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- Lal Family Holdings Pty Ltd v Brygon M.C. Pty Ltd[2022] QDC 122
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Lal Family Holdings Pty Ltd v Brygon M.C. Pty Ltd[2022] QDC 122
Lal Family Holdings Pty Ltd v Brygon M.C. Pty Ltd[2022] QDC 122
DISTRICT COURT OF QUEENSLAND
CITATION: | Lal Family Holdings Pty Ltd v Brygon M.C. Pty Ltd [2022] QDC 122 |
PARTIES: | LAL FAMILY HOLDINGS PTY LTD (ACN 132 566 842) AS TRUSTEE FOR DWARKA MAA FAMILY TRUST v BRYGON M.C. PTY LTD (ACN 151 799 905) AS TRUSTEE FOR BRYGON MEDICAL CENTRE TRUST |
FILE NO: | BD2291/21 |
DIVISION: | Appellate |
PROCEEDING: | Appeal |
ORIGINATING COURT: | Magistrates Court (Brisbane) |
DELIVERED ON: | 20 April 2022 (ex tempore) |
DELIVERED AT: | Brisbane |
HEARING DATE: | 14 April 2022 |
JUDGE: | McGinness DCJ |
ORDER: |
|
CATCHWORDS: | APPEAL – APPEAL FROM MAGISTRATE – PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – POWER TO ORDER – FACTORS RELEVANT TO EXERCISE OF DISCRETION – whether the court is satisfied that there is reason to believe the Appellant will be unable to pay the Respondent’s costs if ordered to pay them – whether discretion should be exercised in favour of granting security for costs. |
LEGISLATION: | Uniform Civil Procedure Rules (Qld), rr 633, 670, 671, 748, 765, 776. Magistrates Court Act s 45 |
CASES: | Jorgensen v Body Corporate for Cairns Central Plaza Apartments [2020] QDC 300 28 Careel Development v S.O.S. Plumbing Services (Qld) Pty Ltd [2016] QDC 223 Fletcher Constructions Australia Ltd v Lines Macfarlane & Marshall Pty Ltd (2001) 4 VR 28 Selwyn v Selwyn (2017) 326 FLR Transocean Capital Pty Ltd v AFSIG Pty Ltd [2006] NSWSC 806 Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR Harpur v Ariadne [1984] 2 Qd R 523 Pure Casting Pty Ltd v Craig Long and Ors [2020] QSC 325 Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143 Rove Estate Pty Ltd v Chomp Excavation and Demolition Pty Ltd [2020] NSWSC 1839 LPD Holdings (Aust) Pty Ltd v Rusells & Anor [2022] QSC 48 Mio Art Pty Ltd v Mango Boulevard P/Land Ors [2018] QSC 31 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1997) 16 FCR 497 |
COUNSEL: | W Macintosh for the Appellant/Plaintiff J Hastie for the Respondent/Defendant |
SOLICITORS: | Robinson Locke Litigation Lawyers for the Appellant/ Plaintiff Macpherson Kelley for the Respondent/Defendant |
Introduction
- [1]The Appellant brings this appeal against some of the orders made by a Magistrate on 2 July 2021 following an interlocutory application heard on 18 June 2021. For the purposes of this appeal those orders were;
- the Magistrate provide security for the Respondent’s cost of the proceeding in the Magistrates Court in the sum of $25,000; and
- the Respondent pay the Respondent’s costs of the application
- [2]Turning to the nature of the appeal, the appeal is brought under s 45 of the Magistrates Court Act, r 765(1) of the UCPR provides that an appeal under this chapter 18 of the UCPR is an appeal by way of rehearing. But r 765(2) provides for appeals from interlocutory decisions to be “brought by way of an appeal”, that is an appeal in the strict sense
- [3]There are some conflicting views in this Court about the correct approach. See 28 Careel Development v SOS Plumbing Services Queensland Pty Ltd[1] There Dorney DCJ considered whether an appeal from an interlocutory matter is by way of a strict appeal or an appeal by rehearing. His Honour considered s 45 of the Magistrates Court Act and the tension between r 765(2) and 776(1) of the UCPR and concluded it was in the interests of justice in that case to proceed by way of rehearing.
- [4]
“The question of whether a judgment is final or interlocutory can be a tricky one, “productive of confusion and no entirely satisfactory test has evolved to determine into which category a judgment should be placed.” The correct approach in determining the issue is to ascertain whether the legal (as opposed to the practical) effect of the judgment is final or not. This requires a determination of whether the order finally determines the rights of the parties in a principal cause pending between them.”
