Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd
[2016] QSC 67
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- Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd[2016] QSC 67
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Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd[2016] QSC 67
Suncare Constructions Australia Pty Ltd v Gainspace (Mackay) Pty Ltd[2016] QSC 67
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Application |
DELIVERED ON: | 31 March 2016 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 9 February 2016 |
JUDGE: | Jackson J |
ORDER: | The order of the court is that:
|
CATCHWORDS: | PROCEDURE – SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE OF DISCRETION – PLAINTIFF'S OR APPLICANT'S IMPECUNIOSITY – where the plaintiffs’ insolvency is due to the defendant’s conduct in failing to pay the claimed debt or damages – whether the defendant’s conduct must be related to particular debts to other creditors that the plaintiff is unable to pay – whether the defendant’s conduct must involve some form of misconduct or unacceptable business dealings qua the plaintiff ACN 006 577 162 Pty Ltd (formerly Harrop Engineering Australia Pty Ltd) as trustee for Harrop Family Trust v Beauville Pty Ltd [2014] VSC 298, cited Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, cited Contamination Control Laboratories Pty Ltd v Reyer [2010] QSC 1, cited Dalma Formwork Pty Ltd (administrators appointed) v Concrete Constructions Group [1998] NSWSC 472, not followed Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405, cited Gore v Justice Corp Pty Ltd (2002) 119 FCR 429; [2002] FCAFC 83, cited Green v CGU Insurance Ltd (2008) 67 ACSR 105; [2008] NSWCA 148, cited Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523, considered Jazabas Pty Ltd v Haddad (2007) 65 ACSR 276; [2007] NSWCA 291, considered KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189, cited Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [2016] QSC 2, cited Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133, cited Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304, cited Melunu Pty Ltd v Claron Constructions Pty Ltd [2004] NSWSC 1064, cited Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420, cited Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609, applied Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114, cited Specialised Explosives Blasting & Training Pty Ltd v Huddy’s Plant Hire Pty Ltd [2010] 2 Qd R 85; [2009] QCA 254, cited Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294, cited Companies Act 1948 (UK), s 447 Corporations Act 2001 (Cth), s 1335 Uniform Civil Procedure Rules 1999 (Qld), rr 670, 671, 672 |
COUNSEL: | T Mathews QC for the plaintiffs J Peden for the defendant |
SOLICITORS: | JHK Legal for the plaintiffs Russell Solicitors for the defendant |
[1] Jackson J: The defendant applies for orders for security for costs of the proceeding against both plaintiffs. Each of the plaintiffs is in liquidation. There is reason to believe that the plaintiffs will be unable to pay the costs of the defendant if the defendant is successful in its defence and the plaintiffs are ordered to pay the costs. Accordingly, there is no question that the threshold requirements for an order for security under s 1335 of the Corporations Act 2001 (Cth) or under r 671(a) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) have been met.
[2] The circumstances therefore engage the discretionary powers to make an order for security for costs conferred by s 1335(1) and r 670(1) which provide, respectively, that the court “may … require sufficient security to be given for those costs” or “may order the plaintiff to give the security the court considers appropriate”.
[3] The principal points ventilated on the hearing of the application were that:
(a) the plaintiffs’ prospects of success favour or disfavour making an order for security;[1]
(b) no order for security should be made, or the amount of security that would otherwise be ordered should be reduced, because the plaintiff’s impecuniosity was caused by the defendant’s conduct;[2]
(c) the amount of security that might otherwise be ordered should not include outlays or costs in relation to:
(i) the defendant’s counterclaim;
(ii)an application for disclosure;
(iii) costs that the defendant was ordered to pay in an application for removal of caveats; and
(iv) expert evidence.
Background
[4] The defendant was the developer of a construction project comprising 35 units or townhouses in Mackay. The first plaintiff and the defendant entered into a contract dated 23 March 2012 for the first plaintiff to construct the works for a fixed amount of $5,402,033.25. The second plaintiff and the defendant entered into an associated contract for the second plaintiff to carry out civil works for a fixed amount of $1,106,137.
