Juniper Property Holdings No 15 Pty Ltd v Caltabiano
[2015] QSC 95
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- Unreported Judgment
- Juniper Property Holdings No 15 Pty Ltd v Caltabiano[2015] QSC 95
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Juniper Property Holdings No 15 Pty Ltd v Caltabiano[2015] QSC 95
Juniper Property Holdings No 15 Pty Ltd v Caltabiano[2015] QSC 95
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Application |
DELIVERED ON: | 27 April 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 7 April 2015 |
JUDGE: | Jackson J |
ORDER: | The order of the court is that:
|
CATCHWORDS: | COSTS – JURISDICTION – PERSONS NOT PARTIES TO PROCEEDINGS – where the plaintiff was the seller and the defendant was the buyer in a contract of sale of land – where the plaintiff claims termination of the contract of sale, forfeiture of the deposit and interest – where the defendant counterclaims rescission on the basis of misrepresentations, unconscionable conduct and misleading and deceptive conduct – where there were receivers and managers appointed for the plaintiff – where the defendant applied for a declaration that the receivers and managers be made jointly and severally liable in relation to any costs order made in favour over the defendant – whether a declaration should be made Civil Proceedings Act 2011 (Qld), s 58 Corporations Act 2001 (Cth), s 420(2)(k) Trade Practices Act 1974 (Cth), ss 51AA, 51AB, 52, 87 Uniform Civil Procedure Rules 1999 (Qld), rr 680, 681, 682 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9, followed Burns v State of Queensland & Croton [2007] QCA 240, followed Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18, cited Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd & Ors (2009) 239 CLR 75; [2009] HCA 43, applied Kelaw Pty Ltd v Catco Developments Pty Ltd (1989) 15 NSWLR 587, considered Knight & Anor v FP Special Assets Ltd & Ors (1992) 174 CLR 178; [1992] HCA 28, followed Nambour Valley Estates Pty Ltd v Henebery Holdings Investment Trust & Anor [2007] QSC 393, applied Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, applied Seabird Corporation Ltd (Receiver and Manager Appointed) (in liq) v National Securities Exchanges Guarantee Corporation Ltd (1989) 7 ACLC 1263, applied |
COUNSEL: | R Bain QC and J Morris for the applicant C Jennings for the respondent |
SOLICITORS: | Johnsons Solicitors & Attorneys for the applicant Norton Rose Fulbright Australia for the respondent |
[1] Jackson J: On 27 February 2015, the defendant filed this application seeking a declaration that the receivers and managers appointed to the plaintiff be made jointly and severally liable to the defendant in respect of any costs order made in favour of the defendant in this proceeding. Alternatively, they seek a declaration that the receivers and managers be made jointly and severally liable to the defendant in respect of any costs order made in favour of the defendant in this proceeding that, having been called upon by the defendant to pay, remain unsatisfied by the plaintiff after a period of 28 days.
[2] On 25 October 2012, the receivers and managers were appointed to the rights, property and undertaking of the plaintiff. The appointment was made by a secured creditor, the National Australia Bank Ltd, in its capacity as security trustee for the Soul Security Trust. The details of the security are not in evidence.
[3] The receivers and managers have the power to bring or defend any proceedings in the name of and on behalf of the plaintiff corporation.[1] On 5 June 2014, the plaintiff started the present proceeding against the defendant.
The claim and counterclaim
[4] The claim in the proceeding is for a declaration that the plaintiff validly terminated a contract, a further declaration that the deposit under the contract together with interest is forfeited to the plaintiff, an order that the defendant pay the sum of $3,843,184.93 to the plaintiff as a debt due and owing under the contract and damages for breach of contract in an unquantified sum. The plaintiff also claims interest.
