Capri Building Group Pty Ltd v Palmer [2024] QCAT 614

• [3] Whether or not to order security for costs requires the exercise by the tribunal of a discretion. In addition to those matters set out in s 109(2) of the QCAT Act, it is also necessary to consider whether, if Mr Palmer is successful in defending the claim, an order for costs would be made in his favour.[1]
• [4] Mr Palmer has filed written submissions in support of the application for security for costs. Capri has filed no submissions.

• [5] The proceeding is about a building dispute. Capri undertook building renovation work on an existing domestic dwelling owned by Mr Palmer. In its originating application, Capri says that the works reached practical completion when Mr Palmer took possession. Capri claims that $72,645.27 is owed by Mr Palmer for works undertaken to the completion stage.
• [6] Mr Palmer denies any indebtedness to Capri and counterclaims $190,254.80 for damages, restitution and liquidated damages.
• [7] The Tribunal has the power to award costs in building disputes. That power is to be exercised judicially in accordance with established principle. It should be noted that costs do not follow the event in building dispute proceedings, however in circumstances where the nature and complexity of a dispute justifies engaging legal representation and expending monies on experts, it could not generally be said to be in the interests of justice for the successful party's success to be eroded by having to bear their own costs. The starting point in considering the application for security for costs is that in this proceeding there is a broad discretion conferred on the Tribunal to award costs in favour of the successful party.
• [8] I turn now to a consideration of the matters at s 109(4) of the QCAT Act:

The financial circumstances of the parties - s 109(4)(a)

• [9] As I have earlier observed Capri has filed no submissions. Mr Palmer relies upon an affidavit by his solicitor in which he attests to the following:

(a) Capri was the holder of four categories of licence issued by the Queensland Building and Construction Commission ('QBCC');

(b) All of the licenses were suspended from 25 January 2024 on the basis of the non-payment of debts by Capri;

(c) The last financial year in which Capri undertook residential construction work was 2021/2022. The QBCC licence records for Capri indicate that Capri has not undertaken residential construction work since 2021/2022;

(d) Capri is the defendant in three current District Court proceedings;

(e) A credit search rates Capri 'E/481 Impaired Risk'. 'E' indicates that the company is highly vulnerable to default or insolvency in the short term. 481 is an at risk score out of 850 points which indicates that Capri is at higher adverse financial risk than similar entities;

(f) In September 2023 Capri was the subject of two default judgments in the Magistrates Court in amounts of $11,427.30 and $19,816.38;

(g) Capri has a paid up share capital of $170,010, the shares being held by two corporate entities and the director of Capri, Mr Eades;

(h) Mr Palmer is in a financially sound position, being the owner of a property in which he has a net equity of $2.5 million.

• [10] Mr Palmer, referring to those matters set out in the preceding paragraph, says that there is strong evidence Capri will be unable to pay Mr Palmer's costs in the event a costs order is made.
• [11] In Greg Black Constructions Pty Ltd v Brodie and Anor[2] the tribunal stated:

[6] Section 109(4)(a) of the Queensland Civil and Administrative Tribunal Act 2009 is very different in terms from Rule 671(a) of the Uniform Civil Procedure Rules and for good reason. The tribunal is not a court. It has a specific statutory obligation to deal with matters in a way that is accessible, fair, just, economical, informal and quick. It must encourage the early and economical resolution of disputes. It must ensure that proceedings are conducted in an informal way that minimises costs to parties and is as quick as is consistent with achieving justice. It must act with as little informality and technicality and with as much speed as proper consideration of the matter before it permits. Those imperatives are not met by applying a requirement, as does rule 671(a), that impecunious corporate plaintiffs will have to provide security for costs before they can seek the assistance of the tribunal. (footnotes omitted)