[5] About four months after the construction contract and civil works contracts were entered into the plaintiffs and defendant entered into a further contract styled the “development agreement”. It provided for a profit sharing arrangement.
[6] In mid-2013 the project was nearing completion when the parties fell into dispute. The first plaintiff threatened to suspend the works. The defendant alleged that was a repudiation by the plaintiffs. The defendant elected, or purported to elect, to terminate the construction contract and the civil works contract. The defendant took possession of the site. The defendant completed the construction works.
[7] Of the completed units or townhouses, 31 have been sold. The four remaining units or townhouses are the subject of a caveat lodged by the plaintiffs to secure their claims in the proceeding.
[8] The plaintiffs claim damages based on the defendant’s wrongful termination of the contracts. The total claim is approximately $1,800,000. The plaintiffs claim in the alternative that they are entitled to an amount on a restitutionary claim for the construction and civil work and labour done for the defendant at the defendant’s request.
[9] The defendant defends both the claim based on the contracts and the claim in restitution. It counterclaims for damages for breach of contract or in restitution. One part of the counterclaim is for the alleged cost to complete the works in excess of the sums that were payable under the contracts. Another is a claim for restitution of payments made for variations which are alleged not to have been authorised.
Prospects of success
[10] Both sides accept that the prospects of success may be a relevant discretionary factor. However, in oral argument they also accepted that the court was not in a position to form a view as to the prospects of success that would enable them to be taken into account in the exercise of discretion.
[11] On an application for security for costs, that will often be the position. Such an application is not to become a mini trial with provisional views formed so as to encourage one or other side. The accepted[3] approach is that the strength and bona fides of the plaintiff’s case are relevant considerations, but usually “the court should proceed on the basis that the claim is both bona fide and has reasonable prospects … [and] should not go into the merits of the claim in detail unless it can be demonstrated that there is a high degree of probability of success or failure”.[4]
[12] It should also not be forgotten that the condition for the making of an order for security is the assumption that the defendant may succeed in the proceeding. In this context, the mischief or purpose to which s 1335 and r 670 are directed is the risk that the defendant will be unable to recover an order for costs against the impecunious corporate plaintiff in the event that the defendant succeeds.
Impecuniosity caused by the defendant’s conduct
[13] The plaintiffs submit that their impecuniosity is attributable to the defendant’s conduct. Rule 672(e) of the UCPR provides that in deciding whether to make an order the court may have regard to whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct.
[14] The defendant disputes whether the plaintiffs’ impecuniosity is attributable to the defendant’s conduct as a matter of fact. The plaintiffs submit that on the evidence their insolvencies were due to the defendant’s conduct.
[15] One of the liquidators, David Michael Stimpson deposed that on 31 October 2013 a summary of the first plaintiff’s position as set out in the first “Report as to Affairs” was as follows:
Assets | $ |
Cash on Hand Sundry Debtors Funds in Solicitor’s Trust Account Bank Guarantees Unpaid Progress Claim Total Assets Liabilities Superannuation Partly Secured Creditor Unsecured Creditors | 15,000.00 9,571.54 145,000.00 26,287.50 1,096,691.83 $1,292,550.87 23,166.02 26,767.32 1,196,779.26 |
Total Liabilities | $1,246,712.60 |
Net Assets/ (Liabilities) | $45,838.27 |
[16] As to the second plaintiff, Mr Stimpson deposed that a summary of the position as set out in the first “Report as to Affairs” was as follows:
Assets | $ |
Cash on Hand Sundry Debtors Total Assets Liabilities Superannuation Unsecured Creditors | 15,000.00 102,767.78 $117,767.78 7,743.88 618,526.24 |
Total Liabilities | $626,270.12 |
Net Assets/ (Liabilities) | ($508,502.34) |
[17] That summary of the second plaintiff’s position omitted from the assets the amount of the claim by the second plaintiff against the defendant in the sum of $419,485.36.
