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  • Unreported Judgment

Hambleton v Idec Solutions Pty Ltd

 

[2020] QDC 17

DISTRICT COURT OF QUEENSLAND

CITATION:

Hambleton & Anor v Idec Solutions Pty Ltd [2020] QDC 17

PARTIES:

DAVID JAMES HAMBLETON AS LIQUIDATOR OF M&B RIGGING (QLD) PTY LTD (IN LIQUIDATION) ACN 148 170 923

(First Plaintiff)

AND

M&B RIGGING (QLD) PTY LTD (IN LIQUIDATION) ACN 148 170 923

(Second Plaintiff)

v

IDEC SOLUTIONS (PTY LTD) ACN 082 559 920

(Defendant)

FILE NO:

1461/19

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court at Brisbane

DELIVERED ON:

5 March 2020

DELIVERED AT:

Brisbane

HEARING DATE:

6 December 2019

JUDGE:

Porter QC DCJ

ORDER:

  1. Application for security for costs against the First and Second Plaintiff dismissed. 

CATCHWORDS:

PROCEDURE – COSTS – SECURITY FOR COSTS – where the defendant seeks an order for security for costs under r 670 of the Uniform Civil Procedure Rules 1999 (Qld) or s 1335(1) of the Corporations Act 2001 (Cth) – where the First Plaintiff is the liquidator of the Second Plaintiff – where the liquidator is not a proper party to the proceedings but the defendant does not seek to have the liquidator removed as a plaintiff – whether the principle Harpur v Ariadne applies – whether it is open to the Court to order security for costs against the liquidator – whether the liquidator is suing for the benefit of another –  whether there is reason to believe that the liquidator will not be able to pay the defendant’s costs if ordered to pay them

Uniform Civil Procedure Rules 1999 (Qld) rr 69, 670, 671, 672, 673

Corporations Act 2001 (Cth) ss 477, 1335

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170

Barnden v Zulian 133 ACSR 361

Devine v Lu (2018) 338 FLR 208

Go Gecko (Franchise) Pty Ltd v Plyable Pty Ltd & Anor [2017] QSC 329  

Green v CGU (2008) 67 ACSR 105

Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523

Hession v Century 21 South Pacific Limited (in Liq) (1992) 28 NSWLR 120

Horn v York (1991) 5 ACSR 112

Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd  (2009) 239 CLR 75

JNJ Resources Pty Ltd v Crouch & Lyndon [2014] QSC 137

Kent v La Communaute des Soeurs de Charites de la Providence [1903] AC 220

Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377

Mitry v Business Australia Capital Finance Pty Ltd (in liquidation) [2010] NSWCA 360

Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143

Park & MacIntosh v Lanray Industries Pty Ltd [2010] QCA 257

Press Metal Aluminium (Australia) P/L v Total Concept Group P/L & Anor (No 2) [2014] QDC 186

Robson v Robson [2008] QCA 36

Schneider v Alusa & Ors [2012] QSC 37

Schokman v Hogg [2003] QCA

Upton & Anor v TVW Enterprises Ltd (1984) 4 FCR 121

Wong v Huisman [2009] QSC 266

COUNSEL:

N J Shaw for the first and second plaintiffs
M Trim for the defendant

SOLICITORS:

GRT Lawyers for the first and second plaintiffs
McCullough Robertson for the defendant

Summary

  1. [1]
    In about March and April 2018, the second plaintiff (M&B) entered into two separate subcontracts with the defendant (Idec) by which M&B agreed to provide rigging and related services to Idec in relation to contracts being undertaken by Idec on two projects involving, apparently, military maintenance work. 
  2. [2]
    By these proceedings, M&B claims delay costs and retention monies paid under the subcontracts, along with money due for work done.  Idec denies it is liable for any sums under the subcontracts and counterclaims for sums it alleges are due by M&B under the subcontracts on various grounds, totalling some $1m.  There was no suggestion by either party that, for the purposes of this application, the claims of the other were demonstrably without merit.
  3. [3]
    M&B has been wound up in insolvency.  On 29 April 2019, these proceedings were commenced.  On 6 December 2019, Idec filed this application seeking security for its costs.  The plaintiffs do not dispute that, if M&B was the only plaintiff in the proceedings, the Court’s discretion to award security would be enlivened and that it would be appropriate to make an order for security.  The parties also agree that the appropriate sum for security, if an order is made, is $113,625.60.  However, the plaintiffs contend that security should not be ordered because of the presence of the first plaintiff as a party to the proceeding.
  4. [4]
    The first plaintiff (Mr Hambleton) is the liquidator of M&B.  The plaintiffs contend that his presence as an additional plaintiff engages a principle that where multiple plaintiffs in the same interest are suing a defendant, security should not be ordered unless an order for security may properly be made against each such plaintiff.   Further, the plaintiffs contend that security could not be ordered against Mr Hambleton because none of the threshold conditions in r. 671 UCPR are established: in particular while it appeared to be accepted that Mr Hambleton was a plaintiff suing for the benefit of another person, it was submitted that the evidence did not establish that there was reason to believe that Mr Hambleton would not be able to pay Idec’s costs if ordered: see r. 671(b) UCPR set out in paragraph [24] below.
  5. [5]
    Idec for its part, contends that Mr Hambleton is not a proper party to the proceeding and that accordingly the principle identified by the plaintiffs does not apply.   Even if it did, Idec contends that the circumstances are such as to engage the Court’s jurisdiction to order security where the justice of the case requires it. 
  6. [6]
    Further, whether a proper party or not, Idec contended that security should be ordered because evidence did establish that there was reason to believe that Mr Hambleton would not be able to pay the Idec’s costs if ordered. 
  7. [7]
    For the reasons that follow, I find that the application for security for costs against the first and second plaintiffs should be dismissed.

Correspondence pre-application

  1. [8]
    The communications before the filing of the application took place against the background of extensive correspondence dealing with pleading and disclosure issues.  None of those issues arise on this application. The exchanges relevant for present purposes were brief.
  2. [9]
    On 10 July 2019, Idec’s solicitors (McCullough Robertson) wrote to the plaintiff’s solicitors (GRT) asserting that Mr Hambleton did not have standing to bring the proceedings and raised the capacity of M&B to meet a costs order.  McCullough Robertson also sought an undertaking from Mr Hambleton not to withdraw as a party from the proceedings and an undertaking to be personally be liable for M&B’s costs.  Although it was not clear, it appeared at that stage that those undertakings would be accepted in lieu of an order for security.
  3. [10]
    On 11 July 2019, GRT responded stating that Mr Hambleton had standing to bring the proceedings under s. 477(2)(a) Corporations Act and would not give the undertakings sought nor provide security.   No further explanation was given of those positions. 
  4. [11]
    On 2 August 2019, McCullough Robertson wrote to GRT foreshadowing an application directed at either confirming the liquidator’s standing and liability for costs or, alternatively, obtaining security for costs against M&B.  That letter specifically raised the question of Mr Hambleton’s position personally as well as that of M&B.  The matters suggesting M&B was not likely to be able to meet a costs order need not be canvassed, given the concessions made at the hearing.  In respect of Mr Hambleton, McCullough Robertson stated:

Further, our client has conducted the searches it can in relation to [Mr Hambleton].  By virtue of his role as a liquidator, it is not possible to ascertain in any meaningful way that he has assets which would be sufficient to satisfy any costs orders as searches reveal too many results to enable any proper evaluation of the assets available to him (as the searches appear to show all the assets which he has interests in his role as external administrator of various capacities).

  1. [12]
    The letter went on to assert that if Mr Hambleton remained a party, his ability to meet a costs order would be relevant.  It then indicated that if Mr Hambleton refused to provide details of his finances, the defendant might seek to compel him to do so or seek security based on his failure to provide information.  There was no substantive response to these issues prior to the filing of this application.  

