Noosa Retail v Ritter[2008] QDC 258

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   In 2000 Mr. Ridley and Mr. Ritter agreed to open and operate a retail clothing store in Hastings Street Noosa. The plaintiff company was formed for that purpose. The business operated until 2006 with Mr. Ritter essentially responsible for the day to day running of the shop and Mr. Ridley’s company providing stock and expertise. The claim before the Court concerns the nature of certain payments made by the plaintiff to Mr. Ritter during the period Mr. Ridley now controls the plaintiff; Mr. Ritter having resigned as a director. Essentially Mr. Ridley (on behalf of the plaintiff) alleges that pursuant to an agreement he made with Mr. Ritter, certain expenses and monies lent in (approximately) monthly payments to Mr. Ritter of $2000 from December 2001 to April 2006 are now owing by Mr. Ritter to the company. Mr. Ritter disputes the terms of the agreement and denies that any expenses paid by the plaintiff are owing, and alleges that the monthly payments were in fact for wages.

2. [2]
   The claim was lodged in October 2006 and pleadings closed with the filing of a Reply on 15.12.06. On 21.5.08, the plaintiff filed an Amended Statement of Claim which did vary considerably from the earlier pleading in a number of respects.

The present dispute

3. [3]
   There are three applications to be determined. The first chronologically is the plaintiffs application for disclosure filed 19.9.08. This has been resolved except as to costs. The second is the plaintiff’s application filed 23.9.08 which (in effect) seeks to hold Mr. Ritter to some alleged deemed admissions made in an Amended Defence filed 23.6.08. Finally there is Mr. Ritter’s application filed 23.9.08 for security for costs. I will deal with each in that order.

The Disclosure Application

4. [4]
   Mr. Webb (solicitor for Plaintiff) filed an affidavit in support of his client’s application on 19.9.08. He says that Lists of Documents were exchanged in 2007 (obviously relating to the original pleadings). Mr. Ritter’s List self-evidently does not disclose taxation returns or superannuation contributions for the relevant period. In 2008, supplementary lists (as a result of the amended pleadings) were exchanged, and again Mr. Ritter’s List did not refer to these documents. Mr. Webb made it clear in a number of letters that he required these documents to be provided, and Mr. Cogill (solicitor for Mr. Ritter) made it clear that he regarded these documents as irrelevant and therefore not disclosable.

5. [5]
   Given that Mr. Ritter alleges that the $2000 monthly payments were wages and not a loan from the company, the documents sought by Mr. Webb were clearly relevant and disclosable. Mr. Cogill concedes that he was wrong. The documents that are available have now been disclosed and copies provided, so the plaintiff no longer needs an order.

6. [6]
   This leaves the issue of costs. The plaintiff says that Mr. Cogill’s incorrect refusal to disclose relevant documents left it with no choice but to apply to the Court, and Mr. Turnbull (Counsel for the plaintiff) submits that the plaintiff is entitled to its costs. Mr. Ritter argues that the filing and pursuit of the application for disclosure was unnecessary in light of the belated concessions made by Mr. Cogill.

7. [7]
   On the 8.9.08, Mr. Webb wrote to Mr. Cogill and advised that unless the documents were supplied by 10.9.08, an application would be filed. Up until then, Mr. Cogill had consistently maintained that the documents were irrelevant and would not be disclosed. Mr. Webb deals with this correspondence in paragraph 26 of his affidavit. He then says in paragraph 27:

“As at the date of swearing this Affidavit, the Defendant has failed and/or neglected and/or refused to provide to the Plaintiff copies of his personal taxation and superannuation records for the 2000-2001 to 2006-2007 financial years, despite repeated written demands by way of both general correspondence and by way of correspondence written pursuant to Rule 444 of the UCPR.”