[18] On the basis of payment claims issued by the first and second plaintiff on 13 August 2013 and the plaintiffs’ claims in the proceeding which have not been paid, Mr Stimpson opined that the cause of each company’s impecuniosity can be attributed to the lack of payment or payments by the defendant in respect of those claims. In oral evidence, Mr Stimpson said that in his opinion it was the primary cause.
[19] The defendant submits that there was, in any event, a net deficiency in the second plaintiff’s assets. While that is true, as Mr Stimpson said, had the second plaintiff’s claim against the defendant been paid the directors might have been able to make arrangements to continue the second plaintiff’s business on a solvent footing. There is a difference between a net deficiency on a balance sheet and an inability to pay debts as and when they fall due as a matter of cashflow. Insolvency is determined by the latter consideration, because it is directed to the ability to pay debts as and when they fall due.[5]
[20] The defendant submits that there were two further reasons why this factor, that the plaintiff’s impecuniosity is attributable to the defendant’s conduct, is not engaged in the circumstances of the present case.
[21] First, the defendant submits that the defendant’s failure to pay the claims made against it, on the evidence, is not connected to the plaintiffs’ liabilities to other creditors which have forced them into winding up in insolvency. The thrust of the submission was that the defendant’s conduct in not paying has to be related to the particular debts which, as a matter of substance, caused the insolvency.
[22] In my view, no gloss of that kind should be introduced to the consideration of whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct within the meaning of r 672(e) of the UCPR or under s 1335(1) of the Corporations Act 2001 (Cth). Looking at the matter broadly, there is no authority of which I am aware for the requirement of a nexus upon which the defendant relies. In principle, there is no reason I can discern as to why a relevant question should be whether the debts which a plaintiff is unable to pay have some particular connection to the defendant.
[23] Second, the defendant submits that the plaintiff’s impecuniosity is not attributable to the defendant’s conduct unless there is a:
“… real causal connection between the conduct and the impecuniosity which in the exercise of the court’s discretion, would make it unjust to require security, and it must be established that the applicant for security for costs has been guilty of some form of misconduct or unacceptable business dealings qua the respondent”.[6]
[24] The original passage from which the formulation relied upon was derived appeared in Dalma Formwork Pty Ltd (administrators appointed) v Concrete Construction Group Ltd,[7] as follows:
“These authorities, if I may say so with respect, do not support the view that the impecuniosity has been ‘contributed to’ by the conduct of the defendant. In my opinion they establish that there must be real causal connection between the conduct and the impecuniosity which, in the exercise of the Court’s discretion, would make it unjust to require security. That, in turn, requires a consideration not only of the causal nexus, but also the nature of the conduct. In my opinion, the fact that the defendant has not made payment to the plaintiff because there is a bone fide dispute between the parties, cannot, without more, exculpate the plaintiff from providing security for costs if the other requirements are met. If this were so a defendant may be required to abandon its defence simply to ensure that the plaintiff is in a better financial position than it would have been, but for the non payment of the money the obligation to pay which the defendant disputes. That would be a strange result and would apply whether the amount payable is relatively large or small. It may also mean that a defendant was bound to pay over money to an impecunious plaintiff in circumstances where, if the defendant was ultimately successful, it could not recover from the plaintiff. This would only make the result more odd. In my opinion, before this matter can be given any real weight, it must be established that the defendant has been guilty, in not making payment, of some form of misconduct or unacceptable business dealings qua the plaintiff.”
[25] With all respect, in my view, this is a confusing passage. I have no difficulty with the proposition that a plaintiff is not necessarily excused from providing security for costs by the fact that there is a bone fide dispute between the parties about the defendant’s liability to the plaintiff. For example, if those who stand to benefit from the litigation and who stand behind the plaintiff are able to provide the security, it will often be appropriate to take that factor into account in assessing how the discretion should be exercised.
