Plaintiff v Defendant

2 There has been an earlier application for security for costs made by the third defendant, Mr Peter Andrew Breckenridge (Breckenridge). In June 2018 I ordered security for costs of the proceeding in favour of Breckenridge.[2] I will refer to parts of those reasons in the course of these reasons. However, it is important to observe that this application concerns a different defendant against whom different claims are made and that the material now available to the plaintiff is more detailed and, it is contended, provides a solid foundation for the ground upon which it resists giving security.

3 The applicable law is well settled by a variety of decisions of this Court and many other courts.[3] It is unnecessary to rehearse the principles. I will deal with the applicable law as necessary in the course of considering the evidence and submissions.

4 There was no dispute that there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of BCP if ordered to do so, so that the threshold condition for the exercise of the power is satisfied.

5 The principal basis on which the plaintiff resists the making of an order is that the plaintiff's present impecuniosity has been caused or contributed to by the conduct of BCP in relation to the transactions the subject of the claim against that company. That was also the basis of the earlier application. I said in the reasons for judgment in that earlier decision:[4]

It is always difficult to resist an application for security on the basis that the plaintiff's impecuniosity has been caused or contributed to by the conduct of the applicant for security. This is because the plaintiff has the burden of persuasion, based on admissible evidence, on the question whether the conduct of the defendant was a cause of, or contributed to, the plaintiff's financial difficulties and there must be a solid foundation for that conclusion.[5] It is a factor often raised in conjunction with another factor, that an order for security may stultify the litigation or be otherwise oppressive.[6]

After examining the plaintiff's evidence submitted to oppose an order for security, and its pleadings, it is not possible at this stage to conclude that the plaintiff's present impecuniosity has been caused or contributed to by the conduct of Breckenridge. [emphasis added] It is also not possible to conclude that the plaintiff's impecuniosity may have been so caused.

6 At the time of that decision there had been no discovery of documents or pleadings beyond the further amended statement of claim. Breckenridge had not filed a defence and his defence to the claim was the subject of affidavit evidence of his solicitor. Since that decision:

(a) Coonwarra has obtained documents by way of subpoenas from various companies, including BCP;

(b) a second further amended statement of claim was filed to which the first defendant (CornoNero), Breckenridge and the fourth defendant, Mr Silvio Ascenzo (Ascenzo), have pleaded and Coonwarra has replied;

(c) Coonwarra, CornoNero, Breckenridge and Ascenzo have made discovery of documents;

(d) BCP has been added as the fifth defendant (by consent), and has appeared and pleaded to the third further amended statement of claim indorsed on the amended writ filed pursuant to the order giving leave to add BCP as the fifth defendant. Coonwarra has filed its reply to BCP's defence;

(e) BCP has filed affidavits in opposition to the application for security. One of them, the affidavit of Mr Brett Douglas Hartwig (Hartwig's affidavit),[7] provides evidence relevant to the foundation for Coonwarra's resistance to the provision of security.

7 Contrary to the position reached in that earlier decision, in this case Coonwarra's evidence submitted in opposition to an order for security, its pleadings and the affidavits filed on behalf of BCP, make it possible to conclude that Coonwarra's present impecuniosity has been, or at least may have been, caused or contributed to by the conduct of BCP. I will accordingly refuse to order security for BCP's costs.

8 The application is supported by two affidavits of Mr Michael Douglas Main, solicitor,[8] and the affidavit of Mr Brett Douglas Hartwig, the sole director of BCP.[9]

9 The application is opposed by the plaintiff, who has filed affidavits of the plaintiff's director, Mr Martin van der Burgt[10] and the plaintiff's solicitor, Mr Simon Nixon.[11]

10 In this proceeding, Coonwarra seeks to recompense losses it claims to have suffered as a result of entering into an Asset Development Agreement (ADA) with the second defendant, Trimont Pty Ltd (Trimont), to develop 1435 Plenty Road, Mernda, Victoria (the Mernda Land) into a shopping complex. This Land was Coonwarra's only asset. There are five defendants, but Trimont is no longer being proceeded against because it is in liquidation.