8. [8]
   The affidavit was sworn on 16.9.08, and it and the application for disclosure were filed on the 19.9.08.
9. [9]
   In a letter dated 27.8.08 (which is annexed to Mr. Webb’s affidavit at p. 54), Mr. Cogill, in responding to Mr. Webb’s r 444 letter says this (inter alia):

1. “1.The Defendant admits that he has not provided or disclosed the documents listed in your letter of 21^st August 2008 as they are not relevant to the proceeding.
2. 2.The defendant admits that the amounts paid to him or alleged to have been paid to him in this proceeding are not included in the documents listed in your Rule 444 letter.”

10. [10]
    What is not disclosed in Mr. Webb’s affidavit is a letter from Mr. Cogill dated 10.09.08 in which he says this (inter alia):

“We refer to your letter of 8^th September 2008.

As we have stated previously, we are of the view that the admission by our client that amounts received by him from your client were not included in his taxation and superannuation documents, makes those documents irrelevant.

……

As for the disclosure of our client’s taxation and superannuation documents, whilst our view remains as set out above, we are instructed that our client does not physically hold copies of those documents. He could not therefore produce those documents to you in the time requested.

We have been instructed to contact our client’s Accountant to ascertain the whereabouts of those documents and upon confirmation of their whereabouts to seek our client’s further instructions to provide those to you for the purposes only of avoiding the cost and inconvenience to the parties of an Application for their production.

We contacted our client’s Accountant by telephone yesterday to be advised that he is on holiday until Sunday, 19^th September 2008. We seek and extension of time in which to reply to your letter until 26^th September, 2008 so that we may ascertain the whereabouts of the documents and seek our client’s further instructions regarding their provision to you.”

11. [11]
    In light of this letter it is clear that Mr. Cogill was very much having second thoughts about his original position. It was therefore not fair to say that as of the 16^th September Mr. Ritter had “failed and/or neglected and/or refused to provide (copies of the documents)”.

12. [12]
    On 26^th September Mr. Cogill wrote to Mr. Webb advising that the accountant:

“…will be able to advise by next Friday, 3^rd October 2008, which of the documents that you have requested he holds.

Upon receipt of that information, we will take our client’s further instructions and advise you accordingly.”

13. [13]
    The application was served on Mr. Cogill by fax and post on 29^th September 2008.

14. [14]
    On 3^rd October, he wrote again to Mr. Webb and (not surprisingly in light of his letters of the 10^th and 26^th September) he took issue with paragraph 27 of Mr. Webb’s affidavit.
15. [15]
    With that letter he included a copy of a letter from Mr. Ritter’s accountant and copies of his clients’ 2002, 2003, 2006 and 2007 returns.

16. [16]
    He concluded by saying:

“We are of the view that your Application was premature.

We are of the view that that Application can now be disposed of by Consent, with no Order as to costs. We invite you to provide that Consent Order for our consideration.”

17. [17]
    Mr. Webb responded on 8 October 2008 and there was further correspondence from Mr. Cogill.

18. [18]
    In my view, the filing of the application was premature in light of the contents of Mr. Cogill’s letter of the 10^th September. Mr. Webb should have disclosed that letter in his affidavit of the 16^th September.  Mr. Cogill should have clearly and unequivocally acknowledged then and earlier, the relevance of the documents and advised his client to disclose them. Mr. Webb should have accepted Mr. Cogill’s proposal that the application be dismissed with no order as to costs.

19. [19]
    I order the plaintiff to pay the defendants costs of the disclosure application but limited to his costs of and incidental to the hearing on the 17.10.08.

20. [20]
    To make it clear, I intend the defendant to have his costs related to the hearing which would include preparation for the hearing, Mr. Cogill’s affidavit filed 15.10.08, and Counsel and Solicitor’s fees of the 17.10.08 appearance.

The “pleading” application

21. [21]
    Mr. Turnbull on behalf of the Plaintiff elected to proceed with this application so it is necessary for me to consider it in some detail.

22. [22]
    In the (extensively) amended statement of claim filed 21.5.08, the plaintiff alleges (in paragraph 5):

“In or about January, 2001, Ridley, as director of the Plaintiff, and on behalf of the Plaintiff, orally agreed with the Defendant, that the Defendant would be entitled to claim certain expenses from the Plaintiff on certain terms (“the Expenses”).”

