DALY v. COFFS HARBOUR SHIRE COUNCIL [2004] NSWSC 215

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

1 GREG JAMES, J: By notice of motion filed on 31 July 2002, the defendant, Coffs Harbour City Council, in proceedings in the Common Law Division for damages, seeks security for costs in the sum of $405,300 or such other amount as the court thinks fit be provided by the plaintiff. 2 The proceedings were commenced on 20 December 2001. They have so far required some considerable degree of preparation. On the motion a number of affidavits were read and complex written submissions were provided. In addition, the parties later provided me with, supplementary submissions and chronologies. 3 The application for security for costs was filed on 30 July 2002. Because of the expected duration of argument and evidence, it was included in the progressive list. When it came on, however, it proceeded on the basis of the affidavit material without oral testimony or cross-examination although argument occupied a considerable time. 4 The delay in making the application was occasioned by the deferral of the application until after the close of pleadings, the exchange of particulars and the parties' preparation to a considerable extent of the case. 5 Prior to the application being brought, the proceedings had reached the point at which the parties had filed their DCM documents and substantially, if not completely, the affidavit evidence which it had been directed the parties file in preparation for the final hearing. 6 Oral argument on the motion occurred on 24 September 2003. The matter was stood over to permit further submissions to be filed. They were filed shortly thereafter and toward the end of last term I reserved judgment. 7 As the nature of the litigation is complex and the circumstances of the parties are somewhat unusual, I will have to consider those matters in some detail to show the basis of the arguments.

The nature of the litigation 8 The statement of claim pleads the plaintiff's basis for her bringing the proceedings, that she was a co-director of Daly Constructions Pty. Limited ("Daly Constructions") together with her husband; that Daly Constructions was wound up by its creditors on 16 July 1997; that the liquidator assigned to the plaintiff absolutely and for consideration the whole of Daly Constructions right in any action it might have against the defendant Council and that notice of that assignment was given. 9 In the action, the right to which is said to have been so assigned, the plaintiff asserts that Daly Constructions was a builder carrying on business in and about Coffs Harbour; that in about April 1995, it entered into a contract to purchase 7.448 hectares of land known as the Palm Trees Nursery site at a price of $560,000, the completion of which contract was conditional upon the defendant granting consent to subdivision into residential lots of that land. By its agent, Resource Design and Management Pty. Limited ("RDM"), Daly Constructions applied to the defendant for development approval for portion of the site to be subdivided into 52 residential lots. 10 A consent was granted subject to a schedule of conditions. A later amendment to the consent provided for an additional four lots. It was pleaded that the defendant's existing control plan for the area, including the subject land, made no provision for water and sewerage services. The then existing water mains were adequate to service those lots approved and no sewer mains then existed. 11 Condition six of the said approval required Daly Constructions to extend temporary water and sewerage mains to the subdivision from the defendant's existing mains at its own cost and the defendant was not obliged to release the subdivision linen plan until those water and sewerage connections were made. 12 Paragraph 12 of the statement of claim states:- "In the premises, by accepting and deliberating upon the Daly Constructions said development application, the defendant owed to Daly Constructions a duty to:- (a) consider how and in which manner sewerage from the subdivision was to be disposed of; (b) determine who was to bear the cost of providing such a service, when and in what proportion; (c) warn that the cost of such a service was intended to be made a cost of the Daly Constructions Development and was to be borne thereby, or alternatively, the cost thereof could possibly be imposed upon Daly Constructions as a cost of the said development; (d) impose all conditions at once including conditions as to cost and contribution for sewerage and water services that had to be imposed as conditions for undertaking the development." 13 Paragraph 13 pleads that there was a representation by the defendant as the relevant statutory authority, to the plaintiff of the following matters:- "(a) all the conditions that were necessary and reasonable to impose for the purposes of the development had been imposed and communicated to Daly Construction." 14 It was further pleaded that from 15 March 1996 until November 1996, Daly Constructions, by its agents, the vendor, by its agent, worked with the defendant's officers to resolve the absence of sewerage mains and the terms of special condition six. Under the heading "Particulars" to this paragraph it is asserted that the defendant retained the plaintiff's agent, RDM, to service Daly Construction's lots and 500 other lots with a sewerage pump station to the sited on the Palm Trees Nursery land; that Daly Constructions agreed to provide to the defendant an area of land for the sewerage pump station and the defendant, by its officers, represented to Daly Constructions and RDM that the defendant would "forward fund" the cost of the pump station. 15 Under the heading "Particulars", it is asserted, that the meaning of that expression ("forward fund") was well known to councils and developers as meaning that the council would pay the construction costs up front and ultimately seek to recoup the same from all developers benefited by way of contributions when the respective subdivisions serviced by the works are completed. 