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UI International Pty Ltd v Interworks Architects Pty Ltd

 

[2012] QSC 142

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

UI International Pty Ltd v Interworks Architects Pty Ltd & Ors [2012] QSC 142

PARTIES:

UI INTERNATIONAL PTY LTD
ACN 070 639 422 as trustee for the LIN FAMILY TRUST
(plaintiff)
v
INTERWORKS ARCHITECTS PTY LTD
ACN 087 985 402
(first defendant)
and
PAUL THOMAS SHEPPARD
(second defendant)
and
MOSTIA CONSTRUCTIONS PTY LTD
ACN 010 608 009
(third defendant)
and
GROGAN RICHARDS PTY LTD
ACN 006 346 087
(fourth defendant)
and
MOSTIA PROJECT MANAGEMENT PTY LTD
ACN 099 777 223
(fifth defendant)
and
ROWAN WOODFORTH
(sixth defendant)
and
REDLANDS SHIRE COUNCIL
(seventh defendant)

FILE NO:

BS 10390 of 2004

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

30 May 2012

DELIVERED AT:

Brisbane 

HEARING DATE:

15 February 2012

JUDGE:

Daubney J

ORDERS:

1.The plaintiff provide, in a form satisfactory to the Registrar, the following further security for the first and second defendants’ costs, namely:

(a)$250,000 by 30 June 2012; and

(b)$250,000 by not later than 30 days prior to the first day of trial.

2.The plaintiff provide, in a form satisfactory to the Registrar, the following further security for the fourth defendant’s costs, namely:

(a)$250,000 by 30 June 2012; and

(b)$250,000 by not later than 30 days prior to the first day of trial.

3.The costs of and incidental to each of the applications be reserved.

CATCHWORDS:

PROCEDURE – COSTS – SECURITY FOR COSTS – PLAINTIFF – where plaintiff developed land through construction of building – where construction provided, supervised and approved by defendants – where plaintiff claims defendants’ breach of contractual duties or negligence caused structural defects – where proceedings involve multi-party complex litigation – where the plaintiff was ordered to provide security for costs in 2006 –  where the first and second defendants and fourth defendant have applied for an order that the plaintiff provide further security for costs – where plaintiff has posited a number of discretionary considerations against a further order for security for costs – whether an order for further security for costs is warranted in the circumstances 

Aqua Blue (Noosa) Pty Ltd v Soil Surveys Engineering Pty Ltd & Ors [2010] QSC 176

Bryan E Fencoot & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497

Iron Gates Pty Ltd v Richmond River Shire Council [2006] QSC 141

Kilmac Investments Pty Ltd v NHLS & Co Ltd [2008] QSC 240

Transocean Capital Pty Ltd v AFSIG Pty Ltd (2006) 202 FLR 270

UI International Pty Ltd v Interworks Architects Pty Ltd & Ors [2010] QSC 280

COUNSEL:

JK Bond SC with S Armitage for the plaintiff

D de Jersey for the first and second defendants

SS Monks for the fourth defendant

SOLICITORS:

Rodgers Barnes & Green Lawyers for the plaintiff

Thynne & Macartney Lawyers for the first and second defendants

Sparke Helmore Lawyers for the fourth defendant

  1. The first and second defendants and the fourth defendant, respectively, have applied for orders that the plaintiff provide further security for the costs of those defendants.
  1. The claim by the plaintiff concerns land at Raby Bay which was purchased in 2001, and which it sought to develop by constructing a mixed commercial, retail and residential complex.  In a previous judgement in this proceeding,[1] I summarised the nature of the plaintiff’s case as follows:

“[1]The plaintiff was the owner of certain land at Shore Street, Cleveland.  The land abutted the Raby Bay marina harbour.  When the plaintiff bought the land in 2001, it was the subject of a development approval issued by the seventh defendant (the relevant local authority) and there were some incomplete plans and drawings for a mixed commercial, retail and residential development on the land in existence.  The plaintiff, after having some preliminary works completed on the land, lodged a community management statement pursuant to the Body Corporate and Community Management Act 1997, as a consequence of which the Raby Bay Harbour Community Titles Scheme 30942 (“the Scheme”) was created over the land.  The plaintiff became the registered proprietor of specified lots within that Scheme, namely Lots 3, 4 and 6 to 22 on Survey Plan 147268, and Lot 4 on Survey Plan 147266.