23. [23]
    In its amended defence filed 23.6.08 the defendant does not specifically plead to paragraph 5 but says (at paragraph 5):

1. “5. The Defendant denies the allegation in paragraph 4 of the Amended Statement of Claim because that allegation is untrue. The Defendant alleges that allegation is untrue because:

1. At the time of the conversation referred to in paragraph 2 of the Amended Statement of Claim, the Defendant, Ridley and Ridley’s wife, Ester, had a conversation at Sandy’s Deli Hastings Street, Noosa Heads where the proposal for opening a store was first discussed.
2. At that time:

1. the Defendant and Ridley had been friends for many years;
2. had previous business dealings together;
3. the Defendant knew Ridley had considerable experience in the retail fashion industry;
4. Ridley said words to the effect – “I think that shop would make a good shop for the sale of my garments, do you want to go in as partners?” (indicating the shop known as Shop 6, Laguna on Hastings, 32 Hastings Street, Noosa Heads);
5. The Defendant said words to the effect that he did not know anything about the rag trade but it would be good for the Defendant’s wife and the Defendant would be interested;
6. Ridley said words to the effect that if they could secure that shop (meaning the shop ultimately secured for the purposes of the operation of the business and located at Shop 6, Laguna on Hastings, 32 Hastings Street, Noosa Heads Queensland), Ridley’s associated company, Alphabet Designs Pty Ltd would provide all stock in return for 50% of the takings as payment for that stock. The remaining 50% was to pay for all expenses associated with the shop;
7. Ridley indicated to the Defendant that in consideration of Ridley’s associated company providing the stock on the basis set forth in paragraph 5 b. iv) hereof, the Defendant would provide any security for any capital to commence the business. The Defendant ultimately provided a rent guarantee of $51,000.00 and security for an overdraft of $80,000.00;
8. Ridley indicated that he wished to lease a motor vehicle as an expense through the proposed new business;
9. The Defendant agreed to the matters raised by Ridley and referred to in paragraph 5 b. vi), 5 b. vii) and 5 b. viii);
10. The Defendant and Ridley further agreed the Defendant would be entitled to have his travel expenses paid for by the Plaintiff from the outset;
11. Ridley and the Defendant subsequently received expenses accordingly.”

24. [24]
    Paragraph 4 of the Amended Statement of Claim (to which this paragraph in the Defence responds) is in these terms:

“It was initially a term of both the Defendant’s and Ridley’s engagement as the directors of the Plaintiff that neither of the Defendant or Ridley would be entitled to claim any expenses from the Plaintiff for travel or otherwise, and/or that neither the Defendant or Ridley would receive a salary or other like amount from the Plaintiff.”

25. [25]
    Paragraph 6 of the Amended Statement of Claim pleads what the plaintiff says were the terms of the “expenses” agreement with Mr. Ritter. Paragraph 6 of the first Amended Defence specifically denies the allegations made in paragraph 6 of the Amended Statement of Claim in clear terms:

1. “6.The Defendant denies the allegation in paragraph 6 of the Amended Statement of Claim because the same is untrue. The Defendant repeats and relies upon the allegations set out in paragraph 5 of this Defence as being the basis upon which Ridley and the Defendant were entitled to claim expenses. The Defendant denies that there was ever any discussion of a loan or that any expenses would be repaid to the Plaintiff. The Defendant alleges that no loans were ever recorded in the books and accounts of the Plaintiff.”

26. [26]
    In paragraph 8 of the Amended Statement of Claim the Plaintiff alleges:

1. “8.In or about June or July 2001, Ridley as director for the Plaintiff, and on behalf of the Plaintiff, orally agreed with the Defendant that, as the Defendant was suffering cash flow problems, the Plaintiff would, loan to the Defendant certain monies per week from the Plaintiff’s weekly cash takings (“the Loan”).”

