SUPREME COURT OF QUEENSLAND
PARTIES: | RODGERS FAMILY INVESTMENTS PTY LTD ACN 082 602 239 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Application |
ORIGINATING COURT: | |
DELIVERED ON: | 02 May 2008 |
DELIVERED AT: | Rockhampton |
HEARING DATE: | 28 April 2008 |
JUDGE: | McMeekin J |
ORDERS: | 1. Within 28 days of the date of this order the plaintiff give security for the defendant’s costs of proceeding RS 375 of 2007 in the amount of $50,000 in a form satisfactory to the registrar;2. Proceedings RS 111 of 2006 and RS 375 0f 2007 be heard together;3. The evidence in the one proceeding be evidence in the other;4. The parties have liberty to apply on 5 day’s written notice to the other;5. That the plaintiff in proceeding 375 of 2007 pay the defendant’s costs of and incidental to the application for security for costs; and 6. That the parties’ cost on the consolidation application be each parties cost in the cause. |
CATCHWORDS | CORPORATIONS – LEGAL CAPACITY AND RELATIONS WITH OUTSIDERS – EXTERNAL LITIGATION PROCEDURE – COSTS – SECURITY FOR COSTS – GENERALLY – where the defendant is seeking security for costs – where merits of the plaintiff’s case substantially subject of previous trial and appeal – whether security would be oppressive against an impecunious party PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – TRANSFERS AND CONSOLIDATIONS – where there are multiple proceedings between the two parties – where there are substantial similarities between the proceedings Corporations Act 2001 (Cth) s 1335 UCPR r 78, r 79, r 670, r 671(a), r 672 ANZ Banking Group Ltd v Rodgers & Anor [2004] QCA 186 applied Australian Energy and Electrical Holdings Pty Ltd v Isbell & Ors [2006] QSC 034 applied Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176 followed Bosun Pty Ltd (in Liq) v Makris (2003) 21 ACLC 666 at 669 applied Harpur v Ariadne Australia Limited [1984] 2 Qd R 523 applied Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 applied John Bishop (Caterers) Ltd v National Union Bank Ltd [1973] 1 All ER 707 followed Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 followed PS Chellarum & Co v China Ocean Shipping (1991) 65 ALJR 642 followed Rodgers v ANZ Banking Group Ltd [2006] QSC 190 cited |
COUNSEL: | The plaintiff appeared on its own behalf J Payne for the defendant |
SOLICITORS: | The plaintiff appeared on its own behalf Minter Ellison for the defendant |
[1] MCMEEKIN J: There are two applications before the court. The plaintiff, Rodgers Family Investments Pty Limited (“RFI”), applies for an order consolidating this action with proceedings RS 111 of 2006. That latter action is between the director of RFI, Mrs Rodgers, and her husband and the Australia and New Zealand Banking Group Limited (ANZ). The defendant, ANZ, applies for security for costs against RFI.
History of Litigation
[2] There has been extensive litigation between the parties arising out of certain dealings in 2001-2002 between Mr and Mrs Rodgers on the one hand and a Mr Cameron Blair, representing the ANZ, on the other.
[3] In 2001 Mr and Mrs Rodgers were involved in two companies – RFI, a private investment company, and Wodda.com Limited (“Wodda”), an unlisted public company. The companies were customers of the National Australia bank (NAB). In about September 2001 Mr Blair approached Mrs Rodgers with a view to having her transfer the business of both companies to the ANZ.
[4] The parties are in dispute about what transpired between Mr Blair and Mr and Mrs Rodgers. Subsequently the Rodgers executed letters of offer from the ANZ to RFI and deeds of guarantee and indemnity. There is debate about the dates on which documents were executed. The ANZ made available certain facilities to RFI totalling $419,000.00.
[5] In May 2002 accountants were appointed by the ANZ to investigate the financial viability of RFI. The ANZ allege that RFI defaulted under the facilities, that demand was made for the amount then outstanding of $449,319.00, and that demand was not met. On 19 June 2002 the ANZ appointed receivers and managers to RFI.
