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  4. Specialised Explosives Blasting and Training Pty Ltd v Huddy's Plant Hire Pty Ltd - [2009] QSC 55

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Specialised Explosives Blasting and Training Pty Ltd v Huddy's Plant Hire Pty Ltd[2009] QSC 55

Specialised Explosives Blasting and Training Pty Ltd v Huddy's Plant Hire Pty Ltd[2009] QSC 55

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Specialised Explosives Blasting and Training P/L v Huddy’s Plant Hire P/L [2009] QSC 55

PARTIES:

SPECIALIST EXPLOSIVES BLASTING AND TRAINING PTY LTD ACN 121 812 986
(plaintiff/respondent)
v
HUDDY’S PLANT HIRE PTY LTD ACN 079 126 307
(defendant/applicant)

FILE NO/S:

BS 8857 of 2008

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

24 March 2009

DELIVERED AT:

Brisbane

HEARING DATE:

12 December 2008

JUDGE:

Martin J

ORDER:

1.That the defendant’s application for security for costs be adjourned for 28 days to allow the lodgement with the Registrar of the Court of an irrevocable guarantee by Cedric Rodriguez, in a form acceptable to the Registrar, in favour of the defendant whereby Mr Rodriguez guarantees every obligation which the plaintiff may have to pay any costs order made against the plaintiff in this proceeding.

2.That the plaintiff cause such a guarantee to be lodged with the registrar within 14 days. Upon notification by the Registrar to the parties that the guarantee has been lodged and is in a form acceptable to the Registrar, the defendant’s application for security for costs will stand dismissed.

CATCHWORDS:

PRACTICE - COSTS – SECURITY FOR – where defendant/applicant seeks security for costs - where plaintiff/respondent company is impecunious - where sole shareholder of company offers to provide a personal irrevocable guarantee to pay costs – where shareholder is also impecunious - where trial has not yet begun – where an order for security for costs would stifle the plaintiff/respondent’s action – whether an order for security of costs should be granted.

Corporations Act 2000 (Cth), s 1335

Uniform Civil Procedure Rules, r 670

Aqwell Pty Ltd v B J C Drilling Services Pty Ltd. [2008] QSC 266

Hession v Century 21 South Pacific Ltd (In liquidation) (1992) 28 NSWLR 120

Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364

COUNSEL:

J Sweeney for the plaintiff/respondent

J Peden for the defendant/applicant

SOLICITORS:

MacGillivrays for the plaintiff/respondent

Russell and Company for the defendant/applicant

  1. The defendant applies for security for costs pursuant to s 1335 of the Corporations Act 2000 (Cth) or r 670 of the Uniform Civil Procedure Rules or both on the ground that the plaintiff is a corporation and is impecunious.
  1. The plaintiff admits impecuniosity but, among other things, says that it was caused by the defendant.
  1. Cedric Rodriguez, the sole shareholder of the plaintiff, offers a personal undertaking to pay the costs should an order be made in the defendant’s favour at trial.

The dispute

  1. The plaintiff and defendant were parties to a contract whereby the defendant used the services of the plaintiff as a shot-firer at the Trekelano mine near Mount Isa.
  1. The plaintiff alleges that the defendant has breached that contract in a number of ways and, as a result, the plaintiff’s business has been destroyed and it claims a loss of profits in the sum of $1.5 million.
  1. The defendant alleges that the plaintiff’s claim for loss is excluded by a clause of the contract and counterclaims for approximately $1.25 million. The bases of the counterclaim are:
  1. The plaintiff misrepresented the quality of its services, and
  1. The plaintiff misrepresented the quality of certain explosives which led to the defendant’s costs increasing by $700,000.

Basis for application

  1. Section 1335 of the Corporations Act provides:

“Costs

  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.

…

  1. 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.”
  1. Rule 670 of the Uniform Civil Procedure Rules provides:

“670 Security for costs

  1. On application by a defendant, the court may order the plaintiff to give the security the court considers appropriate for the defendant’s costs of and incidental to the proceeding.
  1. This rule applies subject to the provisions of these rules, particularly, rules 671 and 672.”

Factors for consideration

  1. The factors which are relevant in an application of this nature are well established.

Impecuniosity

  1. It is a factor relevant to the exercise of the discretion (under either the Corporations Act or the UCPR) whether or not those standing behind a plaintiff are attempting to protect their assets from an order for costs.[1] If a person is willing to offer a personal undertaking or guarantee to be liable for the costs, then that may lead the court to favour refusing an application. Mr Rodriguez has offered such an undertaking. It is clear, though, from the material that he, like the plaintiff, is impecunious, and that the use of the corporate platform has not been designed to protect shareholders’ assets. The principles to be applied in circumstances where a shareholder does offer such an undertaking was considered recently by Daubney J in Aqwell Pty Ltd v B J C Drilling Services Pty Ltd.[2] His Honour examined the circumstances in that case and then at [21] to [27] analysed the relevant authorities. I gratefully adopt what his Honour said in that case without repeating them here. In those circumstances Daubney J considered that the proffering of the personal guarantee was sufficient to tip the scale against the ordering of further security.