27. [27]
    Paragraph 9 then goes on to set out what the Plaintiff alleges were the terms of the Loan.

28. [28]
    The Defendant again did not specifically plead to paragraph 8, but says (in paragraph 8) of his amended Defence:

1. “8.The Defendant denies the allegation in paragraph 9 of the Amended Statement of Claim because it is untrue. The Defendant believes same to be untrue because:

1. Ridley and the Defendant did not ever agree that any monies paid to the Defendant would be by way of loan.
2. It was never agreed nor discussed that any money paid to the Defendant would be repaid at all or on the terms alleged by the Plaintiff.
3. On 22^nd December 1996 the Defendant lent Ridley the sum of $100,000.00. Ridley made periodic payments from that date. By 1^st September 2000, the sum of approximately $20,000.00 was still outstanding.
4. On or about the 1^st September 2000 the Defendant telephoned Ridley for the purpose of having Ridley pay the Defendant the sum of $8,000.00 on account of the moneys previously loaned by the Defendant to Ridley. Ridley uses words to the effect of take it out of Noosa Retail Pty Ltd. It was never discussed as a loan, nor was there any discussion about it being repaid or any terms of repayment. The $8000.00 was paid at the rate of $1000.00 per week from 1^st September.
5. Further, payments were made by the Plaintiff for and on behalf of the Defendant either:
   1. In accordance with agreement in accordance with paragraph 7 a) hereof; or
   2. In repayment of the debt referred to in paragraph 8 c) hereof being-

6. In or about April 2002 the Defendant again telephoned Ridley and said words to the effect that he had been working in the business of the Defendant for almost two years without taking any wages. Ridley said words to the effect of how much do you want. The Defendant said words to the effect of I need $500.00 per week. Ridley again agreed.
7. There was never any discussion about any of those moneys being paid by way of loan or repayment of those moneys on terms alleged by the Plaintiff or at all.”

29. [29]
    In its Amended Reply filed on 18 July the Plaintiff sought to rely on the deemed admission rules of pleading in the UCPR and pleaded (in paragraph 4):

1. “4.The Plaintiff adopts the implied admission by the Defendant of each of paragraphs 5 and 8 of the Amended Statement of Claim and says:

1. (a)
   That the Defendant has failed to plead a denial or non-admission in response to the allegations contained in those paragraphs of the Amended Statement of Claim; and

2. (b)
   That consequently the allegations contained in those paragraphs of the Amended Statement of Claim are deemed to be admitted pursuant to Rule 166(1) of the Uniform Civil Procedure Rules (Qld) 1999.”

30. [30]
    In response, and impliedly admitting (no pun intended)  that its original pleading did constitute an implied admission of paragraphs 5 and 8 of the Amended Statement of Claim, Mr. Ritter filed a further Amended Defence on 8.9.08 which added new paragraphs 6 and 9 in these terms respectively:

1. “6.The Defendant denies the allegation in Paragraph 5 of the Amended Statement of Claim because same is untrue. The Defendant repeats and relies upon the allegation set out in Paragraph 5 of this Defence as being the basis upon which Ridley and the Defendant were entitled to claim expenses from the Plaintiff.

…..

1. 9.The Plaintiff denies the allegation contained in Paragraph 8 of the Amended Statement of Claim because it is untrue. The Defendant believes the same to be untrue because:

1. a)
   The Defendant alleges that Ridley and the Defendant did not ever agree that any money paid to the Defendant would be by way of loan;
2. b)
   It was never agreed nor discussed that any money paid to the Defendant would be repaid at all or on the terms alleged by the Plaintiff.”

31. [31]
    Not content to leave it there, the plaintiff filed the present application along with a fat 35 page affidavit by Mr. Webb on 23.9.08. The application seeks the following orders:

“1.  A declaration that, pursuant to Rules 371 and 379 of the Uniform Civil Procedure Rules (Qld) 1999, paragraphs 6 and 9 of the Respondent/Defendant’s Amended Defence of the Defendant filed 8 September 2008 are ineffectual and disallowed and do not form part of the Respondent/ Defendant’s pleadings.