16 It was further pleaded that Daly Constructions entered into advance sales of 12 residential lots, completion of which was conditional upon the subdivision linen plan first being registered; that Daly Constructions had, in reliance on what had been put to it, concluded the development could reasonably be commenced and completed for a profit; had entered into a mortgage advance facility of $1.8 million; and accepted a written tender for earth moving for the said development at a price of $703,221 and retained RDM to provide consultancy services. 17 It was pleaded that as a condition of the mortgage finance, RDM must certify that, except for latent foreseeable costs, no further construction costs were to be required. On behalf of Daly Constructions, RDM so certified. Daly Constructions, it was pleaded, commenced the construction works pursuant to the approval but on 22 April 1997, the defendant purported to impose a further condition upon Daly Constructions as a condition for the release of the linen plan that Daly Constructions must first pay the cost of constructing the proposed sewerage pump station. This involved an additional cost of $280,000. At this point, about four weeks work remained to be done to complete the subdivision work; the sewerage pump station had not commenced nor had the defendant provided a sewer main; Daly Constructions required access to the funds available in its existing funding arrangements and needed a further approval for further funding to pay for additional $280,000. 18 It was further pleaded that the financier, however, declined to make the progress payment or provide any further funding on the basis that the requirement for further funding evidenced a breach of the contract of finance. 19 The statement of claim asserts that the absence of funds from the financier meant that the contractor's progress claim was not met; the contractor left the site, Daly Constructions could not pay the claim from its own resources or pay the defendant's requirement for $280,000 and appointed an administrator. The administrator was unable to raise the required monies and by reasons of entering into administration, Daly Constructions was deemed to have been in breach of another contract in respect of which a progress payment claim and other payments were due for payment in respect of constructions works at Pacific Parade at Dee Why so that it lost the benefit of that contract. In due course it was wound up. 20 It was contended that by reason of those matters, the defendant became liable in negligence, and for negligent mis-statement and thereby became liable for the damages claimed. The pleadings may also relate to other causes of action. 21 In its defence, the Council does not admit certain paragraphs of the statement of claim. It denies others and assert that such loss and damages as might have been suffered by Daly Constructions were caused by or contributed to by its own negligence. The particulars of these defences include an assertion that the plaintiff had failed to make adequate enquires in relation to the defendant's plans for a permanent pumping station at the site and funding proposals, that it negligently acted to its own detriment by relying on assumptions that the defendant would forward fund the pumping station and that as a result of its negligence it failed to disclose the costs of complying with the relevant condition of the development consent to its financier and through its agent, it negligently certified as correct when they were not so correct, the costings of the site development and that no further costs were required. It was asserted that the plaintiff did not exercise the care required of a prudent developer in budgeting. 22 In support of the application, the parties have filed voluminous affidavits as to the circumstances of the parties and of the case.

The circumstances of the plaintiff 23 I have already referred to the plaintiff having taken an assignment of whatever right of action Daly Constructions had against the defendant. I have also referred to her having been a co-director in that company with her husband. In commencing these proceedings, the plaintiff has assumed the liability for costs inherent in conducting the litigation. She is not entirely a stranger to the litigation, in that she was a director and shareholder of Daly Constructions, so she had, together with her spouse, Terrence John Daly, a concern and expectation as to the prospects of that company and might have been expected through her relationship with that company and her co-director and shareholder to have benefited from any profitable activities of the company, albeit, she might have been protected from liability in the event of its failure in the absence of any commitment to it such as the giving on its behalf of guarantees. 24 By her affidavit of 24 March 2003, she sets out that she has assets comprising a weekly salary of $449, superannuation of $7,500 and furniture of $10,000, although as against that she deposes to liabilities for mobile telephone, groceries, children's school activities per week of $365. She also refers to Visa card and Bankcard debts totalling $10,000. As was conceded in the oral argument, there is no issue but that she is unable to pay the costs should the litigation be determined against her. 25 In his affidavit of 24 July 2003, her spouse, Terrence John Daly, deposes to his means and that he enjoys a weekly salary after tax of $1,150 from which needs to be deducted a total of some $860 expenses. Apparently his Visa card is drawn to the limits of $17,800 and he makes repayments on that Visa card of some $6,500. The evidence does not allow me to show as to how frequently such repayments must be made. He has assets comprising an equity in property at 15 Bundock Street, North Ward, Townsville of $26,000 and other assets totalling about $93,000. 