The evidence and correspondence after filing of the application

  1. [13]
    The application was filed on 4 November 2019.  It sought security from the plaintiffs in a certain sum.  It did not seek to have Mr Hambleton removed as a party, despite the position adopted in the correspondence.  (That position was maintained at the hearing.)  It was supported by an affidavit of Mr Power of McCullough Robertson.  That affidavit exhibited correspondence (the relevant parts of which are stated above) and contained evidence on the financial position of M&G and on the appropriate amount of costs.
  2. [14]
    As to the capacity of Mr Hambleton to meet a costs order, the only evidence in that affidavit was Mr Power’s confirmation of the matter asserted in correspondence in paragraph [11] above.  It is not specifically stated what searches he had undertaken, though one might reasonably infer they included ASIC searches and real property searches of the kind undertaken for M&B. It might be thought this was a thin evidentiary basis for the inference that Mr Hambleton would not be able to pay the estimated costs of the proceedings if ordered to pay them.  It amounted only to evidence that Mr Power could not tell either way.  However, matters did not rest there.
  3. [15]
    On 18 November 2019, Mr Hambleton filed an affidavit dealing with his capacity to meet a costs order and his standing to bring the proceedings.  He gave evidence on three matters.
    1. (a)
      First, he swore that it was his usual practice to include himself personally as a plaintiff whenever he caused a company in liquidation to commence proceedings and gave his reasons for doing so.  This was objected to as irrelevant opinion which amounted to no more than a submission as to why Mr Hambleton was properly a party to the proceedings.  The objection was well made.  I treat that part of his evidence as no more than a submission on that issue. (Some of the matters sworn to are not properly characterised as a submission because they contain on one view, assertions of fact or opinion from Mr Hambleton, but I deal with them in any event.  As will be seen, the defendant suffers do disadvantage from that approach).
    2. (b)
      Second, he addressed the reasons for refusing to undertake to remain a party in the proceedings.  He swore that while he had no intention of withdrawing as a party, he could not give an undertaking not to do so because he might be forced to withdraw as a party by circumstances beyond his control, such as being removed as liquidator.  He gave evidence that he understood he would remain liable for costs incurred before his removal in that case.
    3. (c)
      Third, he addressed the financial position of the administration.
    4. (d)
      Finally as to his personal position, he referred to two matters. 
      1. (i)
        The first related to his entitlement to call on his employer to pay any costs order made in the proceedings. This evidence was objected to as hearsay and the giving of secondary evidence of the contents of documents but it seemed to me the following matters were neither hearsay nor otherwise inadmissible:

My employer, Rodgers Reidy, employs 16 staff and one subcontractor.  The company has turnover in excess of $3m per year and in exchange for an entitlement to the work in progress of any appointments that I hold…it is typically jointly liable for any expenses I incur in generating the above work in progress.  Consequently, should a costs order be made against me personally in these proceedings, I will be entitled to call up Rodgers Reidy to assist in the payment of same.

  1. (ii)
    The second relates to his professional indemnity cover.  He purported to give evidence of the legal effect of that policy.  That evidence was objected to by Mr Trim for the defendant and Mr Shaw for the plaintiffs did not maintain its admissibility.  I have not relied upon that evidence in this judgment.
  1. [16]
    Mr Hambleton filed a second affidavit on 21 November 2019, which expanded on his explanation of his entitlement to be indemnified by his employer against any costs order made in the proceedings.  The whole of that evidence was objected to on numerous grounds.  However, again in my view it was admissible evidence. It explained a financial arrangement of which Mr Hambleton had personal knowledge.  He explained in more detail the arrangement he described in his first affidavit.  Notably he added that although there was no written record of the arrangement he described, the arrangement he described had been in place since at least 2005 (when he was appointed a director of Rodgers Reidy) and that he had no reason to believe it would not apply in the future. 
  2. [17]
    There was further relevant correspondence after the filing of the application. 
  3. [18]
    On 25 November 2019, McCullough Robertson, having received Mr Hambleton’s evidence, wrote to GRT calling on Mr Hambleton and Rodgers Reidy to both provide guarantees in a form acceptable to the registrar under r. 673(2) UCPR for Idec’s costs.  They also sought financial information to satisfy Idec that they would satisfy the guarantees if called upon.  I am uncertain what kind of guarantee was being sought by this letter.  If an unconditional bank guarantee was sought, then the capacity to meet it was not a matter which need have concerned Idec.  The reference to r. 673(2) UCPR does not assist in this regard.  It is difficult to see why the Registrar would play a part in the process where no Court order had been made, and it is unlikely that the Registrar would in any event conduct his or her own inquiry into the financial capacity of a party.
  4. [19]
    Perhaps what was being sought was an undertaking to the Court to be liable for any costs order made in favour of Idec.  This had been sought before from Mr Hambleton but without the added requirement of financial information supporting the value of his undertaking.
  5. [20]
    On 28 November 2019, GRT responded offering to provide a letter from another member of Rodgers Reidy confirming that they held adverse costs insurance and that the company would assist Mr Hambleton to meet any costs order, along with a copy of the policy wording and the balance sheet of the company for 2019.  GRT sought to provide the insurance and financial information “on an external counsel basis” (presumably meaning that only counsel and perhaps solicitors should see them).  GRT asked whether that material, if provided, would satisfy Idec’s application for security.
  6. [21]
    McCullough Robertson rejected those offers.  It contended that the evidence offered was inadequate to satisfy its client that a costs order would be met and that a letter from Rodgers Reidy would not materially improve the position.  It sought the provision of the information offered but refused to keep them confidential to Idec advisers and referred to the implied undertaking as sufficient protection for their confidentiality.  Idec also sought an undertaking to the Court by Rodgers Reidy to meet any costs orders made against the plaintiffs.
  7. [22]
    GRT (presumably on instructions) refused to provide an undertaking sought on behalf of Rodgers Reidy or indeed Mr Hambleton because “to do so could compromise their ability to claim under” the insurance policy they had mentioned.  GRT also impliedly declined to provide the information previously offered, asserting in effect that the affidavit evidence should be sufficient to dispose of the application.
  8. [23]
    McCullough Robertson indicated in those circumstances that the application would proceed.  I do not find this correspondence of much assistance in resolving this application.

The place of the liquidator as a party in determining the threshold issue

General principles

  1. [24]
    Rr. 670 to 672 UCPR deal with the matters which inform the determination of an application for security for costs.  Those rules provide:

670 Security for costs

  1. On application by a defendant, the court may order the plaintiff to give the security the court considers appropriate for the defendant’s costs of and incidental to the proceeding.
  2. This rule applies subject to the provisions of these rules, particularly, rules 671 and 672.

671 Prerequisite for security for costs

The court may order a plaintiff to give security for costs only if the court is satisfied—

  1. the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; or
  2. the plaintiff is suing for the benefit of another person, rather than for the plaintiff’s own benefit, and there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; or
  3. the address of the plaintiff is not stated or is misstated in the originating process, unless there is reason to believe this was done without intention to deceive; or
  4. the plaintiff has changed address since the start of the proceeding and there is reason to believe this was done to avoid the consequences of the proceeding; or
  5. the plaintiff is ordinarily resident outside Australia; or
  6. the plaintiff is, or is about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient property of a fixed and permanent nature available for enforcement to pay the defendant’s costs if ordered to pay them; or
  7. an Act authorises the making of the order; or
  8. the justice of the case requires the making of the order.