11 In the earlier decision I set out a good deal of the background facts.[12] Despite amendments to the claims since the further amended statement of claim,[13] the account given in the earlier decision remains substantially correct, insofar as it deals with the claims by Coonwarra against the defendants other than BCP. Because it concerned an application by Breckenridge for security for his costs, it deals with material advanced by him and not with the material relevant to the claims against BCP. I will only repeat the facts referred to in the earlier decision where necessary.

12 The ADA was entered into between Coonwarra and Trimont on or about 18 December 2014.[14] Coonwarra characterises the ADA as a partnership or joint venture. Under the ADA the Mernda Land was to be developed into a shopping complex, containing a supermarket and other retail premises (Development).[15] Amongst the pleaded terms of the ADA, and of singular significance to the claims made by Coonwarra, is that it agreed to make the Mernda Land available a security for borrowings to enable Trimont to obtain finance for the development.

13 Intriguingly, CornoNero, who later purchased the business of Trimont, denies that the ADA was entered into. CornoNero particularises the denial by reference to the letter of offer or terms sheet, that Coonwarra signed and which it says constitutes the ADA. CornoNero says the letter of offer set out the proposed terms of an ADA which was never prepared. [16] The denial has interesting consequences throughout the pleading, including that all the actions of Breckenridge and the fourth defendant, Ascenzo, purportedly undertaken on behalf of CornoNero were not authorised by it, despite the admission that Breckenridge was a director and Chief Executive Officer of CornoNero from 15 September 2015 until 30 October 2016.[17]

14 Even more intriguingly, CornoNero pleads that despite very large sums of money being borrowed on the security of the Mernda Land, supposedly for the purposes of its development (which CornoNero denies), CornoNero:

...did not undertake any development work on the Land, and its actions in relation to the Land were limited to affixing temporary fencing to secure the Land, and site clearing including tree removal, and soil and rock removal.[18]

15 Coonwarra claims that Trimont's business was purchased by CornoNero on or about 7 August 2015.[19] As a part of this purchase, it is claimed that CornoNero replaced Trimont, and Coonwarra accepted the performance of Trimont's obligations by CornoNero, under the ADA.[20] BCP does not plead to these allegations. But it admits advancing loan moneys to CornoNero, or on its instructions, for the purposes of development of the Mernda Land.[21] CornoNero, on the other hand, admits the purchase of the business of Trimont, says there was no binding ADA entered into by Coonwarra with Trimont and that there was no acceptance by CornoNero of any liability under the ADA if it was binding.

16 CornoNero has commenced proceedings, with a company called GJB Building Pty Ltd as co-plaintiff, against AI & PB Property Pty Ltd,[22] Ascenzo, Breckenridge, BCP, Berkeley Capital Developments Pty Ltd and Brett Hartwig claiming, amongst other things, damages for misleading or deceptive conduct in contravention of s 18 of schedule 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) arising out of representations made concerning the sale of Trimont's business to CornoNero (CornoNero's proceeding).[23] One of the claims in that proceeding is that the purchase of Trimont's business did not include any obligations under the ADA as alleged by Coonwarra. In addition, CornoNero claims that the actions of Breckenridge, of which complaint is made in this proceeding, were not authorised by CornoNero and constituted a breach of his duties as a director and CEO of CornoNero. Additionally, CornoNero claims that Hartwig and Ascenzo (each of whom were directors of CornoNero) knew of the dealings and each breached their duties to CornoNero and are liable to compensate it.

17 The effect of the ADA, as Coonwarra contends, is that it was not liable for expenses incurred under the ADA.[24] Rather, the plaintiff was responsible for providing the title to the Mernda Land to act as security so finance could be obtained to undertake the development.[25] Under the ADA Coonwarra was guaranteed to be paid $6.5 million, the agreed value of the Mernda Land (increased by reference to CPI), as well as 50% of the net profit from the development when it was complete, amongst other things.[26]

18 The financier for the project was BCP, who advanced a total amount of $8.5 million under loan agreements with Coonwarra between the end of December 2014 and February 2016.[27] These monies were advanced by BCP predominantly to Trimont and CornoNero, who then distributed the funds purportedly in furtherance of developing the Mernda Land.[28]

