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Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential[2017] QCAT 424

Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential[2017] QCAT 424

CITATION:

Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550 [2017] QCAT 424

PARTIES:

Ultimate Property One Management Pty Ltd

(Applicant)

v

Body Corporate for the Pivotal Point Residential CTS 33550

(Respondent)

APPLICATION NUMBER:

OCL031-16

MATTER TYPE:

Other civil dispute matters

HEARING DATE:

2 November 2017

HEARD AT:

Brisbane

DECISION OF:

Senior Member Brown

DELIVERED ON:

22 November 2017

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The application for security for costs is refused.
  2. The parties are to file and exchange any submissions on the costs of the application by 4:00pm on 30 November 2017.
  3. The submissions:
  1. Must not exceed three (3) pages in length;
  2. Must address the assessment and fixing of costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – PROCEDURE – where the Queensland Civil and Administrative Tribunal may make an order for security for costs – where s 109 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) considered – where the Tribunal considers the financial circumstances of the parties – where the Tribunal finds that the claim has reasonable prospects of success – where the Tribunal considers the prospects of success or merits of the proceeding – where the Tribunal considers the genuineness of the proceeding – where the Tribunal considers delay in bringing the application for security for costs  – where the Tribunal considers as a relevant matter the prospects of an order for costs being made pursuant to s 102 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) – where the Tribunal finds that no order for security for costs should be made

Body Corporate and Community Management Act 1997 (Qld) Chapter 3, Part 2, Division 4

Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld)

Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 102(3)(b), 102(3)(c), s 109(1), s 109(2), s 109(4), s 109(4)(a)

Uniform Civil Procedure Rules 1999 (Qld) r 681(1), r 671, r 672(b)

Bell Wholesale Co Pty Ltd v Gates Export Corp (No 2) (1984) 2 FCR 1

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225

Greg Black Constructions Pty Ltd v Brodie and Anor [2011] QCAT 671

Hapisun Pty Ltd v Rikys & Moylan Pty Ltd [2013] VSC 730

Hyperion Technology Pty Ltd v Queensland Motorways Ltd [2013] QSC 20

Jazabas Pty Ltd v Haddad [2007] NSWCA 291

LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QCA 305

Prime Forme Cutting Pty Ltd v Baltica General Insurance Co (1990) 8 ACLC 29

Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412

Tamawood Ltd & Anor v Paans [2005] QCA 111

APPEARANCES:

 

APPLICANT:

Mr Kidston of Counsel instructed by Mahoneys

RESPONDENT:

Mr Thomas of Counsel instructed by MBA Lawyers

REASONS FOR DECISION

  1. [1]
    Ultimate Property One Management Pty Ltd is the caretaking contractor and letting agent for Pivotal Point Residential Community Titles Scheme 33550. The respondent is the body corporate for the scheme.
  2. [2]
    The body corporate resolved to terminate the caretaking agreement and letting agreement between Ultimate and the body corporate at an extraordinary general meeting on 7 June 2016.
  3. [3]
    Ultimate commenced this proceeding on 15 June 2016. After the filing of the Application to resolve a complex dispute, and by consent, the Tribunal ordered that the body corporate be restrained from terminating or attempting to terminate the caretaking agreement and the letting agreement until the determination of the proceeding, order of the Tribunal or agreement between the parties.[1]
  4. [4]
    The hearing of the proceeding is listed to proceed over five days commencing on 4 December 2017. On 13 October 2017 the body corporate filed an application for miscellaneous matters seeking orders that Ultimate’s application be dismissed on the basis of the failure by Ultimate to comply with Tribunal directions. In the alternative, the body corporate sought directions relating to the filing of further evidence by Ultimate. The body corporate also sought an order for security for costs. The application for miscellaneous matters was heard on 2 November 2017.
  5. [5]
    During the course of the hearing of the application, the body corporate abandoned the application to dismiss the proceeding by Ultimate. The application for directions in relation to the filing of further evidence was dealt with by me at the conclusion of the hearing by way of further directions progressing the matter to the hearing. The sole remaining matter for determination is the application for security for costs.
  6. [6]
    The security for costs sought by the body corporate is in an amount of $195,000. That amount is calculated by the body corporate as being its legal costs and disbursements to date totalling $148,428.14 and the estimate of its legal costs and disbursements to the end of the hearing in the amount of $47,272.50.[2] Somewhat surprisingly the body corporate placed no evidence before the Tribunal regarding the costs other than the assertions contained in an affidavit by the body corporate’s solicitor as to how the amount of security sought was calculated.

