Great Northern Developments Pty Ltd & Ors v The Portland Downs Pastoral Company Pty Ltd [2011] QCA 184

MUIR JA: The appellant/respondent, The Portland Downs Pastoral Company Pty Ltd, has appealed against orders of a judge of the Supreme Court made on 30 May 2011 after a trial.

The issues before the primary judge, which also arise for determination on appeal, concern the construction of a written agreement between the respondent and the first applicant, Great Northern Developments Pty Ltd, and more particularly, whether by virtue of certain acts, omissions and conduct Great Northern waived contractual rights or was otherwise estopped from relying on them.

Under the subject agreement, Portland agreed to sell to Great Northern it's 50 per cent interest in a joint venture between Portland and Moonbrook Holdings Pty Ltd concerning a development at Marcoola through the mechanism of the sale and purchase of half the shares in the project vehicle, Discovery Beach Project Pty Ltd. Under clause 2.3 of the subject agreement, provision was made for the delayed payment of the purchase consideration. Such consideration was to be paid by Great Northern to Portland "on Practical Completion of the North Tower in the Development" by the transfer of unencumbered title to what was described as "the Portland Units". However, if practical completion did not take place within two years of the date of the agreement, Great Northern was required to pay the purchase price in cash on a stipulated date.

The payment of the purchase price, either by delivery of the Portland Units or by cash payment, was made subject to Great Northern successfully negotiating with the builder to construct the project for a total sum of $26 million or less. If the building contract for the project exceeded $26 million (as adjusted on account of specified contingencies), Great Northern had the option of (a) continuing with the development or (b) withdrawing from the project and selling its shares to Moonbrook or selling its shares to a third party. In the latter event, the purchase price was to be paid to Portland. Other issues which arose were whether the $26 million figure included GST and whether the knowledge of the directors and agents of Discovery Beach was to be imputed to Great Northern. The primary judge held that the construction costs exceeded the $26 million figure as adjusted in accordance with the terms of the contract and that, accordingly, no consideration was payable.

I mention these matters to show that the issues for determination on appeal are not without complexity. Counsel for Great Northern contended that Portland's prospects of success on appeal are, at best, poor. Counsel for Portland submitted that its prospects were good. I am not in a position, on the material before me, to determine the merits of the appeal. There are, with respect, no obvious errors on the face of the primary judge's reasons but there is also nothing in Portland's outline of argument on appeal which has been shown to be manifestly unarguable, apart perhaps from the argument based on the GST which would seem to have ceased to have relevance.

The principles to be applied on applications for security for costs under r 772(1) of the Uniform Civil Procedure Rules are stated in cases such as Murchie v The Big Kart Track Pty Ltd (No 2) [2002] QCA 339; [2003] 1 Qd R 528, Natcraft Pty Ltd v Det Norske Veritas & Anor [2002] QCA 241 and Mt Nathan Landowners Pty Ltd (in liq) v Morris & Ors [2008] QCA 409.

There is adequate evidence to support the conclusion that if Great Northern and the second respondents are successful on the appeal, Portland will have no assets available to satisfy any order for costs. The sole director of Portland has not offered to stand behind it and provide security for the costs of the appeal and nor have its shareholders. In all the circumstances, it seems to me to be appropriate that an order for security for costs be made.

Mr Bloom, a costs consultant retained by Great Northern, has given the opinion that Great Northern's costs of the appeal, including the costs of this application, will be approximately $84,000. Mr Robinson of counsel, who has provided an affidavit for Portland, has assessed the respondents' likely costs at approximately $36,000. In my respectful opinion, Mr Bloom's assessment appears high.

Mr Robinson has made a number of reasoned criticisms of allowances made by Mr Bloom and it seems to me that some of those criticisms are justified. I am of the view also that Mr Robinson's allowances for counsel's fees cannot be regarded as niggardly. He allows counsel's fees for the appeal of $30,000 as compared with Mr Bloom's estimate of $42,000. His detailed reasoning for the difference appears to me to have substance.

I agree with Mr Robinson that, although I can see the logic in Mr Bloom's approach, the costs of this application should be excluded at least in part. I agree also that the allowance for the costs of the solicitors is high.

I accept Mr Robinson's criticism that where two days have been allowed for counsel to settle an outline of argument allowing a further one and a half days for each of senior and junior counsel to prepare for the appeal appears excessive in the light of the fully and clearly defined written arguments at first instance. It is relevant also that it is not necessarily the case that an order for security for costs should provide a respondent to an appeal with a full indemnity.

(a) By 4 pm on 25 August 2011, the appellant provide security for the first and second respondents' costs of the appeal in the sum of $35,000 in a form satisfactory to the Registrar.

(b) Failing the furnishing of such security by that time and date, the appeal stand dismissed with costs without further order.

(c) The time for filing the respondents' outline of argument be extended to a day 14 days after the provision of such security.

(d) The costs of this application be costs in the appeal.