Logan Control Systems Pty Ltd v Barlina Pty Ltd
[2004] QDC 410
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- Unreported Judgment
- Logan Control Systems Pty Ltd v Barlina Pty Ltd[2004] QDC 410
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Logan Control Systems Pty Ltd v Barlina Pty Ltd[2004] QDC 410
Logan Control Systems Pty Ltd v Barlina Pty Ltd[2004] QDC 410
DISTRICT COURT OF QUEENSLAND
CITATION: | Logan Control Systems Pty Ltd v. Barlina Pty Ltd [2004] QDC 410 |
PARTIES: | LOGAN CONTROL SYSTEMS PTY LTD (Respondent/Plaintiff) v. BARLINA PTY LTD (Applicant/Defendant) |
FILE NO/S: | BD1700 of 2004 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court Brisbane |
DELIVERED ON: | 3 September 2004 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 13 August 2004 |
JUDGE: | Tutt DCJ |
ORDER: |
|
CATCHWORDS: | Security for costs – “competing considerations” to an application. Corporations Act 2001 (Cth) s 1335(1). Uniform Civil Procedure Rules 1999 r 670(1). Harpur v. Ariadne Australia Ltd (1984) 2 Qd.R. 523 Harpur & Ors v. Ariadne Australia Pty Ltd & Ors [1995] QCA 221 (unreported 7/4/95). Natcraft Pty Ltd & Anor v. Det Norske Veritas & Colley [2002] QCA 241. Sir Lindsay Parkinson & Co Ltd v. Tripland Ltd (1973) QB 609. |
COUNSEL: | Mr I Erskine for the applicant/defendant. Mr A Collins for the respondent/plaintiff. |
SOLICITORS: | Stockley Furlong Lawyers for the applicant/defendant. Slingsby’s Lawyers for the respondent/plaintiff. |
- [1]This is an application by the defendant in the proceeding for an order that the plaintiff in the proceeding provide security for the defendant’s costs of the plaintiff’s claim pursuant to r. 670(1) of the Uniform Civil Procedure Rules 1999 (“the UCPR”) and s. 1335(1) of the Corporations Act 2001 (Cth) (“the Act”).
- [2]The court’s jurisdiction to order the plaintiff to give security for the defendant’s costs of a proceeding is governed by Chapter 17 part 1 of the UCPR and s. 1335 of the Act.
- [3]Rule 671 of the UCPR sets out the criteria of which the court must be satisfied before making an order that a plaintiff give security for costs and for present purposes r. 671(a) is relevant which provides:
“A court may order a plaintiff to give security for costs only if the court is satisfied –
- (a)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.”
- [4]Section 1335 of the Act relevantly provides:
“(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.
- (2)The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.”
Counsel’s Submissions
- [5]The applicant’s counsel submits that the plaintiff company’s (respondent to the application) paid up share capital is $2, being two ordinary class fully paid shares of $1 each, and that despite being requested to do so, the respondent’s directors have not offered security or financial support to the company, nor have they put any evidence before the court as to the respondent’s financial capacity to meet any adverse order for costs.
- [6]Essentially the applicant submits that in the circumstances the court should reasonably infer that the respondent is not of any substance and that it is appropriate that it gives security for the applicant’s costs in defending the respondent’s claim.
- [7]The respondent’s counsel opposes the application on a number of grounds, including:
- (a)the applicant’s delay in bringing the application at a late stage of the proceedings;
- (b)that it would be prejudicial to the respondent and frustrate the litigation;
- (c)that the respondent’s case is a strong one; and
- (d)that generally the application for security for costs is a “delaying tactic” to stifle the respondent’s claim.
“Competing considerations”
- [8]There are a number of discretionary factors set out in r. 672 of the UCPR to which the court may have regard in deciding whether security for costs should be given, some of which have been referred to in the applicant’s submissions before the court.
- [9]The ultimate decision is entirely in the court’s discretion and “there is no burden one way or another. It is a discretion to be exercised in all the circumstances of the case”. See Sir Lindsay Parkinson & Co Ltd v. Tripland Ltd (1973) QB 609 cited with approval in Harpur v. Ariadne Australia Ltd (1984) 2 Qd.R. 523 at 529 per Connelly J.