Strength of claim and counterclaim

  1. The action has just commenced. All that is before me are the pleadings and some affidavits in support. Although some of the material goes to the merits it is too early in the proceedings for any useful assessment to be made. This application falls into the category referred to Memutu Pty Ltd v Lissenden where Rogers J said that if a claim is prima facie regular and discloses a cause of action then, in the absence of evidence to the contrary, the courts will assume the claim to be bona fide with a reasonable prospect of success for the purposes of an application of this type.[3]

Will the action be stifled?

  1. I am satisfied that should the application be successful and security ordered, then the plaintiff would not be able to proceed with the action.

Cause of the plaintiffs’ impecuniosity

  1. It is not uncommon for a plaintiff to claim that its financial difficulties are a result of a defendant’s actions. It is hard to demonstrate that in a case where the plaintiff is and has always been a “$2 company”. What has occurred on the plaintiff’s own case is that its prospects of making a profit have been denied by the alleged breaches of the defendant. This is not a case where a company which was otherwise in financial health has had its position weakened by a defendant’s actions.

Timing of the application

  1. It is sometimes a factor in applications of this nature that an application which is brought late in the proceedings will serve to deprive an applicant for security of an order in its favour. That is not the case here. The application has been brought in a timely fashion.

Conclusion

  1. In this matter the factors which weigh against the making of an order for security for costs are:
  1. the fact that such an order would stifle the plaintiff’s action, and
  1. the shareholder behind the plaintiff has offered a personal undertaking to pay the costs.
  1. Against these is the fact that the shareholder is as impecunious as the plaintiff. That, though, would be the case had Mr Rodriguez been the contracting party, and a natural person will not be denied his or her day in court purely because of impecuniosity.
  1. There was some contention during the hearing of this application about the circumstances which would prevail if an order for security was made and the plaintiff could no longer continue. The defendant undertook that should an order be granted then it would not pursue the counterclaim if the matter was stayed.
  1. Having weighed the various factors relevant to the exercise of discretion in this matter, I find that the balance is in the plaintiff’s favour and, for that reason, I intend to deny the defendant’s application. However, the defendant should be certain as to the protection which is afforded by any undertaking or guarantee.
  1. I order that the defendant’s application for security for costs be adjourned for 28 days to allow the lodgement with the registrar of the court of an irrevocable guarantee by Cedric Rodriguez, in a form acceptable to the registrar, in favour of the defendant whereby Mr Rodriguez guarantees every obligation which the plaintiff may have to pay any costs order made against the plaintiff in this proceeding.
  1. I order that the plaintiff cause such a guarantee to be lodged with the registrar within 14 days. Upon notification by the registrar to the parties that the guarantee has been lodged and is in the form acceptable to the registrar, the defendant’s application for security for costs will stand dismissed.
  1. The parties have liberty to apply on two days written notice.
  1. Although the plaintiff has been successful in having the application dismissed, in the circumstances the defendant’s application was not inappropriate. In those circumstances, it is appropriate that costs be reserved.

Footnotes

[1] Hession v Century 21 South Pacific Ltd (In liquidation) (1992) 28 NSWLR 120 at 123.

[2] [2008] QSC 266.

[3] (1983) 8 ACLR 364.

Close

Editorial Notes

  • Published Case Name:

    Specialised Explosives Blasting and Training P/L v Huddy's Plant Hire P/L

  • Shortened Case Name:

    Specialised Explosives Blasting and Training Pty Ltd v Huddy's Plant Hire Pty Ltd

  • MNC:

    [2009] QSC 55

  • Court:

    QSC

  • Judge(s):

    Martin J

  • Date:

    24 Mar 2009

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2009] QSC 5524 Mar 2009-
Appeal Determined (QCA)[2009] QCA 25401 Sep 2009-

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Aqwell Pty Ltd v BJC Drilling Services Pty Ltd [2008] QSC 266
2 citations
Jump To
Cite 1 - [2008] QSC 266
Cite 2 - [2008] QSC 266
Hession v Century 21 South Pacific Ltd (In liquidation) (1992) 28 NSWLR 120
2 citations
Jump To
Cite 1 - (1992) 28 NSWLR 120
Cite 2 - (1992) 28 NSWLR 120
Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364
2 citations
Jump To
Cite 1 - (1983) 8 ACLR 364
Cite 2 - (1983) 8 ACLR 364

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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