2. A declaration that, pursuant to Rules 371 and 379 of the Uniform Civil Procedure Rules (Qld) 1999, the Respondent/ Defendant has, for the purpose of these proceedings, admitted paragraphs 5 and 8 of the Plaintiff’s Amended Statement of Claim filed 21 May 2008.

3. Further and in the alternative to order 2 above, that, pursuant to Rule 171 of the Uniform Civil Procedure Rules (Qld) 1999, paragraphs 6 and 9 of the Respondent/ Defendant’s Amended Defence of the Defendant filed 8 September 2008 be struck out;

4. Further and in the alternative to order 2 above, that, pursuant to Rule 375 of the Uniform Civil Procedure Rules (Qld) 1999, the Respondent/ Defendant further amend its pleadings, by filing a Further Amended Defence, removing from the document paragraphs 6 and 9 of the Amended Defence of the Defendant filed 8 September 2008.

5. Any such further and other orders as this Honourable Court may see fit;

6. That the Applicant/Plaintiff’s costs of and incidental to this application be paid by the Respondent/Defendant.”

32. [32]
    Mr. Wilson on behalf of Mr. Ritter submits that the application is wholly unmeritorious, although he used more colourful language than that. He submits that the Amended Defence filed 23.6.08 when read as a whole does not contain implied admissions of the matters pleaded in paragraphs 5 and 8 of the amended Statement of Claim. Alternatively, he makes oral application for leave to retrospectively amend in terms of the second amended defence filed 8.9.08.

33. [33]
    The plaintiffs argument focuses on r. 166(1)(a) of the UCPR:

1. “(1)
   An allegation of fact made by a party in a pleading is taken to be admitted by an opposite party required to plead to the pleading unless--

1. (a)
   the allegation is denied or stated to be not admitted by the opposite party in a pleading”

34. [34]
    r. 188 then provides that a party may withdraw an admission made in a pleading only with the Court’s leave.

35. [35]
    The first question is, does the failure in the first amended defence to specifically deny the allegations of fact in paragraphs 5 and 8 of the amended Statement of Claim constitute an implied admission by virtue of r. 166(1)(9)?.

36. [36]
    Paragraph 5 alleges the making of an oral agreement in January 2001 between Ridley and Ritter relating to the payment of expenses, and paragraph 6 then pleads the terms of the alleged oral agreement. In the first defence, without specifically denying the allegation of fact in paragraph 5, the pleader nevertheless denies that the expenses agreement was at the time alleged or was in the terms alleged by the plaintiff by (a) referring back to the detailed pleading in paragraph 5 of the amended defence and (b) asserting that there was never any discussion of a loan or that any expenses would be repaid to the plaintiff.

37. [37]
    Paragraph 8 of the amended Statement of Claim, in a similar vein to paragraph 5 pleads the oral agreement between Ridley and Ritter that the plaintiff would lend certain monies to Ritter, and paragraph 9 then pleads the terms of the alleged oral agreement.

38. [38]
    In the first defence, without specifically denying the allegation of fact contained in paragraph 8, the pleader nevertheless specifically denies (in paragraph 8) that there was ever an agreement in terms alleged in paragraph 9. Paragraph 8(a) states :

“Ridley and the Defendant did not ever agree that any money paid to the Defendant would be by way of loan;”

39. [39]
    The pleader then goes on to plead other facts in support of the defendant’s denial of the allegations of fact in paragraph 9.

40. [40]
    It is axiomatic that the function of pleadings is to state with sufficient clarity the case that must be met: Gould v Mt. Oxide Mines Ltd (in Liq) (1916) 22 CLR 490 at 517; so as to ensure that the opposing party is not taken by surprise at trial. It is an aspect of procedural fairness. The position at common law is completely consistent with r. 149 UCPR and r. 5(2) which states as part of the underlying purpose and philosophy behind the rules “the objective of avoiding undue delay, expense and technicality.”