Orders for security for costs in QCAT

  1. [7]
    If, under the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (“QCAT Act”) or an enabling Act, the Tribunal may award a party’s costs for a proceeding, the Tribunal may require a party to give an applicant party security for the applicant party’s costs and may stay a proceeding or part of a proceeding until the security is given.[3]
  2. [8]
    In deciding whether to make an order for security for costs the Tribunal may have regard to any of the following matters:
    1. the financial circumstances of the parties to the proceeding;
    2. the prospects of success or merits of the proceeding or the part of the proceeding against the applicant party;
    3. the genuineness of the proceeding or the part of the proceeding against the applicant party;
    4. anything else the tribunal considers relevant.[4]

The discretionary factors for security for costs

  1. [9]
    The relevant enabling Act in this proceeding is the Body Corporate and Community Management Act 1997 (Qld) (“BCCM Act”). Unlike, for example, the Queensland Building and Construction Commission Act 1991 (Qld), the BCCM Act does not provide for the awarding of costs. Whether and to what extent costs may be awarded in the proceeding will depend upon whether the Tribunal considers it appropriate to make an order for costs pursuant to s 102 of the QCAT Act. As observed by the QCAT Appeals Tribunal in Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2):

Under the QCAT Act the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase ‘the interests of justice’ point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in s 100.[5]

  1. [10]
    The relevant starting points for considering the awarding of costs in the Tribunal on the one hand, and in the courts under the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) under the other, are quite different. Whereas in the Tribunal, the starting point is that each party must bear their own costs, the UCPR provides that the costs of a proceeding are in the discretion of the court but follow the event unless the court orders otherwise.[6] This distinction is an important one and a note of caution must be sounded when considering an application for security for costs in the Tribunal and applying relevant principles derived from authorities dealing with applications for security for costs in the courts. As was observed by the Supreme Court of Victoria in Hapisun Pty Ltd v Rikys & Moylan Pty Ltd in the context of an application for security for costs in the Victorian Civil and Administrative Tribunal:

… the fact that VCAT is, by presumption imposed by s 109 of the VCAT Act, a “no-costs” jurisdiction, means that part of any analysis of the question of whether security for costs ought to be ordered needs to include some assessment of the likelihood of whether, even if a defendant was successful in defending a claim, that an order for costs would be made in its favour.[7]

  1. [11]
    There is no threshold to be established by a party seeking security for costs under the QCAT Act as is found in the UCPR.[8] The Tribunal’s discretion to order security for costs is a broad one but it must be exercised judicially.
  2. [12]
    Before turning to a consideration of the matters relevant to the exercise of the discretion to order security for costs, I will briefly outline the submissions by the parties.
  3. [13]
    Central to the body corporate’s position is the submission that Ultimate’s failure to pay the body corporate’s costs of considering assignments of the caretaking ‘is evidence of (Ultimate’s) doubtful financial standing’.[9] The body corporate says that Ultimate has no real prospects of success and that Ultimate’s failure to comply with Tribunal directions is a strong indicator of its lack of genuineness.
  4. [14]
    Ultimate says that the body corporate has placed no evidence before the Tribunal about its ability to absorb the costs of the proceeding and that the costs will be divided between the 103 lot owners in the scheme.[10] Ultimate refers to its financial position and says that it trades profitably and has a significant surplus of assets over liabilities. Ultimate says that the proceeding does not lack merit nor is it likely to fail, that the proceeding is genuine and that it is being genuinely prosecuted.[11] 
  5. [15]
    As to the timing of the application by the body corporate, Ultimate says that it has been brought very late and that this weighs heavily against making an order for security for costs. It says that costs do not follow the event in the Tribunal and that the body corporate has made no attempt to deal with the issue of why it would be in the interests of justice for an award of costs to be made.[12]