- [5]See also Muir DCJ’s further discussion at [15] – [16] of that judgment
- [6]This issue was briefly ventilated before me and I determine, in the circumstances of this case, it is unnecessary to resolve the issue. In this case both sides agree, and I accept, that there was an error and that the Magistrate failed to provide adequate reasons and that I must therefore determine the application on the material that was before the Magistrate.
- [7]I have therefore conducted, in this instance, a rehearing of the application, but even if I was to decide the matter as a strict appeal, as can be seen, it follows by my decision that the Magistrate’s decision was right on the materials she had before her.
Grounds of Appeal
- [8]The Grounds of appeal are as follows:
- The Magistrate erred in law by failing to provide reasons for the decision within the timeframe required for the Appellant to exercise their right to appeal the decision.
- The reasons provided by the Magistrate do not comply with r 663 UCPR
- The reasons provided were manifestly unreasonable, as the evidence did not disclose satisfaction of the threshold under r 671 UCPR for ordering security for costs.
- If the Appellant is unsuccessful on appeal then the costs order should not have been made by the Magistrate.
- [9]The Respondent accepts grounds 1 and 2 are made out. I have reached the same conclusion so will only brief the reasons for my conclusion
Background
- [10]First, by way of background, on 1 April 2021 the Appellant initiated proceedings in the Magistrates Court by way of a claim which would cover a loan of $71,426.61 said to be owed to it by the Respondent. On 17 May 2021 the Respondent filed a notice of intention to defend and a defence. The defence denied any amount was owing under the loan, alternatively the debt was owed by a different entity.
- [11]On 17 May 2021, the same date, the Respondent filed an application for several orders including an order for summary judgment be entered for the Respondent, alternatively the Appellant answer certain unanswered requests for particulars, the Appellant provide security for the Respondent’s costs of the proceeding up to the first day of trial and the Appellant pay the costs of the application.
- [12]On the morning of the application the Appellant provided affidavit material to the Respondent which led to the Respondent withdrawing a part of the application for summary judgment but maintaining the application for security for costs and costs of the application. The affidavit from the appellant’s solicitor, Mr Blue, sworn 18 June 2021, deposed the Appellant was willing to give an undertaking to retain the sum of $25,000 in a bank account “until determination of this proceeding or such earlier orders of this Court” in resisting the application.
- [13]On 18 June 2021 the application was heard in the Magistrates Court at Brisbane. The Magistrate reserved her decision
- [14]On 2 July 2021 the Magistrate made orders including:
- the Appellant provide security for the Respondent’s costs of the proceeding in the Magistrates Court in the sum of $25,000; and
- the Appellant pay the Respondent’s costs of the application.
- [15]Unfortunately, the Court did not notify the Appellant or the Respondent of the decision at that time. The order was sent to the Respondent’s solicitors on around 13 July 2021. The Court’s order was not provided to the Appellant until 5 August 2021.
- [16]No reasons were provided for the Magistrate’s decision. On 10 August the Appellant requested reasons from the Magistrate. On 1 September 2021 the Appellant filed a notice of appeal. On 14 September 2021, outside the appeal limitation period, the Magistrate provided reasons for her decision and orders by email to the parties.
Grounds 1 and 2
- [17]Turning to consideration of grounds 1 and 2. The authorities referred to by the Appellant and Respondent confirm that it is generally desirable, although not mandatory, that where a Court gives judgment or makes an order, reasons for the judgment or order should be delivered at the same time as the making of the order or soon after. Where the interests of justice do require a Court to give judgment expeditiously, the Court may give reasons at a later date. See Fletcher Constructions Australia Ltd v Lines MacFarlane & Marshal Pty Ltd[3], per Chernov JA at [44], the other members of the Court agreeing.
- [18]Whether or not it is in the interests of justice to defer the delivery of reasons will depend on the circumstances of the case. In Selwyn v Selwyn[4] [2017] 326 FLR, the Court observed at [78]:
“… there may be circumstances where the delay between the making of orders and the provision of reasons of itself gives rise to an injustice that amounts to an error of law. That will easily be the case where the interests of justice did not dictate that orders be made first and then reasons be delivered at a later date. Whether an error of law arises in a particular case will depend very much on the nature of the proceedings and the orders, the importance of the reasons to an understanding of why the orders were made and the extent of the delay.”