[26] However, I do not understand the meaning of the sentence referring to a defendant being “required to abandon its defence” to ensure that a plaintiff is in a better financial position, or the following two sentences.
[27] If a defendant who has caused a plaintiff’s impecuniosity by non-payment of the plaintiff’s claim is unable to obtain an order for security, I accept that it may be prejudiced because it will not later recover its costs from security provided. But that does not involve abandoning the defence. Nor is the plaintiff in a better financial position except to the extent of not having to find the security.
[28] It seems to me that the requirement sought to be introduced of “some form of misconduct or unacceptable business dealings”, beyond the factor that the defendant disputes the plaintiff’s claim, is an unwarranted gloss.
[29] Before Dalma was decided, there were a number of cases in which account had been taken of the factor that the plaintiff’s impecuniosity was caused by the defendant’s conduct including a failure to pay the plaintiff’s claim.
[30] A leading case, referred to in Dalma and other cases, was Sir Lindsay Parkinson & Co Ltd v Triplan Ltd.[8] Lord Denning said:
“If there is reason to believe that the company cannot pay the costs, then security may be ordered but not must be ordered. The court has a discretion which it will exercise. The court has a discretion which it will exercise considering all the circumstances of the particular case … [S]ome of the matters which the court might take into account … [are] whether the company’s claim is bone fide and not a sham and whether the company has a reasonably good prospect of success. Again it will consider whether there is an admission by the defendants on the pleadings or elsewhere that money is due. If there was a payment into court of a substantial sum of money (not merely a payment into court to get rid of a nuisance claim), that, too, would count. The court might also consider whether the application for security was being used oppressively – so as to try to stifle a genuine claim. It would also consider whether the company’s want of means has been brought about by any conduct by the defendants, such as delay in payment or delay in doing their part of the work.”[9] (emphasis added)
[31] Lord Denning’s reasons were regularly accepted as expressing well established principles at the time when Dalma was decided.[10]
[32] In my view, it is quite apparent from the emphasised part of the passage taken from Lord Denning’s reasons that consideration of whether the company’s want of means has been brought about by any conduct of the defendants does not depend on that conduct constituting “misconduct or unacceptable business dealings qua the plaintiff.”
[33] That additional gloss seems to have been introduced for the first time in Dalma. Notwithstanding that other cases have subsequently followed Dalma on this point, there does not seem to have been any prior case which has considered whether a requirement of “misconduct or unacceptable business dealings by the plaintiff” restricts the operation of the factor that the plaintiff’s impecuniosity is attributable to the defendant’s conduct. In my view, it does not.[11]
Means of those standing behind the company
[34] Under r 672(a) of the UCPR the means of those standing behind the proceeding is another matter that the court may consider in deciding whether to make an order for security. This reflects a discretionary consideration often taken into account in cases dealing with the operation of s 1335 and its statutory predecessors. In Harpur v Ariadne Australia Ltd,[12] Connolly J said the following:
“The mischief at which the provision is aimed is obvious. An individual who conducts his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play. If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied.”[13]
[35] There has been a subsequent controversy about the extent to which this, and other like statements, should be treated as articulating a principle that dictates an application for security for costs should be dismissed if those who stand to benefit from the insolvent corporate plaintiff’s success undertake to be responsible for the defendant’s costs, if the defendant is successful. For my part, the careful analysis of the competing arguments by Basten J in Jazabas Pty Ltd v Haddad[14] is persuasive and compelling and accepts the principle in Harpur as explained and applied in Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd.[15] and Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd.[16]
[36] However that may be, the persuasive authority for my purposes is to be found in the dicta of Muir JA in Specialised Explosives Blasting & Training Pty Ltd v Huddy’s Plant Hire Pty Ltd[17] where his Honour said:
“I respectfully agree with the observations of Beazley J in KP Cable Investments that the decisions in Mantaray and Gentry do not purport to propound a principle that where the shareholders or other persons interested in the outcome of the litigation offer to be personally liable for the plaintiff company's costs, an order for security should not be made and other circumstances need not be considered.”[18] (footnote omitted)
[37] In the present case, all but one of the 36,012 shares held in the first plaintiff are held by Phoebus International Trading Pty Ltd (“Phoebus”). All the shares in the second plaintiff are held by Pheobus. Phoebus also holds the shares in Echo Living Pty Ltd (“Echo”). The sole director of Echo is Mrs Birchall. She is also the sole director and shareholder of Phoebus. Mrs Birchall is the wife of Ian Birchall. He was formerly the sole director of each of the plaintiff companies.