[6] Subsequently:
Security for Costs
[7] The application for security for costs is brought pursuant to r 670 UCPR and s 1335 of the Corporations Act 2001 (Cth). The jurisdictional basis for the application is that RFI is impecunious (r 671(a)). That is not disputed.
[8] The defendant sought security in the sum of $50,000. That principally represents the costs of obtaining an expert forensic accountant’s report.[7] Their solicitor’s estimate of costs to the first day of trial on the standard basis is between $100,000 and $125,000. The plaintiff made no submission that the amount suggested was unreasonable.
[9] The plaintiff company was represented by Mrs Rodgers at the hearing. In the course of her submissions Mrs Rodgers indicated that she and her husband were prepared to provide personal guarantees in respect of the defendant’s costs in the amount of $50,000.00. She frankly conceded that she and her husband are also impecunious and could not meet an order to pay the sum of $50,000.00.[8]
[10] Two conclusions seem to follow - if successful in the litigation the defendant’s costs will not be met; if security is ordered, other than by a meaningless guarantee, the litigation will be stifled.
Impecuniosity
[11] Mrs Rodgers’ principal submission was that the plaintiff’s impecuniosity is attributable to the defendant’s wrongful conduct and that it would therefore be unjust to require security. The submission presupposes success in the litigation. I will come to the merits of the litigation later.
[12] Several pieces of evidence are against that submission. The NAB had concerns about the state of the plaintiff’s accounts for some time prior to 25 May 2001.[9] The NAB had, according to documents from its file, already referred its lending file in respect of RFI, Wodda and related entities to its asset restructuring unit and had declined further funding to the Rodgers.[10]
[13] The investigative accountants appointed by the ANZ found that RFI was insolvent prior to the ANZ exercising its rights under its securities.[11] Their conclusions included that RFI was unable to pay its debts as and when they fell due and had no cash reserves to satisfy the arrears owing to the defendant. Substantial debts were then owed including $50,000 to the Australian Tax Office.
[14] Mrs Rodgers submits that the report was flawed. She asserted that assets were included in the statement of financial position that were not in fact RFI’s and which made the position seem worse than it was. The assets that she pointed to made a difference of $8,000 on the optimistic scenario and about $45,000 on the pessimistic scenario – out of a deficiency of between $504,000 and $705,000.[12] In other words, on the most optimistic view, there was a deficiency of $496,000, and on the most pessimistic $660,000. Assuming the error alleged I cannot see that it was material to the conclusions arrived at.
[15] RFI was in fact in excess of the facilities put in place with the ANZ by some $38,000 within 6 months of establishment.
[16] If it be relevant no evidence is available that the NAB would have been prepared to continue to support RFI in the circumstances that prevailed in May 2002.
[17] I am not satisfied that the plaintiff’s impecuniosity has been caused by the actions of the defendant in the relevant sense even on a prima facie basis.
Merits of the Action
[18] I am conscious of the difficulty and undesirability of expressing any view as to the merits of the action at this stage. However, as any order requiring meaningful security will stifle the action, it is relevant to consider the merits of the plaintiff’s claim noting that at this stage only a “provisional view of the strength of the plaintiff’s claim” can be formed: Impex Pty Ltd v Crowner Products Ltd[13].
[19] There are three essential elements to the plaintiff’s action. It must first establish that the representations or promises that they allege were in fact made by Mr Blair. Secondly it must be shown that the ANZ acted contrary to those representations and hence unconscionably or in breach of the relevant statutory provisions governing its conduct[14] or negligently. Thirdly it must be shown that as a result RFI suffered loss.
[20] The allegations that Mr and Mrs Rodgers make against Mr Blair have already been the subject of the trial before Muir J and the consequent appeal. That gives more than the usual insight into the strengths of the plaintiff’s case. I will not traverse the arguments in detail. The allegations made by Mr and Mrs Rodgers were comprehensively rejected. Whilst Dutney J has found that Mr and Mrs Rodgers are not bound by certain of the findings and observations of Muir J that does not mean that his analysis of the evidence does not provide a valuable guide to the probabilities, especially given the subsequent review of the evidence on appeal. I appreciate this is not yet the trial but Mrs Rodgers could not demonstrate to me any new evidence that could materially affect the probabilities.