19 Each of the loans was secured by the Mernda Land.[29] Prior to the execution of these loans, the Land was unencumbered.[30] Coonwarra alleges, and the evidence generally confirms, that the monies advanced under these loans were used for purposes other than those permitted under the ADA.[31]

20 There were three separate loan agreements: [32]

(a) The first for $1.5 million created in December 2014 (December 2014 loan). The stated purpose of this loan was as a bridging facility prior to the establishment of a Land and Construction Facility;

(b) The second for $5.2 million was created in August 2015 (August 2015 loan). The stated purposes of this loan were to fund fees and costs incurred to date in relation to the planned retail development on the Mernda Land (tranche 1) and to fund fees and costs incurred to date in relation to the planned retail development on the Mernda Land and refinance the bridging finance facility (tranche 2);

(c) The third loan was created in February 2016 (February 2016 loan). The stated purposes of this loan were the two purposes set out in the August 2015 loan and to fund the commencement of construction of the project and allow the continued negotiation of the sale of the project.

21 From Van Der Burgt's affidavit it emerges that in July 2018, after my earlier decision, he instructed his solicitors to issue various subpoenas to produce documents, including one to BCP. The documents produced show, he deposes, that none of the funds advanced under the three loan agreements were used for the stated purposes or for the benefit of Coonwarra or the ADA.[33]

22 Before dealing with the way in which the several loans secured against the Mernda Land were disbursed, or to whose benefit they were ultimately paid, it is necessary to identify some more of the actors involved:

(a) Ascenzo Industries Pty Ltd, the director of which was Mr Silvio Ascenzo, developed commercial properties, in particular Quest Apartments;

(b) Kanyon Pty Ltd (Kanyon) was a development company, or a financier of developments, which at various times had Hartwig, Ascenzo and Breckenridge as directors;

(c) Aida Nominees Pty Ltd, that funded the December 2014 loan. One of its directors was Richard Minc who was also a director of Minc Sallon (Dandenong) Pty Ltd and Minc Sallon (Laverton) Pty Ltd with Hartwig and these companies received monies from the Coonwarra loans;

(d) AI & PB Property Pty Ltd, a company controlled by Ascenzo and Breckenridge, held 1,500 shares in CornoNero;

23 In respect of the December 2014 loan, the contemporaneous information as to its use is an unsigned letter dated 20 February 2015 from Hartwig to Breckenridge which states that $1 million was advanced to Ascenzo Industries 'in recognition of the fees and costs expended by AI to date on the Mernda Development' and a further $500,000 'was drawn, payable to Ascenzo Industries for future costs and working capital requirements'.[34] The letter concludes that '[i]t is recognised by all parties that the ultimate responsibility for the Facility rests with Ascenzo Industries'. The Subpoena to BCP produced no other documents related to this loan and its disbursement. In its defence BCP admits it sent the letter, says it had 'no personal knowledge of the arrangements which were referred to' in the letter and that it was sent at the request of Breckenridge. Hartwig in his affidavit says the monies were advanced to Trimont by two cheques, but he cannot confirm this and has looked for documents without success.[35] He says that the letter dated 20 February 2015 was written at the request of Breckenridge who said Van Der Burgt wanted confirmation that Trimont had the benefit of the moneys and would ultimately be responsible for paying it back in the final accounting between the parties under the ADA. Hartwig says he erroneously referred in the letter to Ascenzo Industries instead of Trimont.[36]

24 The August 2015 loan was distributed in two tranches, one of $2.5 million on 10 August 2015 and the second of $2.7 million on 21 August 2015.[37] At this time nursery supply and mulch businesses were being conducted, as they had for some years, from the Mernda Land and there were no construction works being undertaken.