[38] Mr Birchall is presently an undischarged bankrupt. Mrs Birchall’s means are not established by any evidence.
[39] Echo is the proprietor of an unencumbered parcel of land at 12 Lower King Street, Caboolture. It was acquired in May 2008 for the sum of $505,000.
[40] There is a funding agreement relating to the present litigation between the liquidators of the plaintiffs and Echo. By cl 2.1, Echo promises to pay the legal costs and disbursements incurred on behalf of the liquidators for the purpose of prosecuting this proceeding.
[41] By cl 3.1, Echo promises to indemnify the liquidators and the plaintiffs in respect of any adverse costs order to the extent of the net sale proceeds of the property. As defined in cl 1.1, an adverse costs order means any order made against the liquidators or the plaintiffs in respect of costs incurred after 13 April 2015 and includes any court order made against them to provide security for costs.
[42] In other words, Echo has promised to indemnify the liquidators and the plaintiffs against any order for security for costs to the extent of the net sale proceeds of the property.
[43] There are well defined limits to Echo’s exposure on the indemnity. By cl 3.2, the liability of Echo is strictly limited to the net sale proceeds of the property. Echo agreed to grant a first registered memorandum of mortgage over the property to secure its obligations. By cl 10.2, Echo may terminate the funding agreement at any time by notice in writing. By cl 10.3, the effect of doing so would be to limit the indemnity for any adverse costs order to costs incurred until the date of termination of the agreement by Echo.
[44] Under the funding agreement, Echo is to share in any fruits of the litigation. By cl 4, the parties agree that after payment of the legal costs and disbursements the liquidators will pay to Echo a proportion of any sum received. The proportion ranges between 33 per cent and 23 per cent depending on a number of factors. Echo will thus stand in priority to the unsecured creditors to that extent.
[45] These facts show that Echo has a substantial interest in the outcome of the proceeding. Equally, as a member of the plaintiffs, Phoebus has an interest in the outcome of the proceeding, subject to the prior interests of the creditors upon a winding up.
[46] However, in the present case, no undertaking to pay the defendant’s costs was provided by Echo, any creditor or Phoebus as the shareholder of the plaintiff.
[47] An important consideration in some cases[19] is whether an order for security for costs would stultify the proceeding.[20] In this context, the verb “stultify” is used to mean bring the proceedings to a halt and make them useless to the plaintiff, because the plaintiff cannot provide and will not be able to obtain the security ordered. The plaintiffs did not adduce any evidence to that effect. They did not submit that would be the effect of an order for security.
[48] The existence of the litigation funding agreement with terms set out above is a discretionary matter to be taken into account. Although there are some statements that suggest that the existence of a commercial litigation funder who will share in the proceeds but not in the risk of an adverse costs order is a powerful factor in favour of making an order for security for costs, in my view, it is but another discretionary factor.
