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Combined Property Holdings Pty Ltd v Galea[2020] QSC 338

Combined Property Holdings Pty Ltd v Galea[2020] QSC 338

SUPREME COURT OF QUEENSLAND

CITATION:

Combined Property Holdings Pty Ltd v Galea & Ors [2020] QSC 338

PARTIES:

COMBINED PROPERTY HOLDINGS PTY LTD

ACN 161 599 444

(plaintiff)

v

PAUL WILLIAM EDWARD GALEA

(first defendant)

and

MICHAEL GEORGE PORTER

(second defendant)

and

SASHWILL PTY LTD ACN 124 191 591 (trading as Porter Galea Lawyers)

(third defendant)

FILE NO/S:

SC No 660 of 2018

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Cairns

DELIVERED ON:

6 November 2020

DELIVERED AT:

Cairns

HEARING DATE:

22 October 2020

JUDGE:

Henry J

ORDERS:

  1. The plaintiff will give security for the defendants’ costs up to the close of pleadings and disclosure in the sum of $75,000 to be either paid into court or secured by provision of a bank guarantee evidenced in a form satisfactory to the Registrar within 21 days of this order.
  2. The proceeding is stayed until such security is provided.
  3. Liberty to apply on the giving of two clear business days notice in writing.
  4. In the event such security is provided:
  1. the plaintiff has leave to amend its claim and third amended statement of claim to add breach of fiduciary duty as a new cause of action;
  2. the plaintiff has leave to amend its third amended statement of claim to plead a breach of duty to warn of economic risk as part of the existing causes of action for breach of contract or negligence.
  1. In respect of both applications, costs reserved.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE OF DISCRETION – PLAINTIFF'S OR APPLICANT'S IMPECUNIOSITY – CAUSE OF PLAINTIFF'S OR APPLICANT'S IMPECUNIOSITY – where the impecunious corporate plaintiff claims the defendants caused it loss via their negligence or breach of retainer – where the defendants apply for security for their costs – where the plaintiff claims that the defendants’ wrongs were the cause of its impecuniosity – where the plaintiff entered into a number of convoluted transactions concerning the development of property – where there is a lack of evidence as to the real financial position of the plaintiff – whether and to what extent the defendants should be granted security for their costs             

LIMITATION OF ACTIONS – GENERAL MATTERS – AMENDMENT OF ORIGINATING PROCESSES AND PLEADINGS OUTSIDE LIMITATION PERIOD – AMENDMENTS INTRODUCING NEW CAUSE OF ACTION OR PARTICULARISING CAUSE OF ACTION – where the plaintiff claims the defendants are liable for breach of contract and negligence – where the plaintiff seeks to claim the defendants are additionally liable for breach of contract and negligence because they had knowledge of a risk and a duty to warn of a risk but did not do so – where the plaintiff seeks to amend its originating process to claim the defendants breached their fiduciary duties – whether the amendments in relation to a failure to warn of a risk of economic loss merely involve the particularisation of an existing cause of action or introduce a new cause of action – whether leave should be granted to allow the pleading of the failure to warn of a risk of economic loss and the breach of fiduciary duty causes of action

Uniform Civil Procedure Rules 1999 (Qld) r 670, r 671, r 672, r 376, r 377

Zenith Corporation Australia Pty Ltd v Optus Mobile Pty Ltd [2020] NSWSC 1110, applied

Borsato v Campbell & Ors [2006] QSC 191, cited

Mantonella Pty Ltd v Thompson [2009] 2 Qd R 524, considered

Sloan v Arnold Thomas & Becker (No 2) [2019] VSC 682, considered

COUNSEL:

B Bilic for the plaintiff

G Beacham QC for the defendants

SOLICITORS:

Robert James Lawyers for the plaintiff

Hall & Wilcox for the defendants

  1. [1]
    The plaintiff company is suing its former lawyers in connection with their alleged failure to advise the plaintiff to register certain mortgages over property forming part of a residential subdivision development.
  2. [2]
    An application for security for costs has been brought against the plaintiff by the defendants.[1]  The plaintiff has in turn made applications for leave to amend its claim for damages for breach of contract or negligence to add a claim for equitable compensation for breach of fiduciary duty and for leave to include an out of time new cause of action.  The applications were heard together.[2]
  3. [3]
    Before dealing with the discrete applications it is convenient to review some of the evidence of factual background of varying relevance to both applications.  As will become apparent there is a lack of clarity in, and documentary support for, some of the more critical features of that evidence.  It is a shortcoming of particular importance to consideration of the security for costs application.

Background

  1. [4]
    The plaintiff’s claim arises in connection with the property development of a residential subdivision at Edmonton, south of Cairns.  Purported ownership of substantial parts of the development land (“the land”) has passed between various entities over time.  The plaintiff’s sole director, Geoffrey Vance Landrey, has had direct or indirect connections with each of those entities.
  2. [5]
    Mr Landrey deposes in his first affidavit[3] that in 2004 a number of investors (“the investors”) lent a total of $12 million to his then wife Toni Landrey and that she lent that money to Cairns Development Company No 3 Pty Ltd (“CDC”), secured by a mortgage over the land,[4] which consisted of Lot 1 on RP 717773 and Lot 900 on SP 167091.  He deposes that between 2006 and 2007 Mrs Landrey transferred her mortgage to each of the investors as tenants in common in proportion to their respective contribution to the loan of $12 million.  There are 42 such investors in an exhibited list of what Mr Landrey describes as a list of “all” investors. [5]
  3. [6]
    Mr Landrey deposes that in 2007 Stony Creek Pty Ltd (“Stony Creek”), of which he was sole director, “acquired” the land from CDC and “agreed to give” new unregistered mortgages over the land to the investors in proportion to their respective investment, with Mrs Landrey’s mortgage being discharged. 
  4. [7]
    What, if any, purchase price was paid by Stony Creek to CDC to acquire the land and why the change of ownership occurred is not apparent from Mr Landrey’s affidavit.
  5. [8]
    When, if ever, the investors’ equity in the land was legally preserved during this movement in ownership is muddy.  Mr Landrey deposes Stony Creek “agreed to give” them mortgages.  He then exhibits what he describes as “an example of one of those unregistered mortgage documents with one of the Investors”.  That document bears an execution date of 8 June 2007.  The annexure of such an exhibit is presumably intended to convey the impression that such mortgages were in fact given and given around when the change of ownership to Stony Creek occurred in 2007.  However, the mortgagee named in that mortgage is Tundra Corp Pty Ltd, which is not one of the investors listed in the aforementioned list of all investors. 
  6. [9]
    Such an inconsistency is surprising given Mr Landrey must be well aware his conduct relating to Stony Creek’s purported execution of the investor mortgages is the subject of criminal charges pending against him.[6]  That prosecution case alleges in part that  Mr Landrey later used false, backdated purported versions of eleven such “mortgages” to advantage the plaintiff company.
  7. [10]
    Mr Landrey deposes Stony Creek continued to develop the land into a residential subdivision, creating smaller lots for sale.  The first 78 lots were said to be part of Lot 900 and formed stages 1 to 3 of the development.
  8. [11]
    On Mr Landrey’s account, Stony Creek repaid $1,500,000 to some of the investors during 2011 and 2012.  Mr Landrey deposes:

“15. … This then left a balance of investment at $10,500,000 (the Investor’s Balance). 