672 Discretionary factors for security for costs

In deciding whether to make an order, the court may have regard to any of the following matters—

  1. the means of those standing behind the proceeding;
  2. the prospects of success or merits of the proceeding;
  3. the genuineness of the proceeding;
  4. for rule 671(a)—the impecuniosity of a corporation;
  1. [25]
    Also relevant where the plaintiff is a company, is s. 1335(1) Corporations Act which provides:

1335 Costs

  1. 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.
  1. [26]
    Where (as here) the threshold condition relied upon requires the defendant to establish that there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them (s. 671(a) and (b) UCPR), there has been differing articulations of what the statute requires to be established.   That question was authoritatively determined for this state by the Court of Appeal in Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143 where Gotterson JA, with whom McMurdo JA and Boddice J agreed, held:

[38]Analysis of this ground of appeal appropriately begins with consideration of the nature of the threshold question posed by the expression in r 671(a) as to whether “there is reason to believe that [the plaintiff corporations] will not be able to pay the [defendants’] costs if ordered to pay them”. For that purpose, the appellants referred to the joint observations of Maxwell P and Buchanan JA, who constituted the Court of Appeal of Victoria in Livingspring Pty Ltd v Kliger Partners.

[39] In that case, their Honours considered the analogous threshold questions posed by s 1335(1) of the Corporations Act and r 62.02(1)(b) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). They said:

“[15] The phrase “reason to believe” is the touchstone of jurisdiction. It requires a rational basis for the belief — and no more. The wording adopted may be contrasted with other familiar formulations such as “if the court is satisfied that” or “if in the view of the court it is likely that”. The section requires the making of a judgment, a risk assessment: is there a risk that the corporation will be unable to pay? (It adds nothing, in our view, to say that it must be a “real risk”.) A risk assessment is, of necessity, imprecise. The section calls for a practical, commonsense approach to the examination of the corporation’s financial affairs.

[16] It may be said, with justification, that this is a low threshold. But the test simply reflects the policy of the provision, which is to protect a defendant against the risk of the plaintiff corporation’s impecuniosity. The provision equips the court with the means to require that the defendant be secured against that risk.”

[40] In reliance upon Livingspring, a risk assessment approach was subsequently adopted by a judge of the Supreme Court of New South Wales in ruling upon an application for security for costs made under both s 1335(1) and r 42.21(1)(d) of the Uniform Civil Procedure Rules 2005 (NSW). However, on appeal, in Cornelius v Global Medical Solutions Australia Pty Ltd, the approach was criticised.

[41] In Cornelius, Macfarlan JA (with whom Tobias AJA agreed) said:

“[16] The words “reason to believe” acknowledge that on an application for security for costs, as a matter of practicality, a court will not be able to undertake as thorough an examination of the financial position of a plaintiff as it would if an issue as to that arose at a final hearing. Almost inevitably, the court’s assessment will be a preliminary one based on limited materials. Nevertheless, for the power to order security to arise, the outcome of the assessment must be that the court considers that there is “reason to believe” that the plaintiff “will be” unable to meet an adverse costs order. A conclusion that there is a risk that that will, or may, be the case is insufficient.

[17] The words of the statute and rule are clear and should be applied according to their terms without a gloss being placed upon them. They were so applied in the last Full Bench decision of this Court applying the provisions, Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 (Wollongong City Council). In that case, Beazley JA (as her Honour then was) (with whom Barrett JA agreed) referred to the onus of the applicant for security as being to establish “that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful”: at [29] and [30].”

Ward JA agreed in the result. Her Honour accepted that the test requires a rational basis for the requisite belief to be held and that the requisite belief is that the corporation will be unable in the future to pay the defendant’s costs, assuming the defendant were to succeed.

[42] I would, with respect, adopt the reasoning of Macfarlan JA. In my view, it accords with the earlier observations of a full bench of the High Court in George v Rockett as to the meaning of the expression “reason to believe”. In a joint judgment, their Honours said:

“The objective circumstances sufficient to show a reason to believe something needs to point more clearly to the subject matter of the belief, but that is not to say that the objective circumstances must establish on the balance of probabilities that the subject matter in fact occurred or exists: the assent of belief is given on more slender evidence than proof. Belief is an inclination of the mind towards assenting to, rather than rejecting, a proposition and the grounds which can reasonably induce that inclination of the mind may, depending on the circumstances, leave something to surmise or conjecture.”

[43] I draw from these observations that for a reason to believe that a fact will exist, the objective circumstances must be sufficient to incline the mind towards accepting, rather than rejecting, that the fact will exist. By way of contrast, the requisite belief is not merely that the circumstance may come in to existence, or that there is some risk that it may. It is a belief that the fact will come into existence.

[Footnotes omitted]

  1. [27]
    It has been said that the threshold condition articulated in rr. 671(a) and (b) (which are in relevantly identical terms in this respect) is an undemanding test.[1]  However, the words of the statute must be applied in this Court as construed by the Court of Appeal, and in my respectful view, it does not assist to characterise the condition as demanding or undemanding. 
  2. [28]
    The onus of proof in establishing the existence of one or more of the threshold conditions set out in r. 671 and s. 1335 lies on the applicant,as does the onus to establish that discretionary factors favour the exercise of the discretion (though an evidential onus might lie on the plaintiff in respect of factors knowledge of which lie within its particular knowledge).[2]   In respect of the onus to establish reason to believe  that the plaintiff will not be able to pay the defendant’s costs, Gotterson JA in Monto Coal observed:

The threshold question – onus and “unable to pay”

[48] In reaching a conclusion on the threshold question, it is relevant to bear in mind that it is the applicant for security who bears the persuasive onus of establishing that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful.

[49] I acknowledge that in Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd, Corboy J doubted that an applicant for security bears an evidentiary onus on the threshold question. Notwithstanding, his Honour described that question as one which requires “an evaluation of the evidence led by the applicant to see whether that leads to a reason to believe that the corporation will be unable to pay the costs of the defendant”. I prefer the view endorsed some three years later in Cornelius that it is for the applicant to adduce evidence from which the requisite reason to believe may be deduced and also to persuade the court that such a deduction ought to be made.

[Footnotes omitted, underlining added]

  1. [29]
    I would add this observation.  In the underlined quote, Gotterson JA referred to the obligation on the applicant to adduce evidence to make out the necessary belief.  However, I do not consider his Honour thereby intended to suggest that evidence led by the respondent which was also relevant to that matter should be ignored.  In my view, if the applicant’s evidence alone is insufficient to meet the threshold test, but evidence led by the respondent added to that of the applicant is sufficient, then it is open to the Court to conclude that the applicant has discharged the onus to make out the threshold issue.  That is relevant where, as here, the respondent to the application has gone into evidence.
  2. [30]
    The other relevant threshold condition in this application is that set out in r. 671(h): i.e. the justice of the case requires the making of the order.  Such catchall provisions do not lend themselves to exhaustive articulation of the circumstances where they can apply.  The scope of r. 671(h) was considered in Robson v Robson [2008] QCA 36 in the context of whether the factors mentioned in r. 672 were relevant to a consideration of whether the condition specified in the injustice ground in r. 671(h). 
  3. [31]
    Keane JA (as his Honour then was) did not think so.  His Honour reasserted the established approach in which ordering security involved a two stage process where a party had first to establish a threshold consideration and only then turned to the discretionary factors in r. 672.  His Honour observed:

[18] In their argument in this Court the defendants submitted that the prerequisite in r 671(h) is satisfied in this case because the plaintiff has no assets within Australia to meet an order for costs if his action fails, and there is no suggestion from the plaintiff's side that an order for security will stifle the pursuit of the plaintiff's claim.

[19] It seems to me that the text and structure of r 671 and r 672 require the court to treat the preconditions of making an order for security, which are stated in r 671, separately from the discretionary factors, which are stated in r 672. The latter fall for consideration only when the court is satisfied that the discretion to make an order has been enlivened under r 671. The provisions of r 671 are concerned to identify the occasions on which an order for security for costs may be made, while the provisions of r 672 are concerned to state the considerations which bear upon whether an order should be made. Rule 671 and r 672 thus require the court to deal separately with issues which, under the statutory provisions in relation to the giving of security for costs by a corporate plaintiff, have been dealt with in a global fashion - "in all the circumstances of the case" - where the principal concern of the court tends to be focused upon whether the litigation of the individual's claim will be stifled by reason of the plaintiff's lack of financial means if an order for costs is made. Notwithstanding the broad language of r 671(h), r 671 seems to me to have been deliberately intended to limit the occasions when application for security for costs should be entertained by the court.