- [10]All authorities on the point in one way or another refer to “competing considerations” in considering the question: see Natcraft Pty Ltd & Anor v. Det Norske Veritas & Colley [2002] QCA 241 and the various authorities referred to therein.
- [11]A significant factor in the favourable exercise of a court’s discretion to an applicant for security for costs must necessarily be the likely ability of the respondent to pay the applicant’s costs of successfully defending the proceeding and in the court’s consideration of this significant factor the court must have regard to a number of matters which are succinctly summarised in r. 672 of the UCPR.
- [12]It would seem that an order will be made if it can be shown by an applicant that there is a real likelihood that it would have considerable difficulty in recovering its costs were it to be successful in the proceeding: see Harpur & Ors v. Ariadne Australia Pty Ltd & Ors [1995] QCA 221 (unreported 7/4/95).
- [13]While on its face the nature of the respondent’s claim in this action is a relatively simple one of a claim for monies owing pursuant to an agreement which is Exhibit “A” to the affidavit of Maree Ann Slingsby filed with leave on 13 August last the defence raises a number of issues quite apart from its counter-claim which will no doubt be the subject of much debate at trial. Consequently, while the respondent has a genuine claim and is entitled in its view to be optimistic in respect of its prospects of success there is no certainty of success in litigation and the applicant is likewise well entitled to pursue the application presently before the court.
- [14]A very simple way for a respondent to resist an application such as this is to place before the court adequate material of its financial standing from which it may be reasonably inferred that an applicant’s apprehension as to its being able to recover its costs from the respondent is misplaced.
- [15]In this matter the respondent has chosen not to place any evidence before the court as to its financial standing and thereby leaves itself open to the conclusion that it would not be able to meet any adverse costs order from its own resources.
- [16]The respondent’s counsel conceded this inference during the course of argument and essentially submitted that the respondent’s opposition to any order was the applicant’s delay in bringing the application.
- [17]The timing of these applications in the course of a proceeding is a very relevant factor for the court to take into account as was discussed in Natcraft (supra).
- [18]I am of the opinion that this current application can be distinguished from Natcraft in that it would seem that there are still a number of disclosure issues to be resolved between the parties before the request for trial date can be signed.
- [19]I do not accept therefore that the application should be refused on this ground.
- [20]Having regard to all of the discretionary factors referred to in r. 672 of the UCPR and those matters referred to in Natcraft by Jerrard JA as being relevant to these applications, I am of the opinion that the respondent should be required to give security for the applicant’s costs of and incidental to the proceeding and I order accordingly.
Quantum
- [21]The respondent’s solicitor has deposed that his estimate of his client’s costs “… on a party and party basis up to and including the first day of the hearing …” will amount to the total sum of $44,750, details of which are contained in his affidavit filed 13 July 2004, although on my arithmetic the sum of the amount set out in para. 6(b) of his affidavit is $42,750.
- [22]In any event, I am of the opinion that those estimates are far in excess of what might be considered reasonable taking into account the nature of the matter and the evidence likely to be adduced, even allowing for potential overseas witnesses whose evidence may be provided in a number of more economical ways than personal attendance if required. I note for example that the estimate of expert witness fees alone amounts to the sum of $22,900.
- [23]On reviewing all the material I am of the opinion that a reasonable amount for which the respondent should be required to give security for the applicant’s costs is the sum of $20,000 as I am also of the view that the estimate of the duration of the trial of this matter of seven (7) days is similarly extravagant.
- [24]At the hearing it was indicated by counsel for both parties that if I were of the view that security for costs should be given then it may be in the form of a guarantee from the directors or relevant officers of the respondent company rather than the payment of a sum of money, and I intend to order that the security be given in that form.
Orders
- [25]I therefore make the following orders:
- The respondent give security for costs in the sum of $20,000;
- Such security can be satisfied by the respondent at its election providing a guarantee by the director(s) of the company to the applicant for security for costs in the sum of $20,000 in such form as the applicant and respondent may agree or failing agreement, in the form satisfactory to the Registrar;
- The proceeding is stayed until the respondent complies with the order for security of costs herein.
- [26]The applicant further seeks an order for its costs of this application, and as there would not appear to have been any attempt by the respondent to negotiate on the question of security, notwithstanding that the amount sought was in my view excessive, I am further of the opinion that it is reasonable that the respondent pay the applicant’s costs of and incidental to the application and I order accordingly.