26 The defendant's solicitor, Mr. Brothers, has sworn various affidavits in support of the application. The affidavit of 15 January 2003 annexes a search of the New South Wales Purchaser's Index as at 31 January 2002 in respect of the name Terrence John Daly. Reference is made to two properties at Maroubra Junction and Potts Point under the heading "current owners". Under the heading "purchasers/lessees" (from 1 June 1971 to date) there is reference to properties at Rhodes, Rous, West Sawtell. 27 In his affidavit of 10 March 2003, Mr. Brothers updates those searches in respect of the name of the plaintiff and Terrence John Daly to 10 March 2003 and 4 February 2003 respectively. 28 It is not clear to me that Mr. Daly's assets would be available in any way to meet an order for costs or be likely to add up to a sum sufficient to meet such costs as might be ordered, even if such an order might be made against Mr. Daly. 29 The deponent, however, swears that the defendant caused, by the very matters in respect of which the plaintiff sues, Daly Constructions, his wife and himself to be placed in their present parlous financial position. 30 It is asserted, for various reasons set out in paragraph five of the deponent's affidavit that the company was in a strong financial position with a bright future, dependent, however, upon the sale of the land subject of this dispute when subdivided. Mr. Daly deposes to the liquidation of the Daly Constructions as meaning that it is likely that neither that company or himself could attain accreditation again with the New South Wales Department of Housing as a developer and that, in consequence, his and the company's commercial reputations are irrevocably adversely affected unless the Department were to be apprised of facts leading to the liquidation leading it to take a more favourable view of Daly Constructions. 31 Mr. Daly also refers to a credit information report which adversely refers to the liquidation such that he can now no longer obtain credit. 32 It is Mr. Brother's evidence that substantial costs have already been incurred in the litigation and it is very clear that substantial further costs will be incurred. It is also very clear from the financial position of the plaintiff to which I have referred that she is completely unable to meet her own costs, the litigation is apparently being conducted by lawyers on her behalf on a basis which does not require her to meet their expenses as they are incurred. It is clear that should she lose and suffer an order she pay the defendant's costs, she could not afford to pay them. It is also clear that the company is impecunious and were it a plaintiff, it could be the subject of an order for security. Mr. Daly is better off but not much so. The likely costs would seem to exceed his assets, even if they were available to meet an adverse order by a considerable margin. 33 It is contended it would be unjust to make such an order as the plaintiff seeks as it was the defendant that caused the plaintiff's parlous financial position and the parlous financial position of the company and of the co-director and shareholder, the plaintiff's husband. However, that matter is strongly put in issue by the defence, as is the assertion that the company was in a strong financial position with a bright future and the prospect that it might have been managed in such a way as to realise that future, so that the matters relevant to making a security order are the very matters in issue in the case itself. 34 I therefore turn to how the parties set out their respective cases.

The nature of the cases 35 I have already referred to the pleadings. I shall now turn to how the parties say their respective cases stand in their DCM documents and the affidavits relied on in respect of the motion. 36 In the plaintiff's DCM document, it is asserted that the condition for payment of the $280,000 inserted by the Council as referred to in the pleading was unlawful on the ground that the defendant had no power or authority to add conditions to a development approval after its consent to the application has been given. No reference is made to the launching of any appeal to challenge the Council's decision. 37 It is asserted that Daly Constructions was regarded by its financier as in breach of its loan agreement because of that Council requirement. It is not asserted any challenge was made to that view of the plaintiff's financier. 38 The defendant, in its DCM documents, referred to it still conducting factual enquiries. The plaintiff noted that it was necessary that extensive discovery, interrogatories and expert evidence including expert valuation and town planning evidence would be necessary. It was indicated there might be an extensive number of lay and technical witnesses. The defendant, in its DCM document, asserts that when the defendant's representatives raised with the plaintiff's company, Daly Constructions, the issue of location and funding of a sewerage pumping station, that company was told the location was not yet decided and that in the past developers had forward funded such infrastructure. It is asserted Daly Constructions confirmed that it would incorporate forward funding to the programme. The defendant denies that it engaged RDM to prepare the necessary pumping station and sewer rising main to service the subdivision and future subdivisions or represent that it would build a permanent pumping station or when such a permanent pumping station might be built. 39 As to the assertion that the permanent infrastructure would be forward funded, the defendant asserts that, if so, it was to be forward funded by the plaintiff and that that is the ordinary meaning of the term. The defendant denies using the term in any connection as would represent to Daly Constructions that the Council would forward fund the provision of sewerage to that company's subdivision. As to the loss of the other contracts, the defendant asserts either that the placing of Daly Constructions into administration was not the cause of the termination of those contracts or that the losses associated with the determinations were too remote. 