[20] The heading to r 671 describes what follows as "prerequisite for security for costs", and introductory language of r 671 makes it clear that the power of the court to order that an individual plaintiff give security for costs is confined to only those cases expressly described in sub-rules (a) – (h). The express identification in r 672(h) of the potential of an order to stifle the litigation as a discretionary factor bearing upon whether or not the power to order security should be exercised tends to suggest that the absence of any such potential in the order will not serve to satisfy the requirements of r 671(h). Consideration of that potential is required by r 672(h) where the court has decided that the power to order security for costs has already been enlivened by reason of the satisfaction of one of the requirements prescribed by r 671 such as r 671(h). It would be odd if the consideration in r 672(h) was relevant to determining whether r 671(h) is satisfied.

[21] More importantly for present purposes, r 671(f) would be rendered otiose if the general language of r 671(h) were to be held to encompass a case where the plaintiff has no assets in Australia to meet an order for costs if the plaintiff's action fails, and the action would not be stifled by the making of an order because of, for example, the plaintiff's ownership of assets located overseas. Indeed, if r 671(h) were given an operation unconfined by its context, all the other provisions of r 671 would be unnecessary. How then is one to understand r 671(h)? The application of r 671(h) may be informed by analogy with the particular provisions of r 671(b) to (f), but the exercise then being performed is to determine whether, having regard to the residential status and circumstances of the plaintiff, or the capacity in which the plaintiff brings the proceeding, the occasion for the making of an order has arisen.

When r 671(h) speaks of "the justice of the case" being such as to "require the making of an order", it must, I think, be taken to refer to the justice of the case in terms of these kinds of circumstances rather than in terms of the considerations set out in r 672. Thus, it seems to me that r 671(h) allows for the possibility that the justice of the case, considered in terms of the circumstances in r 671(b) to (g) or analogous circumstances and without reference to r 672, may be said to require the making of an order. Even in such a case, however, the court may then conclude that an order should not be made as a matter of discretion by reason of one or more of the considerations in r 672, such as, for example, in r 672(b) or (i).

  1. [32]
    Muir JA disagreed.  His Honour concluded that it was proper to have regard to factors mentioned in r. 672, and in doing so made comments about the scope of the sub-rule:

[31] I agree with the reasons of Keane JA and with the orders he proposes save in one respect. Although I acknowledge the force and logic of Keane JA’s reasons, I am not persuaded that r 671 and r 672 require a two-stage process under which matters listed in r 672 become relevant only where the court is satisfied in terms of one or more of the paragraphs of r 671.

[32] In my view, the role of r 672 in identifying matters to which “the court may have regard” in deciding whether to make an order is to provide a checklist of those matters which are normally relevant to the determination of an application for security for costs. The matters listed in r 672 also encompass many, if not most, of the circumstances normally relevant to a determination of whether “the justice of the case requires the making of the order.”

[33] I do not discern an intention that in determining whether “the justice of the case requires the making of the order” regard may not be had to any of the matters listed in paragraphs (b), (c), (f), (i), (j) or (k) of r 672. Frequently, it will be the case that one or more of the matters listed in r 672 will inform the determination under r 671(h). That would have been apparent at the time the Uniform Civil Procedure Rules were made.

[34] Rule 671(h) is extremely broad and, if construed literally and without textual constraints, it would render otiose the other paragraphs of the rule. Paragraph (h), however, is part of a list of matters the fulfilment of any one of which will enliven the discretion to make an order. It is plainly intended that the other paragraphs inform the construction of paragraph (h). It may be inferred from paragraph (a), for example, that it is not the intention of the rule to interfere with the well-established principle that “so far as natural persons are concerned poverty was no bar to a litigant.” Accordingly, the impecuniosity of a natural person plaintiff will not, without more, fulfil the requirements of paragraph (h).

[35] I accept that r 671(h) will not apply merely because a plaintiff resident of Australia has no assets here and will not be prevented from pursuing his or her action by an order for security. That conclusion, I think, flows from paragraphs (e) and (f). Paragraph (e) deals with plaintiffs who are ordinarily resident outside Australia. Paragraph (f) is concerned with the more specific class of persons who are or are about to become ordinarily resident outside Australia in circumstances in which there is reason to believe that they may not have sufficient property in the jurisdiction to meet the defendant’s costs.

[36] That is not to say, however, that want of assets in the jurisdiction by an Australian resident plaintiff may not, in combination with other matters, including those listed in r 672, compel a conclusion that “the justice of the case requires the making of” an order for security for costs. Whether such a conclusion is warranted depends on the weighing of those matters favouring the making of an order against those matters which do not.

[37] The exclusion from this process of the matters listed in r 672, to my mind, would impose an unintended limitation on the broad scope of paragraph (h) and promote an unduly artificial approach to the determination of security for costs applications.

  1. [33]
    McMeekin J reached a similar conclusion to Muir JA, though recognising the force of Justice Keane’s analysis.  His Honour observed

[61] Keane JA has set out the provisions and I will not repeat them. The factors mentioned in r 672 are ones which might well be ordinarily relevant to a consideration of the justice of the case although not exhaustive of those factors. The argument that they are to be ignored in an assessment of “the justice of the case” turns on an implication drawn from the drafting of the rules. I acknowledge the force of the analysis performed by Keane JA. However a number of matters combine to persuade me to the view that it is proper to have regard to factors mentioned in r 672: the reference to “the justice of the case” is as broad as can be imagined; there is no express direction to ignore the factors in r 672; the scope for those factors to be material to any such assessment; and the evident injustice of ignoring some of those mentioned - such as the very foundation of the appellants’ case here that they may not be able to enforce a costs order in this jurisdiction.

  1. [34]
    The defendant does not seek to invoke r. 671(h) based on factors in r. 672, so the specific matter which seemingly divided the Court in Robson does not arise.  The broader question of the articulation of the scope of considerations which inform construction of r. 671(h) has not otherwise been authoritatively determined, though some guidance might be gleaned from the judgments in Robson and subsequent judgments which deal with specific circumstances in which provision has been raised.[3]   
  2. [35]
    One matter frequently litigated in relation to r. 671(h) is whether, and to what extent, it permits an order for security for costs to be made against a natural person plaintiff who is impecunious.  While the general rule is that the Court will not order security against an impecunious natural person plaintiff (whether under r. 671(h) or at its inherent jurisdiction)[4], the authorities appear to recognise that there are exceptions (for example where the order is required to prevent an abuse of process).[5]  Those considerations do not arise in this case.  However, the authorities do demonstrate the breadth of the r. 671(h) and its scope for considering matters outside those identified in r. 671(a) to (g).