  1. On or about 11 December 2012, the Investors, but excluding the Stefanovski Trust and a Mr B Whelan, appointed the Plaintiff to act as their nominee and trustee to receive transfer of land to which they were entitled by priority as secured creditor pursuant to their mortgage.  That residual land was the total residual land comprised Lot number 1 RP 717773, 11 titled lots on the Developed Land for which Stony Creek had not, at that time, effected settlement of the sale of same (the Stage 7 Lots), and the remainder of the Balance Lot 900.
  1. The list of those Investors appears as Annexure A to the Plaintiff’s statement of claim in this proceeding together with the proportion of their lending in the sum of $1,500,000, such being part of the Investor’s Balance as apportioned to the Stage 7 Lots.  In the paragraphs that follow herein, these Investors are referred to as the ‘Beneficiaries’ in the same manner as that term is used in the Plaintiff’s statement of claim.  The list of the Stage 7 Lots appears as Annexure B to the Plaintiff’s statement of claim.”
  1. [12]
    In paragraph 16 quoted above, the land referred to in the first sentence may, by implication, be the land referred to as the “residual land” in the second sentence, but it is not entirely clear that is so.
  2. [13]
    The apparently intended meaning of paragraph 16 is that the plaintiff company became the owner of the so-called “residual land” as trustee for the investors who became beneficiaries of that trust.  Yet the Stage 7 Lots were supposedly part of that residual land and those lots were not transferred to the plaintiff.  Rather they were transferred to yet another company, Naturelink Environmental Services Pty Ltd (Naturelink).
  3. [14]
    There seems to be no document(s) signed by all the investors transferring their interest in the property, which had supposedly been secured by mortgages to Stony Creek over the land, to the plaintiff company to hold on trust for them.
  4. [15]
    As to whether there really was any actual protection of the investors’ diminishing interest in the property, Mr Landrey’s first affidavit exhibited a declaration of trust by the plaintiff, dated 14 December 2012.  It is not clear whether this is the same document in respect of which Mr Landrey is facing a criminal charge which alleges his “use of a backdated Declaration of Trust dated 14/12/2020, knowing it to be false”.  In any event, the declaration of trust exhibited in this proceeding was on its face only executed by the plaintiff’s then directors, Robert Byrne and Neil Cameron, and listed beneficiaries who, with some exceptions, were the investors.  That declaration, that the plaintiff held all of its interest in the property for the beneficiaries, only related to Lot 1, which was only part of the so-called residual land mentioned in paragraph 16.  There seems to be no documentary evidence of any declaration of trust relating to the rest of the residual land, namely the Stage 7 Lots and the remainder of Lot 900.
  5. [16]
    Further, there is no evidence of any payment made by the plaintiff company to Stony Creek as consideration for the transfer of the residual land mentioned in paragraph 16 above. Why the transfer occurred is not directly apparent from Mr Landrey’s affidavit.  Some explanation for the latter may lie in the fact that by this time Stony Creek owed significant money, including to the Australian Tax Office, which applied to wind Stony Creek up during 2012.  Voluntary administrators were appointed on 17 December 2012, soon after the aforementioned transactions, and they became official liquidators of Stony Creek on 21 December 2012. 
  6. [17]
    The liquidators were to later report:

“Whilst the effect of the transfer to CPH [the plaintiff] resulted in no payment of funds to the Company [Stony Creek], having regard to the debt due to the beneficiaries [the investors], we do not consider that the transaction was uncommercial having regard to the provisions of Section 588FB of the Act.”[7]

  1. [18]
    That conclusion may, in hindsight, have been a credulous one for it was evidently founded upon the legitimacy of the investor’s pre-existing mortgages with Stony Creek.  The aforementioned prosecution case against Mr Landrey is that he used falsified, backdated mortgages to induce the liquidator of Stony Creek to believe they were genuine.
  2. [19]
    The proposition in paragraph 17 of Mr Landrey’s affidavit quoted above, that Annexure A to the plaintiff’s statement of claim lists the investors “together with the proportion of their lending” is incorrect.  Annexure A to the plaintiff’s statement of claim and its various amendments only lists names, not proportions of lending. 
  3. [20]
    In Mr Landrey’s second affidavit filed on 22 October 2020 he deposes to an error in paragraph 17:

“4. I have realised a typographical error in my 29 May affidavit at paragraph 17.  The value should have read “$10,500,000” not “$1,500,000”.”

  1. [21]
    It is not clear what that correction is intended to mean.  On the face of it, the correction might suggest that the entirety of the investors’ balance of $10,500,000 was apportioned to the Stage 7 Lots, but that does not rest comfortably with the proposition in paragraph 17 of Mr Landrey’s first affidavit that the amount was only “part of the investors’ balance as apportioned to the Stage 7 Lots”.
  2. [22]
    Continuing to refer to the events around 11 December 2012, Mr Landrey’s first affidavit introduces Naturelink, into the mix:

“18. At about the same date Naturelink Environmental Services Pty Ltd (Naturelink) entered into a contract with Stony Creek under which Naturelink purchased from Stony Creek the Stage 7 Lots for the total sum of $1,382,500 (the Land Sale Contract).”

  1. [23]
    That Naturelink could have purchased the Stage 7 Lots from Stony Creek is at odds with the plaintiff company having been appointed trustee to receive the transfer of the residual land inclusive of the Stage 7 Lots. 
  2. [24]
    I will deal further with the arrangement under which the Stage 7 Lots were transferred to Naturelink, whose director was Mr George Barnes, and the unregistered mortgage associated with that arrangement.  First it is convenient to complete reviewing the fate of the residual land other than the Stage 7 Lots.  Mr Landrey deposes in his first affidavit:

“23. At the same time as all these events were occurring, as from 14 December 2012:

  1. the Plaintiff became the registered owner of the remaining part of the Developed Land which was Lot 1 on RP 717773; and
  2. a Declaration of Trust was signed by the then directors of the Plaintiff relative to that Lot 1 and the Investor’s Balance. …
  1. Subsequently, the Plaintiff also became the registered owner of the remainder of the Balance Lot 900 in May 2013 …
  1. Ultimately, the Plaintiff developed the first 40 lots of the original Lot 1, and sold off the remainder leaving a portion of the remaining Investor’s Balance unpaid.”
  1. [25]
    Whether the “remainder” referred to in paragraph 25 is a reference to the remainder of Lot 1 beyond “the first 40 lots” or was also intended to include the remainder of the balance of Lot 900 referred to in paragraph 24, is unclear.  The fate of the “first 40 lots of the original Lot 1” is unclear.  What amounts of the remaining investor’s balance were paid is unclear. 
  2. [26]
    The upshot of paragraphs 23 to 25 inclusive appears to be that the plaintiff company would have remained the registered owner of the remainder of the balance of Lot 900 and the first 40 lots of the original Lot 1.  There is no reference in Mr Landrey’s first affidavit to the fate of the ownership of that mix of property.  If it was all sold, it seems reasonable to expect Mr Landrey’s affidavit would mention that fact and mention how much it was sold for and where the proceeds of such sales went.  If it was not sold it seems reasonable to expect Mr Landrey’s affidavit would reveal the value of the plaintiff company’s equity, if any, in that land after allowing for whatever amount of the remaining investor’s balance remains unpaid.
  3. [27]
    There appears to have been some attempt in the second affidavit of Mr Landrey to cure the lack of coherence and detail in his first affidavit.  According to that affidavit, the remaining property owned by the plaintiff company (setting aside the Stage 7 Lots) was:

“7. …

  1. Lot 1 RP 717773 and Balance Lot 900 which was 90 lots of elevated land valued at $2,222,000.  This was also unencumbered land, but not presold. …”
  1. [28]
    The fate of that land, and the plaintiff’s financial fate generally, was deposed to by Mr Landrey in his second affidavit as follows:

“13. In relation to the land referred to in paragraph 7(b) above, after development approval and developing the first 40 lots of the 90 lots above … CPH [the plaintiff] owed approximately $900,000 plus accruing interest in or around 2017. …

  1. CPH’s net asset position at that time at around end 2017 was:
  1. 50 lots at approximately $20,000 each, which was a total of around $1,000,000 (undeveloped);
  2. the Mortgage of $1,950,000 (as it was at that time) plus accruing interest; and
  3. council credits of $210,000 (which were payable in 2019).
  1. Since the bridge and other infrastructure for all 90 lots in the estate had been built in the development of the first 40 lots and was already paid for, CPH would have had a relatively straightforward time developing the remaining 50 undeveloped lots. …
  1. The Mortgage was not repaid on the 12-month anniversary as it was supposed to be.
  1. The future development of the 50 lots held a potential profit to CPH of about $4,000,000.  If CPH had received the Mortgage at the 12-month term in December 2013 like it was supposed to (which was also when the 11 houses were built and settled), CPH would not have had to borrow $5,450,000 to develop the lots.  The borrowings would have been much less, and CPH would have had cash left over after settlement of the sale of the original 40 lots, as well as still owing the remaining 50 lots unencumbered with its $4,000,000 development profit yet to be realised.
  1. Unbeknown to CPH, Mr Barnes [Naturelink’s director] registered further mortgages over the 11 lots for Naturelink, was provided the mortgage which was in the defendants’ possession and Naturelink proceeded to take the proceeds of settlement of each of the housing lots itself without payment to CPH of any of the Nett Sale Proceeds.  CPH only realised this when there were two lots left.  Mr Barnes and/or Naturelink did not repay the Mortgage.
  1. In or around late 2017 the financier for the development called in the approximately $900,000 loan.
  1. The non–payment of the mortgage by Naturelink forced CPH to sell the rest of the 50-lot land undeveloped in order to pay the outstanding loan debt owed to the financier plus interest.  The debt at that time was around $900,000 (plus interest).
  1. The financier engaged Knight Frank and sold the 50-lot land for approximately $1.1 million, and I signed the contract when required by Knight Frank to enable the sale.  The financier took all of this money (after sale expenses). …
  1. The cost to CPH is the developed profit of the 50 lots, the council credits and the balance of the Naturelink mortgage after repayment of any debt (if CPH had the mortgage to enforce).
  1. CPH was supposed to go from a land rich, cash poor company to a cash rich company.  The opportunity cost of the non-payment and loss of the Naturelink Mortgage to CPH has caused its current impecuniosity.”
  1. [29]
    It will be noted in reference to paragraph 14 above that by the end of 2017 the plaintiff apparently only owned 50 lots of what, according to paragraph 13, should have been 90 lots.  The fate of the other 40 lots was not expressly addressed, save for a passing reference in paragraph 17 to the proposition that the plaintiff “would have had cash left over after settlement of the sale of the original 40 lots”.  If the lots did sell, no detail has been proffered by the plaintiff as to the fate of the sale proceeds.[8]
  2. [30]
    The plaintiff company’s profit and loss statements, tax returns or balance sheets might perhaps have shed some light on many of the above vagaries, but they were not produced.  Mr Landrey’s explanation for this gaping documentary omission is that the documents had been asked for from “the accountant” but not been provided “to date”.  No other detail has been given about that request or its pursuit.  It is an unsatisfactory explanation bearing in mind Mr Landrey has been director of the plaintiff since 9 September 2013 and the application for security for costs was filed over eight months before it was heard.
  3. [31]
    I now return to the arrangement under which the Stage 7 Lots were transferred to Naturelink.   It will be recalled paragraph 18 of Mr Landrey’s first affidavit referred to “the land sale contract” by which Naturelink “purchased” the Stage 7 Lots from Stony Creek for the total sum of $1,382,500.  Mr Landrey thereafter deposed:

“19. Contemporaneously with the Land Sale Contract, on or about 11 or 12 December 2012 Naturelink executed a ‘Deed of Loan Agreement’ with the Plaintiff (the Loan Agreement) under which

  1. On the request of Naturelink, the Plaintiff would novate to Naturelink a portion of the mortgage security held by the Beneficiaries over the Land, which included the Stage 7 Lots, in the aggregate sum of $1,500,000 (the Principal Sum),
  2. the Plaintiff would advance the Principal Sum to Naturelink as funds to complete the purchase of the Stage 7 Lots under the Land Sale Contract.

