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  • Unreported Judgment

H & R Management Consulting Pty Ltd v Bickford

 

[2009] QSC 447

 

SUPREME COURT OF QUEENSLAND 

 

CITATION:

H & R Management Consulting Pty Ltd v Bickford  [2009] QSC 447

PARTIES:

H & R MANAGEMENT CONSULTING PTY LTD

CAN 085 388 000

(plaintiff/respondent)

v

BICKFORD, John Lindsay

(first defendant)

RUSSELL & COMPANY

(second defendant/applicant)

FOOTE, Kenneth Ian

(third defendant)

FILE NO/S:

SC No 6644 of 2003

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court, Brisbane

DELIVERED ON:

14 December 2009

DELIVERED AT:

Supreme Court, Brisbane

HEARING DATE:

11 December 2009

JUDGE:

Margaret Wilson J

ORDER:

  1. that the plaintiff/respondent provide security in the amount of $100,000 for the second defendant/applicant’s costs;
  2. that the plaintiff/respondent pay the second defendant/applicant’s costs of and incidental to the application to be assessed on the standard basis.

CATCHWORDS:

PROCEDURE – COSTS – SECURITY FOR COSTS – PLAINTIFF – where plaintiff an impecunious corporation – where individual who stands to benefit from litigation lives abroad, has not offered security and has not been shown to be without means – where second defendant seeks an order that the plaintiff provide further security for second defendant's costs in the sum of $295,575 – where in 2006 a Deputy Registrar made an order by consent that the plaintiff pay $65,000 into Court as security for the costs of the second defendant – where that consent order had been negotiated between the parties on the basis of a three day trial and was intended to include security up to the first day of the trial – where at the time of that order there were three defendants to the proceeding – where the proceeding has since been consolidated with another brought by the parties who became the fourth and fifth defendants in this proceeding – where the consolidated proceeding is provisionally listed for trial over seven days – where second defendant seeks security topping up the security for its preparation for trial and for days 2-7 of the trial – whether security should be provided by the plaintiff

Corporations Act 2001 (Cth), s 1335(1)

Uniform Civil Procedure Rules 1999 (Qld), r 671(A), r 672

Specialised Explosives Blasting & Training Pty Ltd v Huddy’s Plant Hire Pty Ltd [2009] QCA 254, considered

COUNSEL:

D Clothier for the second defendant/applicant.

J N Jordan for the plaintiff/respondent.

SOLICITORS:

Coyne & Associates for the second defendant/applicant.

Michael Coe Solicitor for the plaintiff/respondent.

SUPREME COURT OF QUEENSLAND

CIVIL JURISDICTION

MARGARET WILSON J

No BS6644 of 2003

H & R MANAGEMENT CONSULTING PTY LTD

(ACN 085 377 000)

Plaintiff

and 

 

JOHN LINDSAY BICKFORD & ANOTHER

Defendant

BRISBANE 

..DATE 14/12/2009

JUDGMENT

HER HONOUR:  The second defendant seeks an order that the plaintiff provide further security for the second defendant's costs in the sum of $295,575.  The application was filed on 20 November 2009.

On 17 May 2006, a Deputy Registrar made an order by consent that the plaintiff pay $65,000 into Court as security for the costs of the second defendant.  That consent order had been negotiated between the parties on the basis of a three day trial and was intended to include security up to the first day of the trial:  for example, account had been taken of counsel's fee on brief.

When that order was made, there were three defendants to the proceeding.  Since then, the proceeding has been consolidated with another brought by the parties who became the fourth and fifth defendants in this proceeding.  The pleadings have been amended on several occasions.

On 21 September 2009, the Chief Justice made an order provisionally setting the consolidated proceeding down for trial over seven days commencing 8 February 2010.  Subsequently, on 11 November 2009, the proceeding was further reviewed by Justice Atkinson.  It remains provisionally listed for trial over 7 days commencing 8 February 2010.

In this application, the second defendant seeks security:

(a) topping up the security for its preparation for trial and

(b) for days 2-7 of the trial.

The plaintiff's primary claim is to obtain title to properties at Tara free from first and second registered mortgages.

The first mortgage was originally in favour of Suncorp.  It was transferred to Foote and Keskay, the third and fourth defendants in this proceeding, and subsequently Keskay's interest was transferred to the plaintiff.

The second mortgage is in favour of the first defendant Bickford.

The liquidators of Keskay (i.e. the fifth defendant) seek to set aside the transfer of Keskay's interest in the first mortgage to the plaintiff.

The proceeding stems from the activities of Mr Foote (the third defendant) who is a resident of the United States.

For present purposes, I adopt the summary of the transactions which is contained in paragraphs 6-7 of the submissions on behalf of the applicant second defendant.

The claim against the second defendant (Russell & Co) is based on their failure to advise the plaintiff to lodge a caveat over the Tara properties.  Had that been done, the first mortgage could not have been transferred and the second mortgage would not have been registered. 

It is not possible to form any view, even a qualified view, on the likely outcome of the proceeding.  I adopt paragraph 24 of the second defendant's submissions.