[5] The contract was for the sale and purchase of a penthouse in a development at Surfers Paradise known as “Soul”. The purchase price was $16,850,000. The deposit was $1,685,000. The plaintiff alleges that settlement was first due on 10 August 2012 but was extended until 10 September 2012. The defendant failed to settle on that date. The plaintiff alleges that it gave a notice to complete nominating 18 October 2012 for settlement. The defendant failed to settle on that date. The plaintiff alleges that on 4 March 2014 it gave a further notice to complete on 19 March 2014. The defendant failed to settle on that date. The plaintiff alleges that in consequence of the defendant’s breaches of contract in failing to complete the purchase it was entitled to terminate the contract and did so on 19 March 2014.
[6] The plaintiff alleges that: first, the deposit is forfeited to the plaintiff; secondly, under cl 15.6 of the contract interest is payable on the purchase price from 10 September 2012 to 19 March 2014 at the rate of 15 per cent as a debt due and owing under the contract; thirdly, the plaintiff is entitled to damages for breach of contract measured by the difference between the purchase price and the market value of the penthouse on 19 March 2014, together with holding costs and expenses; and, fourthly, the plaintiff is entitled to an award of pre-judgment interest under s 58 of the Civil Proceedings Act 2011 (Qld).
[7] The plaintiff’s claims are for sums due under a contract and damages for breach of contract, as well as declaratory relief founded on the statutory power to grant a declaration and interest under statute. These are claims at common law and under statute.
[8] The defendant admits the existence of the contract and that it failed to settle on any of the appointed dates. The defendant alleges that before the contract was made, on 24 April 2006, an agent acting on behalf of the plaintiff made representations as to the sale price, floor area, and other features of two penthouses in other complexes so as to compare them to the penthouse. The defendant alleges that the representations were false or constituted misleading or deceptive conduct for the purposes of s 52 of the Trades Practices Act 1974 (Cth) (“TPA”). The defendant alleges that it has elected to rescind the contract.
[9] The defendant sets up the same subject matter by way of counterclaim as misrepresentations, unconscionable conduct under s 51AA or s 51AB of the TPA and misleading or deceptive conduct under s 52 of the TPA. The defendant claims a declaration that the contract has been rescinded, or an order pursuant to s 87 of the TPA that the contract is rescinded, and a declaration that the defendant is entitled to return of the deposit and all interest thereon.
An insolvent administration
[10] In a report as to affairs made in late 2012, the receivers and managers stated that the plaintiff’s unsecured creditors claim amounts of $261,402,581.19. At that time, the secured creditor’s debt was stated to be $434,992,182. By an accounts statement for the six months ending 24 October 2014, the receivers and managers stated that the debt to the secured appointing creditor was reduced to $188,887,186. The receivers and managers’ fees to that time were $5,873,399.77. The amount of the unsecured creditors’ claims was not identified.
[11] It does not clearly appear by evidence what deficiency, if any, there is in the plaintiff’s assets to meet the debts of the secured creditor. Nevertheless, given that the outstanding amount of the secured creditor’s debt at 24 October 2014 was still over $188,000,000, I am prepared to infer in the absence of any contrary evidence that there will be a significant deficiency in the plaintiff’s assets to meet the claims of unsecured creditors.
The defendant’s exposure as an unsecured creditor and the submissions
[12] On 29 January 2015, the defendant sought an undertaking from the receivers personally to meet any costs order made in favour of the defendant in the proceeding. Neither the receivers nor the secured creditor has offered any undertaking as to those costs.
[13] To date, no application for security for costs as been brought by the defendant. Thus, if the defendant is successful in the proceeding, any order for costs made against the plaintiff will result in an unsecured debt in the plaintiff’s insolvent administration.
[14] The defendant submits that there is an inequity in the situation. The receivers and managers are likely to be indemnified by the secured creditor and have started the proceeding in the name of and on behalf of the plaintiff for the benefit of the secured creditor. Yet, they have refused to provide the requested undertaking as to costs. The defendant submits that an application for security is not appropriate in this case because the dispute over the entitlement to the deposit means that the litigation must be progressed to a resolution on the counterclaim as well as defending the claim.