[49] This point was skilfully analysed by Basten JA in Green v CGU Insurance Ltd.[21] That case was a little unusual because the order for security for costs was sought against a liquidator personally, not against the company in liquidation. However, his Honour said:
“The presence of litigation funding may justify a new approach to the basis on which orders for security are made with respect to individual plaintiffs, or to the way in which liquidators suing personally are to be treated. While the issue arises in respect of practice and procedure within the court, the approach proposed by the respondent involves departure from, rather than extrapolation of, existing authority. It raises an issue which calls for a uniform approach across jurisdictions and would better be addressed in the broader context of the regulation of commercial litigation lending. Such consideration will need, among other things, to define with some precision what is a ‘litigation funder’.”[22]
[50] Hodgson JA had said earlier:
“However, in my opinion a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation funding is not against public policy … the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails.”[23] (citations omitted)
[51] In my view, Echo’s position is better analysed as that of a shareholder than as a commercial litigation funder.
[52] It is also relevant that under the funding agreement Echo promises to indemnify against the costs that the plaintiffs may be ordered to pay to the defendant. However, to the extent that the promise of indemnity might operate as a discretionary factor in favour of not making an order for security, it is negated by the fact that the promise of indemnity may be terminated for the future by Echo at any time. In the context of a litigation funding agreement such an indemnity offers no satisfactory security, as the circumstances of Gore v Justice Corp Pty Ltd[24] show.
[53] In my view, these factors and circumstances lead to the conclusion in the present case that there should be an order for security for costs.
Amount of security
[54] The defendant sought security for costs in the sum of $350,000 in correspondence forwarded before the application was filed. Mr Tiplady, the defendant’s solicitor, estimates that the recoverable party and party costs of the defendant up to the first day of trial were $310,181.50. The application for security for costs as filed sought security in the amount of $250,000. Mr Robinson, an expert costs assessor retained by the plaintiffs to review the defendant’s estimate analysed the amounts for the work described in the defendant’s schedule of those costs in the sum of $232,657.88. Before the hearing, the defendant’s solicitors proposed that the amount of the security to be provided should be $232,000 in accordance with Mr Robinson’s analysis.
[55] As previously stated, the plaintiffs submit that there should be reductions of the amount of any security sought for a number of reasons.
[56] First, it is submitted that the circumstance that the plaintiffs’ insolvency was caused by the defendant’s conduct should reduce the amount of the security to exclude past costs, and to cover only costs yet to be incurred.
[57] On the analysis of the plaintiffs’ costs assessor and his reductions of the defendant’s solicitor’s estimate of the costs of the proceeding to the first day of trial, the defendant’s costs total approximately $232,000. Of this total, the plaintiffs submit that approximately $103,000 are past costs. However, in my view, the plaintiffs’ submission is not a principled basis for that reduction. Past costs may be excluded from an order for security but it is a matter of discretion.[25] To the extent that I have taken into account the circumstance that the plaintiffs’ insolvency was caused by the defendant’s conduct, I have done so as part of the global reduction of the defendant’s estimates for this factor and to reduce the amount for the costs of the counterclaim.
[58] Second, the plaintiffs submit that the security sought included costs for the defendants’ counterclaim, which should have been excluded. The counterclaim includes two sums. One is the amount of $393,030.85 paid to the plaintiffs by the defendant on account of claimed civil works and construction works that the defendant alleges did not need to be carried out and had not been carried out to complete the project, and which should have been the subject of variations under the contracts. The other is the amount of $121,590.03 for sums paid by the defendant to the plaintiffs for the works, but which the defendant paid again to subcontractors in order to obtain completion of the works.
[59] In my view, the plaintiffs should not have to provide security for any of the costs relating to those counterclaims. It does not appear that any reduction for costs incurred for items relating to the counterclaim has been allowed in the defendant’s estimates. Although the assessment is somewhat arbitrary, it seems to me that the relevant costs should not be significant for the second sum counterclaimed. I would reduce the overall amount allowed for the defendant’s costs by one third for this factor and for the effect of the plaintiffs’ insolvency being caused by the defendant’s conduct.
