7Steel Building Solutions Pty Limited v Wright

Judgment - EX TEMPorE 1By Originating Process filed on 5 April 2012 the Plaintiff, Mr Milos Djudjevic sought an order that the Defendant, Century Group Pty Limited ("Company") be wound up. That Originating Process relied on non-compliance with a statutory demand ("Demand") served on 19 December 2011 in relation to a debt of $600,000 claimed to be owed to Schlotzsky's Australasia Trust. 2It appears that the Company brought proceedings in the Federal Court of Australia to set aside the Demand, but those proceedings were not commenced within the 21 day period required under s 459G of the Corporations Act 2001 (Cth) and, accordingly, were dismissed. There has, therefore, been no determination on the merits of the matters on which the Company relied to seek to set aside the demand. 3In these proceedings the Company gave notice, under s 465C of the Corporations Act, of its intent to oppose the winding up application on the ground that, inter alia, the Company is solvent and there is in fact no debt owed by the Company to the Plaintiff. The question of the extent to which those grounds would have been available to the Company, in circumstances that there had been no determination on the merits of its application to set aside the Demand, under s 459S of the Corporations Act, is a matter which would have had to be determined at a final hearing of the proceedings. The Company has served affidavit evidence in the proceedings, including evidence as to the circumstances in which the claimed debt arose, and evidence of its accountant going to the question of its solvency. 4By Interlocutory Process filed on 13 June 2012, the Company sought an order that security for costs be provided by the Plaintiff and, on 18 June 2012, the court made consent orders requiring the Plaintiff to pay, within 14 days, a relatively modest amount by way of security for costs into a controlled moneys account maintained by the parties, or failing agreement as to that account, to the Court to the credit of these proceedings. That order was not complied with. 5The Company then brought the matter back before the Court seeking orders that the proceedings be dismissed by reason of the non-compliance with the order for security for costs. The Court made a second order on 16 July 2012 requiring the Plaintiff to provide the same amount of security for costs in the proceedings and requiring that security to be provided by 20 July 2012. It appears that second order requiring the provision for security for costs was also not complied with. 6By letter dated 25 July 2012, the Company sought to relist the matter in order to deal with the non-compliance with the order for security for costs and that letter was copied to the Plaintiff on 26 July 2012. Also on 26 July 2000, the Company's solicitors wrote a second letter to the Plaintiff referring to previous correspondence and noting that, on 30 July, the Company would be seeking to have the proceedings dismissed for breach of the relevant orders. 7By Notice of Motion filed in Court today, the Company seeks orders that the proceedings be dismissed due to the Plaintiff's failure to provide security for costs as ordered on 18 June 2012, and again on 16 July 2012, and also seeks an order that the Plaintiff pay the Defendant's costs. 8The fact that this order is sought can come as no surprise to the Plaintiff, given that a corresponding order was sought on the first non-compliance with the first order to provide security for costs and that the Plaintiff was notified on 26 July 2012 in clear terms of the Company's intent to seek that order. 9There was no appearance for the Plaintiff in respect of the application today. I note that the Plaintiff is not represented by solicitors in the proceedings, although Counsel has appeared for him in previous mentions before the court. I have been informed by Mr Hadley, who appears for the Company, from the bar table that Counsel who has previously appeared for the Plaintiff in the matter is aware of the listing today but has no instructions in respect of that listing. 10The Court has twice made orders for security for costs in these proceedings which have twice been not complied with. There is no explanation before the court of that non-compliance. The non-compliance is striking, particularly in circumstances where the amount ordered to be provided by way of security is not substantial. 11Section 61 of the Civil Procedure Act 2005 (NSW) provides that, if a party to whom a direction has been given, fails to comply with that direction, the Court may, by order, take several steps, including dismissing the proceedings, whether generally, in relation to a particular cause of action or in relation to the whole or part of a particular claim. That power is, of course, to be exercised having regard to s 56 of the Civil Procedure Act in particular, and the associated provisions in s 58 of the Act, which emphasises the Court's role in facilitating the just, quick and cheap resolution of the real issues in dispute in proceedings. Rule 42.21(3) of the Uniform Civil Procedure Rules 2005 (NSW) in turn provides that, if a plaintiff fails to comply with an order for security for costs under that rule, the court may order that proceedings on the plaintiff's claim for relief be dismissed. I will return to the application of that rule shortly. 