• [12] With respect, the statement in Greg Black Constructions should not be construed as having application as a general principle. The facts in that case were quite different to the present matter. The company in Greg Black Constructions responded comprehensively to the application for security for costs presenting evidence that: it had recently renewed its Queensland Building Services Authority ('QBSA') (now QBCC) licence; a deed of covenant and assurance by the sole director, Mr Black, had been provided to the QBSA; that there was in excess of $50,000 of retention money in a joint account in the name of the parties. Here, Capri has not responded to the application, its QBCC issued licences have been suspended for non-payment of debts, the company has recently had two judgements entered against it for in excess of $30,000, it is the defendant in three District Court proceedings (seemingly brought by suppliers), and its credit score indicates that the company is at considerable risk of financial default or insolvency in the near future.
• [13] There is no direct evidence before the Tribunal in the form of financial statements which might indicate the financial position of Capri. Had Capri responded to the application it could have placed before the Tribunal evidence that it was in sound financial health and explaining each of the matters relied upon by Mr Palmer as evidence of Capri's parlous financial position. The fact that Capri has not responded to the application, and the factors I have outlined, tend to indicate that any financial statements Capri might produce would not paint a picture of a company in good health.
• [14] On the other hand, the evidence suggests that Mr Palmer does have some capacity to absorb the costs of the dispute however this might require Mr Palmer to liquidate a substantial asset or borrow against it. Few individuals have the available cash liquidity to meet legal costs that might be upwards of $30,000.
• [15] On balance, the factors to which I have referred favour the making of an order for security for costs.

The prospects of success or merits of the proceeding or the part of the proceeding against the applicant party - s 109(4)(b)

• [16] Mr Palmer says that Capri's claims lack merit and that the value of the claims are more than offset by the quantum of his counterclaim. Mr Palmer says that Capri's position, that the patio roof was not part of the contractual scope of works, is not credible. Mr Palmer says that, among other things, part of Capri's claim relates to unapproved variations and that Capri did not raise a claim for prime cost items until nine months after practical completion.
• [17] The matters raised by Mr Palmer in his submissions will undoubtedly be addressed by the parties when they file statements of evidence. In an application such as this, and in a jurisdiction where there are no pleadings and the statements of evidence often serve to identify and/or clarify the issues in dispute, it is not possible to form a concluded view as to the merits of the parties' respective positions.
• [18] I am satisfied that, at this stage of the proceeding at least, Capri has an arguable case. Statements of evidence have not been filed by the parties. A compulsory conference has yet to be conducted. The relative merits of Capri's case may become more apparent after these steps have been undertaken. At this time, I do not consider this factor weighs in favour of an order for security for costs.

The genuineness of the proceeding or the part of the proceeding against the applicant party s 109(4)(c)

• [19] The genuineness of a proceeding is not the same as the prospects of success. A proceeding that is not genuine is one not brought on a bona fide basis or which is otherwise a sham.
• [20] Mr Palmer says that Capri knows it did not complete the works and that it raised an invoice for in excess of $50,000 nine months after the works had been completed. This, says Mr Palmer, leads to the conclusion that the claim by Capri is not genuine.
• [21] As I have earlier observed, Capri claims that the works reached practical completion when Mr Palmer took possession and that $72,645.27 is owed by Mr Palmer for works undertaken to the completion stage. This is disputed by Mr Palmer on the basis that the works never reached practical completion. Nevertheless, it does appear that Mr Palmer signed the practical completion form and defects form notwithstanding his assertion that Capri had not completed construction of the patio roof. Capri's position, according to Mr Palmer's response, is that the patio roof did not form part of the contractual scope of works.
• [22] The submissions by Mr Palmer tend to go to the issue of Capri's prospects of success as opposed to the bona fides of the proceeding.
• [23] There is nothing in the material before the Tribunal to suggest that the proceeding brought by Capri is not genuine. This factor does not tell in favour of an order for security for costs.

• [24] Rule 672 of the Uniform Civil Procedure Rules 1999 sets out the discretionary matters relevant when considering whether security for costs should be ordered. Some of those matters are relevant in tribunal proceedings.
• [25] The proceeding was commenced by Capri in August 2023. Mr Palmer's response and counter application was filed in October 2023. The application for security for costs was filed by Mr Palmer in February 2024. I am satisfied that Mr Palmer brought the application promptly after discovering Capri's QBCC licences had been suspended for non-payment of debts.
• [26] There is no suggestion that the financial position in which Capri appears to be has been in any way caused by the conduct of Mr Palmer.
• [27] It is also a relevant consideration whether an order for security for costs would be oppressive or would stifle the proceeding. In the absence of any submissions by Capri it is difficult if not impossible to assess the impact an order might have on Capri's ability to continue the proceeding. I am therefore unable to attribute any weight to these considerations, one way or the other.