41. [41]
    In light of paragraphs 6 and 8 of the first amended Defence, and despite the pleaders failure to specifically deny the allegations of fact in paragraphs 5 and 8 of the Amended Statement of Claim, the plaintiff must have clearly then understood that

1. (a)
   That although Mr. Ritter  acknowledged that there was an “expenses agreement” between he and Mr. Ridley, he was asserting it was made at an earlier date and had different terms; and
2. (b)
   He was positively denying the creation of an oral loan agreement (as asserted in paragraph 8 of the amended statement of claim), and that his case was that they agreed orally in about April 2002 that Mr. Ritter would receive wages of $500 per week from then.

42. [42]
    r. 166(1) is drafted in general terms i.e. it refers to “an allegation of fact in a pleading” and does not specifically refer to allegations of fact in paragraphs in a pleading. I am satisfied that the first Amended Defence in paragraphs 6 and 8, in a practical sense, constituted a denial of the allegations of fact in paragraphs 5 and 8 of the amended Statement of Claim. It follows that amendment was not necessary and leave is not required.
43. [43]
    Mr. Wilson also sought to call in aid r. 166(7), but I have to say I think that refers to a pleading practice that I have seen on occasions, where the pleader, in one often convoluted and confusing paragraph, denies a number of allegations of fact contained in separate paragraphs in the pleading under response.

44. [44]
    Mr. Turnbull, in his submission, relied heavily on the Court of Appeal’s analysis in Ridolfi v Rigato Farms Pty Ltd [2001} 2 Qd R 455. The circumstances there were quite different. The solicitors for the Defendant had failed to respond to a Notice to Admit Facts served pursuant to r. 189(1) UCPR so, by virtue of sub-rule (2), the defendant was deemed to have admitted facts which included an admission of liability in a claim for damages for negligence in the workplace. The solicitors for the Defendant had then signed a certificate requesting a trial date and the matter was promptly listed for trial. Workcover, who stood behind the defendant, then changed its solicitors and the new solicitors foreshadowed an application pursuant to r. 189(3) for the leave of the Court to withdraw the deemed admissions. The application was made a few weeks later at the commencement of the trial and was refused on discretionary grounds. The plaintiffs solicitors had placed considerable reliance upon the deemed admissions which weighed heavily in favour of refusal. The prejudice to the Defendant in that case is obvious. No such prejudice is suggested here; nor could there be given the relatively early stage reached in the litigation. Mr. Turnbull also relied upon what he characterised as a failure by the defendant to explain by sworn evidence the reasons for the failure to plead to paragraphs 5 and 8 of the amended Statement of Claim. He relied upon a passage at p. 458-59 of the judgment of the Chief Justice:

“Asked to exercise the discretion under r. 189(3), a court would ordinarily expect sworn verification of the circumstances justifying a grant of leave. Those circumstances may include why no response to the notice was made as required, the response the party would belatedly seek to make, and confirmation that the response would accord with evidence available to be led at a trial. Here none of those matters was so verified. Issues of prejudice may also fall for consideration upon the hearing of such an application.”

45. [45]
    I must say I had difficulty comprehending the argument on this point. Mr. Cogill has explained (in an affidavit filed 15.10.08) why he overlooked specifically pleading to paragraphs 6 and 8 and he was not required for cross-examination, so his sworn evidence is uncontested. In any event, for the reasons I have expressed I have rejected Mr. Turnbull’s primary argument to the effect that as a result of the first amended defence there is an implied admission to the allegations of fact in paragraphs 5 and 8, and leave of the Court is required to withdraw the admissions pursuant to r. 188 UCPR. In my opinion, the real thrust of Ridolfi is to the effect that appeal courts will ordinarily be reluctant to interfere with discretionary rulings of lower courts on matters of practice and procedure.