25 The presently available evidence shows the first tranche was distributed in the following manner:

(a) $100,000 to Multifit Projects, which is described as 'Plastering for all Melbourne Jobs'.[38] This was said by Hartwig to be paid on the instruction of the Chief Financial Officer (CFO) of Trimont, one Mr Jevan Clay;[39]

(b) $100,000 to Renda Air Services, for 'Air Con services - Trimont jobs in Melbourne'.[40] This was said by Hartwig to be paid on the instruction of the CFO of Trimont;[41]

(c) $107,847.30 to the Marijohn Group for 'Kitchen Equipment 280 Lygon Street'.[42] This was said by Hartwig to be paid on the instruction of the CFO of Trimont;[43]

(d) $284,900 was paid to BCP in respect of fees payable by Ascenzo to BCP as the arranger and agent of facilities for projects unrelated to the development of the Mernda Land, being projects described as the Quest Preston Project, the Quest Preston Development, working capital for Ascenzo Industries (also described as tranche 6 of the Quest Preston facility), working capital for the Trimont Group (also described as tranche 7 of the Quest Preston facility). In addition, the figure included fees payable by Katia Ascenzo to BCP as the arranger and agent for a facility to renovate a property at 8 Albert Street, Templestowe. It seems Katia is the wife of Ascenzo, who was one of the Directors of CornoNero.[44] This was said by Hartwig to be paid on the instruction of Breckenridge;[45]

(e) $1,907,252.70 to Trimont.[46] This was said by Hartwig to be paid on the instruction of one Mr Brian Sockalingum, the in-house accountant of Trimont, and Breckenridge;[47]

26 It seems plain, as Coonwarra submitted, that the only legitimate way these funds could be claimed to be for the purpose of developing the Mernda Land, is if they were to clear debts of Trimont in relation to the Mernda Land, for which there were invoices.[48] However, after full discovery, there has been no such evidence produced.[49] Nor have there been any documents produced detailing planning applications, surveyor's work and fees, amongst other documents.[50]

27 The second tranche of $2.7 million dollars was said to be distributed in the following manner:

(a) $248,476.09 to Minc Sallon (Dandenong) Pty Ltd, described as 'Trimont Loan Repayment', being part repayment of a $500,000 loan from Kanyon.[51] This was said by Hartwig to be paid on the instruction of Breckenridge;[52]

(b) $1,625,694.36 million to Aida Nominees Pty Ltd to refinance principal and interest in respect of the December 2014 loan.[53] Aida Nominees Pty Ltd as trustee for the Minc Family Trust was the principal who made the loan through the agency of BCP. This is described in an email between Mr Brodie Ryan, an Executive of BCP, to Mr Thurgood as 'the pay-out of the existing mezzanine loan.'[54];

(c) Payments to Trimont of $400,000, $151,523.91 and $274,305.64.[55] These were said by Hartwig to be paid on the instruction of Breckenridge.[56] These amounts have not been able to be accounted for by BCP.

28 There is reason to conclude, so far as the evidence reveals at present, that the August 2015 loan was taken out with BCP to solve funding issues that Trimont was having at the time CornoNero was acquiring its business. The business was sold, it seems, on about the same date as the August 2015 loan agreement was entered into. On 10 February 2015, Hartwig sent a letter to Mr Geoff Brady, a prospective shareholder in CornoNero through GJB Building Pty Ltd, where he noted that $5 million would be required to launch CornoNero.[57] This is also supported by an affidavit made by Hartwig on behalf of Minc Sallon (Laverton) Pty Ltd in a separate but related proceeding in the County Court,[58] which details that Trimont was in financial difficulty with respect to other projects in mid to late 2015 and had builders threatening to leave development sites unless they were paid.[59] The affidavit also reveals the financial interrelationships of Hartwig, Ascenzo and Breckenridge in Kanyon, one of the lenders relating to projects other than the development of the Mernda Land to which moneys borrowed on the security of the Land were paid. Hartwig makes his affidavit from personal knowledge, unless otherwise stated. In it he also gives an account of the financial difficulties facing Trimont in 2015, which led to the sale of its construction business to CornoNero (when it was called Trimont Australia Pty Ltd).

29 Counsel for the plaintiff further supported these conclusions by noting correspondence in August 2015 between Hartwig and Breckenridge, where the former noted past 'cash flow pressures.'[60] Coonwarra submitted that these pressures were those being felt by a connected group of entities, including Ascenzo, BCP, Trimont, Render Air, Multifit Projects and Marijohn.[61]

30 The third loan to Coonwarra was for $2,400,000, of which only $1,800,000 was drawn down. It was distributed in the following manner:

(a) $70,584.44 to a Lygon Street Joint Venture;[62]

(b) $145,042.70 to a Queens Parade Joint Venture;[63]

