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Supreme Court of the ACT |
Last Updated: 30 January 2012
CLEARY BROS (PARRAMATTA) PTY LIMITED; PARKER CONSTRUCTIONS PTY LIMITED; ICEHOT PTY LIMITED v COMMONWEALTH BANK OF AUSTRALIA; NATIONAL AUSTRALIA BANK LIMITED; VICTORIAN SECURITIES CORPORATION LIMITED; BENDIGO AND ADELAIDE BANK LIMITED (No 4) [2011] ACTSC 209 (14 December 2011)
EX TEMPORE JUDGMENT
No. SC 584 of 2006
Judge: Penfold J
Supreme Court of the ACT
Date: 14 December 2011
IN THE SUPREME COURT OF THE )
) No. SC 584 of 2006
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN: CLEARY BROS (PARRAMATTA) PTY LIMITED (ACN 105 359 957)
First plaintiff
PARKER CONSTRUCTIONS PTY LIMITED (ACN 008 469 743)
Second plaintiff
ICEHOT PTY LIMITED
(ACN 085 175 867)
Third plaintiff
AND: COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First defendant
AND NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937)
Second defendant
AND VICTORIAN SECURITIES CORPORATION LIMITED (ACN 004 496 208)
Third defendant
AND BENDIGO AND ADELAIDE BANK LIMITED
Fourth defendant
ORDER
Judge: Penfold J
Date: 14 December 2011
Place: Canberra
THE COURT ORDERS THAT:
(1) The proceedings of the first, second and third plaintiffs against the first, second, third and fourth defendants, are dismissed.
(2) The plaintiffs are to pay the defendants’ costs of the proceedings, including all costs previously reserved.
(3) The plaintiffs are barred from bringing fresh proceedings concerning any cause of action for the whole or any part of any claim for relief by them, or any of them, in these proceedings, until the costs in these proceedings have been paid in full.
(4) The parties have liberty to apply within 28 days from today if any ambiguity emerges in the reference to costs previously reserved.
1. The three plaintiff companies in this matter instituted action against the four defendants, all financial institutions, in 2006. At one stage a further plaintiff, Mr Michael Buggy, a major shareholder in some or all of the companies, was added, and in August this year his action was dismissed after he became a bankrupt. Since 2006, three hearing dates have been vacated at the instigation of the plaintiffs, although I exclude from further consideration the vacation of one hearing date as a result of the sudden illness and death of one of Mr Buggy’s sons.
2. The hearing finally began in mid2010. It was adjourned partheard to a date in mid2011, which had to be vacated due to Mr Buggy’s bankruptcy proceedings, and is now listed to resume in June 2012. At the same time as dismissing Mr Buggy’s action, I made orders for the plaintiff companies to provide security for costs to the defendants, in the total amount of $105,000. The security was to be provided by 6 September 2011, after which, if it was not provided, the proceedings were stayed until further order (Cleary Bros (Parramatta) Pty Limited & Ors v Commonwealth Bank of Australia & Ors (No 3) [2011] ACTSC 139 (9 August 2011) (Cleary Bros (No 3).
3. The security was not provided as ordered and on 6 October this year I heard and dismissed an application for an extension of time to provide the security. The defendants now apply for the proceedings to be dismissed under r 1904 of the Court Procedures Rules 2006 (CPRs).
Application for dismissal of proceedings
4. Counsel for the third and fourth defendants identified the matters to be taken into account in determining such an application, relying on Battenberg v Union Club [2007] NSWSC 265 at [32], where Nicholas J (citing Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271 and Porter v Gordian Runoff Ltd (No. 3) [2005] NSWCA 377) said:
32 Guidance in the exercise of the court’s wide discretion requires consideration of a number of factors, including the time that has passed since security was ordered; the plaintiff’s likely ability to provide security; the extent to which the plaintiff has been on notice of the dismissal application; the likelihood of prejudice to the defendant (as a result of continuing the stay); the impact on the court of continuing the stay; the ability of the plaintiff to commence new proceedings; and prejudice to the plaintiff.
5. Counsel’s submission was supported by counsel for the first and second defendants and, as far as I understand, was not disputed by counsel for the plaintiffs. I propose to consider the relevant matters in order.