46. [46]
    I will hear the parties as to the appropriate orders that should now follow. Although, as a result of my reasoning, the second amended defence is superfluous, a practical solution may be to leave it in place, however this will require the consent of both parties.

Application for Security for Costs

47. [47]
    Finally, there is the defendant’s application for security for costs which is opposed. Mr. Turnbull concedes that the Plaintiff is impecunious which enlivens the Court’s discretion to make an order: r. 671 (a); see also s. 1335 of the Corporations Act (Cth) 2001. In his submission he focussed primarily on the defendant’s delay in making the application and the defendants prospects of success. He also obliquely referred to the means of Mr. Ridley who stands behind the plaintiff.

48. [48]
    The legal principles involved in applications of this kind are well established and settled. In Harpur v Ariadne Australia Limited (No 2) [1984] 2 Qd R 523 at 532 Connelly J (at 529) said:

“For practical purposes, once the legislature has made it legitimate to regard the lack of means of the plaintiff and its likely inability to meet an order for costs, this must always be a consideration of great weight and it will frequently be the determining factor.”

49. [49]
    On the face of it, the defendant here has delayed in making its application however this fact has to be seen in context. The plaintiff filed its claim on 16.10.06 and pleadings closed with the filing of a reply on 15.12.06. There was disclosure between the parties in August-October 2007. On 12.10.07, Mr. Cogill (who was then with another firm) wrote to the plaintiff’s solicitors and (in part) sought evidence of the plaintiffs financial standing, and requested that $35,000 be paid into Court by the Plaintiff as security for costs, and foreshadowed an application if these requests were not satisfied. The plaintiff’s solicitors did not give any substantive response. On the 18^th March 2008, the plaintiff’s solicitors gave notice pursuant to r. 389(1) of the UCPR of the plaintiff’s intention to proceed after one month. The amended Statement of Claim, which significantly altered the factual basis for the claim, was filed on 21.5.08 and the matter has proceeded expeditiously since then.

50. [50]
    On the 18^th June 2008 Mr. Cogill, whose firm now acted for the defendant, wrote to the plaintiff’s solicitors, and renewed the request made in the letter of the 12^th October 2007.

51. [51]
    On the 11^th July 2008, Mr. Webb wrote to Mr. Cogill denying impecuniosity of his client and requesting details of the $35,000 estimate.

52. [52]
    Mr. Cogill then engaged Mr. Michael Graham of Graham Costs to prepare an estimate of the defendant’s costs. It is common ground that Mr. Graham is an expert in the field of legal costs assessment. Mr. Cogill informed Mr. Webb of this move in a letter dated 24^th July 2008. on the 15^th August 2008, Mr. Cogill wrote to Mr. Webb enclosing Mr. Graham’s estimate and a draft affidavit which would be filed in support of the application, and requested a response within (14) days. An extension of time was requested by Mr. Webb and granted until 8^th September 2008. There was no further response and the application was filed on 23.9.08 returnable on 17.10.08.
53. [53]
    The plaintiff’s response is contained in an affidavit sworn by Mr. Webb on 16.10.08 and filed by leave at the hearing on 17.10.08.

54. [54]
    As I have noted, Mr. Turnbull conceded impecuniosity at the outset, and concentrated in his argument primarily on the defendant’s delay, and to a lesser extent the merits of the defendant’s case. Mr. Webb’s affidavit raises other discretionary matters mentioned in r. 672 e.g. the means of those standing behind the proceeding (paragraph 32), and whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct (paragraphs 23-27), and these factors are advanced (faintly) by Mr. Turnbull in his written submission.

55. [55]
    Delay is not a factor referred to in r. 672 however it has always been a factor to be weighed in the balance in applications of this kind.: per Mullins J in Combined Property Industries (Qld) Pty Ltd v Pullenvale Estates Pty Ltd [2001] QSC 73. The reasons for this are summarised by French J (as the Chief Justice then was) in Bryan E V Fencott v Eretta Pty Ltd (1987) 16 FCR 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.”