and in return

  1. Naturelink would grant to the Plaintiff a mortgage of even date over the whole of the Stage 7 Lots as security for the Principal Sum and interest thereon and all other money which may become due and payable under the terms of the Deed or of the mortgage (the Mortgage);
  2. Naturelink would covenant to repay to the Plaintiff the Principal Sum on 12 December 2013 plus interest as it was to be calculated under the terms of the Loan Agreement.
  1. The Plaintiff then advanced the Principal Sum to Naturelink by way of an assumption by Naturelink of the debt owed to the Beneficiaries by Stony Creek, and Naturelink executed a Queensland Land Registry Form 2 ‘Mortgage’ document as Mortgagor in favour of the Plaintiff as Mortgagee, to record the Mortgage (the Mortgage document).
  1. Exhibited hereto and marked with the letters GVL-4 is a true copy of the Loan Agreement and the Mortgage document.”
  1. [32]
    That convoluted explanation does not sensibly explain the involvement of the plaintiff company.  Ownership of the Stage 7 Lots was apparently never transferred by Stony Creek to the plaintiff.  Nor on the above account did the plaintiff actually lend any money to Naturelink.  Nor was there any actual payment of money as the purchase price to Stony Creek.  One might understand the transaction if it was Stony Creek which became the mortgagor, so as to secure payment of an effectively vendor financed purchase price.  It might arguably even be comprehensible if the plaintiff had been a creditor of Stony Creek and rather than be repaid by Stony Creek it was content to use the security of a mortgage to receive that repayment from Naturelink.  But there is no evidence that the plaintiff was a creditor of Stony Creek, nor did the liquidators’ report suggest the plaintiff was a creditor. 
  2. [33]
    Despite all of this it appears from the liquidators’ report that they did not conclude the transaction was uncommercial because they understood the plaintiff had agreed “to assume $1.5M of debt due by the Company [Stony Creek] to the beneficiaries”.[9]  It is not apparent from the liquidators’ report what evidence of such an agreement was provided to them.  Presumably it was not a declaration of trust document relating to any purported trustee role in which the plaintiff held the alleged security over the Stage 7 Lots, for, if such a document exists, it is reasonable to expect (particularly bearing in mind Mr Landrey exhibited the purported declaration of trust relating to Lot 1) that it would have been exhibited here and it was not.  It could not have been the Naturelink mortgage because it names the mortgagee as the plaintiff only, not the plaintiff “as trustee for” other persons. Perhaps it was the “Deed of Loan Agreement” exhibited collectively with the mortgage between the plaintiff and Naturelink (“the Naturelink mortgage”) by Mr Landrey as GVL-4.
  3. [34]
    However, the only named parties to the deed of loan agreement are Naturelink, the so-called borrower, and the plaintiff, the so-called lender, who does not even appear to have executed the document.  There is no reference to a trust or beneficiaries.  The only reference to Stony Creek in the document is in the interpretation clause and in the recitals, which relevantly provide:

“(a) The Lenders have previously been given a second mortgage by Stony Creek Pty Ltd.

  1. (b)
    The Borrower has purchased from Stony Creek Pty Ltd certain lots of land (hereinafter called “the Security” set out in the attached Schedule “A”), which secured part of the Lenders’ mortgage with Stony Creek Pty Ltd.
  1. (c)
    On request by the Borrower, the Lenders will novate a portion of their mortgage in the sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00) (hereinafter called “the Principal Sum”) to the Borrower on 13th December, 2012 for twelve months (“the Term”) and otherwise on the terms and conditions contained in this Deed as funds to complete the purchase of the Security.”
  1. [35]
    It is noteworthy that in all three of the above-quoted paragraphs there is a plural use of the word “Lenders” (it returns to the singular in the remaining recitals).  The heading to the agreement specifically defines the plaintiff as “Lender”.  It is not clear whether the shift into plural is a genuine typographical error or a deliberate ambiguity to cater for the potential emergence of the scenario that the investors, not the plaintiff, had purportedly been mortgagors to Stony Creek.  There is no suggestion in Mr Landrey’s affidavits that, as recital (a) quoted above seems to suggest, the plaintiff had “previously been given a second mortgage by Stony Creek”.
  2. [36]
    It will be recalled that, on Mr Landrey’s account, when ownership of the residual property was transferred by Stony Creek to the plaintiff company, this was purportedly on the basis the plaintiff company would hold that property on trust for the investors.  Mr Landrey’s affidavit does not expressly depose that the plaintiff company was to hold the interest purportedly secured over the Stage 7 Lots by the Naturelink mortgage on trust for the investors.  It is difficult to see from the presently filed materials how the plaintiff could have novated a portion of its mortgage with Stony Creek if it did not have such a mortgage with Stony Creek.  It is equally difficult to see how, if the deed of loan agreement was mistakenly referring to the investors as the lenders, the agreement could be of any effect without the investors being a party to it, or at least being beneficiaries of a trust in which the plaintiff was acting as trustee in connection with the Stage 7 Lots.
  3. [37]
    Despite these yawning evidentiary gaps it appears from the plaintiff’s pleading of its case that two of the investors, Mr Byrne and Mr Cameron, who became the plaintiff’s directors on 11 December 2012, are alleged to have been appointed as agents of the investors (or at least those listed as beneficiaries in Annexure A to the Statement of Claim) “for the purposes of forming the Plaintiff company so it may act as their nominee and trustee in their dealings with” Naturelink and Stony Creek in relation to the Stage 7 Lots.  Whatever the true position may actually be it is tolerably clear the plaintiff is inviting the defendants and the court to understand that in allegedly acting as mortgagee of the Naturelink mortgage it did so as trustee for the investors.
  4. [38]
    The Naturelink mortgage purportedly secures a “debt or liability” of $1,500,000 over the Stage 7 Lots.  It was never registered.  The essence of the plaintiff’s existing claim is that its then lawyers, the defendants’, acted negligently and in breach of its contractual retainer by not registering it.  The proposed claim of equitable compensation for breach of fiduciary duty is apparently premised on the defendants having acted for Naturelink as well as the plaintiff company in this era and having had a conflict of interest in doing so.
  5. [39]
    It will be recalled Mr Landrey deposes to various losses flowing from the non-payment to the plaintiff of the alleged debt of $1,500,000 owed to it by Naturelink.  It is alleged that default occurred against a background where other mortgages were entered into by Naturelink and registered, much of the secured land was sold and Naturelink went into liquidation.  The essence of the claim is that if the mortgages had been registered then once the alleged loan of $1,500,000 remained unpaid after its 12 month term the plaintiff could have taken possession of the Stage 7 Lots in satisfaction of the debt.  It complains its lawyers not only failed to register the mortgage but prepared other mortgages for Naturelink which were registered.
  6. [40]
    Correspondence authored by the first defendant and exhibited by Mr Landrey suggests that there was some form of joint business activity being engaged in by Mr Landrey (who did not become a director of the plaintiff until 9 September 2013) the then directors of the plaintiff and Mr Barnes (of Naturelink) around the era in question.[10]
  7. [41]
    In the criminal prosecution against Mr Landrey it is alleged Mr Landrey had discussed with George Barnes, the director of Naturelink, a joint venture to develop two commercial lots in Cairns that required Mr Barnes to borrow the money.  It is alleged that in order to give Mr Barnes the equity to borrow the money, Mr Landrey transferred 11 lots of land belonging to Stony Creek to Naturelink – evidently the Stage 7 Lots.  It is alleged this occurred against a background where the financial trouble being faced by Stony Creek included the Tax Office application to wind up Stony Creek and a bank loan owing to St George Bank of approximately $2 million.  It is alleged Mr Landrey informed Mr Barnes there were two sources of funds on offer, one from the plaintiff and the other from individual investors.  It is alleged that, because Mr Barnes resided in New South Wales, Mr Landrey suggested that, for expediency, he sign the deed of loan agreement and the Naturelink mortgage in case the funds were borrowed from the plaintiff company.  In the end result, it is alleged that Naturelink ended up borrowing the funds from individual investors.  It is alleged there is evidence that those funds totalled $1,384,000.00 and were paid towards an outstanding loan of St George Bank to Stony Creek.  It is alleged that, as Naturelink ended up borrowing the relevant funds from individual investors, the deed of loan agreement was never required. 
  8. [42]
    The latter allegation accords with the defendants’ pleaded assertion that Mr Landrey informed the second defendant that the Naturelink mortgage was not needed for settlement because funds had been raised from other sources.