40 It makes a similar assertion in relation to the loss of the association with the Department of Housing. It asserts that the company simply failed to prudently budget for the overall costs of the subdivision by appropriately taking into account the costs of providing sewerage. It asserts that it never departed from the original consent or inserted additional conditions into it. It too refers to the necessity for extensive discovery of documents, interrogatories, expert evidence and indicated in 2002 that a security for costs application is to be made. The DCM document, at paragraph 5(d)(ii) asserts:- "Factually, this case is dependent on the interpretation given in conversations that took place between the parties, their agents and representatives in meetings, phone conversations and conferences over a number of years. Consequently, a large number of witnesses, both lay and expert, may be involved." 41 It also refers to the prospect of considerable evidence of a technical nature. 42 By his affidavit of 16 December 2002, Terrence John Daly refers to the history of his involvement with Daly Constructions and the involvement of that company with RDM. In that affidavit he refers to Mr. Lamont contacting him concerning a sewage pumping station that Coffs Harbour Council had retained RDM to design and construct to service the North Bonville district, which it was proposed would be placed upon his land. He had indicated consent provided no costs were incurred and it didn't delay the completion of the subdivision. He says no request from Council was made to him but he became aware in February 1997 that Mr. Lamont was finalising the engineering design drawings for Daly Constructions to comply with its development approval conditions and saw that the sewage lines were directed to Lot 56. He became concerned a delay would occur. He spoke to Mr. Lamont and that gave rise to a letter being written to the Council. He was unaware of any reply for over a month and contends that at the time of that reply 95% of the sewer and water works of the subdivision had been completed as well as 95% of the drainage, kerbing and guttering, 70% of the road works, the bulk of the earth works and 95% of landscaping. A mere three weeks work remained to be done. He refers to the reasons for his concern at Council's refusal to forward fund the construction costs of the permanent pump station. He says:- "So far as I know, it had never been a condition of the development approval that the cost of the said works should be paid for wholly by Daly Constructions." 43 It is notable, of course, that these works were not for the sole benefit of Daly Constructions. He refers to conversations with Council officers seeking to set aside the decision that Council would not forward fund the construction. He asserts that his wife was the absolute assignee of the liquidator's cause of action and sues in her own right and as being responsible for the cost of the action. He deposes to a number of factual conflicts with what is asserted in the affidavit of Mr. Brothers and annexures. 44 The liquidator, John Duncan Green, gives evidence of the circumstances of the company having been placed into liquidation and what monies were owed to the company at that time. 45 An affidavit of Thomas Clive Park sworn 11 July 2002 has been filed annexing a report. Mr. Park gives evidence as an expert witness that Daly Constructions did suffer economic loss as a result of its ceasing to carry on business after July 1997 in about the amount of $5 million to $6 million dollars, depending upon the appropriate discount rate. 46 An affidavit was read of Michael Francis Lamont sworn 13 February 2003. Mr. Lamont was a registered surveyor employed by (RDM). He has qualifications in urban and regional planning. He referred to his role as assigned by RDM to prepare and submit for Council approval the development application for the subdivision. He referred to the consultancy services RDM were asked to provide to Daly Constructions. He takes issue with a number of matters sworn to by Mr. Brothers concerning the development and the development control plan. In particular, he says he was not aware of any statement that meant to him that Daly Constructions was to pay for the cost of constructing the permanent sewer pump station. 47 He refers to a conversation with Council's officers in which they said:- "The Council will not forward fund the cost of the permanent sewer pump station. We stand by our position stated in our letter of 15 April." 48 He refers to various discussions concerning proposals to deal with the impasse concerning the sewer pump station, and particularly, a proposal that a temporary station be built for $50,000, a proposal which Council rejected. 49 By the affidavit of 10 March 2003, Mr. Brothers deposes to his belief as to the extent of the estimated legal costs from his experience in conducting such litigation as this. He refers to his belief as to the prospects of the plaintiff succeeding in establishing negligence and negligent mis-statement, as to prudent development practice, proper enquiries and assessments, his belief as to the requirements placed by the defendant on Daly Constructions and matters which may have alerted Daly Constructions to the need for a temporary pumping station from his reading of the development consent and information and instructions provided to him by the defendant and officers of the defendant. He deposes to relying on that source for ascertaining what had occurred in conversations and his belief as to a letter dated 10 March 1997 from RDM as being the first time the defendant asked the Council to forward fund the pumping station as arising from an examination of the Council's files and information and instructions provided by the defendant's officers. That is his source for deposing as to the meaning of the term "forward funding" and that there had been no application for a variation of the development consents. Similarly, he refers to his belief as to the effect of a letter referred to at paragraph 27(e) and (f) of his affidavit, which he deposes to having come from the information and instructions provided by the defendant and officers of the defendant and an examination of the correspondence.