The time that has passed since the security was ordered
6. It is now just over four months since I ordered the provision of security for costs and over three months since that security should have been provided. During that time, the plaintiffs have made an unsuccessful application for an extension of the time, which was refused in October, and accordingly have been in no doubt about the need to provide the security as ordered.
The extent to which the plaintiffs have had notice of the dismissal application
7. The application was served on the plaintiffs’ solicitor 28 days ago, on 16 November, but the making of such an application had been foreshadowed on several previous occasions. The application for security for costs in fact sought an order that the proceedings be dismissed if the security ordered was not provided, but that matter was not argued at that time and in the event I made only an order that the matter would be stayed if security were not provided by the specified date (Cleary Bros (No 3) at [33]).
The plaintiffs’ likely ability to provide the security
8. As to the plaintiffs’ ability to provide the security, I note first the finding I made when originally ordering the payment of security for costs (specifically, a finding that the plaintiffs were impecunious), as follows (Cleary Bros (No 3) at [11]-[13]):
11. The defendants’ affidavits provide credible evidence of the following matters:(a) that the three plaintiff companies have a paidup capital totalling less than $5,500;
(b) that two of the three companies have ceased trading and the third company has had a receiver and manager appointed to all its assets and undertakings; and
(c) that there are various mortgages and charges over property of the companies, no evidence of property other than that subject to charges or other claims, and no evidence of the value of the relevant properties except that IceHot Pty Ltd, the third plaintiff, is said by its controlling trustee to own property worth several million dollars, which will not, however, be sufficient to meet a judgment debt already owed to one of the defendants in this matter.
12. Furthermore on 6 October last year, Michael Buggy, who until February this year was the sole director of each of the three companies, swore an affidavit in connection with his bankruptcy proceeding, in which he said:
IceHot’s main asset is the [Tweed Heads property] and I am unable to cause IceHot to realise its equity while the receivers control IceHot’s assets.
The Tweed Heads property, incidentally, is the property that has been identified as not sufficient to fund the outstanding judgment debt. Mr Buggy went on to say:
There are no sizeable assets owned by either Cleary or Parker, [being the first and second plaintiffs respectively] and I alone am funding the ACT proceedings. Consequently, if I am adjudicated bankrupt there is no other source of funds by which the plaintiff companies will be able to continue to prosecute the ACT proceedings.
13. In the absence of evidence from the plaintiffs about their financial position I am entitled to infer that any such evidence would not have assisted the plaintiffs in resisting an order for security for costs; HJA Holdings Pty Limited v Iliev [2006] ACTSC 8 (HJA) at [6]; Canberra Data Centres at [222]-[228]. I am accordingly satisfied that the three remaining plaintiffs are impecunious companies that would not be able to meet a costs order in favour of the defendants, if such an order were made.
9. The application for an extension of time to provide security that was refused in October was supported by an affidavit by Mr Alan Buggy, a son of Michael Buggy whom I have already mentioned. The affidavit was made on 5 September 2011 and bears some consideration. The relevant paragraphs of the affidavit are as follows:
10. I note first that, despite my indication in October that I regarded this affidavit as unsatisfactory in a variety of ways, there has been no attempt to provide a new affidavit giving more convincing information, or even updating the very scanty information previously provided. In particular, I noted that the alleged contract was not annexed; that the profit projection was not supported by any kind of evidence; that there was no indication that the alleged contract provided for a guaranteed sale immediately at the end of the contract period; and that the volatility of the Australian real property market suggested that, in the absence of such a guaranteed sale, the profit projection might be even less reliable than it would otherwise have been.
11. Counsel for the plaintiffs, conceding that he had no further evidence to put before the Court in support of his arguments, said that Mr Alan Buggy was unable to make a further affidavit because he was in Perth and busy with the contract; that the contract allegedly signed on 20 August was a conditional contract; and that signing of a final contract was now running about a week late and had been affected, among other things, by delayed flights from the USA. He assured me, however, that these delays would not affect the completion date of 29 February, which had had some flexibility built in.