[15] The defendant submits that the orders sought by him engage the inherent jurisdiction of the court to protect the integrity of its processes. In particular, he submits that the abuse is found in the situation of a secured creditor, free from the risk of an adverse costs order, benefitting from the litigation instituted by its appointed receivers.
[16] The application is brought against the plaintiff. However, it was defended on the footing that it was brought, in effect, against the receivers and managers in their personal capacity.
[17] They submit that there is no power in the court to make the declaration sought. They submit that the prosecution of the proceeding by the plaintiff is not an abuse of process even though it is unable to meet an adverse costs order. They submit that the court’s power to make a costs order against a non-party does not include a power to make a declaration for a non-party’s future liability for costs. They submit that, if the court has power to make the declaration sought, the orders sought should be refused, in any event, as a matter of discretion.
Power to make an order for costs
[18] The history of the statutory power to award costs is traced in both Knight & Anor v FP Special Assets Ltd & Ors,[2] and in Oshlack v Richmond River Council.[3]
[19] The present source of the power in this court is s 15 of the Civil Proceedings Act 2011 (Qld). It provides that a court may award costs in all proceedings unless otherwise provided. More particularly, the exercise of the power is provided for in Ch 17 and Ch 17A of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”). Rule 680 UCPR provides that a party to a proceeding cannot recover any costs of the proceeding from another party other than under those rules or an order of the court. Rule 681 UCPR provides the costs of a proceeding are in the discretion of the court but follow the event unless the court otherwise orders. Rule 682(1) UCPR provides as follows:
“(1) The costs a court may award –
(a)may be awarded at any stage of a proceeding or after the proceeding ends; and
(b)must be decided in accordance with this chapter.”
[20] There was no power at common law for a court to order a party to pay another party’s costs.[4] In Knight & Anor v FP Special Assets Ltd & Ors,[5] Mason CJ and Deane J said:
“The courts at common law had no inherent jurisdiction to award costs.”[6]
A novel application
[21] The plaintiff’s application raises what seems to be a novel point.
[22] At the outset, it is noticeable that neither of the alternative declarations applied for is a declaration of an existing right. Although the defendant frames the order sought as a declaration, the determination he seeks is of the liability of a non-party to pay a party’s costs of the proceeding. That follows from the declaration engaging upon “any costs orders made in favour of the defendant in this proceeding”. The costs orders that might be made in favour of the defendant in the proceeding include an order that the plaintiff pay the defendant’s costs of the proceeding, or an order to pay the defendant’s costs of the claim, or other more specific orders. They may also include an order to pay the defendant’s costs of any application brought in the proceeding.
[23] I accept the plaintiff’s submission that the prosecution of a proceeding by a company unable to meet an adverse order for costs is not, per se, an abuse of process.[7] But that does not necessarily answer the defendant’s contentions. The defendant’s starting point is that Knight v FP Special Assets recognised a general category of case in which an order for costs should be made against a non-party, including a receiver of a company where the company is insolvent and the person on whose behalf the receiver is acting has an interest in the subject of the litigation. Mason CJ and Deane J said of such a case:
“Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”[8]
[24] Secondly, the defendant submits, correctly, that the existence of a power to make an order for security for costs against an insolvent party is not a reason for denying the existence of the jurisdiction to make an order for costs against the “real” party “at the end of the trial of an action”.[9]
[25] From there, the defendant relies on the circumstances of the receivership in the present case as fitting within the category of case previously described. In particular, the defendant relies on the absence of material to refute the inference that the plaintiff could not satisfy an adverse costs order, that the litigation is for the benefit of the secured creditor and that the secured creditor and the receivers refuse to give undertakings as to costs. The conclusion for which the defendant submits is that the receivers and the unsecured creditor are benefited while the defendant is disadvantaged by the processes of the court.