The general law 50 The general law relating to security for costs has been expressed in the following paragraphs taken from the notes at paragraph 9.4.0090 to the Australian Corporations Law Principles and Practice, Butterworths:- "The question of whether security for costs should be ordered is a matter of the court's discretion. In Idoport Pty. Limited v. National Australia Bank BC200105623; [2001] NSWSC 744, Einstein, J. set out seven guidelines which Beazley, J. in KP Cable Investments Pty. Limited v. Meltglow Pty. Limited (1995) 56 FCR 189; 13 ACLC 437 at 449-50 described as ones which the court is said to typically take into account when determining such an application:- (a) that such application should be brought promptly; (b) that regard is to be held to the strength and bona fides of the applicant's case; (c) whether the applicant's impecuniosity was caused by the respondent's conduct the subject of the claim; (d) whether the respondent's application for security is oppressive in the sense that it is being used merely to deny an impecunious applicant a right to litigate; (e) whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security; (f) whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking; (g) security will only ordinarily be ordered against a party who is in substance a plaintiff and orders ought not be made against parties who are defending themselves and thus forced to litigate. In the case of a corporation, a specific factor to be taken into account is whether those who stand behind a company are capable of providing security for costs. In Idoport Pty. Limited v. National Australia Bank BC200105623; [2001] NSWSC 744, a material consideration concerned the involvement of third party funders who held no pre existing interest in the proceedings. Thus where the shareholders of a company have agreed to accept personal liability for any judgment for costs the court may not require that security be given. A powerful consideration against making an order for security is whether the ordering of security will frustrate the plaintiff's right to litigate the claim: Idoport Pty. Limited v. National Australia Bank BC200105623; [2001] NSWSC 744; Baida Holdings Pty. Limited v. Pocknell BC200205155; [2002] ACTSC 88." 51 Had the plaintiff been the company, security might have been ordered, at least, by reason of Part 53 Rule 2(e) of the Supreme Court Rules, to which I will refer later, or by application of s.1335 of the Corporations Law which provides:- "Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given." 52 More generally, circumstances in which security might be ordered are set out in Part 53 Rule 2 of the Supreme Court Rules. That Rule provides:- "(1) Where, in any proceedings, it appears to the court on the application of a defendant:- (a) that a plaintiff is ordinarily resident outside the State; (b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so; (c) subject to subrule (2), that the address of a plaintiff is not stated or is mis-stated in his originating process; (d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings; or (e) that there is reason to believe that a plaintiff being a body corporation will be unable to pay the costs of the defendant if ordered to do so, the court may order that plaintiff to give such security as the court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given. (2) The court shall not order a plaintiff to give security by reason only of subrule (1)(c) if it appears to the court that the failure to state his address or the misstatement of his address was made without intention to deceive." 53 Part 53 Rule 2 does not apply in this case in its terms and there is a general rule that mere impecuniosity does not found a basis for making a security for costs order against a plaintiff: Cowell v. Taylor (1885) 31 ChD 34 at 38.