12. The failure of the plaintiffs to provide a further affidavit and the explanations provided by their counsel did not persuade me that Mr Alan Buggy has any real wish to make a proper case to the Court, or to seek the Court’s protection in enforcing what he says are his legal claims; that any of the things he has said in his affidavit can be accepted at face value, noting that even at face value they carry little weight; or that matters are likely to improve.
13. In particular, I have no faith in Mr Alan Buggy’s 5 September assertion that on 29 February 2012 the plaintiffs will have the funds to pay into court and fund the continuation of the litigation, and I note that even this assertion is worded, whether carefully or accidentally, to refer to the plaintiffs having the funds by 29 February, not to express any intention of actually paying them into court.
The likelihood of prejudice to the defendants from continuing the stay
14. Counsel for the third and fourth defendants identified several kinds of prejudice accruing to the defendants from simply continuing the stay, rather than dismissing the action.
15. First, while conceding that corporate defendants did not suffer the emotional effects of drawn-out litigation, counsel noted the comments of Kirby J in Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 at [39] that it is not only individuals who have:
... [a] natural desire ... to be freed, as quickly as possible, from the anxiety, distraction and disruption, which litigation causes.
16. Counsel pointed to the personal burden being borne by various people involved in the proceedings on behalf of the defendants, including one important witness who is facing the prospect of having to prepare, for the fourth time, to give evidence at the long-delayed hearing.
17. Secondly, counsel noted the approaching need for the defendants to prepare for the resumption of the hearing in June next year.
18. I accept the submission of counsel for the plaintiffs that much of that preparation was presumably done before the hearings started in 2010, and that the preparation by which the participants would remind themselves of the progress of the matter generally, and of the first part of the hearing in particular, would likely be started weeks, rather than months, before the next hearing date. However, I also accept the submission of counsel for the third and fourth defendants that while the hearing remains scheduled, a number of people, including lawyers and witnesses (some of whom are not employees of the various defendants) will have to maintain their availability for the hearing period, and that this in itself may be a significant prejudice.
19. Finally, counsel noted that as long as the proceedings remained alive but without security for costs having been provided, the defendants are at risk of incurring further unprotected costs, as they did when the plaintiffs applied for an extension of time to provide the security for costs.
The impact on the Court of continuing the stay
20. Counsel referred to r 21(2)(b) of the CPRs, which requires that the CPRs are applied in civil proceedings with the objective of achieving the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.
21. There is no doubt that in the current circumstances affecting the ACT Supreme Court, the early freeing up of the week currently scheduled for the resumption of this matter in June next year would provide an opportunity for another matter to be listed earlier than would otherwise be the case.
22. It is also true that if an earlier hearing date is to be offered to other parties, that offer should be made so as to give the parties maximum notice. On the other hand I note that there is no scope for dismissing proceedings just so that other parties can be offered earlier hearing dates, and that this is not yet a situation in which immediate action is necessary to prevent the June hearings being vacated only when it is too late for the freed-up court time to be used effectively.
23. Counsel for the plaintiffs pointed out that vacating the hearing date shortly after 29 February, if his clients had not by then provided security for costs, would still leave scope for listing other matters in that period. I note also that the other objective identified in rule 21(2) is the just resolution of the real issues in the proceedings. This is obviously an important consideration, but it carries relatively little weight now, given the history of the plaintiffs’ failure to use their several previous opportunities to have the real issues in the proceedings resolved.
The ability of the plaintiffs to commence fresh proceedings, and any prejudice to the plaintiffs from dismissal
24. Counsel for the third and fourth defendants said that r 1614 of the CPRs makes it clear that the dismissal of the proceedings would not, of itself, preclude any fresh proceedings being instituted and that on the basis of an applicable limitation period of six years, the plaintiffs’ claims would not be statute barred until July 2012.
25. Given that date, it may be that a later dismissal of these proceedings, that is after further time had been given to provide the security for costs, would in fact be more prejudicial to the plaintiffs than an earlier one, because it would foreshorten the time for any fresh proceedings to be instituted. Counsel for the third and fourth defendants did, however, also seek the making of an order to the effect that no fresh proceedings could be commenced until the costs of the current proceedings had been paid.