56. [56]
    By reference to many of the common law authorities, Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 said (at paragraph 69):

“The authorities have recognised that it would be patently unjust to permit a defendant who stood by and allowed the plaintiff to work on their case to ask for security after expenses had been incurred…”

57. [57]
    In the same case, his Honour wrote (at 81):

“Ultimately it seems to me that in the context of the broad discretion and consistently with the approach referred to in the above authorities, delay is best regarded simply as a factor whose consequences are to be weighed in the balance in determining what is just between the parties. [cf French J in Bryan E Fencott supra at 515] The Court, in approaching delay as a discretionary factor, looks at the length of the delay and the nature of the acts done during the interval. If a company has suffered no real relevant prejudice in the sense of expenditure of its own funds or the incurring of liabilities in relation to the litigation in the period until the application for security for costs, the significance of delay reduces or may substantially disappear.”

58. [58]
    Plainly the functional delay here has primarily occurred because the plaintiff chose not to prosecute its case expeditiously initially, necessitating a notice of intention to proceed. The defendant pressed for information relevant to the application once it was clear that the plaintiff was serious about prosecuting its case. It must have been clear from an early stage that the plaintiff was indeed impecunious but this concession was not made until the date of the hearing.

59. [59]
    It is relevant that the plaintiff has incurred costs of $20,000-$25,000 but, as Mr. Webb attests in paragraph 32 of the affidavit filed on 17.10.08, these costs have been paid by Mr. Ridley not the plaintiff.

60. [60]
    Mr. Turnbull’s argument on the lack of merits of the defendants case focuses on the fact that the monies Mr. Ritter says he received as wages are not declared as such in his Tax Returns. As the material now stands, this will be a case of word against word, and the issue of the tax returns will be but one factor that may bear on issues of credibility. At this stage, it is impossible to say that one party’s case is objectively stronger than the other. Issues of credibility can only be determined after a trial.

61. [61]
    Reference was also made to r. 672(e) i.e. that the impecuniosity of the plaintiff is attributable to the defendant’s conduct. As the evidence presently stands, it is impossible to determine this issue because it will ultimately turn on findings of credit. The uncontested evidence thus far however establishes that both Mr. Ridley and Mr. Ritter provided personal guarantees for the Bank in support of an overdraft facility of $80,000 in favour of the plaintiff. In addition however, Mr. Ritter gave security to the Bank over a term deposit with the Bank of $80,000 which has now been applied in reduction of the overdraft debt leaving a balance of $4,169.31. It follows that this ground is simply not established on the evidence before me.

62. [62]
    Finally, reference was made in Mr. Turnbull’s written submission to Mr. Ridley’s means. It is said that he is a man of substance however there is no evidence to support this. Directors of impecunious corporations, who offer personal guarantees or undertakings to pay any costs that may be ordered against the plaintiff corporation, carry the onus of establishing that such guarantees or undertakings obviate the need for a court to make an order for security for costs: Siyan Pty Ltd v Nillumbik Shire Council [2002] VSC 285.

63. [63]
    Mr. Ridley has not offered any personal guarantee. It follows that this ground is not established.

64. [64]
    Mr. Grahams estimate of the defendant’s costs up to and including the first day is $46, 448.85.

65. [65]
    I order as follows:

1. Within 14 days of the date of this order, the plaintiff give security for any costs awarded to be paid by the plaintiff to the defendant in the sum of $46,448.85 to be

(i) paid into Court; or

(ii) secured by a Bank guarantee in a form to be settled by the Registrar.

2. In the event that the plaintiff fails to provide such security then the proceeding is stayed until the order for security for costs has been complied with.

3. Liberty to apply.

66. [66]
    In advance of today’s date I caused a copy of my draft reasons to be forwarded to both parties and invited them to make submissions on costs if they wished. Mr. Wilson has provided written submissions and the solicitor for the Plaintiff advised me that he did not wish to make submissions. I have made costs orders accordingly.