Application for security for costs

  1. [43]
    I now turn to the application for security for costs.

Relevant legislative provisions

  1. [44]
    The circumstances under which security for costs can be ordered are stipulated in the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”).  Rule 670, provides:

“670 Security for costs

  1. (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. (2)
    This rule applies subject to the provisions of these rules, particularly, rules 671 and 672.”
  1. [45]
    Rule 671 relevantly provides:

“671 Prerequisite for security for costs

The court may order a plaintiff to give security for costs only if the court is satisfied—

  1. (a)
    the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; or …
  1. (g)
    an Act authorises the making of the order;
  1. (h)
    the justice of the case requires the making of the order.”
  1. [46]
    For present purposes (g) above is not materially different to (a), in that s 1335 Corporations Act 2001 (Cth) confers a discretion upon the court to order security for costs against a corporation if there is reason to believe the corporation will be unable to pay the costs of a defendant if successful. 
  2. [47]
    The plaintiff invites consideration of the security for costs application on the premises that its only assets were lost, that it is currently impecunious and will remain so.  If those premises are accepted then there is reason to believe the plaintiff will not be able to pay costs if ordered to do so. 
  3. [48]
    It is apparent from the background discussed above, that the evidence advanced in support of those premises is vague and not well supported on important matters by documentary evidence.  This raises two possibilities – an unintentional and or unavoidably ineffective evidentiary explanation, or, a deliberate lack of candour about the plaintiff’s true financial history.  However, even if the latter possibility is the real position it makes it likely that the plaintiff would in any event claim impecuniosity and choose not to pay costs if ordered – an obviously unjust outcome. 
  4. [49]
    It is not practicable or fair to even attempt to reach a concluded view as to which of the possibilities mentioned represents the true position merely by reference to the state of the affidavit evidence.  Nonetheless, the state of the affidavit evidence supports the conclusion it is likely the plaintiff will not pay costs if ordered, either because it will be genuinely impecunious or because it will pretend that it is.  If it is the former, then the pre-requisite at r 671(a) is met.  If it is the latter, then the pre-requisite at r 671(h) is met.  It follows the court may order security for costs.
  5. [50]
    As to whether the court should actually exercise the power to order security for costs, that decision is informed by r 672, which provides:

“672 Discretionary factors for security for costs

In deciding whether to make an order, the court may have regard to any of the following matters—

  1. (a)
    the means of those standing behind the proceeding;
  1. (b)
    the prospects of success or merits of the proceeding;
  1. (c)
    the genuineness of the proceeding;
  1. (d)
    for rule 671(a)—the impecuniosity of a corporation;
  1. (e)
    whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct;
  1. (f)
    whether the plaintiff is effectively in the position of a defendant;
  1. (g)
    whether an order for security for costs would be oppressive;
  1. (h)
    whether an order for security for costs would stifle the proceeding;
  1. (i)
    whether the proceeding involves a matter of public importance;
  1. (j)
    whether there has been an admission or payment into court;
  1. (k)
    whether delay by the plaintiff in starting the proceeding has prejudiced the defendant;
  1. (l)
    whether an order for costs made against the plaintiff would be enforceable within the jurisdiction;
  1. (m)
    the costs of the proceeding.”
  1. [51]
    The matters listed in r 672 which are most material here are discussed hereunder.

(d) for rule 671(a)—the impecuniosity of a corporation; (e) whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct

  1. [52]
    It is convenient to consider the issues of impecuniosity and its cause collectively.  I have already discussed the plaintiff’s assertion of impecuniosity and the vagueness of the evidence advanced in support of it.  Despite proceeding, as I will, on the basis the plaintiff is impecunious, the vagueness of the evidence cannot be overlooked in considering whether the impecuniosity was caused by the defendants.
  2. [53]
    If a plaintiff company seeks to avoid a security for costs order by asserting its impecuniosity is attributable to the very conduct attracting its claim then, unless the assertion is admitted, it must do more than merely make the assertion.  That is not to say it must prove its entire claim as if at trial.  However, if the court is to be equipped to reach a sufficiently informed view, then the plaintiff must at least prove the impecuniosity is prima facie attributable to the alleged conduct complained of in the claim.[11]  The plaintiff has not done so here.
  3. [54]
    All that has occurred is that Mr Landrey has deposed to bare assertions that the plaintiff’s company’s alleged financial downfall involved a chain of events caused by the defendants’ actions.  Only some documents of relevance to mere snippets of that process have been exhibited.  It is reasonable to expect the plaintiff, who had more than eight months to prepare to meet this application, and sought no adjournment of its eventual hearing, would have been able to exhibit documentary evidence sufficient to both expose the basic detail of the historical progress of its financial decline and inform consideration of whether its demise was attributable to the alleged conduct of the defendants.  It did not do so.  Indeed, even Mr Landrey’s narrative description of events omitted key information, for example, about the fate of some of the so-called residual land and monies received in connection with it.
  4. [55]
    The plaintiff has not demonstrated that its impecuniosity is prima facie attributable to the alleged conduct complained of in the claim

(a) the means of those standing behind the proceeding; (h) whether an order for security for costs would stifle the proceeding;

  1. [56]
    The means of those standing behind the proceeding and whether an order for security for costs would stifle the proceeding are interconnected considerations.  While an order for costs might stifle the proceeding it will only do so if both the company and those standing behind the proceeding are unable, not merely unwilling, to meet such an order.  If a plaintiff seeks to assert that those who stand to benefit from the litigation do not have the means to bear an adverse costs order it is for the plaintiff to prove the assertion.  So it is that in Zenith Corporation Australia Pty Ltd v Optus Mobile Pty Ltd,[12] Henry J observed:

“[A] plaintiff that seeks to prove stultification must call the necessary evidence to establish the financial position of the persons who stand to benefit from the litigation and be full and frank in its disclosure to the Court.”[13]

  1. [57]
    The plaintiff has not met that requirement.  While Mr Landrey deposes (sparsely) to his own problematic financial situation, it is in any event not apparent how he stands to benefit financially from the litigation.  Those who do stand to benefit would presumably be the plaintiff’s shareholders and, if there actually exists a relevant trust under which the company is trustee and the investors are beneficiaries, the beneficiaries.
  2. [58]
    The sole shareholder of the company is Michael John McCarthy.  There is no evidence as to whether he is able to meet a costs order. 
  3. [59]
    As to the purported beneficiaries Mr Landrey deposes to having spoken with an unspecified number of beneficiaries, including nine whom he names, and deposes of those conversations:

“They have all indicated they are not in a position to provide any financial support for this proceeding”.[14]

Not being “in a position” to provide financial support is not evidence of a person’s inability to meet a costs order.  It might mean inability.  However, it also might mean the person is merely unwilling to arrange the person’s financial affairs to allocate resources to that purpose, for instance because of a preference for other more important and or less speculative financial causes or because of a lack of faith in the integrity of the claim or those pursuing it.  In any event there are many more alleged beneficiaries than the nine mentioned by Mr Landrey.  It appears there has not even been an attempt to consult all of them in respect of this litigation.