The financial circumstances of the parties

  1. [16]
    The Tribunal may have regard to the financial circumstances of the parties in considering whether to order security for costs.[13]
  2. [17]
    It is appropriate to begin consideration of this particular s 109(4) matter by reference to the central ground of the body corporate’s application for security for costs and specifically what the body corporate says is the refusal or failure by Ultimate to pay the body corporate’s legal costs associated with the assignment of the caretaking and letting agreements.
  3. [18]
    The caretaking agreement provides for the assignment of the caretaker’s interest in the agreement, subject to the consent of the body corporate.[14] The agreement provides for the entitlement of the body corporate to require the caretaking manager pay ‘all legal costs and costs of the Body Corporate administrator incurred by the Body Corporate giving its consent’.[15] In a letter from the solicitors for the body corporate to the solicitors for Ultimate, an undertaking was sought from Ultimate in respect of the body corporate’s legal fees and administrative costs incurred in relation to the matter ‘even if the assignment does not proceed’.[16] The solicitors for Ultimate responded by email requesting ‘an estimate’ of the costs. The solicitors for the body corporate responded by email setting out the ‘Body Corporate’s estimate of legal fees in relation to the review, advise and negotiation of new agreements’ and the ‘(a)ssignment of Management Rights to the proposed Purchasers’. The solicitors for Ultimate responded by email stating that they were instructed by Ultimate ‘that it will pay the body corporate’s reasonable legal and administrative costs in relation to the new agreements and the assignment’.[17] What thereafter transpired might be seen as a consequence of a lack of clarity surrounding whether the parties had reached agreement in relation to what costs Ultimate would pay in respect of the assignment of the agreements.
  4. [19]
    The solicitors for the body corporate forwarded to Ultimate’s solicitors tax invoices for legal costs ‘with respect to the engagement of a new manager and letting agent’ and ‘with respect to the review, advice and negotiation on new management and letting agreements’.[18] The solicitors for Ultimate subsequently responded taking issue with the demand for payment of the invoices and noting that the undertaking by Ultimate was to pay Ultimate’s ‘reasonable legal and administrative costs in relation to the entering into of new agreements and an assignment of the management rights’. The solicitors for Ultimate also took issue with various items claimed in the tax invoices, noting that they related to the conduct of the present litigation. As no new agreements had been entered into and no assignment had taken place, the solicitors for Ultimate advised that the ‘demand is both premature and, in various respects, improper…’.
  5. [20]
    The body corporate subsequently gave notice to Ultimate that the outstanding legal costs would be deducted from Ultimate’s future monthly remuneration instalments. The solicitors for Ultimate responded by again noting that the undertaking given by Ultimate had not been triggered as there had been no new agreements entered into and no assignment of the agreements had taken place. Ultimate’s solicitors advised that any attempt by the body corporate to deduct any part of the remuneration payable to Ultimate would be a breach of the agreements and would result in an application to the Tribunal.[19]
  6. [21]
    It is unnecessary for me to make any determination as to the merits of the parties positions regarding the payment of the costs claimed by the body corporate and whether agreement had been reached by the parties in relation to payment of those costs. I accept that Ultimate’s refusal to pay the body corporate’s claimed legal costs arises out of Ultimate’s disputing whether such an obligation exists.
  7. [22]
    There is no suggestion that the body corporate has taken any steps to seek to recover from Ultimate the outstanding legal costs other than the various demands for payment I have referred to. The highest the body corporate seeks to put its view as to the financial position of Ultimate is that the status of Ultimate’s financial position is ‘uncertain’ and that the body corporate has a ‘genuine concern’ regarding Ultimate’s current financial position.[20]
  8. [23]
    The body corporate presents no evidence upon which the inference could be drawn, nor any submission which I accept, that the failure or refusal by Ultimate to pay the claimed legal costs forces the conclusion that Ultimate is unable to pay its debts and is unlikely to have the ability to pay any adverse costs order.
  9. [24]
    As to the financial circumstances of the applicant, the solicitor for Ultimate deposes to the applicant’s financial position.[21] The director of Ultimate, Mr Han, owns a lot in the scheme which was recently subject to a contract of sale for $550,000.00.[22] The applicant’s management rights were recently subject to a contract of sale for $710,000.00. Copies of the signed contracts are in evidence.[23] The management rights and Mr Han’s lot are encumbered to a financier to the extent of $600,000.00. The applicant is said to have a surplus of assets over liabilities of approximately $650,000.00 and is said to generate an annual profit of approximately $220,000.00. The solicitor for Ultimate deposes to the fact that the applicant has funded the litigation to date and has expended approximately $75,000.00 in legal costs to its solicitors.
  10. [25]
    Neither party addresses in their submissions whether and to what extent the assets of Mr Han and the other director of Ultimate are relevant in the determination of this application. I note that the lot in the scheme is owned by Mr Han and the other director of Ultimate, Liqiong Yang.[24] There is a mortgage registered over the lot to Suncorp Metway. There is no evidence before the Tribunal as to the extent of that encumbrance other than the affidavit by Ultimate’s solicitor.
  11. [26]
    The means of those standing behind a proceeding is a relevant discretionary factor to be considered in an application for security costs under the UCPR.[25] A person standing behind a plaintiff who is able to pay an adverse costs order will defeat the argument that an order for security for costs will stifle the proceedings.[26] Here, Ultimate’s submissions refer to the application by the body corporate as being an attempt to ‘stymie’ the proceeding.[27] This particular submission is not further expanded upon, nor was it the subject of oral submissions at the hearing of the application. Mr Han and the other director of Ultimate are guarantors under the Deed of Assignment entered into when Ultimate acquired the benefit of the agreements. Pursuant to the terms of the Deed the directors of Ultimate guarantee the payment of all loss and damage recoverable by the body corporate from Ultimate.[28] Any such loss and damage would presumably include a costs order in favour of the body corporate, assuming such an order was made by the Tribunal. There is however no suggestion by Ultimate that the directors are prepared to provide a personal undertaking in relation to an adverse costs order and, thus, step out from behind the corporate shield.[29]
  12. [27]
    In the absence of any specific submissions by the parties I do not propose to further consider the financial position of the directors of Ultimate in deciding this application.
  13. [28]
    The body corporate refers to Ultimate’s modest paid up share capital.[30] The body corporate says that if it is successful in the proceeding and the application is dismissed, the management rights will be valueless, calling into question the financial position of Ultimate.
  14. [29]
    It is common ground between the parties that the agreements are financed contracts.[31] If the body corporate is successful in the proceeding, a number of consequences are likely to immediately flow, subject to the exercise of any appeal rights and any stay of the decision. The injunction preventing the body corporate from acting upon the resolution to terminate the agreements will be lifted. The body corporate will give notice to the financier pursuant to s 126(1) of the BCCM Act. The financier is likely to start to act under s 126(2) of the BCCM Act and thereafter appoint a receiver or receiver and manager in order to undertake the sale of the management rights. None of these steps are disputed by the parties as being other than likely.
  15. [30]
    Contrary therefore to the submissions by the body corporate, success by it in the proceeding will not render the agreements valueless although there remains obvious uncertainty as to what the ultimate value of the agreements might be. The only evidence before me about value is the contract of sale for $710,000.00 which, for reasons not readily apparent from the material, did not progress to completion. If the rights under the agreements are sold for a figure in accordance with the contract of sale, then taking into consideration the indebtedness to the financier, a surplus of something over $100,000.00 would be realised to the benefit of Ultimate.
  16. [31]
    The financial circumstances of both parties, not only Ultimate, are relevant considerations in an application for security for costs. Ultimate points to the failure by the body corporate to place before the Tribunal any evidence of its ability to absorb the costs of the proceeding. Ultimate says that this is not surprising as the body corporate’s costs will be divided between 103 lot owners and the cost per owner will be insignificant.
  17. [32]
    Ultimate relies upon the decision of the Tribunal in Greg Black Constructions Pty Ltd v Brodie and Anor.[32] There, the Tribunal held when considering an application for security for costs:

Dr Brodie and Ms Holt have provided no evidence of their ability to absorb the costs of the dispute. They have not demonstrated that, like the plaintiff in the often-quoted case of Tamawood Ltd v Paans any success in the proceedings would be nullified by the costs necessarily spent in obtaining that result.[33]

  1. [33]
    In Tamawood v Paans the Court of Appeal held that:

In the absence of countervailing considerations, where a party has reasonably incurred the cost of legal representation, and has been successful before the Tribunal, it could not rationally be said to be in the interests of justice to allow that success to be eroded by requiring that party to bear the costs of the representation which was reasonably necessary to achieve that outcome.[34]

  1. [34]
    If the body corporate is successful in the proceeding and if the body corporate is successful in obtaining an order for costs and if an order for costs is made on an indemnity basis and if the assessment of costs is, or approximates to, the amount for security sought by the body corporate, and if Ultimate is not able to satisfy the costs order, the cost for each lot owner will be in the order of $1,900.00. Of course, if an order for costs is other than on an indemnity basis any assessment of costs will be less than the amount of security sought and the contribution by each lot owner, should Ultimate not pay the costs, will reduce accordingly.
  2. [35]
    The nature of a respondent party may be relevant to the exercise of the discretion to order security for costs.[35] In Prime Forme Cutting Pty Ltd v Baltica General Insurance Co it was held:

These large corporations[36] stand in no special need of care and protection. Suing and being sued is for them a normal part of this imperfect world. They can afford to pay the piper, just as they will expect to call the tune. But if one of these wealthy, powerful institutions is sued by an insolvent company, why should it be viewed as outside the policy of the security for costs provisions?[37]

  1. [36]
    The note of caution sounded in Prime Forme Cutting Pty Ltd was echoed by Daubney J in Hyperion Technology Pty Ltd v Queensland Motorways Ltd where his Honour held:

At its highest, the relative financial standing of the parties may be a factor of relevance to be weighed in the mix in an appropriate case.[38]

  1. [37]
    The body corporate is not, as was referred to in Prime Forme, a wealthy or powerful institution. It is an entity comprised of a number of individual lot owners. That any potential financial obligation that the body corporate might incur can be defrayed over the lot owners does not persuaded me that, in the present application, the financial circumstances of the body corporate is a factor to be afforded much weight.

The prospects of success or merits of the proceeding

  1. [38]
    The body corporate relied upon what is alleged to be the failure by Ultimate to satisfactorily comply with three remedial action notices (“RAN”) to resolve to terminate the agreements. Ultimate says that the RANs were not given either in accordance with the relevant Module[39] or the caretaking agreement. The RANs, says Ultimate, failed to provide with sufficient particularity the duties the body corporate said had not been carried out, the duties the body corporate said were required to be carried out in order for Ultimate to properly discharge its duties and what steps Ultimate could or should have taken to remedy the complaint. Ultimate says that the RANs complained of the contravention of obligations that did not exist, which were remedied either within the notice period or within a reasonable period, and complained of the failure by Ultimate to perform duties which required specialist skill or a skilled service contractor.[40] Ultimate says that the RANs were not valid, if they were valid then the breaches were remedied by Ultimate either within the notice period or within a reasonable time and that the body corporate is not entitled to act in reliance upon the RANs to terminate the agreements.
  2. [39]
    In its response to the Application for a complex dispute, the body corporate refers to the allegations regarding the RANs and says that the allegations in the Application merely regurgitate the same statements with respect to each RAN. The body corporate refers to broad, sweeping statements contained in the Application without any actual detail being provided. The body corporate says that the RANs contained sufficient detail to enable Ultimate to apprehend what was complained of and what was required to be undertaken by it. The response by the body corporate refers to many of the duties the subject of the contraventions referred to in the RANs being continued to be performed poorly. The response makes reference throughout to what it says is the failure by Ultimate in its application to properly particularise its claims and refers to Ultimate being required to provide further and better particulars of the various allegations contained in the Application.
  3. [40]
    It is relevant to note that an application for security for costs under the UCPR requires a consideration of the pleadings, the nature of the allegations and any relevant admissions or offers.[41] The pleadings must disclose a cause of action and the claim must be neither frivolous nor vexatious. In the Tribunal, there are no pleadings. It is therefore necessary to look to the Application and response and the statements of evidence filed by the parties.  
  4. [41]
    In my view, there is clearly a factual dispute about whether and to what extent Ultimate failed to discharge its obligations under the agreements, whether the RANs were validly given and whether the body corporate acted reasonably in relation to the circumstances giving rise to the resolution to terminate the agreements. The parties have each filed large amounts of statement evidence. A significant amount of that evidence relates to the performance by Ultimate of its obligations under the agreements including lengthy affidavit evidence by Mr Han regarding when and how he says Ultimate remedied various alleged breaches contained in the RANs.[42]
  5. [42]
    I am satisfied that the claim by Ultimate is neither frivolous nor vexatious and has reasonable prospects of success.