[21] The representations allegedly made by Mr Blair included a promise of the provision of a facility to the Rodgers and their related entities (particularly Wodda) of $450,000 for a period of 6 months, with some “flexibility”[15], by which time the final amount required would be known and securities only then provided and necessary documents then prepared.[16] The difficulty for the Rodgers is that they did sign letters of offer which restricted the facilities to $419,000, the facilities were not made available to Wodda, at least directly, and they did sign security documents, even on their case, well within the 6 month period. They dispute the date of signing, but now not the fact of signing. They contend that the documents were signed, albeit without them appreciating their purport, on 22 January 2002 not 26 October 2001 as the ANZ contends. These competing arguments, as to the date of signing, were the subject of extensive evidence and express findings at trial and on appeal. The Rodgers’ contentions were rejected. One reason for that rejection was that two bank officers, whose handwriting appears on the security documents, were not in the employment of the bank after Christmas 2001.[17]
[22] Further, the plaintiff’s case depends to a large extent on findings of credit in favour of Mr and Mrs Rogers. Significant findings and adverse to the Rodgers were made by Muir J. Since then Mr and Mrs Rodgers have changed their stance on a crucial matter in a fundamental way. Central to the arguments before Muir J was an allegation that the signatures of Mr and Mrs Rogers on the security documents relied on by the ANZ were forgeries. Mrs Rogers now informs me that she and her husband accept that those allegations were wrong – not merely that they are bound by the finding, but that the allegations they made were not accurate and the signatures are in fact theirs. The case now to be conducted is that the documents were executed by the Rodgers on 22 January 2002, that they were included in documents relating to other transactions involving their son’s company, and that representations had been made at an earlier time that such documents were not to “be sent to ANZ’s security department for registration”.[18] Putting to one side the implausibility of an officer of a major bank representing that the bank would not wish to register its securities for an advance as large as $450,000, especially when taking over a debt funded by another major financial institution which had expressly declined further funding, the effect of such a change in stance on any assessment of reliability and credit is self evident. What is more Mrs Rodgers expressly rejected that very possibility in her evidence to Muir J.[19]
[23] Success on the second issue depends upon establishment of the first.
[24] As to the third issue – assuming success on the first two issues – the plaintiff must establish a loss caused by the breach complained of. Mrs Rodgers submitted that had the alleged promises not been made RFI would not have left the NAB, that RFI would not have continued to put money towards Wodda, that the NAB would have continued to support RFI, and hence receivers and managers would not have been appointed, and RFI would not have suffered the loss of its businesses. A claim is made, without any great particularisation, for $2,000,000.
[25] Every step in that process of reasoning involves controversial elements. A crucial step is that the NAB would have continued to support RFI and would not have itself exercised its rights under its securities. Mrs Rodgers informed me that she had no evidence from the NAB to that effect. Her case simply was that the NAB was willing in October 2001 to continue the facilities then in place. A willingness to maintain funding in October 2001 is not the same as a willingness to do so in May 2002. Without more I doubt that any court could draw such an inference.
[26] There needs to be an assumption about the probable financial state of RFI in May 2002 had the move to the ANZ not occurred. I have no evidence before me as to that. I assume that no accounting analysis has yet been done to demonstrate the probable cash flow and asset position. None was referred to in the application. Such an analysis requires controversial assumptions to be adopted as to the decisions Mr and Mrs Rodgers would have made in conducting RFI. No evidence was led on the application to demonstrate that RFI was viable assuming continuing financial support from the NAB at the pre October levels.
[27] I note that Dutney J in his reasons on the strike out application also commented on the evidentiary problems associated with proof of the claim then outlined to him as being “obvious”.[20]
[28] Thus to the extent that a preliminary view can be formed as to the strength of the plaintiff’s case it is not favourable to the plaintiff.
Summary of Factors
[29] I am conscious that I am required to bear in mind all relevant circumstances.[21] The principal discretionary factors are listed in r 672 UCPR.[22] The crucial issue is to weigh the injustice to the defendant if it incurs further costs in defending this action[23], with no realistic prospect of recovery if successful, against the probable stifling of the proceedings should security be ordered.