• [28] Ultimately, the exercise of the discretion as to whether or not to order security for costs requires weighing up and balancing the various factors for and against. It is necessary to ensure that justice is done as between the parties. In deciding an application for security for costs it is necessary to achieve a balance between ensuring that adequate and fair protection is provided to the defendant, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings.[3]
• [29] Capri has failed to avail itself of the opportunity to respond to the application by Mr Palmer. That of itself communicates some degree of indifference on the part of Capri that might be reflective of an adverse financial position. I accept that Capri has an arguable case. Ultimately however, I am persuaded by what appears to be the relatively poor financial position of Capri. It is a serious matter for a building contractor's licence to be suspended by the QBCC for non-payment of debts and, in my view, not a step taken by the QBCC without very real justification. Although it is not open to me to draw a conclusive connection between the suspension of Capri's licences and the two Magistrates Court judgements and current District Court proceedings, there is a strong suggestion that Capri's financial position is precarious. On this basis, I am persuaded that this is an appropriate case in which to exercise the discretion to order security for costs.
• [30] Mr Palmer seeks security in the amount of $20,000. His solicitor attests to Mr Palmer's costs exceeding $50,000 by the conclusion of a hearing.
• [31] It is not clear what component of the security sought relates to past costs and the component relating to future costs. Nor is it clear that the estimate is confined to Mr Palmer's costs of defending Capri's claim. Security is only awarded, generally speaking, against a plaintiff. Nor is there any detailed evidence as to how Mr Palmer's solicitor arrived at the estimate of costs to hearing or indeed how the sum sought by way of security is calculated.
• [32] In Allen Dodd as Trustee for the Dodd Superannuation Fund v Shine Corporate Ltd Martin J stated that the assessment of an appropriate amount for security for costs is not susceptible of great precision.[4] His Honour went on to say:

[15] ... To a greater or lesser extent, the court is required to apply the experience gained through the observation of similar cases and the steps which were taken and those which were necessary to take. As French J (as he then was) stated in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd and Others:

"The process of estimation embodies to a considerable extent, necessary reliance on the 'feel' of the case after considering relevant factors..."

[16] In many authorities it is said that a "broad brush" approach is to be taken when fixing the amount of security for costs . In Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques, Jackson J said:

"[52] ... Parties should not be encouraged to devote extensive resources (including court resources) to questions of security for costs. It should not be forgotten that an order for security is not a final assessment of anything about the amount of the costs that may be payable but a provision against a contingent amount that depends on a number of things that are not amenable to precise predictions."

[17] Consistent with that approach, an applicant is not required to present evidence on an application of this kind as though it were preparing a costs statement for past costs, or supplementing the statement as if for a final costs assessment. An order for security for costs does not provide a defendant with an indemnity for the expenses of defending a claim - it is intended to provide protection against the risk that an order for party and party costs in the defendant's favour might not be satisfied.

• [33] The difficulty I face in fixing costs is the lack of clarity as to what part of the security sought relates to Mr Palmer as the respondent to Capri's claim as opposed to Mr Palmer's costs as the counter claimant. A determination is required of, at least insofar as the issue of costs is concerned, who is the attacker and who is the defender.[5] I would characterise Mr Palmer as the aggressor in the counter-application. His claim is substantially one for damages for breach of contract and liquidated damages and significantly exceeds the amount claimed by Capri. Accordingly, no part of the amount ordered for security for costs may relate to the counter-application. The security must be limited to those costs directly relating to Mr Palmer's defence of Capri's claim.
• [34] Doing the best I can, and adopting a broad brush, I fix security for costs in the amount of $10,000.

• [35] I order that Capri must pay to the trust account of the solicitors for Mr Palmer the amount of $10,000 within 14 days of the date of this decision.

[1] Hapisun Pty Ltd v Rikys & Moylan Pty Ltd [2013] VSC 730.

[2] [2011] QCAT 671.

[3] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [47].

[4] [2018] QSC 40.

[5] Maatschappij Voor Fondsenbezit v Shell Transport and Trading Company [1923] 2 KB 166 at 178 per Scrutton LJ.