King Tide Company Pty Ltd v Arawak Holdings Pty Ltd

An important procedural issue arose in this application: whether funds paid into court for security for costs can be paid out for an alternative purpose (here, a pre-existing unsatisfied costs order). An order for security for costs had been made against the respondent. It had only partially complied with that order. Pursuant to r 561 UCPR, the applicant applied for the payment of the remaining amount, plus interest, from the funds which had been paid into court. In dismissing the application, Justice Martin held that there was no basis upon which the applicant had any present entitlement to the funds.

Martin SJA

23 August 2023

The procedural background was neatly summarised by his Honour. The respondent had brought proceedings in 2016 against the applicant. Those proceedings and a subsequent appeal were dismissed, as was a further application for special leave to appeal in the High Court of Australia. On all occasions costs orders were made. Ultimately, the respondent was successful in an appeal against the dismissal of an application to set aside a costs order. The matter was remitted to the trial division (confined to one ground) and the respondent was permitted to take a step in the proceeding on the condition that security for costs of its application be paid into court. Ultimately, it only paid $61,976 into court leaving a balance of $40,162.66. [4], [5].

The applicant sought the $40,162.66 plus interest to be paid out of court to satisfy an earlier costs order. [5]. It argued that under r 561 UCPR, the court has an unfettered discretion to make an order releasing money paid into court and that in the current instance, it was appropriate that the discretion be exercised having regard to the protracted history of the matter and the fact that the respondent had not complied with the costs orders against it. [7].

Consideration

His Honour did not accept the proposition that r 561 UCPR confers any discretion on the court, much less an unfettered discretion. He clarified:

“Rule 561 sets out the steps which must be taken on an application for payment out of court, but says nothing about the basis on which such an order might be made. For that, one goes when security for costs has been given, to r 676”. [11].

Rule 676 UCPR applied to the question of whether the court should release the funds to the applicant. As his Honour noted, it details the conditions under which a payment out (or a discharge of the security) may be made. Since the rule’s wording is permissive, it is simply not the case that a payment out is an automatic process which occurs subsequent to a costs order being made. In addition, matters such as Bullock or Sanderson orders, or the staying of an order, can curtail costs orders. It can be seen that r  676 UCPR relates to a “proceeding” which, in this case, concerns the specific matter for which security was ordered. Rule 676 UCPR did not allow payment out to satisfy an earlier costs order in these circumstances. [12].

In addition, his Honour adopted Justice Jackson’s obiter comments in Virgtel Ltd v Zabusky [2021] QSC 284, to the effect that a party must establish an entitlement to the funds having regard to the circumstances and events against which it was paid into court. [16].

Justice Martin held that the applicant had no entitlement to the funds. That position might change in the event it was successful on the yet undetermined remitted question and then received a costs order in its favour. His Honour cautioned that, were he minded to allow the application, the practical effect would be to permit it to be used as an alternative to enforcement proceedings – a course which must be discouraged. [18]–[19].

Disposition

The application was dismissed.

A Jarro