26. Counsel submitted that the usual position in such circumstances is that any fresh proceedings would be stayed, and I note that the difference between preventing the commencement of proceedings and staying such proceedings, once commenced, may be significant when there are limitation issues as mentioned earlier. For that reason it may generally be preferable not to prevent the initiation of fresh proceedings as such. On the other hand, I cannot see why, if the plaintiffs do not pay the costs for the current proceedings, they should be permitted to commence fresh proceedings, and leave the defendants to incur further costs in seeking to stay those proceedings on the ground of a failure to pay the earlier costs.
27. Counsel for the third and fourth defendants also noted that a relevant consideration in this context is the prospect that the plaintiffs would not even be able to meet their own future costs of the action. That prospect emerges starkly from Mr Alan Buggy’s affidavit in which he says that the second plaintiff requires the funds, apparently held in a bank account in early August, to continue trading in order for the plaintiffs to fund the litigation, and also that if the provision of security for costs is insisted on, the second plaintiff will not have the funds to pay the legal fees required for the continuation of the hearing set down for June 2012 after the payment of the moneys into court. That is, Mr Buggy appears to be saying that the plaintiffs would currently only be able to fund the future costs of one or other side of these proceedings, putting the defendants at risk even if successful, and making it apparently unlikely that the plaintiffs will continue to have legal representation.
28. Counsel for the plaintiffs submitted that despite their ability to bring fresh proceedings, the plaintiffs would be prejudiced by the dismissal of the current proceedings because of the costs that have already been incurred and the fact that they would then face a further substantial delay before the fresh proceedings could come on for hearing.
29. My order for the provision of security for costs, however, reflected a conclusion that the defendants should not be required to risk incurring further costs in these proceedings without some guarantee that their costs would be met if they were successful, and the plaintiffs have so far been either unable or unwilling to provide that guarantee. Furthermore, as already noted, most if not all the delays in this matter are attributable to the plaintiffs, so they can hardly be heard to complain now of further significant delays that will result from their failure to protect the defendants’ right to recover costs if successful. After all, this application and any resultant delays in resolving the plaintiffs’ claims could have been avoided by the payment of security for costs at any time in the last four months.
30. Counsel for the plaintiffs pointed out that r 1905 of the CPRs permits the court, in special circumstances, to amend or set aside an order for the provision of security for costs. However, he conceded that he had already made one unsuccessful application for that power to be exercised, being the application for an extension of time to pay the security for costs, and that there was no new evidence to support any fresh application.
31. Asked to identify the special circumstances that would be needed before I could exercise my powers under r 1905, counsel simply referred to the circumstances as a whole, to Mr Alan Buggy’s affidavit, and to his own assertion that the defendants were on notice that the security for costs will be paid on or before 29 February. As already mentioned there is, in my view, no way that Mr Buggy’s affidavit and the comments made by counsel from the Bar table could be seen as any kind of assurance from, or even as reflecting any kind of genuine belief held by, Mr Buggy that the security for costs will be provided in February.
Conclusions
32. Accordingly I am satisfied, given the continuing failure of the plaintiffs to provide security for costs as ordered, that there are grounds for dismissing these proceedings, and having regard to the matters canvassed above, that it would be an appropriate exercise of my discretion to do so.
33. The orders will be as follows:
(1) The proceedings of the first, second and third plaintiffs against the first, second, third and fourth defendants, are dismissed.
(2) The plaintiffs are to pay the defendants’ costs of the proceedings, including all costs previously reserved.
(3) The plaintiffs are barred from bringing fresh proceedings concerning any cause of action for the whole or any part of any claim for relief by them, or any of them, in these proceedings, until the costs in these proceedings have been paid in full.
(4) The parties have liberty to apply within 28 days from today if any ambiguity emerges in the reference to costs previously reserved.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Penfold.
Associate:
Date: 3 January 2012
Counsel for the 1st, 2nd and 3rd Plaintiffs: Mr J Choy
Solicitors for the 1st, 2nd and 3rd Plaintiffs: Jeffrey Choy Legal
Counsel for the 1st and 2nd Defendants: Mr D Shillington
Solicitors for the 1st and 2nd Defendants: Moray & Agnew
Counsel for the 3rd and 4th Defendants: Mr TM Faulkner
Solicitors for the 3rd and 4th Defendants: Middletons
Date of hearing: 14 December 2011
Date of judgment: 14 December 2011
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