 005 002 791

Tenth Defendant

and

 

HERBERT PATRICK McCORMACK

Eleventh Defendant

BRISBANE

DATE 12/12/2002

JUDGMENT

HER HONOUR: This is an application for security for costs. The second plaintiff is the sole director of the first plaintiff, a company in liquidation which was the developer of an estate in northern New South Wales. Ultimately, the development was stayed because it was not in accordance with the development approval.

The fourth defendant was the consulting engineer. It is a corporation and the fifth defendant was a director of the fourth defendant.

A report had been prepared for the purposes of the development by a consultancy and it has been called in these proceedings the Walker Newton report. It incorporated a plan of management and impact assessment for the project and the development approval, it seems, was conditional on development in accordance with that plan. The fourth and fifth defendants who were appointed to administer the contract and supervise the site had been involved in the development of that report.

The development was financed by Esanda which provided a facility of 7.6 million which was guaranteed by the second plaintiff and secured by a charge over the first plaintiff's assets. The stay of development I have mentioned was the result of alleged breaches of the conditions of the development approval which it said has caused loss.

The plaintiffs have brought an action against the relevant shire council in respect of representations and its decisions but of more consequence it has alleged against the fourth and fifth defendants that they had a duty of care to ensure the development was in accordance with the Walker Newton report and to advise of potential breaches of the development approval.

It is said that they failed to advise that the plans, as they were ultimately approved by council, breached the development approval conditions and that they allowed work which contravened the development approval.

There is a real question about whether in taking on the role of administration of the contract and site supervision the defendants/applicants here assumed any such duties. While the claim, plainly, is bona fide, it is not what I would regard as a strong case. I put it no higher than arguable.

The first plaintiff, the company, is in liquidation and it is, needless to say, impecunious; and that results from the failure of the development. If the defendants' negligence were made out as pleaded it could be said that the impecuniousness was the result of that, but as I have said it is not a strong case. It is questionable whether there was a duty of care in the terms alleged.

The next question, of course, is whether an order for security for costs would stifle the litigation. Neither the first nor the second plaintiff has funds to meet a security for costs order.

The second plaintiff says in his affidavit that his assets exceed his liabilities by about 150,000 although those assets consist of cars, artwork and furniture and that is just his valuation. He accepts he would be liable for the plaintiff's costs of the action were it not to succeed but it does seem evident it is unlikely he could meet the costs of the action in that event. He says that he has asked Esanda whether it is prepared to fund the litigation. It has refused and the liquidator, not surprisingly, will not guarantee any costs order.

Harper and Ariadne Australia Limited 1984 2 Queensland Reports at page 523 was cited, broadly speaking, for the proposition that where there is a natural person behind a company who had made his own assets available to meet a costs order, whether by undertaking or by being a co-plaintiff, an order for security for costs should not be made.

But Mr Couper for the applicants pointed to what the Court of Appeal in Victoria had to say in Epping Plaza and Bevendale (1999) 2 Victorian Reports 191 at 197, that is to say, that Harper,

“Is not authority for the proposition that orders for security against impecunious corporate plaintiffs should rarely, if ever, be made where those who stand behind the company, whether co-plaintiffs or not and whether pecunious or not, are prepared to come out from behind the skirts of the company and pledge what they have.”

At the following page 198, the Court went on to say,

“The fact that those who stand behind the company are prepared to give an undertaking to the Court to pay a successful defendant's costs might be a factor which, on balance, will influence the Court's discretion in a particular case or more strictly, perhaps, influence the manner of its exercise but to elevate it to a position of critical importance or decisive significance, in general, seems to us to be requiring the Judge to enter upon his or her discretion with a particular predisposition something which the authorities make clear that the Judge should not do.”

They go on to say that,

“The Court should not readily accept an undertaking from impecunious individuals who appear to have no chance of making it good.”

The net result, I think, is that the fact that the second plaintiff says that he is prepared to accept liability for a costs order, is no more than a factor in the exercise of discretion.

In considering the issue of whether a security for costs order would stultify the action it is of significance that there is a creditor who stands to benefit from the outcome of the litigation who can supply the necessary security.

In Bell Wholesale and Gates Exports which is reported at (1984) 2 FCR 1 at 4, the Court said that,

“A Court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful whether they are shareholders or creditors or, as in this case, beneficiaries under a trust, are also without means.”

Patently here, Esanda, as the major creditor stands to benefit from the litigation and is clearly enough - well it is certainly not demonstrated that Esanda is not in a position to meet the security for costs order if it wishes to have the litigation continue in order that it benefits.

I might mention that in Rosenfield Nominees and Bain, which is reported at 14 ACL R467 at 472, 473, Justice Giles expressed similar views, that those behind the plaintiff should and can be required to undertake some of the risks of the proceedings if they wish to have its benefits.

Weighing all those factors, the improbability of the defendants ever recovering their costs should the action fail, what I regard as the fact that the action is by no means a strong case, and that there is the prospect of Esanda as creditor - or that Esanda, as creditor, stands to benefit, but presently has done nothing towards offering any security, I consider that an order for security for costs is in the interests of justice in this case.

I propose therefore to make the order - and I think you had given me a - no, you had not given me a draft, Mr Couper?

MR COUPER: I have not handed up a draft order, your Honour. We can bring a draft in. What we propose is that the plaintiffs provide security to the satisfaction of the Court and to the satisfaction of the Registrar in the sum of $118,000 and if that sum is not provided within 14 days, the action against the fourth and fifth defendants be stayed. If that is a form that suits your Honour, we will bring in a draft order in that form.

HER HONOUR: All right, or I can just make it now, if you like.

MR COUPER: As your Honour sees fit. My learned friend [indistinct] 28 days, rather than 14. We have no objection to that course, your Honour.

HIS HONOUR: I will order that the first and second plaintiffs, within 28 days of today's date, give security for the costs of the applicants in this proceeding in the amount of $118,000, such security to be to the satisfaction of the Registrar and in the event that that security is not provided, that further proceedings in this action, as against the fourth and fifth defendants, be stayed.

MR COUPER: Thank you, your Honour. And I ask for the costs of the application, your Honour.

HER HONOUR: All right. Can you say anything to that, Mr Lilley?

MR LILLEY: Yes, your Honour. In respect of the costs, they should be costs in the cause. If my client is successful in the action, it should not have to pay the costs of the application for security.

HIS HONOUR: All right. That is the order I will make, that costs are costs in the cause. Thank you.

Close

Editorial Notes

  • Published Case Name:

    Iron Gates Pty Ltd v Richmond River Shire Council

  • Shortened Case Name:

    Iron Gates Pty Ltd v Richmond River Shire Council

  • MNC:

    [2002] QSC 458

  • Court:

    QSC

  • Judge(s):

    Holmes J

  • Date:

    12 Dec 2002

Litigation History

No Litigation History

Appeal Status

No Status