Principles applicable where there are multiple plaintiffs

  1. [36]
    Another question of principle which arises in this case is how to approach an application for security for costs where there are multiple plaintiffs.  The starting point is Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523.  In that case, the first plaintiff was Mr Harpur.  He was not ordinarily resident outside Queensland, he was a man of substantial worth and he was the real plaintiff, in the sense of being the person directing the proceedings for his own benefit.  The second to fourth plaintiffs were joined as plaintiff because they were necessary to establish rights asserted by Mr Harpur.  One was an insolvent company, the other two were companies located in Victoria with no assets in Queensland.  The defendants obtained security for costs against the second to fourth plaintiffs.  Those plaintiffs appealed.
  2. [37]
    Connolly J gave the judgment of the Court.  His Honour found that the second to fourth plaintiffs would be unable to meet a costs order if the defendants succeeded and that if any of those plaintiffs failed in their pleaded cases, Mr Harpur must also fail.  His Honour then dealt with the circumstance of Mr Harpur being an additional plaintiff with the same interest as the plaintiffs which were the subject of the security order as follows:

Against this background, what is the rule where there is more than one plaintiff?  In such a case, all plaintiffs suing in the same interest and by the same solicitors and counsel, there is but one set of costs.  If the defendants have an opponent who is worth power and shot they have as much as any litigant is fairly entitled to. …The “two plaintiff” cases start with the situation in which one is out of the jurisdiction.  Prima facie he ought to be ordered to provide security but his co-plaintiff is within the jurisdiction.  In such a case it was considered that there was no ground for ordering security.  See Skyes v. Skyes (1869) L.R. 4 C.P. 645 at p. 648 per Byles J. and Montague Smith J.  This principle was held to apply even where the plaintiff within the jurisdiction was insolvent.  I take the underlying reason to be that the defendant was really in no worse position than if he had been sued by a single plaintiff resident within the jurisdiction and insolvent.  As Brett J. remarked at p. 650, the cases show that, unless there is ground for making an order for security against all the plaintiffs, it cannot be made against any. …The critical point was that each plaintiff was liable for the whole of the defendant’s costs.  Now in John Bishop (Caterers) Ltd v. National Union Bank Ltd [1973] 1 All E.R. 707 Plowman J. made an order for security against a company although there was a co-plaintiff within the jurisdiction who was a natural person.  His Lordship distinguished the earlier cases on the footing that there was in those cases a complete overlap as he put it of the causes of action.  Accordingly, as he was not satisfied that the natural person would necessarily be ordered to pay all of the defendant’s costs he ordered security.  That is concededly not this case.  In Pearson v. Naydler (supra) Megarry V-C., when it came to the exercise of his discretion saw some force in the submission that the true plaintiff was the corporation and it was not in the reality a case of a plaintiff company which had a natural person as a true co-plaintiff.  That decision is therefore also distinguishable.

One’s approach will vary accordingly as one sees s.533(1) as, on the one hand, an isolated provision containing within itself the criteria for the exercise of the discretion, and on the other as a statement of the rule applicable to companies, to be applied as one factor in the exercise of the inherent jurisdiction.  For reasons which I have already given I consider the latter to be the correct approach

  1. [38]
    The case is authority for the proposition that where there are multiple plaintiffs with a common cause of action, security should not be ordered against one unless it would be ordered against all.  Central to this articulation of principle is that the plaintiffs have the same cause of action, tested by asking whether success against one plaintiff is necessarily success against all.   It is evident in my view that his Honour considered that this principle was one which went to the discretion to order security for costs.  The Supreme Court Rules at that time did not adopt the form or content of rr. 670 and 671 UCPR, so the question of the interaction of those Rules and the correct approach to them which was discussed in Robson did not arise.  
  2. [39]
    That the principle in Harpur v Ariadne should be seen as going to the discretion as to whether to order security rather than to the threshold question of whether an order may be made against any plaintiff[6] was confirmed by Justice Jackson in JNJ Resources Pty Ltd v Crouch & Lyndon [2014] QSC 137 at [16].  That approach was adopted by Judge Dorney QC in this Court in Press Metal Aluminium (Australia) P/L v Total Concept.   I adopt the same approach, which respectfully seems to be clearly correct.   
  3. [40]
    Where there are multiple plaintiffs with distinct claims the principle will not be engaged.  Where there is some overlap, it might be thought that the application of the principle as a discretionary consideration will depend on the extent of the overlap. 
  4. [41]
    What about the situation where there are two plaintiffs who advanced a single claim, one of which is insolvent and the other not, but the solvent plaintiff does not have standing to bring that claim?  As I explained below, that is the situation which arises in this case.  
  5. [42]
    Not surprisingly, there are not many cases on that question.  In the one case cited to me dealing with this situation, Peter Lyons J concluded that the principle in Harpur was not applicable where the natural person plaintiffs (against whom security would not have been ordered) did not have a claim against the defendants.[7]  However, in that case, it was not considered whether the presence of the natural person plaintiffs would have attracted a costs order even if they did not have standing (which might be the situation here).  Further, in that case, the defendant would still have been exposed to non-recovery of its costs if successful.  There was no evidence that the natural person plaintiffs would have been able to meet a costs order.  While Harpur recognises that the existence of a natural person as a joint plaintiff would count against ordering security, it remains a matter that informs the exercise of the discretion in each case.
  6. [43]
    I add this observation.  In Harpur, Connolly J observed “… if the defendants have an opponent who is worth power and shot they have as much as any litigant is fairly entitled to”.    The inherent justice of that observation is self-evident in my view.  However, that is not how the principle was typified nor applied, as is evident from the balance of the passage above.  There is therefore a tension in my view between his Honour’s statement of the rationale of the principle and how it was applied in the other cases his Honour cited.  That need not have troubled the Court in Harpur because on the facts of the case, the defendants did have a plaintiff worth powder and shot. 
  7. [44]
    The Harpur principle goes to discretion.  It does not defeat an application for security for costs at the threshold stage.  In my view, the fact that one of the plaintiffs would could not be the subject of an order for security becomes a much less compelling discretionary consideration where there are multiple plaintiffs but none of them are able to meet a costs order, regardless of whether security would be ordered against the indigent plaintiff.  In such a situation, the defendant does not have any plaintiff worth powder and shot and might justly be entitled to an order for security against a plaintiff who is exposed to such an order.
  8. [45]
    Each case will depend of course on its circumstances.  As that is not the situation in this case, I need say take the point no further. 

Does the liquidator have standing to pursue the claim?

  1. [46]
    In assessing the application of the principle in Harpur, a threshold question is whether the liquidator has a common cause of action with the company in respect of the claims advanced in the statement of claim.
  2. [47]
    In my opinion, the answer to this question is yes, though the conclusion is reached in an artificial manner.  The causes of action advanced in the statement of claim are claims arising under the subcontracts.  The liquidator was not a party to the subcontracts.  At general law, he has no standing to sue on those subcontracts.  That situation is not altered by statute.  In particular, s. 477(2)(a) Corporations Act, properly construed, permits the liquidator to bring claims of the company in the name of the company.  It does not confer standing on the liquidator personally to advance such claims.[8] 
  3. [48]
    As I understood it, Mr Shaw accepted that the claims were those of the M&B under the subcontracts.  However, he submitted that so long as the company was a party, the liquidator could also join in advancing the claim and was a proper party.  Mr Shaw relied on the Privy Council decision Kent v La Communaute des Soeurs de Charites de la Providence [1903] AC 220.  In this case, liquidators of a Canadian bank had sued in their own names to recover on a promissory note issued in favour of the bank.  The matter proceeded to trial.  After judgment was reserved, it occurred to the learned trial judge that the liquidators might not have standing to bring the proceedings (one can imagine his Honour’s disquiet when this point occurred to him in his chambers after the trial was supposed to be over).  Further submissions were sought and his Honour ultimately ruled that the liquidators did not have standing at general law or under statute to bring the proceeding.  Further, his Honour dismissed an application by the liquidators to join the company as a plaintiff.
  4. [49]
    Both determinations were confirmed on appeal to the Court of Kings Bench.[9]  In the Privy Council, their Lordships confirmed that the action on the promissory note was an action of the bank which had to be brought in the name of the bank.  However, they disagreed with the trial judge on the joinder issue.  Lord Davey, who gave the judgment, considered that leave could be given to add the company in liquidation as a defendant notwithstanding that the trial had been heard.   It was accepted by the respondent on the appeal that the power to amend existed in those circumstances but that the Court properly exercised the discretion not to permit amendment.  It is his Lordship’s reasoning rejecting this proposition which was relied upon by Mr Shaw for the liquidator.  His Lordship said:

Indeed, it may be doubted whether the defect in the present case was really more than an irregularity of form which might have been cured by amendment by the judge mero motu under s. 518.  The substance of the action was to recover a debt alleged to be due to the company in liquidation which the liquidators were the only proper persons to receive and give a discharge for.  No defence was available against the company which was not equally available against the liquidators, and the parties were content to fight the case out with the liquidators without any exception to their right to sue, and was ripe for judgment.  It is impossible to say that the proposed amendment changes the nature of the demand, or can in any way cause a prejudice to the respondents.  In short, the liquidators are domini litis and it was not improper to make them plaintiffs, but they ought to have joined with themselves the company; or, in other words, the liquidators had the right to sue, but sued in the wrong form

(underlining added)

  1. [50]
    The principle in Kent that claims of the company in liquidation must be brought by the company (and the corollary that claims conferred by statute on the liquidator must be brought by the liquidator) has been applied in Australia on numerous occasions.  Mr Shaw did not dispute those propositions.  Rather, Mr Shaw relied upon the above underlined passage as authority for the proposition that where a company in liquidation is suing on a cause of action belonging to the company, the liquidator may, not must, be an additional plaintiff in the proceedings.  Although the statutory context of the Kent decision is similar to that in the Corporations Act,[10] Mr Shaw could identify no Australian case where this proposition has been recognised as correct.  Nor could I.
  2. [51]
    Kent was applied by the New South Wales Court of Appeal in Mitry v Business Australia Capital Finance Pty Ltd (in liquidation) [2010] NSWCA 360 to permit the liquidator to substitute the company in liquidation as plaintiff for the liquidator where the liquidator had commenced proceedings in his own name within time but since then time had expired.  That case proceeded on the assumption that the proceedings had not been properly commenced within time.
  3. [52]
    In Horn v York (1991) 5 ACSR 112, McLelland J held that although recovery actions under the then equivalent of the Corporations Act had to be brought by the liquidator, the company was an appropriate party since the rights of the company could be affected by a judicial determination avoiding a transaction.  That conclusion seems to me to depend on the particular relief sought in the recovery action.
  4. [53]
    In my view, this Court is not bound by the decision in Kent.   In my respectful view, it should not be followed to the extent it is authority for the principal that the liquidator is, by virtue of his or her status as a liquidator, a proper party as plaintiff to be included in claims the company in liquidation.   I hold that view for the following reasons.
  5. [54]
    First, in my respectful view Kent itself does not explain in a persuasive way why the liquidator is a necessary or appropriate party in cases where the cause of action belongs to the company.  The observations made seem to me to identify the liquidator as being in the same position as the board of directors of a company in relation to claims of the company.  It has never been suggested that directors have to be, or should be, parties to claims belonging to a company.
  6. [55]
    Second, it does not seem to me that the liquidator’s status as such makes the liquidator “a person whose presence before the Court is necessary to enable the court to adjudicate effectually and completely on all matters in dispute” (r. 69(1)(b)(i) UCPR) or a person whose presence would be desirable, just and convenient to permit the court to adjudicate in that way on matters connected with the proceeding (r. 69(1)(b)(ii) UCPR).  Circumstances might arise where a liquidator is a necessary or desirable party to a proceeding brought by the liquidator on behalf of the company on a cause of action belonging to the company.  But I cannot see that mere status as a liquidator is of itself such a circumstance.
  7. [56]
    It is convenient at this point to deal with the arguments of the liquidator as to why he considers he is a proper plaintiff in the proceedings (see paragraph [15] above).   The arguments are premised on the basis that they justify inclusion of the liquidator in every claim brought on behalf of a company in liquidation.  They are:
    1. (a)
      The company has no officers capable of bringing the proceedings;
    2. (b)
      S. 477(2)(a) authorises the bringing of claims of the company in the liquidator’s name;
    3. (c)
      The liquidator’s interests are aligned with those of the company;
    4. (d)
      The liquidator is the person responsible for initiating and conducting the proceedings on behalf of the company;
    5. (e)
      The inclusion of the liquidator gives the defendant and the Court “comfort” that costs orders will be met. 
  8. [57]
    None of these submissions support the conclusion that the liquidator is a necessary or desirable person to be a party in proceedings by the company in liquidation generally or in this proceeding in particular.  In my view, (b) is wrong as a matter of law, as I have already concluded.  The matters in (a), (c) and (d) put the liquidator in no different position to that of a company director or shareholder.  The matter in (e) might lead to a liquidator offering an undertaking to the Court to be responsible for the defendant’s costs, but does not justify the liquidator being a party to the proceedings.

How does Harpur apply?

  1. [58]
    Despite my conclusion that the liquidator does not have standing to pursue the claim and has not been shown to be a necessary or appropriate plaintiff, the fact of the matter is that the liquidator is a plaintiff and the defendant has not applied to have the liquidator removed as a party.  Any such application was specifically disavowed by Mr Trim for the defendant.
  2. [59]
    This highlights the difficulty in determining how to apply Harpur where the liquidator has no cause of action but is nonetheless a party.  In that case, how can the extent of the overlap between the claims of the liquidator and the company be addressed?
  3. [60]
    If the liquidator, by becoming and remaining a party, exposes himself to an order for costs coincident with the liability of the company,  the underlying concept in Harpur still applies.  That is, there is another party liable for costs and if security would not be ordered against that party, then that is a strong discretionary reason favouring refusing an order for costs against the company.
  4. [61]
    The defendant submits that regardless of standing and regardless of whether the liquidator is a proper party, he may be liable for the defendant’s costs.  I do not accept that Hession v Century 21 South Pacific Limited (in Liq) (1992) 28 NSWLR 120 at p. 123 is authority for that specific proposition.  However, the defendant’s proposition is in my view correct.  If a plaintiff wrongly asserts a cause of action against a defendant, for whatever reason (including that the plaintiff did not have standing to bring the claim), and that cause of action is dismissed, the plaintiff will be exposed to an order for costs.  
  5. [62]
    The special consideration which arises here, however, is that because the liquidator is not the party with standing to assert the claims made under the subcontracts, the defendant is concerned that the liquidator might discontinue, leaving the defendant with a claim by an insolvent company.  However, the liquidator could not discontinue without the defendant’s consent or the Court’s leave.  In either case it is difficult to see how the liquidator would avoid liability for costs incurred up to that date, especially where his presence as a party was relied upon in answer to an application for security for costs.  Further, a fresh application for security could then properly be brought, given the change in circumstances.[11]

Conclusion 

  1. [63]
    My ultimate conclusion, therefore, is that in determining this application, the liquidator should be treated, for the purposes of applying the principle in Harpur, in the same way as a party to the liquidation with the same claims as the company.  The next broad question to address is this: would it be open to the Court to order security for costs against the liquidator under r. 671(b)?  If it is, then the parties agree that other discretionary factors justify an order for security in the amount of $113,000. 
  2. [64]
    If it is not open to the Court to order security under that sub-rule, then:
    1. (a)
      The plaintiffs contend that Harpur applies and no order should be made against either plaintiff; and 
    2. (b)
      The defendant contends that security could and should still be ordered against the company in reliance on r. 670(h).

