Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd

Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd - [2018] NSWCA 271 - NSWCA 2018 case summary — Zoe

Judgment

BASTEN JA: In this matter there is an appeal on foot brought by Comlin Holdings Pty Ltd against Metlej Developments Pty Ltd and other parties. The appellant was the unsuccessful party in a trial which lasted for four days before Parker J in the Equity Division. Orders were made on 28 May 2018. A notice of appeal was filed on 24 August 2018. There are four respondents to the appeal. An arrangement has been made which is acceptable to the third and fourth respondents with respect to security for the costs of the appeal.
The matter before the Court is an application by the first and second respondents for an order by way of security. There are three issues which need to be addressed. The first is whether the Court is satisfied that the appellant would be good for costs if an adverse costs order were made against it in the appeal. The second question is whether, as has been proposed by the appellant, one of its directors may come forth and proffer security on its behalf and whether that should be accepted and if so in what amount. The third issue concerns an application by the appellant, based on ground 10 in the notice of appeal, to call further evidence.
With respect to the first matter, there are financial statements before the Court in relation to the Comlin Holdings Unit Trust of which the appellant is the trustee. The financial statements were provided for the year 30 June 2017 and have now been updated at the hearing of this application to include the statements for the year to 30 June 2018. The picture which is painted by the current financial statements does not vary significantly from the one for the previous financial year. As with many unit trusts, this trust appears to be involved in supporting the building and development activities of its unit holders. The balance of assets against liabilities is in a sense a formal figure of $100.
It is true that the bank account provided in the balance sheet has a significant sum by way of cash and cash equivalent and that sum has increased in the past financial year. There is also an indication that the distributable income for the trust for the last year, which was of a similar order to that in the current year, is about $100,000. The difficulty with assessing the value of the financial assets of a trust is that there are large borrowings, which flow through to particular companies which are no doubt the vehicles through which the unit holders conduct their land development businesses.
There are a number of aspects of the financial accounts which are not entirely transparent. For example, many of the assets are through investments in other trusts and companies, mostly proprietary limited companies. It is also true that there are significant non‑current liabilities which in total form most of the total liabilities and which are roughly equivalent to the total assets. With respect to the cash account, the costs of running the appeal will have to be taken into account on the part of the appellant on the assumption for present purposes that it would be unsuccessful, a factor which would reduce the cash available to pay an adverse costs order. I am satisfied in the circumstance that some arrangement should be made with respect to security for costs of the appeal.
Before addressing the extent of the appropriate security, it is convenient to turn to the third matter, which was the application to call further evidence on the appeal. The application has been the subject of affidavits which both set out the further evidence which is sought to be called and was not called at the trial and indicate why that evidence was not called and why it should be called at an appeal. There is a responsive affidavit filed by the first and second respondents indicating that the calling of that evidence will be resisted. At present there is no direction for the determination of that motion. One factor which concerns me is that if the motion is dealt with at the appeal, and fresh affidavit evidence is admitted, it is likely that the respondents will seek to call their own evidence in reply and the hearing of the appeal may then have to be adjourned to allow that step to be taken. That would increase the length of the appeal and the costs.
The alternative course is that the respondents incur the costs of preparing their own evidence and preparing for cross‑examination on the appellant's further evidence prior to the appeal, a factor which will in turn increase the costs which are likely to be incurred by the parties and may not entirely avoid the need for adjournment of the appeal. The appeal might be expected to run for a day if there were no further evidence called. It is not clear how much longer would be required if there were further evidence called because it is not possible to know the extent of the conflicting evidence and the scope of the likely cross‑examination.
In the circumstances I think the proper course is to direct that the parties obtain a date from the registrar for the hearing of the notice of motion for the calling of further evidence, to be listed well in advance of the hearing of the appeal. In that event, there will be some limited costs involved in dealing with that motion but I do not think they will be the same as the costs which would be incurred if there were to be, in effect, a further day of an appeal when the evidence is called.
Accordingly I propose that the appellant's notice of motion should be fixed for hearing and that there should be an opportunity allowed to the first and second respondents to seek further security for costs in the event that the further evidence is admitted and the hearing of the appeal is extended to cope with that additional material. In the meantime, I propose to deal with the matter on the basis that there is a further notice of motion to be heard but otherwise the costs will be the costs of a one day appeal on the usual basis of the material before the trial judge.
Dealing with the second matter, there is an affidavit of 2 November 2018 from Mrs Betty Bassil, a director of the appellant, who states that she is the owner of three properties. She gives values of those properties in her affidavit. There are title searches for the properties annexed but there is no firm basis for the valuation either explained in the affidavit or by way of independent valuer. The respondents object to the evidence of value, but it is entirely probable that the values are within a range and each exceeds the required security by a large factor.
I direct the giving of security in an amount of $85,000 which is to be provided by way of a caveatable interest over one of the properties in the ownership of Mrs Bassil. I reserve leave to the first and second respondents to seek to increase that amount on the hearing of the motion with respect to further evidence if such an application is thought appropriate.
With respect to the costs of this application, I note that there has in effect been an order made on the motion as sought by the first and second respondents. It is true that there have been discussions between the parties; it is true that an offer has been made in terms which are close to, although they do not meet the terms of the order I just indicated; however, it is also true that a lot of the material has only been exchanged between the parties in the last week. I propose to make the costs of the motion costs in the appeal.

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