  1. [60]
    The plaintiff complains it is impecunious yet has failed to show those who stand behind this litigation are unable to meet a security for costs order.  It follows there is no basis to conclude an order for costs would stifle the proceeding.  That is a powerful consideration favouring the protection of a security for costs order.

(b) the prospects of success or merits of the proceeding; (c) the genuineness of the proceeding;

  1. [61]
    It will be obvious from the above discussed background that the circumstances under which a failing company of Mr Landrey’s, Stony Creek, divested its ownership of land to the plaintiff and to Naturelink, and the circumstances under which the plaintiff allegedly became mortgagee of Naturelink’s land in some kind of undeclared trustee role, have not been sensibly explained.  The absence of evidence in support of the existence of that role in connection with the Naturelink mortgage is particularly surprising if the plaintiff’s claim is genuine, but not if, as the defendants allege, the Naturelink mortgage is merely an unused relic of preparation for a purported loan transaction which did not proceed.
  2. [62]
    I am conscious the plaintiff was not facing an application for summary judgment and that disclosure is incomplete.  Against that background I refrain from concluding from the problematic state of the plaintiff’s evidence that its case is not genuine or that its prospects are poor.  However, the state of such evidence as the plaintiff did file has the consequence that the apparent prospects of success, merits or genuineness of its proceeding are not considerations which positively assist its position in the security for costs application.

Other considerations

  1. [63]
    It was submitted the extent of the defendants’ delay in indicating it may bring a security for costs application is a consideration weighing against a security for costs order.  It was also submitted that in the meantime the plaintiff’s solicitors, who are acting on a speculative basis, have, to their prejudice, performed work in the case. 
  2. [64]
    I give no weight to the latter consideration.  Lawyers who choose to act speculatively by definition do so choosing to assume the risk that they may not be remunerated for their work.  As for the extent of the delay, about nine months after the filing of the claim, I do not regard it as a weighty consideration in the context of a claim filed so long after the relevant events and which the plaintiff is still seeking to add to.
  3. [65]
    It was also submitted the public interest in the pursuit of professional negligence actions against lawyers was a consideration mitigating against the potential stifling of the proceeding by a security for costs order.  I have already explained how the plaintiff has failed to demonstrate that because of the inability of those standing behind the proceeding to meet a costs order, the proceeding will be stifled by a security for costs order.  In any event, bearing in mind both the problematic state of the plaintiff’s affidavit material and that the proper conduct of lawyers is regulated by statute and the Legal Services Commission, there is no basis to conclude that the continued pursuit of this claim is so important to the public interest as to weigh against the making of an order for security for costs.

Conclusion

  1. [66]
    The considerations of most relevance in this case in combination compel the conclusion that there should be a security for costs order. 
  2. [67]
    The plaintiff argued, in the event of that conclusion, the less oppressive course would be to make an order limited to covering costs to the close of pleadings and disclosure, rather than to, or including, the trial.  I agree.  The defendants will of course have liberty to apply for a further order thereafter, but it may be that by that point the plaintiff will be in a better evidentiary position to address the inadequacy of it present position in resisting the order.
  3. [68]
    The legal representatives of each side have deposed to quite different cost estimates.  I find the estimates of the defendants’ Mr Castley to be of most assistance, informed as they are by his knowledge of costs, calculated on the standard basis, actually incurred to date.  His affidavit supports the conclusion that the defendants’ costs calculated on the standard basis up to the completion of disclosure will be $93,000. 
  4. [69]
    I favour a more conservative approach to the quantum of the security, particularly bearing in mind that if security is given, as the costs accumulate, the defendants will have evidence thereof and be at liberty to apply for a further order.
  5. [70]
    In my conclusion an appropriate amount of security for costs to the close of pleadings and disclosure is $75,000.  My orders will reflect that conclusion and will stay the proceeding until the security is provided. 

The plaintiff’s application

  1. [71]
    The plaintiff applied for leave to amend its claim along with orders setting a timeframe for filing and serving of its proposed fourth amended statement of claim and pleadings in response thereto.  The plaintiff also seeks a referral of the dispute to mediation.
  2. [72]
    The parties were in agreement that there was utility in my determination of the plaintiff’s application simultaneously with my determination in respect of the order for security for costs.  Doubtless, that was because of the relevance of certain aspects of the facts to both applications.  However, in the event that I give leave for the addition of a new cause of action to the claim, it would be pointless to make specific orders relating to service of amended pleadings when the proceeding is to be stayed pending payment of security for costs.  That future uncertainty also tells against my making an order regarding mediation.  Further, in light of the earlier discussed vagaries in some of the filed evidence of the plaintiff, I am disinclined to intimate any view as to the suitability of this case for referral to mediation.  For the moment the only determination to make is whether leave should be given for the plaintiff to include a new cause of action.

Relevant provisions

  1. [73]
    Rules 376 and 377 UCPR relevantly provide:

“376 Amendment after limitation period

  1. (1)
    This rule applies in relation to an application, in a proceeding, for leave to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended. …
  1. (4)
    The court may give leave to make an amendment to include a new cause of action only if—
  1. (a)
    the court considers it appropriate; and
  1. (b)
    the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.

377 Amendment of originating process

  1. (1)
    An originating process may not be amended except—
  1. (a)
    if the amendment is a technical matter—with the leave of the registrar or the court; or
  1. (b)
    if the originating process has not been served and all sealed copies of the originating process, and other documents filed with the originating process, are returned to the court that issued the originating process—with the leave of the registrar or the court; or
  1. (c)
    otherwise—with the leave of the court. …”
  1. [74]
    In the present case the proposed fourth amended statement of claim, marked “A” for identification at the hearing, contains two categories of amendments, those going to knowledge and duty to warn of risk and those going to a breach of fiduciary duty.  The former attracts the operation of r 376.  The latter additionally attracts the operation of r 377 in that it would require the amendment of the original claim.  I will deal with them in turn.