[30] Whilst I am not in a position to assert that the proceedings are bound to fail it is plain that the plaintiff’s case has “substantial obstacles to be overcome … in proving its claim and in establishing its damages”.[24]
[31] Very great weight should be given to the probable stultification of the proceedings. It has been described as a “powerful” factor.[25] Nonetheless I do not perceive the law to be that a finding that litigation will be stifled requires a rejection of the application for security. Rule 672 in its terms is against such an approach. So is the principle, identified by Connolly J in Harpur v Ariadne Australia Limited[26] in relation to the superseded but analogous provisions under the Companies Rules, that “it is not right to say that as a matter of law any one factor is to predispose the court to a decision one way or another”.[27]The greater the apparent lack of merit in the plaintiff’s case the more cogent the reason for ordering security despite its stifling effect.[28]
[32] Of particular concern is that there are on foot two sets of proceedings covering much the same ground. Security in this proceeding will not prevent the proceedings brought by Mr and Mrs Rodgers personally continuing. That is a factor against imposing security.[29] Here however the significant difference between the two proceedings is in the damages claimed. Very significant costs will be incurred by the ANZ in these proceedings in preparing forensic accounting evidence to endeavour to demonstrate its case concerning the non viability of RFI, not only in May 2002, but hypothetically on the assumed basis on which the plaintiff’s case proceeds. Such evidence will go to ANZ’s defence as well as to damages.[30] ANZ has framed its request for security largely to be protected as to those costs. Those costs are irrelevant to the personal action brought by the Rodgers.
[33] It may be right to consider this as akin to a two plaintiff case. Connolly J in Harpur reviewed the authorities.[31] The relevant principle seems to be that unless there is ground for making an order against all the plaintiffs it cannot be made against any. But that principle has been distinguished as applying only where there is complete overlap of the causes of action so that all plaintiffs would in fact be liable for the same costs: John Bishop (Caterers) Ltd v National Union Bank Ltd[32]. There is no such overlap here. The Rodgers would not be liable for costs related only to the company action.
[34] The amount of security sought is also relevant to the question of oppression. This application is not oppressive in the sense that it is brought merely to prevent an impecunious plaintiff a right to litigate.
[35] Delay is not a factor – whilst the proceedings were commenced in July 2007 the plaintiff then sought a stay due to the illness of Mr Rodgers and the applicant then gave notice of its intention to make this application in a timely way.
Conclusion
[36] The plaintiff seeks to pursue an action which has as its base a commercial arrangement which an experienced commercial judge has found “implausible”,[33] which depends on a favourable finding as to the credit of its two principal witnesses which, as I have endeavoured to explain, is problematic, which requires the court to accept that important commercial documents were signed without the Rodgers appreciating their significance at the time and simultaneously with a legally enforceable caveat to the effect that the ANZ could not avail itself of the protection they gave, and with no evidence presently available to establish its claimed loss. The grounds the plaintiff relies on have, to a very large extent, already been canvassed and rejected at trial and on appeal. Against that is the inevitability of the defendant, if successful, not recovering its costs.
[37] I have a discretion. It must be exercised to best serve the interests of justice. As Finkelstein J observed:
“The system of justice under which we operate assumes that the interests of justice are best served if a successful litigant will receive his litigation costs and that the unsuccessful party will pay them.”[34]
[38] To like effect are the observations of McHugh J in Oshlack v Richmond River Council:
“ [T]he jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationales in mind, namely that, to the extent it can be avoided, the court should not permit a situation to arise where a party’s success is pyrrhic.”[35]
[39] In my judgment the proper exercise of my discretion requires that security be given by the plaintiff in the amount of $50,000.
Consolidation
[40] The necessary jurisdictional ground provided for in r 78 UCPR is made out – there is undoubtedly the same or substantially the same questions to be resolved in the two proceedings. The significant difference is in the damages. The defendant contended that the better course however was to have the two proceedings heard together pursuant to r 79 UCPR.