- [19]In the present case I am satisfied the Magistrate’s significant delay, until after the appeal period had passed, was not in the interests of justice. The delay between when the order was made on 2 July 2021 and the date the Magistrate provided reasons to the Appellant was 74 days. This was well outside the timeframe of 28 days in which a party must file and appeal against a decision or order under r 748 UCPR.
- [20]The Magistrate only provided reasons after they were requested. The Magistrate therefore failed to accord the Appellant procedural fairness. In addition, the Magistrate did not comply with requirements of r 663 of the UCPR as to how written reasons should be published. These factors amount to the Magistrate making an error of law.
- [21]Both the Appellant and Respondent submit that rather than remitting matters to the Magistrates Court I should rehear the matter afresh, which I consider is appropriate in the circumstances of this case.
- [22]In practical terms that means I will rehear the application in relation to the application for security for costs and costs of the application.
- [23]Turning first to the application for security of costs. The Respondent applies for an order that the Appellant provide security for the costs of the proceedings, up until trial, in the amount of $25,000. The application is made pursuant to rr 670 and 671 UCPR. Under r 670 a Court may, on application by a Defendant, order the Plaintiff to give security for costs of and incidental to a proceeding that the Court considers appropriate.
- [24]The Court must first consider whether further prerequisites have been satisfied under r 671 UCPR. Relevantly in this case, under r 671(a), the Respondent musts first satisfy the Court that there is reason to believe the Appellant, a corporation, will not be able to pay the Respondent’s costs of successfully defending the claim.
- [25]A number of factors relevant to this “threshold question” were recently considered by Bowskill J, as she then was, in Pure Casting Pty Ltd v Craig Long & Ors[5], where she referred to principles considered by Gotterson JA, as he then was, in Monto Coal 2 Pty Ltd v Sanrus Pty Ltd.[6] See, in particular [16] – [17], [42], [48] – [49] and [50] – [52].
- [26]Some factors distilled from both judgements include:
- that it is for the applicant for security for costs to adduce evidence from which the requisite reason to believe may be deduced and to persuade the Court that such a deduction ought to be made.
- Next, the words ‘reason to believe’ acknowledge that on an application for security for costs, as a matter of practicality, a Court will not be able to undertake as thorough an examination of the financial position of a plaintiff as it would if an issue as to that arose at a final hearing. The Court’s assessment will be a preliminary one based on limited materials.
- Next, for the Court to order security to arise, the outcome of the assessment must be that the Court considers that there is ‘reason to believe’ that the plaintiff ‘will be’ unable to meet an adverse costs order will be underlined. A conclusion that there is a risk that that will or may be the case is insufficient.
- The phrase “will be unable to pay” does not require that a company have available liquid funds sufficient to meet the costs order on the date the order is made. The period of time likely to be required for determination, by assessment or otherwise (and allowing for resolution of disputes arising in that process) is to be taken into account.
- [27]Turning to the submissions. The Appellant submits that the prerequisite under r 671(a) UCPR has not been satisfied by the Respondent. The Appellant relies on hearsay evidence by the Appellant’s solicitor, Mr Blue, at paragraphs 42 of 45 of his affidavit, affirmed on 18 June 2021, filed a day after the application was filed. I note this is often not an unusual means to present evidence and there is no criticism of Mr Blue.
- [28]Mr Blue affirmed that Dr Lal, a director of the Plaintiff company, instructed him that the Plaintiff does have capacity to pay any adverse costs order. The Plaintiff is prepared to give an undertaking to the Court to retain $25,000 or such lesser amount as the Court deems appropriate, in the Plaintiff’s bank account “until the determination of this proceeding, or such earlier order of this Court.”
- [29]Exhibited to the affidavit (CB-5) is a screenshot of an account, named Dwarika Maa Family Trust. The screenshot records $25,000 was transferred on 17 June 2021 from a Netbank loan account. The screenshot shows a balance of $26,011.74. The Appellant submits this evidence shows the Appellant had or has the capacity to pay any relevant costs because the undertaking is an undertaking to maintain funds already in an account until the end of proceedings. The Respondent therefore would have recourse to those funds by enforcing any costs order in the usual way.
- [30]The Respondent submits the Court would be satisfied there is reason to believe the appellant, a corporation, would not be able to satisfy the costs order.