The genuineness of the proceeding

  1. [43]
    As I have noted, an application by the body corporate that the proceeding be dismissed was abandoned at the hearing of the application. The grounds relied upon by the body corporate in pursuing the order for dismissal pursuant to s 48 of the QCAT Act included an allegation that Ultimate was playing a ‘dead bat’ to delay the hearing.[43] The body corporate submitted that the Tribunal should infer from the manner in which Ultimate was conducting itself that it was delaying the proceeding for the improper purpose of trying to find an assignee for its obligations under the agreements.[44] In correspondence to Ultimate’s solicitors the solicitor for the body corporate referred to the ‘abuse of process’ by Ultimate in commencing the proceeding for ‘an improper purpose’ and without the intention of prosecuting its claim.[45]
  2. [44]
    Ultimate takes significant issue with the body corporate’s submissions and the allegations made regarding the motivations of Ultimate in bringing the claim. It says that both parties have delayed in complying with directions made by the Tribunal. Ultimate says that any delays on its part have not resulted in any prejudice to the body corporate. Ultimate refers to the original hearing dates in the matter having been adjourned by consent to pursue a resolution that would have rendered the proceedings otiose and would have resulted in significant costs savings to the parties. Ultimate says that this is a complex dispute, listed for a five day hearing, and that the length of time for the matter to proceed to this point is unremarkable.
  3. [45]
    Ultimate relies upon an affidavit by its solicitor, Mr Seccombe, setting out a chronology of the proceeding since May 2017. Ultimate says that preparation for the hearing in December is being undertaken.[46]
  4. [46]
    The hearing is listed to commence on 4 December 2017. The hearing dates were set following a compulsory conference on 12 May 2017. Following the conference directions were made for the filing of further statement evidence.[47] By consent, the dates for compliance with the directions for the filing of statement evidence were extended.[48]
  5. [47]
    The present application appears to have been prompted, at least in part, by Ultimate’s failure to comply with the directions to file its further statements of evidence. The body corporate was concerned that this failure would lead to the hearing being adjourned. There is no suggestion before me that the hearing might be adjourned. I am satisfied that the proceeding by Ultimate is a genuine one.