[2]This case consists of claims by the plaintiff consequent upon its decision in 2001 to develop the land by constructing a mixed commercial, retail and residential complex (known as “The Raby Bay Harbour development” and “The Raby Bay Marine Village”).  It has sued:

(a)the first defendant (a firm of consultant architects) which the plaintiff alleges was engaged by it as the consulting architect for the project, together with the second defendant (alleged to be the managing director of, and agent for, the first defendant);

(b)the second defendant (alleged to be the construction manager for the project), the fifth defendant, being the company said to have been engaged as the project manager, and the sixth defendant, who was the director and shareholder of the fifth defendant;

(c)the fourth defendant (a firm of consulting engineers), said to have been engaged by the first defendant to act as the civil, structural and hydraulic engineers for the Raby Bay Harbour development;  and

(d)the seventh defendant, said to have been statutorily responsible as building certifier and assessment manager for the Raby Bay Harbour development.

[3]The plaintiff claims that its lots are physically located above, and gained structural support from, a basement car park structure, and that there are structural inadequacies in the basement car park structure which give rise to structural deficiencies in the plaintiff’s lots.  In brief, these problems are said to be:

(a)The concrete floor slabs of the basement car park are structurally inadequate;

(b)The concrete walls of the supporting basement car park are structurally inadequate;

(c)The post-tensioned concrete roof slab of the supporting basement car park is structurally inadequate.

The plaintiff’s pleadings particularise these alleged inadequacies, and their causes, in some detail.”

  1. The quantum of the damages claimed by the plaintiff exceeds $20,000,000.
  1. There was no issue before me as to the plaintiff’s financial position. It is clear that the plaintiff would not be able to pay the defendants’ costs if ordered to pay them.
  1. It was also not in issue that the individuals who stand behind the plaintiff, and who would stand to benefit from this litigation if the plaintiff succeeds, have not come forward to assume liability for any costs orders.
  1. This is a large and complex piece of litigation. An order for security for costs was made by Atkinson J as long ago as 2006. I will refer to that order in more detail shortly. To the extent, however, that it is thought that the present applicants need to show special circumstances in order to invoke the Court’s discretion (and, in fairness, I must observe that this point was not taken by the respondent plaintiff), I would be satisfied on that point in the present case. It is not unusual that, in complex multi-party actions such as this in which engineering, architectural and other professional expert evidence will be called, special circumstances will arise as a consequence of the complex and unpredictable nature of the case. In that regard, I note the observation of White J (as she then was) in Iron Gates Pty Ltd v Richmond River Shire Council:[2]

“Whilst it is usual for multi-party complex litigation to become longer and more complex as it progresses towards trial it is not appropriate to penalise a defendant for failing to predict the way in which the proceedings will unfold over years as a fuller understanding of the issues is absorbed.”

  1. Counsel for the respondent plaintiff quite properly submitted that the plaintiff did not seek to oppose the present applications by contending that, on the evidence, the Court should conclude that the pre-requisites for the exercise of the discretion did not exist. The plaintiff’s position, rather, was that, in the exercise of its discretion, the Court should either reject the applications entirely or make orders for the provision of security in much lesser amounts than sought by the applicants.
  1. The plaintiff posited the following discretionary considerations:

(a)The plaintiff’s action is both meritorious and genuine; the plaintiff has a demonstrated history of payment of costs orders previously made;

(b)The delay in bringing the application after the initial provision of security in 2006;

(c)The request for security for all of the applicants’ standard costs estimates are excessive;

(d)The possibility that this proceeding may be settled at mediation;

(e)The significance of the offer to provide security in the form of a first registered mortgage over a particular lot of land.

  1. In relation to the first of these discretionary considerations, I proceed, as I should in the absence of contrary evidence, on the basis that the plaintiff’s claim is bona fide with a reasonable prospect of success.[3]  The fact that the respondent plaintiff has met costs orders in the past provides some assurance as to its seriousness in pursuit of the present litigation.  It is not, however, a factor of great weight in persuading me that the discretion to grant security ought not be exercised.  To adapt the observations of Barrett J in Transocean Capital Pty Ltd v AFSIG Pty Ltd,[4] there is a great difference between the plaintiff’s own ability to obtain funds for the purpose of prosecuting a claim and the ability of a creditor of the plaintiff to force the plaintiff to obtain and disgorge funds when the creditor (i.e. a defendant with the benefit of a costs order) seeks to enforce a right to be paid.
  1. In respect of delay, the plaintiff pointed to the fact that Atkinson J made an order, by consent, for security for costs on 21 March 2006.
  1. The full terms of the orders made by her Honour on that day are as follows:

“1.That the plaintiff provide security for costs of each of the defendants in the following amounts:

(a)First and second defendants:  $120,000

(b)Third defendant:  $200,000

(c)Fourth defendant:  $100,000

(d)Fifth and sixth defendants:  $130,000

(e) Seventh defendant:  $120,000

within 30 days in a form satisfactory to the Registrar, with the proceedings to be stayed against each defendant until the sums referred to above are secured.