- [31]The Respondent relies on evidence from the Respondent solicitor, Mr Dreyer’s affidavit sworn 17 May 2021 and attached exhibits. The evidence, it submits, shows:
- The Appellant has paid up capital of only $82
- It does not trade and has no other assets
- The Appellant has not provided any other evidence that the Appellant has other assets and has not demonstrated, apart from the screenshot of the account showing the transfer of $25,000 into an account, only containing approximately $1000, that it is otherwise capable of satisfying a costs order despite several earlier written requests from the Respondent’s solicitors to do so.
- [32]The Respondent submits the Court should have regard to:
- the late timing of the deposited funds on the day prior to the application
- the undertaking was given on behalf of a company with no other apparent assets
- the Appellant is acting in its capacity as the trustee as a trust, the bank account into which the funds were paid is in the name of the trust, the Appellant provided no evidence to establish what, if any, right the Appellant had to indemnify itself out of that bank account or from any assets of the trust.
- there is not the same protection to the preservation of the moneys as if it was deposited into the Court, for example, to prevent its depletion due to bank fees.
- the terms of the undertaking are deficient in that it was proposed only that the Appellant, and not its director, provide the undertaking
- the undertaking was insufficient because it was only until “determination of these proceedings or such earlier order” and not until the time that any final costs order is made and then assessed
- the undertaking is insufficient because it did not provide the funds were to be held for the purpose of meeting the defendant’s costs of the proceedings and would be applied to pay any adverse costs order.
- [33]The Respondent submits that if the Court is satisfied the “threshold test” has been met, then several factors relevant under r 672 UCPR support an exercise of discretion to order security for costs as follows:
- the prospects of success or otherwise of the action are not strong
- the evidence of the Appellant’s impecuniosity is unchallenged apart from the $25,000 deposit
- the Appellant has provided no evidence of Dr Lal’s financial position, where he is the person standing behind the proceeding.
- there is no evidence an order for security would stifle the proceeding.
Consideration of the relevant prerequisite
- [34]Irrespective of the Appellant solicitor’s evidence in the undertaking provided, I am satisfied on the evidence before me there is good reason to believe the Appellant would not be able to pay the Respondent’s costs if ordered to do so. In reaching this conclusion I have regard to a combination of the following factors.
- [35]First, on the unchallenged evidence from the Respondent the appellant does not trade. It has no assets, it had only paid-up capital of $82, the $25,000 that was made available was only transferred into the appellant’s account the day before the original application. I note the transfer was from “NetBank Loan Account”. Prior to that the bank account had only a balance of just over $1000. The appellant did not produce evidence of any other assets. The only reasonable inference to be drawn, as I do, is that it had none.
- [36]The account contained just over $26,000 after the money was transferred. As the Respondent submits, the money in that account could, in a way which was beyond the Appellant’s control, be depleted by bank fees, direct debits or by claims made by creditors, for example, in the event of insolvency or other events beyond the appellant’s control.
- [37]Next, the appellant is a trustee company. If the appellant were to be unsuccessful in the proceedings and an adverse cost order was made, the costs would only be recoverable if the appellant chose to exercise any right to indemnity it had under the trust. There is no evidence before this Court of the terms of the trustee, specifically what is says in terms of the identity or the rights of the beneficiaries to call on the trustee to distribute the trust funds or of any right of indemnity. See Transocean Capital Pty Ltd v AFSIG Pty Ltd[7]at [33] - [38] per Bergin J and the observations of Smithers J in Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Limited[8] 40-584 as summarised by the Respondent in its outline of submissions at paragraph 53. See also Rove Estate Pty Ltd v Chomp Excavation and Demolition Pty Ltd[9] at [28] to [30], where Stevenson J held that in the absence of evidence in an undertaking from the Plaintiff trustee company that it could and would exercise its right of indemnity under the trust, the Defendant had satisfied its onus to show there was reason to believe the Appellant would not be able to pay any adverse costs order.
- [38]Next, the form of the undertaking is deficient for the reasons outlined by the Respondent’s written outline of submissions and oral argument. The undertaking extended only until “determination of this proceeding or such earlier order” and not until the time that any final cost order was made and then assessed. Next, the undertaking was insufficient because it did not provide the funds were to be held for the purpose of meeting the defendant’s costs of the proceedings and would be applied to pay any adverse costs order.
- [39]I am satisfied a combination of these circumstances do provide a rational basis to believe the Appellant would not be able to pay the Respondent’s costs. See also Henry J’s consideration of r 671(a) of UCPR in LPD Holdings (Australia) Pty Ltd v Russells v Anor[10] at [15] and the cases he referred to therein.