[26] In my view, in one respect the defendant overstates this position. Neither the secured creditor nor the receivers are free from the risk of an adverse costs order. That is the point of the decision of Knight & Anor v FP Special Assets. In Queensland, there is no question that there is jurisdiction to make such an order under the current statutory provisions for the making of an order for costs: Burns v State of Queensland & Croton.[10]
[27] The liability the defendant seeks to establish is conditional, namely if there is an order for costs made in favour of the defendant against the plaintiff. In some circumstances, the court will make a conditional order for costs. For example, a common order is that the costs of an application or proceeding be a party’s “costs in the proceeding”. It operates if the party is successful in the proceeding but it does not deal with future costs.
[28] Another well-known example is that the High Court sometimes will only grant special leave to appeal on the condition that the appellant undertakes to pay the other party’s costs in any event. But that is a condition of the grant of leave, where the party does not have an entitlement to start an appeal without leave. It does not inform the answer to the question in the present case as to the power to make the declaration sought.
[29] Given that the court’s power to make an order for costs is statutory, a declaration as to liability in relation to costs must either be founded in or proceed from the statute. The defendant did not identify a statutory source of power. He relied instead upon the court’s power to make orders to protect the integrity of its processes.[11]
[30] There does not appear to be much discussion of this question in authority. The only directly relevant case appears to be Kelaw Pty Ltd v Catco Developments Pty Ltd.[12] In that case, a defendant sought a declaration that a receiver was personally liable for the costs that may become payable by the company plaintiff in circumstances where the receiver continued litigation in the name of the company after an order for winding up had been made. Brownie J held as follows:
“The plaintiff therefore sought a declaration that the receiver was personally liable for the costs, although, presumably, he could confidently look to the mortgagee for indemnity. I do not think that such a declaration can be made. It may, in an appropriate case, be right to order that a receiver pay costs: Bacal (at 660-661) but it does not seem correct that a declaration can be made, in advance of the exercise of a discretion as to costs.”[13]
[31] Kelaw was decided before Knight & Anor v FP Special Assets Ltd & Ors[14] made it clear that the statutory power to award costs includes the power to make an order against a receiver as a non-party. However, the ground of Brownie J’s refusal of the application was that a declaration could not be made in advance of the exercise of the discretionary power to make an order for costs. In my view, that conclusion is right.
Discretionary factors
[32] Strictly speaking, it is unnecessary to say more in order to decide the present application. However, I will deal briefly with the receivers and managers’ other grounds of opposition to the application.
[33] They submit that, if there were power to make the declaration sought, it should be refused still, as a matter of discretion, because the appropriate proceeding in order to protect the defendant’s position would have been an application for security for costs.
[34] In that respect, the defendant relies on Nambour Valley Estates Pty Ltd v Henebery Holdings Investment Trust & Anor.[15] Daubney J held, in a context comparable to the present case, that it is appropriate to make an order for security for costs, saying:
“In particular, I consider that the appointment of receivers and managers to the plaintiff, combined with the evidence to the effect that success by the plaintiff in the proceeding would largely benefit a secured creditor who has chosen not to offer security for costs, outweighs the consideration urged by the plaintiff of commonality of factual issues between the claim and the counterclaim. The following observation by Needham AJ in Seabird Corporation Ltd (Receiver and Manager Appointed) (in liq) v National Securities Exchanges Guarantee Corporation Ltd is apposite:
‘It would be unjust to allow a secured creditor an opportunity to litigate free of any risk that, should it fail, it would not be under an obligation to pay the costs of the defendant. The receiver and manager’s duty, should he succeed in obtaining judgment, would be to apply the proceeds of the litigation towards repayment of the secured debt. In that sense, the proceedings are taken for the benefit of the secured creditor, and there is every reason, in my opinion why the defendant should have the benefit of an order giving it some security for costs.’”
[35] I accept the reasoning in both Nambour Valley and Seabird as set out above, with the qualification that I do not consider that in this State a secured creditor (or a receiver) is free from the risk of an adverse costs order. However, I find it unnecessary to decide whether in the present case the defendant’s application should be dismissed as a matter of discretion, because the defendant could or should have brought an application for security for costs before now.