The particular position of liquidators as plaintiffs 

  1. [65]
    One issue to be considered is whether any special principle applies when considering whether the power to order security arises by reason of the fact that the first plaintiff is a liquidator.  The issue was reviewed by the New South Wales Court of Appeal in Green v CGU (2008) 67 ACSR 105.
  2. [66]
    In Green, the liquidator was the plaintiff in statutory recovery proceedings for insolvent trading.  The liquidator was plainly the proper plaintiff in those proceedings.  The liquidator had the benefit of support of a costs funder to bring the proceedings.  The proceedings had been settled against the directors of the company in liquidation and were continuing only against the insurer, CGU.  It was in that context that CGU sought security in the amount of $450,000 against the liquidator. The learned Trial Judge concluded that the liquidator would or might be unable to pay costs and that the existence of the funding agreement meant that ordering security would not stultify the proceedings.  He also concluded that cases suggesting that security should not ordinarily be ordered against liquidators who were suing in their personal capacity were a manifestation of the general principle that a discretionary consideration for ordering security was whether the order would stultify the proceedings or not.  His Honour ordered the liquidator to provide security. 
  3. [67]
    The case was primarily concerned with the place of the funding agreement in determining whether to order security.  However, the Court also considered general principles applicable to liquidators.  The relevant New South Wales rules included a provision in substantially similar terms to r. 671, but not, so far as I can see, an equivalent to r. 672.
  4. [68]
    Hodgson JA, after reviewing the authorities, summarised the applicable principles as follows:

45In my opinion, on the basis of this review of cases, and especially on the basis of the previous Court of Appeal decisions in Hession and Melville, a court considering applications for security for costs against liquidators should not treat the matter as being entirely at large, but should have regard to guidelines, which I would express as follows: 

  1. (1)
    Liquidators suing personally are generally to be treated in the same way as natural persons, so that, on the one hand, costs orders will be made against them if proceedings fail, and, on the other hand, security for costs may be ordered against them when the conditions set out in UCPR 42.21 are satisfied or (on appeal) there are “special circumstances” within UCPR 51.50.  Although security for costs can be ordered (at first instance only) in other circumstances, this is not the usual or normal course; and it is relevant that, in order that security for costs be ordered in other circumstances on an appeal, where at general law security was more readily granted, “special circumstances” are required.  It is to be noted also that mere inability to meet costs orders does not amount to special circumstances (Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136) and thus does not of itself put an onus on an appellant to prove that an order for security would stultify the appeal. 
  1. (2)
    Where the plaintiff is a company in liquidation, and not the liquidator, then security for costs will more readily be ordered, although the court’s discretion is unfettered (Bell Wholesale P/L v Gates Export Corporation (No 2) (1984) 8 ACLR 588) and there is no presupposition in favour of granting security (Bryan E Fincott P/L v Eretta P/L (1987) 16 FCR 497).  However, the court will not refuse to order security on the ground that this will frustrate the litigation unless the company proves that those who stand behind the company and would benefit from the litigation are unable to provide security (Bell Wholesale). 
  1. (3)
    Cases in which security for costs might be ordered against a natural person or a liquidator outside those provided for in UCPR 42.21 include cases where (in addition to proof that there is reason to believe the plaintiff will be unable to pay the defendant’s costs) the plaintiff has dissipated assets and/or has not paid previous costs orders (especially if those costs orders were in favour of the defendant) and/or brings a weak case to harass the defendant and/or brings a case for the benefit of others (albeit not solely for their benefit as apparently required by UCPR 42.21(1)(e)).  There is of course a sense in which a liquidator is suing for the benefit of others; but what was decided in Cowell and Strand Wood was that this was not of itself sufficient to justify security for costs in relation to a person who has the statutory right and duty to do this.[12] 
  1. [69]
    Campbell JA agreed with Hodgson JA but added his own summary:

83The background against which courts developed a policy of usually not requiring liquidators to provide security for costs when suing in their own name included:

  1. (a)
    The liquidator is performing a public function under statutory authority.  That public function provided a reason for not according as much weight as would be accorded in litigation purely between private individuals and of the type that fell within UCPR 42.21(1) to the private interest of the person sued to have assurance that an order for costs would be paid. 
  2. (b)
    There have always been provisions such as s 545 Corporations Act 2001, that enable a liquidator to not sue if not satisfied that he or she is properly funded.  That fact, combined with the potential personal liability of the liquidator for costs, and a measure of public control over the qualifications of persons who are eligible to be liquidators (eg s 1282 Corporations Act), in itself has a tendency (which might not be realised in every case) for liquidators not to bring litigation unless they were satisfied that they could pay the costs if they were to lose. 
  3. (c)
    That the liquidator is exposing all his or her assets to the risk of an unfavourable costs order puts the litigant into a situation somewhat analogous to a natural person plaintiff who is suing for his or her own benefit. 
  4. (d)
    The liquidator's personal gain from running the litigation consists only of professional costs and disbursements, which are themselves subject to a measure of public control, either by the court or creditors (ss 473, 499 Corporations Act). 
  5. (e)
    Even when the liquidator is being funded by a creditor, in circumstances where the creditor is entitled to a preferential dividend under s 564 Corporations Act by reason of having funded the litigation, the most that the creditor can recover for its own benefit is a return of its outlay for costs, and a 100% dividend on its proved debt.  A creditor who funds the litigation in those circumstances is thus doing nothing more than protecting its own legal right to be paid its debt by the company.[13] 
  1. [70]
    Basten JA agreed with the statements of principle, but disagreed on their application.
  2. [71]
    These statements of principle depend on two related propositions: that a liquidator is not suing for the benefit of another when bringing statutory proceedings and that he or she should therefore be treated as a natural person when suing on such causes of action.
  3. [72]
    The first proposition seems difficult to accept.  The liquidator when suing to recover a preference is not suing for his or her own benefit, except to the extent that such recoveries might, together with the other assets in the administration, pay the liquidator’s costs and expenses.  In this State, r. 671(b) has been interpreted as applying where a plaintiff is suing for the benefit of another person rather than the plaintiff’s own benefit, so that it does not apply where the plaintiff is suing for his or her own benefit as well as the benefit of another.[14]  However, even allowing for that, it is difficult to see how a liquidator is suing for his or her own benefit when pursuing statutory claims, just because an incidental consequence of doing so is that funds might be available to meet costs generally of the administration or costs of the liquidator in pursing the claims.  It cannot be said that the purpose of the proceedings is to recover or meet such costs.[15]  Even if I thought I should follow Green, both parties conducted the case on the basis that r. 671(b) applies to the liquidator.  It would be unfair to the defendant to adopt a different basis for determining the application. 
  4. [73]
    In any event, in my view the principles articulated in Green are not applicable where the Company is the proper plaintiff rather than the liquidator.  In that case, the liquidator is not performing any public function in bringing proceedings as plaintiff and therefore one of the key justifications for not ordering security is absent.   Unless the liquidator is, for some reason, a necessary or appropriate party within the scope of the relevant rules, he or she is intervening officiously in the proceedings as plaintiff.

Reason to believe the liquidator will not be able to pay the defendant’s costs?