Other relevant considerations

  1. [48]
    An application for security for costs should be brought promptly and without delay. In Hyperion Technology Pty Ltd v Queensland Motorways Limited[49] Daubney J referred to the decision in Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd and the summary by Martin J of the relevant principles relating to delay in bringing an application for security for costs:
  • An application for security must be made promptly: Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1; Buckley v Bennell (1974) 1 ACLR 301 at 308; Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123.
  • It would be unfair to allow a defendant security if that defendant has stood by and allowed the plaintiff to work on its case and incur significant expense: Smail v Burton; Re Insurance Associates Pty Ltd (in liq) (1975) 1 ACLR 74 at 75; King v Commercial Bank of Australia Ltd [1921] VLR 48 at 54; Stack v Brisbane City Council (1996) 71 FCR 523 at 531.
  • Although delay is a significant factor, there is no rule requiring refusal of an application on that basis alone. It is a factor to be taken into account with other discretionary criteria. Commonwealth of Australia and Another v Cable Water Skiing (Australia) Ltd (1994) 14 ACSR 760 at 762; Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326 at 332-3 per Lee J. For example, security for future costs was awarded to the defendant in Commonwealth v Cable where there had been a delay of 4 years after the proceedings had commenced.
  • The issue of delay will weigh more significantly in some cases than others. Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd (1995) 19 ACSR 68 at 71. In Crypta Fuels Lehane J noted that the cases in which orders for security were made despite delay have usually involved one or both of two factors, those being:
  1. “…that the hearing or resumed hearing was not immediately imminent…”; and
  2. “…that there has been some forewarning: usually correspondence concerning the financial standing of those who might benefit from the success of an applicant or plaintiff, and often detailed correspondence foreshadowing an application for security for costs.” (at 71).
  • To similar effect was the statement by French J in Bryan E Fencott P/Lv Eretta P/L (1987) 16 FCR 497 at 514: “The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the court that such an order is not, in the circumstances, unfair or oppressive.”
  • In Buckley v Bennell (1974) 1 ACLR 301 at 309 Moffitt P put the matter as follows: “The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or permits substantial sums of money towards litigating its claim.” [emphasis added].
  • When determining the weight to be afforded the effect of delay, the following issues need to be considered:
    1. is there an explanation for the delay and, if so, what is its weight? (Bailey v Beagle Management Pty Ltd (2001) 105 FCR 136 at 144; where the length of the proceedings was not foreseen when they commenced (Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 308); Thirteenth Corp Pty Ltd v State (2004) 50 ACSR 425; James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442 at 446; Stack v Brisbane City Council (1996) 71 FCR 523 at 532; per Drummond J.)
    2. the level of prejudice caused to the plaintiff if required to lodge security at a late stage (Rhema Ventures Pty Ltd v Stenders [1993] 2 Qd R 326 at 333)
    3. the timing of the application for security (James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442).[50]
  1. [49]
    The Application by Ultimate for a complex dispute was filed on 15 June 2016. The hearing dates were set in May 2017. The application for security for costs was filed on 13 October 2017. The delay in bringing in the application is explained by the body corporate by reference to Ultimate’s failure to pay the body corporate’s costs associated with the proposed assignment of the agreements. I have found that the refusal by Ultimate to pay the costs arises out of its disputing an obligation to pay those costs. The assertion by the body corporate that Ultimate’s financial position is ‘uncertain’ does not, in my view, adequately explain the delay in bringing the application. The hearing dates have been set and are imminent. The matter was listed for hearing some 5 months prior to the present application.
  2. [50]
    I accept that there is likely to be significant prejudice to Ultimate if it is required to lodge security in the amount claimed at this very late stage of the proceeding. The lateness of the application means that significant costs have been incurred by Ultimate. In my view the delay by the body corporate in bringing the application weighs against an order for security for costs. 
  3. [51]
    A further consideration relevant to the exercise of the discretion to order security is the likelihood of a costs order. As I have observed, any determination of costs in the proceeding will be in accordance with the provisions of the QCAT Act. An order for costs in favour of the successful party is by no means a certainty and the strong contra-indication against orders for costs will be the general starting point. Having said this, the nature and complexity of the dispute may be factors relevant to an order for costs.[51] The relative strengths of the claims made by each party may also be a relevant consideration depending upon the findings made by the Tribunal at the conclusion of the hearing.[52]
  4. [52]
    The amount sought by way of security by the body corporate is calculated on an indemnity basis, to the end of the hearing.
  5. [53]
    The circumstances which might give rise to an order for indemnity costs were identified by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd.[53] As was noted in Colgate-Palmolive, the question is whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. The justification for an award of indemnity costs requires some special or unusual feature of the particular case.[54] I am unable to conclude on the material before me in this application, whether there is any prospect of the body corporate securing an order for costs on an indemnity basis. There is otherwise no evidence before me as to an assessment of what costs might be recoverable by the body corporate should it be successful in the proceeding and should it be successful in being awarded costs. Indeed there is scant evidence before the Tribunal that would support an assessment of an appropriate amount to be ordered by way of security assuming such an order. The only evidence before the Tribunal regarding the costs is contained in the affidavit by the body corporate’s solicitor. Mr Donnelly deposes to the body corporate’s legal costs and disbursements to date as totalling $148,428.14.[55] The relevant itemised tax invoices supporting this assertion are not in evidence. Mr Donnelly deposes to the estimated further legal costs and disbursements to the end of the hearing totalling $42,975.00.[56] Mr Donnelly deposes to, among other things, his hourly professional charge out rate in estimating the further legal costs. There is no evidence before the Tribunal to support the estimate deposed to by Mr Donnelly by way of, for example, the costs agreement between the body corporate and its solicitors. There is no independent assessment of the legal costs and disbursements incurred to date and the estimate of future legal costs and outlays prepared by a legal costs assessor. 
  6. [54]
    The body corporate might, if successful in the proceeding, be awarded costs. I am unable to form a view one way or the other as to the prospects of the body corporate being awarded costs on an indemnity basis. There is no evidence before me as to what the body corporate’s costs might be if assessed on the standard basis. It seems likely that any assessment of standard costs of the proceeding will be less than the amount sought by the body corporate by way of security, perhaps significantly less. As I have observed, there is scant probative evidence to support the amount of the costs sought by way of security. The possibility of a costs order being made in favour of the body corporate if it is successful is a relevant consideration but for the reasons I have given is not determinative of the application for security of costs.