[36] Lastly, the plaintiff submits that the declaration sought should be declined on the ground that it relates to purely future and hypothetical questions. The defendant submits that the relationships of the receivers and managers to the plaintiff and the secured creditor will be the same at the conclusion of the proceeding as they are now. The plaintiff submits that may not be so, although without any suggested factual basis for any change. The defendant submits, accordingly, that the court can be confident of the factual basis of the liability of the receivers and managers which it seeks to establish by the proposed declaration.
[37] However, those are not the only facts which might go into a determination of whether or not an order should be made that the receivers and managers as non-parties pay the defendant’s costs. The defendant submits that the terms of the declaration sought are such that any limitation that exists in any order for costs that might be made in the defendant’s favour against the plaintiff will also apply to the proposed liability of the receivers and managers. That may be accepted. But what was said in Knight v FP Special Assets is that an order for costs against a non-party is one that is made at the end of the trial of an action and “if the interests of justice require that it be made.”[16] That is the language for the exercise of a power, said to confer a “wide discretion on the court”.[17]
[38] In Bass v Permanent Trustee Co Ltd,[18] the High Court emphasised that it is central to a judicial determination that it includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.[19] The High Court developed that point by reference to the traditional reluctance of courts to provide answers to hypothetical questions in the development of the jurisdiction to grant declaratory relief.[20] In particular, the High Court emphasised that the existence of a concrete situation based on facts, found or agreed, was to be distinguished from an advisory opinion or declaration which does no more than declare the law upon facts which are not stated or which cannot be identified with any precision.[21]
[39] I have some sympathy for the defendant’s submission that the relevant facts relating to the relationships between the plaintiff and the receivers and managers and the secured creditor are not likely to change between now and the conclusion of the case. Still, it is not possible to say with any certainty that there may not be other facts relating to the conduct of the litigation which may be relevant in the exercise of the discretionary power to make an order for costs against the receivers and managers as non-parties.
[40] The substance of the point lies in the circumstance that a significant amount of the costs which would be dealt with by the declaration sought are future costs. The court cannot know in advance all the facts that might affect whether those costs should be paid by the receivers and managers personally as non-parties. Accordingly, in my view, the question sought to be resolved by the declaration is not a real question or is an hypothetical question. That is an alternative reason why the declaration sought by the defendant should not be made, even if there is power to grant it.
[41] It follows, in my view, that the application should be dismissed.
[42] I will hear the parties on the question of costs.
Footnotes
[1] Corporations Act 2001 (Cth), s 420(2)(k).
[2] (1992) 174 CLR 178.
[3] (1998) 193 CLR 72, 84-86 [32]-[35], 95-97 [63]-[66].
[4] Holdsworth, WS, A History of English Law, 3 ed, vol 4, Methuen & Co, London, 536-537.
[5] (1992) 174 CLR 178.
[6] (1992) 174 CLR 178, 182-190, 208-215.
[7] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd & Ors (2009) 239 CLR 75, 96 [37].
[8] Knight & Anor v FP Special Assets Ltd (1992) 174 CLR 178, 193.
[9] Knight & Anor v FP Special Assets Ltd (1992) 174 CLR 178, 191.
[10] [2007] QCA 240, [14].
[11] Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 393.
[12] (1989) 15 NSWLR 587.
[13] (1989) 15 NSWLR 587, 593.
[14] (1992) 174 CLR 178.
[15] [2007] QSC 393, [29].
[16] (1992) 174 CLR 178, 191, 193.
[17] Oshlack v Richmond River Council (1998) 193 CLR 72, 88 [39].
[18] (1999) 198 CLR 334.
[19] (1999) 198 CLR 334, 355 [45].
[20] (1999) 198 CLR 334, 356 [47].
[21] (1999) 198 CLR 334, 356-357 [48]-[49].