  1. [74]
    By that tortuous route we finally reach the main factual issue which was litigated in the application: whether there is reason to believe that the liquidator will not be able to pay the defendant’s costs.
  2. [75]
    While the onus is on the defendant/applicant to make out that proposition, it is to be determined, as I have said in paragraph [29] above, on the whole of the evidence, including the evidence of the plaintiffs.  Further, in my view it is open to me to draw a Jones v Dunkel inference against the plaintiffs where the liquidator has provided information about some aspects of his financial affairs but has omitted to address other areas which it is plain he would have been able to address (his personal position being the main example).  That rule applies against parties who do not bear the onus of proof on an issue.  Further, its application is not limited to failure to call a witness.  It extends to failure to lead evidence on a particular matter from a witness who is called.[16]  On the other hand, the failure to lead evidence on a matter (if it can be concluded it was done because it would not assist the party) only supports an inference that evidence on the issue would not have assisted the party’s case.  It cannot remedy a failure of the party with the onus of proof to make out a prima facie case on the issue in question on the whole of the evidence.[17]
  3. [76]
    Bearing those matter in mind, the defendant has not discharged its onus to persuade me that there is reason to believe the liquidator will not be able to meet costs if required to do so.
  4. [77]
    I will first mention some matters which I think favour the defendant’s position.
  5. [78]
    First, I have not admitted evidence of the scope of the insurance policy which is said to exist and do not have a basis to find it would respond were the liquidator ordered to pay costs of these proceedings.
  6. [79]
    Second, I am persuaded that the liquidator does not have substantial assets in his own name.   The starting point is that it is, in my view, common knowledge that liquidators and others exposed to personal liability in professional practice generally arrange their affairs so they have limited exposure of key assets to personal claims.   That is a fact of which I consider may be the subject of judicial notice.  
  7. [80]
    Next, the defendant was unable to discern from the numerous search results that the liquidator held any assets beneficially in his own name because they appeared to be assets held or possibly held in his capacity as liquidator and trustee in bankruptcy.  That would have been a simple matter for the liquidator to clarify, but he omitted addressing the issue in his material.   Given the issues in the application and the evidence he did choose to lead, I consider he did not address that matter because it would not have assisted him.   In the circumstances of this case I think that tends to support the inference identified in the previous paragraph.
  8. [81]
    Third, the financial position of the administration makes it unlikely to be a source of funds to meet an adverse costs order.
  9. [82]
    However, those matters are not sufficient to persuade me that the defendant has made out the threshold consideration.  The following matters support that conclusion.
  10. [83]
    First, that matter must be assessed by reference to the estimate of costs of the trial if unsuccessful.  Even assuming that agreed sum to be a modest estimate of costs payable, and even assuming that the liquidator will have to meet his own costs in the same sum, the total costs are likely to be less than $350,000.  While a substantial sum, it is not a sum likely to be out of reach of most insolvency practices.
  11. [84]
    Second, in my view, the financial arrangement explained by Mr Hambleton is sufficiently concrete to make it impossible to conclude that there is reason to believe he will be unable to meet a costs order (at least in the amount likely in this case).   There is no doubt that the arrangement is an ad hoc one, and it seems odd to me that a legally sophisticated business like an insolvency practice would not have a documented right to indemnity.  However, I accept Mr Hambleton’s evidence as to the nature of the arrangement and its long-standing character.  Cases are not authority for facts, but on the evidence in this case I respectfully agree in Justice Parker’s observations in Barnden v Zulian 133 ACSR 361 at [49]:

[49]  I summarised the evidence in Devine on this question at [125]. It was similar to the evidence in this case, except that in Devine there was no evidence that the liquidator had insurance cover. I said (at [128]):

But in the end, the evidence shows that Mr Devine is an established professional liquidator and a member of an apparently substantial firm. If a costs order were made against him in these proceedings which he was unable to satisfy he would be faced with bankruptcy, which would end his professional career. It would also cause immense difficulties for his partners who would be liable for the costs as liabilities incurred by Mr Devine in the course of the partnership business. I think I can infer that in these circumstances Mr Devine would do what he could to avoid bankruptcy and that his partners would do what they could to assist him to do so. On the estimates of costs in these proceedings, Mr Devine’s liability would be in the hundreds of thousands of dollars, not the millions. On balance I am not satisfied that there is reason to believe he will be unable to meet an adverse costs order. It is not necessary to consider the issue of principle posed by counsel’s submission.

  1. [85]
    Of course there are risks.  Mr Hambleton could fall out with his co-directors.  Rogers Reidy might itself get into financial difficulties.  However, they are risks which are not sufficiently likely on the evidence before me to permit the reaching of the conclusion that there is reason to believe Mr Hambleton will be unable to meet the likely costs order in this case matter if the defendant succeeds.
  2. [86]
    Accordingly, I am not persuaded that the first limb of the threshold test under r. 670(b) is made out in relation to Mr Hambleton.  The consequence is that security for costs would not be ordered against him if an application was brought and, given the analysis of Harpur above, I ought also to decline to order security against the second plaintiff.
  3. [87]
    That is subject to the defendant’s contention that the discretion to order security is enlivened under r. 670(h).   That matter can be dealt with shortly.   I find the approach of the liquidator to this case unsatisfactory.  The purpose of litigation is to resolve issues in dispute between the parties who are necessary or desirable participants in the litigation, judged from the perspective of effective adjudication of the issues raised in the proceedings.  The adoption of a policy of always being a plaintiff in proceedings without considering whether the liquidator is a proper plaintiff in the proceedings is one which should be discouraged.   
  4. [88]
    However, that circumstance is not one which properly engages r. 670(h).  It would not be in the interests of justice to order security when I otherwise would not, just to impose litigious discipline.  A fortiori when it was open to the defendant to apply to remove the liquidator as a party and it conspicuously chose not to do so.
  5. [89]
    I would add the following three comments. 
  6. [90]
    First, in Barnden v Zulian 133 ACSR 361 at [50], Justice Parker contemplated the possibility of defendants issuing subpoenas to make out their onus on the threshold issue of financial capacity for liquidator plaintiffs.  Further, applications for leave to cross examine on affidavits by liquidators of the kind filed in this case are plainly in prospect if defendants are determined to try to make out an entitlement to security.  Care must be taken to ensure that security for costs applications do not become unduly complex and expensive, particularly in the smaller commercial cases heard in this Court. 
  7. [91]
    Second, this application has been dismissed primarily on the basis of the liquidator’s evidence as to his relationship with Rogers Reidy.  It might be thought that if the circumstances sworn to in that regard were to change, the liquidator would have a duty to disclose that to the defendant, though in the absence of argument on the matter, I merely raise the possibility.
  8. [92]
    Third, both counsel helpfully co-operated and made reasonable concessions. Such an approach is to be commended; it permitted the focus in this application to the key issues. 

Footnotes

[1] Go Gecko (Franchise) Pty Ltd v Plyable Pty Ltd & Anor [2017] QSC 329 at [66] and Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [16]

[2] Livingspring Pty Ltd v Kliger Partners at [22]

[3] Schneider v Alusa & Ors [2012] QSC 37 at [26] to [51]  (where the plaintiff’s delay, prospects and means were relied upon) and Press Metal Aluminium (Australia) P/L v Total Concept Group P/L & Anor (No 2) [2014] QDC 186.

[4] Schokman v Hogg [2003] QCA; Harpur v Ariadne [1984] 2 Qd R 523 

[5] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd  (2009) 239 CLR 75 at [91] and see the review of authority by Applegarth J in Mbuzi v Hall [2010] QSC 359 at [57] to [70]

[6] Assuming the continued correctness of the distinction between establishment of the threshold condition and the consequent exercise of discretion.

[7] Wong v Huisman [2009] QSC 266

[8] Park & MacIntosh v Lanray Industries Pty Ltd [2010] QCA 257 at [9]

[9] As the intermediate court of appeal sitting in Montreal was styled from 1849 to 1974, after which it was renamed as the Court of Appeal of Quebec: https://courdappelduquebec.ca/en/about-the-court/history/

[10] See Devine v Lu (2018) 338 FLR 208 at [135] to [136]

[11] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170

[12] Green v CGU (2008) 67 ACSR 105 at [45].

[13] Green v CGU (2008) 67 ACSR 105 at [83].

[14] Schneider v Alusa [2012] QSC 37; Press Metal Aluminium (Australia) P/L v Total Concept Group P/L (No 2) [2014] QDC 186 at [11]

[15] Upton & Anor v TVW Enterprises Ltd (1984) 4 FCR 121 at 122.8 to 123.3

[16] Byrne, D and Heydon, J D, LexisNexis Butterworths, Cross on Evidence, vol 1 (at Service 209) [1215]

[17] Byrne, D and Heydon, J D, LexisNexis Butterworths, Cross on Evidence, vol 1 (at Service 209) [1210] 

Close

Editorial Notes

  • Published Case Name:

    Hambleton & Anor v Idec Solutions Pty Ltd

  • Shortened Case Name:

    Hambleton v Idec Solutions Pty Ltd

  • MNC:

    [2020] QDC 17

  • Court:

    QDC

  • Judge(s):

    Porter QC DCJ

  • Date:

    05 Mar 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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