Discretionary considerations
- [40]Once the Respondent persuades the Court that the first threshold test has been satisfied then the Court has an unfettered discretion in deciding whether to order security for costs, having regard to all the relevant circumstances of the case. See Harpur v Ariadne[11] at [529] per Connolly J and having regard to the discretionary factors under r 672 UCPR. Circumstances, of course, will vary from case to case. Daubney J, in Mio Art Pty Ltd v Mango Boulevard [1984][12] at [16], summarised several relevant considerations distilled from KP Cable Investments Pty Ltd v Meltglow Pty Ltd.[13] These include:
- An application for security for costs should be brought promptly.
- The strength and bona fides of the case in respect of which security is sought is relevant. In the absence of evidence to the contrary the Court should proceed on the basis that the claim is bona fide with a reasonable prospect of success.
- Whether the impecuniosity of the party against which security is sought was caused by conduct the subject of the claim by the applicant for security.
- Whether the application for security for costs is oppressive in the sense that it is being used merely to deny an impecunious party a right to litigate.
- Whether anyone is standing behind the impecunious company who is likely to benefit and who is willing to provide the necessary security.
- Whether anyone standing behind an impecunious company has offered any personal undertaking to be liable for costs, and if so, the form of any such undertaking.
- [41]The factors I have referred to when considering satisfaction of the prerequisite under r 671 UCPR are also relevant to the secondary issue of the exercise of the Court’s discretion. In my view, further relevant circumstances are as follows:
- First, the application for security for costs was brought promptly. In relation to the merits of the claim this is not a factor weighing in favour of an order. The application for security for costs is not oppressive and there is nothing to indicate the appellant will be deprived of proceeding with its case.
- It is not alleged by the appellant that its impecuniosity was caused by conduct the subject of the claim.
- Next, Mr Lal stands behind the appellant. It is noteworthy that he did not offer to provide an undertaking. In any event, there is no evidence he has financial means.
- [42]In conclusion, I am satisfied the relevant threshold test has been met by the Respondent under r 671. I am also satisfied on the material that the Court should exercise its discretion to make an order for security for costs.
- [43]Just briefly, in relation to the consideration of quantum, it is usually appropriate for a Court, when assessing quantum for security for costs, to adopt a “broad-brush” approach rather than a mathematical exercise. See the principles enunciated by French J, as he then was, in Bryan E. Fencott & Associates Pty Ltd[14] at [515]. The application by the Respondent requested security in the amount of $20,000 or such further or other order. The Respondent’s solicitor, Mr Dreyer, in his affidavit, deposed he originally expressed the view in correspondence with the Appellant that the Respondent would be likely to incur costs of 20,000. Upon further consideration, Mr Dreyer revised his opinion based on his considerable experience as a solicitor and opined that the Respondent’s costs up until the commencement of the trial would be closer to $25,000, and that was a conservative estimation. I have viewed the table of estimated costs and consider Mr Dreyer has provided a reasonable estimation. The Appellant did not lead any evidence in respect of quantum and during oral submissions on the appeal indicated that if I was to make the order, then the amount of $25,000 was not objected to by the Appellant as an appropriate quantum for the security for costs.
- [44]In conclusion, for reasons I have enumerated, I am satisfied the order for security for costs was properly made by the Magistrate. The appeal in relation to the order for security for costs is dismissed. The Appellant concedes in written submissions and during the oral hearing of the application that the hearing of the application in the Magistrates Court focused mainly on the issue of security for costs. The Appellant was unsuccessful on this issue before the Magistrates Court and before this Court. The appeal against the costs order is dismissed.
- [45]Turning to the costs of this appeal, the Magistrate’s disposition of the application on the substantive issue of the application for security of costs and the order for costs was, with respect, correct.
- [46]In the circumstances, there is no reasons why costs should not follow the event.
- [47]Formally, the orders are:
- Appeal dismissed
- The appellant pay the costs of the appeal to be assessed as agreed by the parties.
Footnotes
[1] [2016] QDC 223.
[2] [2020] QDC 300.
[3] (2001) VR 28.
[4] [2017] 326 FLR
[5] [2020] QSC 325
[6] [2019] 3 Qd R 143.
[7] [2006] NSWSC 806.
[8] [1985] 7 ATPR.
[9] [2020] NSWSC 1839.
[10] [2022] QSC 48.
[11] [1984] 2 Qd R 523.
[12] 2 Qd R 523.
[13] [1995] 56 FCR 189.
[14] [1997] 16 FCR 497.