[41] There is good reason not to consolidate. The two proceedings are at very different stages. The pleadings in RS 111 of 2006 have long since closed, disclosure undertaken and directions given. A defence is yet to be delivered in RS 375 of 2007. Preparation of a consolidated pleading by the plaintiff will be unnecessarily time consuming – particularly as the plaintiff is self represented. There will be separate issues that ANZ will raise by way of defence. There is merit in identifying and keeping separate those different issues.
[42] The plaintiff’s principal concern is to avoid two hearings and potentially inconsistent findings. That can be achieved if the two proceedings are heard together.
Orders
[43] I order that:
[44] The defendant has been successful in the substantive matter argued. I order that the plaintiff in proceeding 375 of 2007 pay the defendant’s costs of and incidental to the application for security for costs. The parties’ costs on the consolidation application will be each parties costs in the cause.
[1] [2002] QSC 282
[2] [2003] QSC 304
[3] [2004] QCA 186
[4] [2005] QSC 365
[5] App 2/06 – 28 July 2006 – see Ex DOB 69 at p714 and DOB 70 at p794
[6] [2006] QSC 190
[7] See Para 42(a) and 44 of Mr O'Brien’s affidavit
[8] As to the significance of an undertaking see Australian Energy and Electrical Holdings Pty Ltd v Isbell &Ors [2006] QSC 034 per Philippides J at [15]: “…it is not to be elevated to such importance as to require a predisposition towards the refusal of security (Epping Plaza Freshfruit & Vegetables Pty Ltd v Bevendale Pty Ltd (1999) 2 VR 191 at 198; Iron Gates P/L (in Liq) v Richmond River Shire Council [2002] QSC 458)”
[9] See Ex RR(3)-5 pp18-19
[10] Para 40 of Mr O'Brien’s affidavit and See Ex DOB 71 at p819 and 819B – diary note of 10/10/01; p819A – diary note of 1/10/01
[11] Ex DOB 3 at p 24
[12] See pp14-15 of Ex DOB 3
[13] (1994) 13 ACSR 440 at 441 per Pincus JA; at 445 per Macrossan CJ ; see also Mt Nathan Landowners Pty Ltd (in Liq) v Morris & Ors [2006] QSC 225 per Mullins J at [36]
[14] s 12CA and s 12DA Australian Securities and Investment Act 2001 are relied on
[15] By which is meant presumably a capacity to exceed limits by an indeterminate amount as needed: see [2004] QCA 186 at
[16] Statement of Claim paras 14, 16 and 22
[17] [2004] QCA 186 per de Jersey CJ at [16], Williams JA at [47]
[18] Statement of Claim para 16(d)(iv)
[19] See the analysis of the evidence by de Jersey CJ on appeal: [2004] QCA 186 at [15]
[20] [2006] QSC 190 at [36] and [39] – the outline was much the same as given to me
[21] Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176 at 180; PS Chellarum & Co v China Ocean Shipping (1991) 65 ALJR 642 at 643
[22] See also the summary by Beasley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
[23] ANZ asserts it has expended over $1,000,000 in legal costs already on the various proceedings. I note that it has been successful on all but the strike out application and there it was successful in having struck out claims totalling $760,664 out of a claim for $1,098,264. The trial is expected to take 5 days.
[24] Per Macrossan CJ in Impex at p445
[25] Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 per Clarke J at p545
[26] [1984] 2 Qd R 523
[27] [1984] 2 Qd R 523 at 530
[28] cf Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group (1998) 155 ALR 1 at 11 per Kirby J
[29] See Nambour Valley Estates Pty Ltd v Henebury Holdings Investment Trust & Anor [2007] QSC 393 per Daubney J at [20] and the decisions there cited
[30] See paras 14 and 16 of Ms Payne’s submission
[31] [1984[ 2 Qd R 523 at 531-532
[32] [1973] 1 All ER 707
[33] [2003] QSC 304 at [68]
[34] Bosun Pty Ltd (in Liq) v Makris (2003) 21 ACLC 666 at 669
[35] (1998) 193 CLR 72 at 97