12The application of s 61 of the Civil Procedure Act has been considered in several decisions, and I recently reviewed those decisions in Re Wan Ze Property Development (Aust) Pty Ltd [2012] NSWSC 722. In Bi v Mourad [2010] NSWCA 17 at [47], Allsop P emphasised the importance of elimination of delay in litigation as a step necessary to provide timely individual justice. The Courts have rightly been reluctant to take the drastic step of dismissing proceedings absolutely under s 61(3) of the Civil Procedure Act for a plaintiff's failure to comply with the court's directions if a lesser sanction is appropriate; however, in Chahwan v Euphoric Pty Ltd (No 2) [2010] NSWSC 1062, Palmer J noted that that power should be used in an appropriate case where the considerations of justice and fairness to both sides dictated. A similar view was taken in 7Steel Building Solutions Pty Ltd v Wright [2011] NSWSC 779, although the court did not there make orders dismissing the proceedings. In Zhu v Yingle Cultural Exchange (Aust) Pty Ltd [2011] NSWSC 1339, Rothman J again pointed to the importance of speedy resolution of matters before the court, on the basis that justice delayed is justice denied. I took a similar view in my decision in Re Wan Ze Property Development (Aust) Pty Ltd above. 13A striking out of proceedings for a failure to provide security for costs is, of course, different in some respects from other failures to comply with the court's direction, because the ordinary result of non-compliance with such an order would be a stay of proceedings. As Mr Hadley points out, a stay of proceedings would be of little use to the Company, where it leaves the Company under threat of a subsisting winding up application unless and until the Plaintiff chooses to comply with the Court's order that it provide security for costs. So far as a failure to provide security for costs is concerned, Ritchie's Uniform Civil Procedure NSW at [42.21.110] identifies relevant matters including the time passed since security was ordered; the plaintiff's likely ability to provide security; the extent to which the plaintiff is on notice of the dismissal application; the likelihood of prejudice to the defendant of a continuing stay; the impact on the Court of a continuing stay; the plaintiff's ability to commence new proceedings; and any prejudice to the plaintiff by the dismissal, for example as a result of the expiry of a limitation period. 14In the present case, several weeks have passed since security was first ordered. While that is perhaps not a long time in the context of civil litigation generally, it is, in my view, a relatively longer time in an application brought in the Corporations List to seek to wind up a company, where there is a substantial public interest in the prompt determination of such applications. There is no evidence as to the Plaintiff's ability to provide security, and no explanation of why security has not been provided. The Plaintiff was plainly on notice of the dismissal application, both because it is the second such application, and because the Plaintiff was advised of it, albeit late last week. There has been no appearance by the Plaintiff today to suggest, for example, that it requires more time to either provide such security or to prepare the evidence necessary to resist this application. 15As I have noted above, the prejudice to the Company of a continuing stay is obvious, where it exposes the Company to a continuing threat of a winding up application. The prejudice to the Plaintiff of dismissal of the proceedings is, in my view, relatively limited because, to the extent that it has a cause of action in damages for breach of the alleged contract, or a claim for debt arising out of the alleged contract, the dismissal of the winding up application does not prevent it from pursuing that cause of action. I note, as Mr Hadley fairly conceded, that the dismissal of that application will prevent the Plaintiff proceeding to a further winding up application based on the earlier statutory demand, but that disadvantage does not seem to me unfair in circumstances where the Plaintiff's failure to comply with the Court's orders has brought it upon itself. 16In these circumstances, I am satisfied that it is a proper exercise of the court's discretion to make orders under s 61 of the Civil Procedure Act and r 42.21(3) of the Uniform Civil Procedure Rules dismissing the proceedings. In the ordinary course an order that the Plaintiff should pay the Company's costs of the proceedings would follow. 17Accordingly, I make orders in accordance with the short minutes of order provided by the Defendant initialled by me and placed in the file.