Submissions 54 The defendant contends that security should be granted to secure "the proper and effective administration of justice": Rajski v. Computer Manufacture and Design Pty. Limited [1982] 2 NSWLR 443 at 447G and 449C. It contends that the pursuit of these proceedings is by a "disinterested" plaintiff and cites Cowell (supra). 55 It further contends that the proceedings are tendentious, citing Morris v. Hanley [2000] NSWSC 957 (Young, CJ. in Eq.) and that the proceedings involve a "manipulative" plaintiff: see Rajski v. Computer Manufacture and Design Pty. Limited [1983] 2 NSWLR 122 at 127-128. It is submitted that in the inherent jurisdiction an order might be made and that it would be appropriate that it be made because the risk has been assigned but the benefits might still be enjoyed by the insolvent corporation so that litigation in this form is a way of avoiding the Corporations Law provision and Part 53 Rule 2(e). 56 The applicant/defendant refers to what is asserted to be "the demonstrable fragility of the plaintiff's case", which it asserts is dependent on whether a new condition was included by the Council; whether that condition required the plaintiff to forward fund the costs and it is said to be a case which is contradicted by the correspondence and the materials annexed to Mr. Brother's affidavit. 57 In addition, it is asserted that such loss as has been incurred is not attributable to the Council, not only because any condition was not new, any condition did not involve an agreement that Council would forward fund the works to be done, but also the loss was attributable solely to mismanagement of the company or exceeded the bounds of what loss might be sheeted home to the Council in any event. 58 In its submissions, the applicant defendant firstly points to the deed of assignment which is Exhibit MJB-1 to Mr. Brother's affidavit of 30 July 2002, particularly that the chose is assigned to Mrs. Daly but under the deed she is not required to make any payment in cash. The liquidator is appointed as her attorney in relation to any recovered damages; she must institute proceedings against the Council and must retain a nominated solicitor to act for her; must terminate the solicitor's retainer or vary her costs agreement with him without the liquidator's consent; must report steps taken in the proceedings to the liquidator and must cause all recovered damages to be paid to the solicitor's trust account and thereafter disbursed as to 70% to the liquidator. 59 It is thereby contended that the company, or more precisely, the liquidator is the predominantly interested "beneficial" plaintiff. It is submitted:- "The substance of the deed of assignment is that the liquidator has in effect 'outsourced' the prosecution of the company's cause of action by a 'profit share' arrangement with Mrs. Daly." 60 It is submitted that form of that arrangement taken at face value protects the company and its creditors from any costs obligation. It is submitted there is clearly power to order security for costs against a company in liquidation. So much might be accepted, but it is not usual where the liquidator is party to the proceedings for security to be ordered against the liquidator who would be personally liable for the costs in any event: Re Strand Wood Co. Limited (1904) 2 ChD 1; Hession v. Century 21 South Pacific Limited (In liq.) (1992) 28 NSWLR 120. It has been said by Street, CJ. in Buckley v. Bennell Design and Constructions Pty. Limited (1974) 1 ACLR 301 at 305 that the discretion to order costs "could properly be regarded as ordinarily exercisable so as to protect the defendant sued by an impecunious company". It may be, however, that so far as an application falls to be considered on the basis of an action commenced by an impecunious company, the discretion to order security for costs is a general one and is, in that sense, unfettered. 61 In the present case, however, the liquidator does not sue; the company does not sue. The liquidator seeks to take the benefit substantially of the action; the plaintiff, an ordinary personal litigant, does not have the means to meet the costs if they should be ordered and takes a limited benefit from the proceeds of the action if successful. 62 The general rule that poverty is no bar to a litigant expressed in Cowell (supra) by Lord Justice Bowen, also refers to an exception, that is, an exception introduced in order to prevent abuse, that if an insolvent sues as a nominal plaintiff for the benefit of somebody else, he must give security. Lord Justice Bowen there was referring to cases where a person divested themselves of their interest and handed it over to someone else so that the transferee may sue for them. I see no reason why that proposition should not apply to an impecunious person who acquires the right to litigate on behalf of another and partly on their own behalf. However, there is authority to which the applicant defendant has referred me in the United Kingdom and elsewhere to the effect that where a plaintiff suing as an assignee from a trustee sues substantially on their own behalf an application for security might or should be refused: see also Andrews v. Caltex Oil (Australia) Pty. Limited (1982) 40 ALR 305; Upton v. TDW Enterprises (1984) 57 ALR 361; Ramsey v. Hartley [1977] 1 WLR 687. But the submissions of the applicant draw attention to the key to the problem here, that is, the applicability of the exception which exists to prevent abuse. 63 It is submitted that there is an inherent power to award costs against an individual and so much can be accepted. It seems hard to consider that the exception should apply to those who choose to acquire the right to litigate against another and particularly the right to litigate partly on behalf of an impecunious corporation, when they themselves are impecunious and notwithstanding the combined impecuniosity they seek to take advantage of the exception where both impecunious parties each remain a substantial beneficiary of the cause of action when a single plaintiff, if a corporation, would usually have to provide security. 