Amendments re: knowledge and duty to warn of risk

  1. [75]
    The existing claim is for damages for breach of contract or negligence.  The third amended statement of claim alleged the defendants breached their retainer or were negligent because they:
  • did not advise the plaintiff to register the Naturelink mortgage;
  • did not advise the plaintiff to register a caveat on any one or more of the Stage 7 Lots;
  • did not take steps to obtain payment from Naturelink of sale proceeds;
  • acted for Naturelink in a manner that was inconsistent with the plaintiff’s interests;
  • failed to ensure the plaintiff’s entitlements under Stony Creek’s sale of land to Naturelink, the loan agreement and the Naturelink mortgage were met; and
  • failed to act in a manner which protected and or was not inconsistent with the plaintiff’s interests.[15]
  1. [76]
    The main facts pleaded in support thereof were, in summary:
  • the defendants acted for both the plaintiff and Naturelink;
  • the defendants not only prepared the Naturelink mortgage but also prepared other mortgages for Naturelink in respect of the same Stage 7 Lots;
  • the defendants registered the other mortgages and attended settlements of Stage 7 Lot sales for Naturelink and distributed settlement monies for Naturelink;
  • the defendants did not register the Naturelink mortgage;
  • the defendants registered the other mortgages but not the Naturelink mortgage; and
  • as a consequence the defendants were denied re-payment of their loan to Naturelink. 
  1. [77]
    The proposed fourth amended statement of claim introduces additional factual allegations at [24A], [24B] and [24C] that, in summary:
  • the defendants knew the details of the plaintiff’s dealings with Naturelink regarding Naturelink’s acquisition of the Stage 7 Lots from Stony Creek and the securing of the consequent debt to the plaintiff by the Naturelink mortgage; and
  • the defendants returned possession of the Naturelink mortgage to Mr Barnes knowing it had not been registered.
  1. [78]
    The first of those allegations is pleaded somewhat more obliquely than my summary by effectively adopting a description of events given in a letter by the first defendant to the liquidator of Stony Creek.  The description includes the assertion that Stony Creek owed a debt to the plaintiff, an assertion not well supported by any of the filed evidence discussed earlier in these reasons.  Whether the description reflects reality or is merely an account given to the solicitor is another matter.  It will remain essential to proof of the plaintiff’s claim that the Naturelink mortgage was genuinely security for a genuine debt.  That will not be established merely by exhibiting the aforementioned letter.
  2. [79]
    The above summarised allegations in paragraphs [24A], [24B] and [24C], in combination with factual allegations pleaded in the earlier versions of the statement of claim, are relied upon for the fourth amended statement of claim to allege at [27B], [27C]:
  • the defendants learned of facts putting them on notice the plaintiff’s interests were at risk unless Naturelink remitted the proceeds of its land sales to the plaintiff; and
  • the defendants had a duty to warn the plaintiff of the risk of economic loss if it did not register the mortgage, register a caveat over the lots and take steps to recover the land sales proceeds.
  1. [80]
    Those allegations are in turn included with the paragraphs of the pleading hitherto said to establish the breach of retainer or negligence.  The defendants complain that the new allegations at [24A], [24B], [24C], [27B], [27C] have the effect of adding a new out of time cause of action, founded on knowledge of risk of harm as distinct from the hitherto pleaded foundations for the breach of retainer or negligence. 
  2. [81]
    If it is a new cause of action it is out of time.  As to whether it is a new cause of action, in Borsato v Campbell & Ors,[16] P McMurdo J, as he then was, observed the delineation between whether additional pleadings represent the adding of a new cause of action or are simply particulars of the cause already claimed involves a question of degree which may depend upon the level of abstraction at which the plaintiff’s case is described.  The proposed new pleadings may be accurately described as introducing a new foundational pathway to proof of negligence or the breach of retainer rather than merely being a better described existing pathway.  I accordingly conclude they do introduce a new cause of action.
  3. [82]
    That said, it is obvious the new cause of action is not far removed factually from the cause of action for which relief has already been claimed.  The newly introduced duty to warn the plaintiff of the risk of economic loss if it omitted to:
  1. (1)
    register the mortgage,
  1. (2)
    register a caveat over the lots, and
  1. (3)
    take steps to recover the land sales proceeds;

echoes the hitherto pleaded failures to:

  1. (1)
    advise the plaintiff to register the mortgage,
  1. (2)
    advise the plaintiff to register a caveat over the lots, and
  1. (3)
    take steps to obtain payment of land sale proceeds. 

Those previously pleaded three failures, if proved, could only arise relevantly in circumstances where there should inevitably have been knowledge of risk of economic loss attached to the associated three omissions.  Further, it was previously pleaded that the risk of such economic loss did manifest, resulting in actual loss to the plaintiff.   I am accordingly satisfied the new cause of action arises out of substantially the same facts as the pre-existing cause of action. 

  1. [83]
    As to whether it is appropriate to give leave, the substantial coalescence of facts makes it unlikely that the defendants would be disadvantaged in their gathering of evidence to meet the new cause of action to any greater extent than was previously the case in their meeting of the pleaded case.  Moreover, it verges on academic as to whether the breach is categorised as an omission to warn or a failure to advise and take protective action.  The more determinative issues will be the nature of the retainer and instructions under which the defendants were acting for the plaintiff and whether there really was a debt owed by Naturelink to the plaintiff, genuinely secured by the Naturelink mortgage.
  2. [84]
    I will give the leave sought, subject to security for costs being given.

Amendments re: breach of fiduciary duty

  1. [85]
    Turning next to the amendments to the proposed fourth amended statement of claim alleging a breach fiduciary duty, it will be recalled the originating process, the claim, was not founded at all on a breach of that character.  Rather it was founded on a breach of contract or negligence.  This explains why the court’s leave to amend the originating process is required.
  2. [86]
    The court’s discretion to give such leave pursuant to r 377(1)(c) is a broad one.  It will, inevitably, be informed by the circumstances of the case, including the foundation of the new claim as exposed by the proposed amended pleading of it. 
  3. [87]
    The relevant proposed amendments contained at [29A], [29B], [29C], [29D] and [34](b) are in some respects obscure.  However, it is tolerably clear from their content that the plaintiff seeks to allege that in breach of their duty to act consistently with the plaintiff’s interest, and not be in a position of conflict of interest in relation to any transaction involving the plaintiff, the defendants failed to recover monies on the plaintiff’s behalf at the settlement of Naturelink’s sales of Stage 7 Lots.[17]  This adequately exposes the nature of the new claim.
  4. [88]
    The defendants complain the proposed pleading of the alleged fiduciary duties are prescriptive rather than proscriptive in nature.  The significance of that distinction was discussed by Muir JA in Mantonella Pty Ltd v Thompson.[18]  It is presently unnecessary to discuss the detail of that complaint for at least some components of the pleaded duties appear to be proscriptive in nature.  Of those the defendants complain that they are cast too broadly.  However, I am not here concerned with an application to strike out pleadings and am only having regard to the state of the proposed pleadings in order to identify the nature of the new claim in determining whether it is appropriate to give leave for the plaintiff to add a cause of action based on a breach of fiduciary duty.[19]
  5. [89]
    The defendants also complains that while there is no statutory time limitation for a claim of this character contained in the Limitation of Actions Act 1974 (Qld) it is “arguably statute barred” by analogy.  That submission is based on a line of authority discussed in Sloan v Arnold Thomas & Becker (No 2).[20]  However, that line of authority is more concerned with the scenario where a claim for equitable compensation is advanced instead of a time barred statutory cause of action founded on conduct which would have sought to be compensated for the same loss had such cause of action not been statute barred.  The present case has some similarity with such cases in that the conduct giving rise to the alleged breach of fiduciary duty and loss is, in substance, the same conduct giving rise to the alleged breach of contract and negligence.  But there the analogy ends.  In the present case the claims for breach of contract and negligence were initiated in time.  They are not statute barred.  A claim for breach of fiduciary duty in the present case would be analogous to claims already legitimately underway.
  6. [90]
    The new claim appears to be so closely related in a factual sense to the allegations in any event grounding the existing claims that there appears to be no material prejudice likely to be occasioned by leave being given to add the new claim.  In that regard I note it has long been known by the defendants that the plaintiff alleged they acted in conflict of interest and the existing pleadings alluded in some detail to the allegation the defendants had acted for Naturelink whilst acting for the plaintiff.
  7. [91]
    In the circumstances it is appropriate to give the leave sought.