  1. That the defendants have liberty to apply for further security for costs in accordance with paragraph 6:

(a)After the time for filing of a reply; or

(b)Upon an order of the Court striking out the amended statement of claim,

whichever is earlier.

  1. On any further application for security for costs:

(a)The defendants be entitled to seek further security to cover future costs and incurred costs where the security provided under this order is not adequate to cover them (the defendants) not being bound by the amount provided herein as limited their costs);

(b)The plaintiff be entitled to contend, that the defendants are not entitled to further security in respect of past costs incurred or future costs.

  1. If the first and/or second defendants wish to apply to strike out the statement of claim, they shall do so by no later than on 28 March 2006 and will list such application for hearing on 4 April 2006, to be heard with the other applications to be heard that day.
  1. Subject to the determination of any application referred to in paragraph 4:

(a)The defendants file and serve their defences by 29 May 2006;

(b)The plaintiff file its reply by 29 July 2006;

(c)Alternatively to (a) and (b) any party have liberty to apply to the court for further directions.             

  1. Any re-listing of the adjourned application for security for costs or reserved costs to be heard on 5 days notice.
  1. By 29 June 2006 the defendants construct and agree, where possible upon the joint retainer of experts.
  1. By 6 July 2006 each party is to identify:

(a)The expert witnesses in relation to whom reports will be delivered;

(b)The expert discipline for each such expert.

  1. The applications by the defendants for security for costs be adjourned on the basis that costs be reserved.
  1. The review dated on 12 April 2006 be vacated.
  1. There be a further directions hearing on 7 August 2006.”
  1. Counsel for the plaintiff pointed particularly to Order No. 2, which provided for a timeframe within which the defendants had liberty to apply for further security for costs.
  1. In his written outline of submissions, counsel for the first and second defendants provided a comprehensive chronology of this proceeding. It is unnecessary for present purposes to repeat the detail of that chronology. It is apparent, even on a cursory review of the chronology, that a great deal of water has flowed under the bridge since the order made by Atkinson J. In particular, the plaintiff has amended its statement of claim on numerous occasions, including the filing, on 16 October 2008, of its fifth amended statement of claim. Counsel for the plaintiff properly conceded that after the plaintiff changed representation consequent upon a second successful strikeout of its pleadings (which occurred in 2007), the case which it then pleaded and framed “altered significantly”, and that “many of the issues which had been pleaded were abandoned and the measure of damages was significantly altered”.
  1. I do not regard the order made by Atkinson J as operating to preclude the exercise of the discretion in the present case. The plaintiff’s real complaint is that a significant period of time has elapsed even since the defendants have known of the revised formulation of the plaintiff’s case, and that during this period the plaintiff has itself spent a huge amount of money prosecuting the case (including on experts it has retained). It was submitted that, although the pleading has changed considerably, it cannot be doubted that the defendants must have known “for years” that they had been incurring considerable costs and that they would inevitably incur much more to take this to trial.
  1. Even allowing for the force of those submissions, it must also be noted that the progress of the proceeding, by and large, has been sporadic, and that much of the procedural effort over the years even since the order made by Atkinson J has been devoted to formulation and articulation of the respective cases of the plaintiff and the defendants. It is also clear on the material before me that much work remains to be done, including by the collation and finalisation of experts’ reports, to have this matter ready for trial. In all the circumstances, I do not consider that the bringing of these applications at this point in time, in the context of the extended and extensive history of the proceeding, is such as to constitute delay which would prejudice the exercise of the discretion to make an order for the provision of further security for costs.
  1. Each of the applicants has filed an affidavit by Mr Graham Robinson, barrister at law, in which Mr Robinson makes an estimate, confirmed by detailed workings, of the standard costs incurred by each of the applicants to date and the standard costs which it can be anticipated will be incurred by the applicants up to the first day of trial. Mr Robinson is a highly experienced barrister who has practised extensively in the costs field. In round figures, his estimates are that the standard costs to be incurred by each of the applicants up to and including the first day of trial will be in the order of $850,000.
  1. The respondent plaintiff’s solicitor provided a critique of Mr Robinson’s analysis. With respect, however, that critique was subjective, including subjective assertions as to disputing the periods of time which should be allowed for expert evidence to be prepared for trial.
  1. In Aqua Blue (Noosa) Pty Ltd v Soil Surveys Engineering Pty Ltd & Ors,[5] I observed[6] that a judge hearing an application for security for costs should not be required to engage, in effect, in some sort of anticipatory assessment of costs.  An appropriate “broad brush approach” to fixing the amount of security calls for consideration of a number of matters, including:

(a)the chance of the matter settling or collapsing before trial;

(b)the fact that the Court does not set out to give “a complete and certain indemnity” to a defendant;  and

(c)the necessity for a judge to rely on the “feel” of the case after considering relevant factors.[7]

  1. As is apparent from the order of Atkinson J, the plaintiff has already provided security for the first and second defendants’ costs in the sum of $120,000 and security for the fourth defendant’s costs in the sum of $100,000. As I have already observed, this is a large and complex piece of litigation. The defendants will undoubtedly be put to significant expense in preparing for trial. In my opinion, having regard to the matters to which I have referred, it is appropriate to order that the plaintiff provide, in addition to the security ordered by Atkinson J, further security for the first and second defendants’ costs in the sum of $500,000 and further security for the fourth defendant’s costs in the sum of $500,000.
  1. The plaintiff submitted that, were the Court minded to order security, it would be appropriate in this case for such security to be provided by the plaintiff granting mortgages over certain of the properties which are the subject of the proceedings. The property which the plaintiff would make available as security is described as Lot 4, which comprises penthouses 1 – 3 and the manager’s unit in the complex.  There is some evidence to suggest that this property, in a defect-free and complete state, would have a value in the order of $3,375,000. 
  1. The difficulty with the proposition is that it is clear, on the evidence, that the buildings are far from “defect-free and complete”. They are not only incomplete, they are bare shells. Some estimates have been offered as to the value of the works which would need to be undertaken in order to bring the property to a “defect-free and complete” state, but importantly there is no suggestion that the rectification and completion will occur before the property is provided as security. In short, it would seem the suggestion is that the property should be taken as security in its present state on the basis that if and when the defendants need to realise on that security for the purposes of recovering on any costs orders then the value of rectification and completion will be taken into account when realising the property at that point. That seems to me to be a completely unsatisfactory basis for the provision of security for costs, and is likely to lead to more problems in the future than it presently solves.
  1. Accordingly, I am of the view that, as is conventional, the form of order should be that the security for costs be in a form satisfactory to the Registrar.
  1. Finally, there is the question of timing of provision of this security. The respondent plaintiff invokes the fact that a mediation of the proceeding is shortly to be conducted. Given the stage that the proceedings have reached, and the relative imminence of the mediation, I do not think it would be constructive for the respondent plaintiff to be ordered to put up any further amounts by way of security for costs before the mediation is conducted in early June 2012. The appropriate approach, in my view, is to order in each case that the further security of $500,000 be made available in two instalments, namely:

(a)$250,000 by 30 June 2012, and

(b)$250,000 by 30 days prior to the first day of trial.

  1. This is a variation on the approach adopted by White J in Iron Gates Pty Ltd v Richmond River Shire Council.[8]  It seems to me, however, that this outcome appropriately balances the prospect of the action settling at mediation, or otherwise prior to trial, with the necessity to ensure that the security for costs, in the quantum that I have ordered, is in place well prior to the commencement of trial.
  1. Accordingly, there will be the following orders:
  1. The plaintiff provide, in a form satisfactory to the Registrar, the following further security for the first and second defendants’ costs, namely:

(a)$250,000 by 30 June 2012; and

(b)$250,000 by not later than 30 days prior to the first day of trial.

  1. The plaintiff provide, in a form satisfactory to the Registrar, the following further security for the fourth defendant’s costs, namely:

(a)$250,000 by 30 June 2012; and

(b)$250,000 by not later than 30 days prior to the first day of trial.

  1. The costs of and incidental to each of the applications be reserved.

Footnotes

[1] [2010] QSC 280.

[2] [2006] QSC 141 at [36].

[3] Kilmac Investments Pty Ltd v NHLS & Co Ltd [2008] QSC 240, per Martin J at [8].

[4] (2006) 202 FLR 270 at [39].

[5] (2010) QSC 176.

[6] At [41].

[7] Bryan E Fencoot & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 515.

[8] [2006] QSC 141.

Close

Editorial Notes

  • Published Case Name:

    UI International Pty Ltd v Interworks Architects Pty Ltd & Ors

  • Shortened Case Name:

    UI International Pty Ltd v Interworks Architects Pty Ltd

  • MNC:

    [2012] QSC 142

  • Court:

    QSC

  • Judge(s):

    Daubney J

  • Date:

    30 May 2012

Litigation History

No Litigation History

Appeal Status

No Status