64 Whilst a mere assignee may not be subject to the same advantages and same procedural limitations and sanctions to which the assignor would have been amenable, particularly in a case where the assignee is an ordinary personal litigant and the assignor a company, nonetheless, it is open to make an order, in my view, where the assignment mechanism appears designed as a means for evading the operation of the Rule and the Corporations Law. 65 I accept the views stated by Moffitt, P. in Rajski (supra) at 127-128:- "What is presently relevant and is of concern to a court in the exercise of its jurisdiction is that a person may have received unjustifiably an immunity from the operation of the court's procedures and the sanctions which arise from their operation and that in a particular case this could prevent the court from doing justice between the parties. It may become the concern of the court, if what occurs or is occurring is interfering with its ability justly to determine the proceedings before it. Protracted litigation, particularly that unjustifiably extended by a person against whom the court has no costs sanction, coupled with an unjust procurement of an immunity from costs ordered against him, is capable of producing unfairness to the point that one side not legally assisted is forced to withdraw or compromise because of the unequal situation. The general or overriding power of the court to order a stay of proceedings is a power, the boundaries of which have not been precisely defined, except that in the many different situations in which it has been exercised it can be seen as directed to preventing a person pursuing litigation or doing so in a way which is oppressive so as to be unjust to another party. The power is one which has been exercised where the unjust situation has been produced by a course of action which the plaintiff was entitled to take, eg., before another court, tribunal or body, or has been produced by improper means." 66 It was submitted I should give attention to the four criteria expressed by the Chief Judge in Equity in Morris (supra), viz., (1) whether the claim is bone fide and has reasonably good prospects of success; (2) whether the plaintiff's lack of means would bring the proceedings to an end if security was ordered and, if so, whether the lack of means is related to the cause of action pleaded; (3) whether there is anyone standing behind the plaintiff who might benefit from the action but who is unwilling to contribute to the risk involved in the action and, (4) delay prejudicial to the plaintiff. 67 Although it is plain from the evidence that the company has suffered loss by reason of the asserted breach of the Council's duties, there is no evidence that would tend to establish that Mrs. Daly, the relevant assignee and plaintiff, has a lack of means that can be directly related to the asserted breach except insofar as she had an expectation arising from the company's possible profitability. It is clear that her lack of means might well mean that the proceedings could not continue unless she was able to obtain a source of finance. It is notable that Mr. Daly is not an assignee with her and it is notable that the action seems to be brought considerably for his benefit, at least, from the point of view of seeking to clear his reputation. 68 There seems little basis on which the delay, although extensive and not in accord with what had been referred to in Buckley (supra) as appropriate, should disqualify the defendant from seeking the remedy if it is otherwise available. The prospects of the litigation are immensely important. 69 However, in evaluating those matters, it is clear that I cannot try the case in limine nor that I should embark on a quasi summary judgment application. It is not appropriate that I reach concluded detailed findings of fact as they would be a matter for either final hearing or a summary judgment application. It is important, however, that I consider the matters to which I have referred to examine what the defendants have referred to as the fragility of the plaintiff's case. 70 As to the quantum of any order if it is to be made, it is submitted there is nothing put forward to the contrary of Mr. Brothers' view. On the other hand, the plaintiff submits that the court is not required to accept the quantum put forward as reasonable, notwithstanding it is the only estimate of costs and that the court must form its own conclusion as to what a reasonable quantum of costs is. Further, it is asserted that the costs be proposed on a solicitor and client basis, not party party. I have regard to what Mr. Brothers has said concerning his expertise and what the parties have each said concerning what work remains to be done and what work has been done. In my own independent view of those matters, it may well be that the parties have understated the amount of costs to be incurred. 71 Overall for that reason, I am of the view that, as far as quantum is concerned, there is no reason why I should reject Mr. Brother's estimate. 72 The plaintiffs/respondents' submissions relied upon an asserted necessity to show that Mrs. Daly was not suing for her own benefit when it was asserted that at least, substantially, she was and thus it was said Andrews (supra) and Caltex Oil (supra) did not support the proposition that costs security should be ordered. It was submitted that the nature of the assignment was such that this case did not fall within the Rule and for the applicant to succeed it must demonstrate that to order security for costs was necessary in order to do justice between the parties: see Rajski (supra). 73 It is submitted that deeds of assignment of this form have been approved or sanctioned by courts from time to time. But no question is raised here as to the general appropriateness or efficacy of such an assignment nor could there be quarrel with the proposition that a liquidator may well wish to sell an asset or assign a chose of action on appropriate terms. That is not the point. The question is whether what has been done is a mere device to avoid having to give security. 74 It may also be accepted that Part 53 Rule 2(b) has been interpreted from time to time as referring to a plaintiff who is suing, not for his own substantial benefit, but for the substantial benefit of another. 