[60] Third, the plaintiffs submit that the amount allowed in the estimates for an application for disclosure should not be allowed as disclosure has not yet occurred and it should not be assumed that there will be a dispute as to disclosure requiring the defendant to spend that amount in costs. Again, I agree that the assumption should not be made that those costs will necessarily be incurred. However, they might be and it seems to me that a general allowance against that possibility is not inappropriate. I would reduce the amount allowed by $3,500.00 for that possibility.
[61] Fourth, the plaintiffs submit that the amount allowed in the estimates includes an amount for the costs of an application to remove the caveats lodged by the plaintiffs which the defendant was ordered to pay. However, looking at the defendant’s schedule of costs, I can see no item in respect of that application and I do not make any reduction for it.
[62] Fifth, the plaintiffs submit that the amount allowed in the estimates includes costs of expert witnesses when there has been no order or direction for evidence from any expert witness. In my view, there is every reason to think that expert witnesses will be required. One alternative claim of the plaintiffs is to recover the value of the work and labour done on a restitutionary basis. It seems to me that there is likely to be expert evidence as to the costs and value of the work and labour. I make no reduction for this point.
[63] I note that I have made no reduction for the amount included in the defendant’s estimate for the costs of this application for security for costs. No submission was made that the security ordered should not include any amount for those costs.
[64] The result is that starting from the global sum of $232,000 as previously discussed I would make a reduction of $3,500 to $228,500 and then reduce that amount by one third to $152,333. That amount should be rounded to $150,000.
[65] The plaintiffs should be ordered to provide security for the defendant’s costs of the claim up to the first day of the trial in the amount of $150,000 by payment into court or in a form satisfactory to the registrar.
[66] I will hear the parties on the question of costs and other orders.
Footnotes
[1] Uniform Civil procedure Rules 1999 (Qld), r 672(b).
[2] Uniform Civil procedure Rules 1999 (Qld), r 672(e).
[3] Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, [18]; Jazabas Pty Ltd v Haddad (2007) 65 ACSR 276, 284-285 [30] and 296 [84].
[4] ACN 006 577 162 Pty Ltd (formerly Harrop Engineering Australia Pty Ltd) as trustee for Harrop Family Trust v Beauville Pty Ltd [2014] VSC 298, [8], referring to KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189, 197 and Porzelack KB v Porzelack (UK) Ltd [1987] 1 WLR 420, 423.
[5] Corporations Act 2001 (Cth), s 95A(1).
[6] Contamination Control Laboratories Pty Ltd v Reyer [2010] QSC 1, [8]; Melunu Pty Ltd v Claron Constructions Pty Ltd [2004] NSWSC 1064, [31]; Dalma Formwork Pty Ltd (administrators appointed) v Concrete Constructions Group [1998] NSWSC 472.
[7] [1998] NSWSC 472.
[8] [1973] QB 609. In that case, Lord Denning considered the equivalent English statute providing for security for costs to be paid by an impecunious company plaintiff, s 447 of the Companies Act 1948 (UK).
[9] Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609, 626E.
[10] Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114, 126E; Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133, 136; Spiel v Commodity Brokers Australia Pty Ltd (1983) 35 SASR 294, 300.
[11] I note that Dal Pont, Costs, 3rd ed, 2013, LexisNexis Butterworths, at p 1023 [29.101] appears to at least doubt the requirement.
[12] [1984] 2 Qd R 523.
[13] [1984] 2 Qd R 523, 532.
[14] (2007) 65 ACSR 276, 278-284 [5]-[27].
[15] (1990) 8 ACLC 304.
[16] (1992) 8 ACSR 405.
[17] [2010] 2 Qd R 85.
[18] [2010] 2 Qd R 85, 96 [39].
[19] Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, [18].
[20] An expression used at least since Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443, 455.
[21] (2008) 67 ACSR 105.
[22] (2008) 67 ACSR 105, 127 [80].
[23] (2008) 67 ACSR 105, 120-121 [51].
[24] (2002) 119 FCR 429.
[25] For example, see Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jacques [2016] QSC 2.