Costs

  1. [92]
    The defendants succeeded in their application for security for costs but it is not apparent, absent further argument, whether costs should follow the event or be in the cause.
  2. [93]
    As to the costs of the plaintiff’s application, while the plaintiff has been successful, it was nonetheless an application the plaintiff was obliged to bring by reason of its own past omissions.  It was not a matter which could have been resolved other than by the court hearing the matter and exercising the discretion to give the required leave.  In those circumstances costs should not necessarily follow the event and there may exist a sound argument that the plaintiff should be ordered to meet the costs of its application. 
  3. [94]
    In circumstances where the proceeding will now be stayed, I am disinclined to proceed to hear argument as to costs now and will instead reserve them.

Orders

  1. [95]
    My orders are:
  1. The plaintiff will give security for the defendants’ costs up to the close of pleadings and disclosure in the sum of $75,000 to be either paid into court or secured by provision of a bank guarantee evidenced in a form satisfactory to the Registrar within 21 days of this order.
  2. The proceeding is stayed until such security is provided.
  3. Liberty to apply on the giving of two clear business days notice in writing.
  4. In the event such security is provided:
    1. the plaintiff has leave to amend its claim and third amended statement of claim to add breach of fiduciary duty as a new cause of action;
    2. the plaintiff has leave to amend its third amended statement of claim to plead a breach of duty to warn of economic risk as part of the existing causes of action for breach of contract or negligence.
  5. In respect of both applications, costs reserved.

Footnotes

[1]The first and second defendants are legal practitioners and principals of the third defendant, a company trading as a legal practice.

[2]The plaintiff’s claim was filed on 7 December 2018.  On 7 February 2020 the defendants filed an application for security for costs.  It was the subject of a number of consent adjournments thereafter.  On 29 May 2020 the plaintiff filed an application for leave to amend its claim and for ancillary orders in connection with the filing and serving of a fourth amended statement of claim.  That application was also adjourned by consent (the adjournments were necessitated by the plaintiff having been de-registered and needing to be reinstated).  In the upshot, both applications were heard together on 22 October 2020.

[3]Court doc 16, Affidavit of Geoffrey Vance Landrey, filed 29 May 2020.

[4]Mr Landrey deposed the mortgage was registered but that he could only locate an unstamped copy to exhibit to his affidavit.

[5]Court doc 16, Affidavit of Geoffrey Landrey, Exs p 21.

[6]Court doc 19, Affidavit of Natasha Farr, Exs pp 259-280.

[7]Affidavit of Geoffrey Vance Landrey, filed by leave 22 October 2020, Ex GVL-15A p 6.

[8]The defendants have exhibited evidence of a transfer of some lots by the plaintiff to a company called DMGF Pty Ltd for $1,100,000 on 16 January 2018 but this has not been explained by the plaintiff.

[9]Affidavit of Geoffrey Landrey, filed by leave 22 October 2020, Ex GVL-15A p 8.

[10]Court doc 16, Affidavit of Geoffrey Vance Landrey, filed 29 May 2020, Exs p 57.

[11]G E Dal Pont, Law of Costs (LexisNexis, 4th ed, 2018) [29.101], a passage which in previous editions has been endorsed by multiple intermediate appellate courts: see eg. Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114, [26].

[12][2020] NSWSC 1110.

[13][2020] NSWSC 1110, [65] (citations omitted).

[14]Affidavit of Geoffrey Landrey, filed by leave 22 October 2020, [26].

[15]Third Amended Statement of Claim [27A], [28], [29].

[16][2006] QSC 191, [8].

[17]As much seems to follow from the proposed paragraphs [29A] and [34](b), the latter paragraph pleading the relevant causation of loss or damage.

[18][2009] 2 Qd R 524, 554.

[19]To remove doubt, nothing in these reasons should be regarded as a conclusion that the proposed fourth amended statement of claim properly pleads the case in all respects.

[20][2019] VSC 682, [33]-[42].

Close

Editorial Notes

  • Published Case Name:

    Combined Property Holdings Pty Ltd v Galea & Ors

  • Shortened Case Name:

    Combined Property Holdings Pty Ltd v Galea

  • MNC:

    [2020] QSC 338

  • Court:

    QSC

  • Judge(s):

    Henry J

  • Date:

    06 Nov 2020

  • White Star Case:

    Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Base 1 Projects Pty Ltd v Islamic College of Brisbane Ltd [2012] QCA 114
1 citation
Jump To
Cite 1 - [2012] QCA 114
Borsato v Campbell [2006] QSC 191
2 citations
Jump To
Cite 1 - [2006] QSC 191
Cite 2 - [2006] QSC 191
Mantonella Pty Ltd v Thompson[2009] 2 Qd R 524; [2009] QCA 80
2 citations
Jump To
Cite 1 - [2009] 2 Qd R 524
Cite 2 - [2009] 2 Qd R 524
Sloan v Arnold Thomas & Becker (No 2) [2019] VSC 682
2 citations
Jump To
Cite 1 - [2019] VSC 682
Cite 2 - [2019] VSC 682
Zenith Corporation Australia Pty Ltd v Optus Mobile Pty Ltd [2020] NSWSC 1110
3 citations
Jump To
Cite 1 - [2020] NSWSC 1110
Cite 2 - [2020] NSWSC 1110
Cite 3 - [2020] NSWSC 1110

Cases Citing

Case NameFull CitationFrequency
Business and Personal Solutions Pty Ltd v Witherspoon [2022] QSC 106 citations
Rolleston Coal Holdings Pty Limited v The Deputy Premier, Treasurer and Minister for Aboriginal and Torres Strait Islander Partnerships [2021] QSC 3282 citations
Sandy's Swim Pty Ltd v Morgan [2022] QDC 1312 citations
1

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