Conclusion

  1. [55]
    Whilst I am of the view that a costs order might be made in favour of the body corporate if it is successful in the proceeding, I am not persuaded that the body corporate has demonstrated that Ultimate will be unable to satisfy any adverse costs order. The quantum of any possible adverse costs order is uncertain to say the least. If costs are awarded in favour of the body corporate on a standard basis, the assessment of those costs is likely to be less than the amount sought by way of security. Ultimate has an asset in the form of the rights under the agreements that will be dealt with by the financier in the manner I have outlined if the body corporate is successful in the proceeding. On the evidence before me the realisation of that asset upon its sale (for an amount approximating the sale price under the contract in evidence) by the financier, even taking into consideration the amount to be repaid to the financier, would leave Ultimate with a significant nett sum. The delay by the body corporate in bringing the application also tells against granting the order for security. The matter is listed for hearing next month. Ultimate has incurred significant costs in progressing the matter to a hearing. It would, in my view, be oppressive and unfair to order security at this late stage. There is nothing before me to suggest that the proceeding has been brought for an improper purpose or that the proceeding is not genuine. I am satisfied that the Application for a complex dispute by Ultimate is neither frivolous nor vexatious.
  2. [56]
    Weighing all of the relevant considerations, I conclude that no order for security for costs should be made. The application for security for costs is refused. I will make orders for the filing and exchange of submissions on the costs of the application.

Footnotes

[1] Decision, 28 October 2016.

[2] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, at [53]-[54].

[3] QCAT Act, s 109(1) and (2).

[4] Ibid, s 109(4).

[5] [2010] QCAT 412, 5 [29].

[6] UCPR, r 681(1).

[7] [2013] VSC 730.

[8] UCPR, r 671.

[9] Respondent’s submissions at [31].

[10] Applicant’s submissions at [30].

[11] Ibid at [31]-[33].

[12] Ibid at [34].

[13] QCAT Act, s 109(4)(a).

[14] Caretaking Agreement at 6.1 and 6.2.

[15] Ibid at 6.3.1.4.

[16] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, exh RBD-10.

[17] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, exh RBD-11.

[18] Ibid, exh RBD-12.

[19] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, exh RBD-12.

[20] Affidavit of Rhys Brian Donnelly sworn 13 October 2017 at [40]–[41].

[21] Affidavit of Ben Seccombe sworn 2 November 2017.

[22] Ibid, 18.

[23] Ibid, exh BWS-1.

[24] Ibid – Current Title Search 2 November 2017.

[25] UCPR, r 672(b).

[26] Bell Wholesale Co Pty Ltd v Gates Export Corp (No 2) (1984) 2 FCR 1.

[27] Applicant’s submissions at [35].

[28] Deed of Assignment dated 28 August 2014 at 14.2(b).

[29] Jazabas Pty Ltd v Haddad [2007] NSWCA 291.

[30] ASIC search 2 November 2017.

[31] BCCM Act, Chapter 3, Part 2, Division 4.

[32] [2011] QCAT 671.

[33] Greg Black Constructions Pty Ltd v Brodie and Anor [2011] QCAT 671, 3 [7].

[34] Tamawood Ltd & Anor v Paans [2005] QCA 111, 12-13 [33].

[35] Jazabas Pty Ltd v Haddad [2007] NSWCA 291.

[36] Referring to financial institutions, engineering and construction companies, newspaper proprietors, public authorities and other powerful companies in litigation prone sectors.

[37] (1990) 8 ACLC 29.

[38] [2013] QSC 20, 11 [25].

[39] Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld).

[40] Application for a complex dispute at [6]–[8].

[41] UCPR, r 672(b).

[42] Affidavit of Shengping Han filed 18 October 2016.

[43] Respondent submissions at 24(c).

[44] Application for Miscellaneous Matters filed 13 October 2017.

[45] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, exh RBD-07.

[46] Affidavit of Ben Seccombe sworn 2 November 2017.

[47] Directions made 12 May 2017.

[48] Directions made 14 July 2017.

[49] [2013] QSC 20.

[50] Hyperion Technology Pty Ltd v Queensland Motorways Ltd [2013] QSC 20, 6-7 [15] citing Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2007] QSC 262, 5-7 [27]-[28]. 

[51] QCAT Act, s 102(3)(b).

[52] Ibid, s 102(3)(c).

[53] (1993) 46 FCR 225.

[54] LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QCA 305.

[55] Affidavit of Rhys Brian Donnelly sworn 13 October 2017, at [53].

[56] Ibid at [54].

Close

Editorial Notes

  • Published Case Name:

    Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential CTS 33550

  • Shortened Case Name:

    Ultimate Property One Management Pty Ltd v Body Corporate for the Pivotal Point Residential

  • MNC:

    [2017] QCAT 424

  • Court:

    QCAT

  • Judge(s):

    Senior Member Brown

  • Date:

    22 Nov 2017

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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