As at 8 December 2009, the plaintiff's asset and liability position was as follows.  The properties in issue were worth $258,000.  But for those disputed properties, and but for moneys in Court as security for costs of the first and second defendants, the plaintiff had assets of approximately $15,000.  It had liabilities of approximately $250,000, including $203,000 owing to Ms Helen Gundersen.  So it is Ms Gundersen who stands to benefit from this litigation if the plaintiff is successful.

Until 8 December 2009, Ms Gundersen was a shareholder in the plaintiff.  On that day, she transferred her shareholding to Ms Briley for $1.  Ms Gundersen is Mr Foote's sister.  She resides in the United Kingdom.  There is no sworn evidence about the circumstances of the share transfer, about Ms Gundersen's financial position or whether she supports the litigation.  The Court has been told that she "has no desire to be connected with the litigation in any way."

Ms Sandra Briley is the sole director of the plaintiff.  She is also a shareholder and, since the transfer of Ms Gundersen's shareholding, the sole shareholder in the company.  She is the estranged wife of Mr Foote.  She offers a personal guarantee as security for costs the plaintiff may be ordered to pay the second defendant.  She has net assets of approximately $75,000, including a half interest in a house in the United States.  She is unable to raise a mortgage.

The Court has an unfettered discretion whether to make an order for security for costs and if so, in what amount.  I refer to the Corporations Act section 1335(1) and the UCPR rule 671(A).  The UCPR contains a list of factors which the Court may have regard to in making an order for security:  see rule 672.  Of present relevance are:

(a) the means of those standing behind the proceeding;

(d) the impecuniosity of the plaintiff corporation;

(h)whether an order for security would stifle the proceeding; and

(m)the costs of the proceeding.

On behalf of the respondent plaintiff it was submitted that if the Court were to order security to be provided by the plaintiff, the litigation would be stifled and it was submitted that the Court ought to accept the offer of a guarantee by Ms Briley as adequate security.

I pause to observe that it is Ms Gundersen who stands to benefit from the litigation.  She has not offered any security.  Ms Briley has no substantial assets and she does not stand to benefit from the litigation.

The policy of the law is that a natural person who is a plaintiff and who is impecunious should not have to provide security other than in exceptional circumstances.  But in the case of an impecunious corporation, the policy of the law is different.  While there is no predisposition in favour of security, that impecuniosity is itself a relevant factor.

In Specialised Explosives Blasting & Training Pty Ltd v. Huddy's Plant Hire Pty Ltd [2009] QCA 254 at para 45, Muir JA, with whom the other members of the Court agreed, said:

"A corporate plaintiff wishing to avoid an order that it give security for costs on the ground that the making of the order will prevent the continuation of the litigation, at least as a general proposition, must establish that those 'who stand behind it and who will benefit from the litigation if it is successful are also without means.'  In Hession v. Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120 at 123 Meagher JA, with whose reasons the other members of the Court agreed, cited Bell Wholesale Co Pty Ltd v. Gates Export Corporation (1984) 2 FCR 1 as authority for the proposition that:

'... a company in liquidation against whom an order for security for costs is sought cannot successfully resist such an order merely by proving that it cannot fund the litigation from its own resources if an order for security is made.  It must prove that it cannot do so even if it relies on the other resources available to it (the company's shareholders or creditors.)'"

Here, while the shareholder Ms Briley is without substantial means but offers a guarantee, the creditor, Ms Gundersen, who until a few days ago was also a shareholder, has not been shown to be without means.

I think this is a very relevant factor in the exercise of the discretion.

The second defendant has filed an affidavit containing an estimate of its costs on a standard basis.  The costs to date are estimated at between $212,775 and $254,510.  Its future costs (including the seven day trial) are estimated at $225,313. 

In response to questioning from me, counsel for the applicant told the Court that, of those future costs, the amount expected to be incurred between now and the eve of the trial is $132,000 and the costs of days 2-7 of the trial are expected to be $77,000.  The latter is a relevant figure, because security has already provided for day 1 of the trial.

There has been substantial delay on the part of the second defendant in making this application.  That is relevant to the application for top-up security for the preparation for trial, but not relevant to the application for security for costs of the trial itself.

Weighing all of these factors, I have concluded that the plaintiff should provide top up security for the second defendant's preparation for trial but only for costs to be incurred between now and the eve of trial, and that the plaintiff should provide security for days 2-7 of the trial.

I have concluded that the amount of security which should be provided is a total of $100,000, made up of $60,000 for top-up security for preparation and $40,000 for days 2-7 of the trial.

I will ask the parties to endeavour to agree upon a draft order.  It would seem appropriate to give the plaintiff the opportunity to provide such security by way of cash deposit, bank guarantee, or other security satisfactory to the Registrar of the Court. Further, I think the security should be provided by 4.00 p.m. on 21 December 2009.

The respondent/plaintiff should pay the applicant/second defendant's costs of and incidental to the application filed on 20 November 2009 to be assessed on the standard basis.

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Editorial Notes

  • Published Case Name:

    H & R Management Consulting Pty Ltd v Bickford

  • Shortened Case Name:

    H & R Management Consulting Pty Ltd v Bickford

  • MNC:

    [2009] QSC 447

  • Court:

    QSC

  • Judge(s):

    M Wilson J

  • Date:

    14 Dec 2009

Litigation History

No Litigation History

Appeal Status

No Status