75 I accept the submission made by the defendants that it is not appropriate to go into detail concerning the merits of the case on the application and that on the face of the application, the causes of action are not frivolous or vexatious; that on the face of the material I have seen there are issues which might require final determination, having regard to the law relating to summary judgment applications. 76 It is contended that the effect of an order would be to deny the plaintiff the right to litigate the cause of action. Perhaps that is better expressed as having the effect of denying the plaintiff that opportunity without meeting an additional burden to that enjoyed by other impecunious personal litigants. It may be that the plaintiff can obtain an independent source of finance or join other plaintiffs, but I accept that the plaintiff's own impecuniosity does indicate that the likely consequence of my making an order would deny the plaintiff the opportunity to litigate the claim. Such is a powerful factor in respect of the exercise of the court's discretion, although where a disinterested party has acquired the right to litigation, such a factor would seem of much less importance. 77 In further written submissions, the plaintiff/respondent drew my attention to passage in Lord Justice Bowen's judgment in Cowell (supra):- "No authority has been or could be produced in which security for costs has been ordered or given by a plaintiff suing as executor or as assignee simply on the ground that he is not in a position to pay costs." 78 Later:- "There is no authority, however, for extending that exception to the case of an executor or an assignor of a bankrupt." 79 Bowen, LJ.'s observations are plainly intended to apply to those who sue in a representative capacity. I do not see that there is a precise analogy with the assignment taken here, notwithstanding that orders had not been made in Ramsey (supra); in Norglen Limited (In liq.) v. Reeds Rains Prudential Limited [1996] 1 All ER 945 and Norglen Limited (In liq.) v. Reeds Rains Prudential Limited [1998] 1 All ER 218. 80 I am not assisted by the reasoning of the Court of Appeal in Norglen (supra) that it is not unlawful or contrary to public policy to assign a right of action to a party who can obtain legal aid, if the assignment comes from a party who cannot obtain legal aid, even though that might have the consequence that by force of statute no security for costs can be ordered. I am more troubled with the view expressed in the House of Lords in that case at 224 concerning the privileged position of trustees and liquidators who act on behalf of creditors and assert the right of action in a representative capacity. Here, a substantial benefit is claimed by the liquidator in the proceeds of action in that capacity and a substantial or significant benefit is retained by the assignee who has a real interest in the proceedings and had a real concern with the subject matter of the dispute giving rise to the action. She also has a real concern as to her husband's credit worthiness. It is submitted by the plaintiff that therefore Mrs. Daly is not a nominal or agent plaintiff, she is not merely a "front" and that it should be no bar to litigation that she is the plaintiff and is impecunious. 81 It is further submitted that bearing in mind her interest in the company or her concern with it, more correctly, that she should not be treated as a manipulative and disinterested person. It was submitted that the circumstances in which the inherent jurisdiction would justify the making of an order such as this given that the Corporations Law and Part 53 Rule 2 do not directly apply, must be exceptional indeed: J H Billington Limited v. Billington (1907) 2 KB 106 at 109; Lines v. Tana Pty. Limited (1987) VR 641. It is also submitted that the claim is bone fide and has prospects of success such that it should be permitted to go to trial under the general procedural law that result not being stultified by the making of an order for security for costs. 82 The discretion to order security for costs, particularly where the basis for making such an order lies in the inherent jurisdiction, requires the court to take into account a wide range of considerations. One of those considerations to which the parties have not expressly referred is that when an action is being brought on behalf of creditors or shareholders that it might be reasonable to expect them to make funds available to satisfy any order for security which might be made: National Bank v. Donald Export Trading Limited (1980) 1 NZLR 97. In this case, it seems clear that the liquidator is not minded to undertake any responsibility for costs. There is no suggestion of creditors undertaking any such responsibility and the only other shareholder, Mr. Daly, one can take it is unwilling to contribute. 83 Nonetheless, all that being said, I have come to the conclusion, notwithstanding the evidence of Mr. Brothers of the amount of costs liable to be incurred that an order should not be made in the proceedings at least at this stage. I do not consider this an exceptional case as would require other than the usual doctrines to be applied. Whilst it is complex, the analysis I have already undertaken of the nature of the cases of the respective parties, whilst not sufficient to do other than give an overall picture, is sufficient that I am persuaded that the action is not so fragile so that it should not be permitted to abide the application of the usual rules and processes. 84 I have come to the conclusion that I should not make an order for security for a number of reasons: the matter does not fall within the Rule; I do not see security as necessary to ensure the proper and effective administration of justice in this case. If it were ordered, the litigation would be highly likely to be stultified. It is being brought substantially for the benefit of a liquidator and a litigant who has a genuine concern with the subject matter of the litigation and is concerned to recover a significant proportion of any verdict. I do not consider the assignment to be a mere device to avoid the payment of any liability for costs. 85 I therefore conclude that the motion should be dismissed. I will hear both parties on the issue of costs on a date to be fixed. **********

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