(c) $1,393,084.00 and separately $31,288.90 to Trimont Australia in respect of a loan from Kanyon;[64]

(d) $160,000 to Minc Sallon (Laverton) Pty Ltd described as CornoNero loan part payment.[65]

31 The fact that these payments were made in respect of transactions foreign to the development of the Mernda Land supports the submission by Coonwarra that this further loan was used to assist CornoNero to meet cash-flow problems.[66] Van Der Burgt deposes that Breckenridge told him that the extra funding was required to construct a road to be known as 'Sissinghurst Drive' between lots A and B on the plan of subdivision.[67]

32 The first four amounts were payments made by CornoNero to these entities, once the funds had been transferred to CornoNero by BCP.[68] The first three payments were made by BCP to CornoNero on the 24 February 2016.[69] These same payments are contained in the Flow of Funds document of the monies from the Coonwarra loan facilities, each listed as paid to CornoNero.[70] There is a solid foundation for the contention by Coonwarra that these funds were not applied for the purposes of developing the Mernda Land.[71]

33 The fifth amount is likely to have been a loan reconciliation. It is described in this manner in an email between CornoNero's financial controller Mr Bill Thurgood, and Mr Hartwig as a 'reconciliation of the Minc Sallon (Laverton) Loan account'.[72] The same amount is also contained in the Flow of Funds document.[73]

34 Breckenridge, previously CEO of Trimont (the former second defendant) and a director and the CEO of CornoNero, instructed solicitors to draw up a contract for the sale of the Mernda Land in early 2016.[74] Coonwarra signed the contract for sale on the condition that it was provided with a personal guarantee by Breckenridge that the amount due under the ADA would be paid to them.[75] Coonwarra was unaware of the time and place of settlement.[76] All instructions in relation to the sale of the Mernda Land were provided by Breckenridge to Norton Rose Fulbright, who acted for Coonwarra in the transaction.[77]

35 The Mernda Land was sold for $8,850,000 (inclusive of GST) in August 2016, and in September 2016 ownership of the Land transferred.[78] The settlement funds were transferred to BCP.[79] Coonwarra received $50,000 from the settlement.[80]

36 Coonwarra claims various forms of relief from the CornoNero, Breckenridge, Ascenzo and BCP. All of these, in some way or another, compensate Coonwarra for the loss of the Mernda Land and seek its approximate value.[81]

37 Specifically, in relation to BCP, Coonwarra claims through its conduct of advancing monies under the three loans BCP acted without the direction or consent of Coonwarra and otherwise than in accordance with the loan agreements, and has breached the terms of those loan agreements.[82] Alternatively, or in addition, Coonwarra claims that the funds in the three facilities were not advanced to it by BCP, and therefore BCP owes Coonwarra a debt of $7 million.[83]

38 BCP makes its application on the basis that the plaintiff is impecunious, and that the relevant factors in this case including the strength of the plaintiff's case and whether the defendant caused the plaintiff's impecuniosity cannot be determined at an interlocutory stage.[84] This is owing to the complexity of the case. It was not disputed that the plaintiff is impecunious.

39 In defence of the application for security for costs, Coonwarra submitted that its impecuniosity was caused by BCP.[85] This was because its sole property, the Mernda Land, was sold as a result of the conduct of the defendants, particularly BCP.[86]

40 BCP submitted the core issue in dispute in the broader case between itself and Coonwarra was whether BCP had complied with the instructions Coonwarra supplied to it or whether it had breached its contractual obligations by advancing money to certain parties.[87] BCP submitted that the complex factual dispute in this case could not be resolved in an interlocutory application.[88]

41 BCP's submissions particularly focused on the factors of delay and strength of the case.[89] It was submitted that there was little delay in bringing the application.[90] Further, it was submitted that neither the strength of the case nor whether BCP had caused the impecuniosity of the plaintiff could be determined before trial.[91] In addition, it was submitted that the application brought by the fifth defendant was not oppressive, and its position in the litigation was entirely defensive.[92]

42 In oral argument BCP also made some specific submissions in relation to the strength of Coonwarra's case. Counsel for BCP noted that Coonwarra must have expected that the funds drawn down from the three loan facilities were to be distributed to entities other than itself.[93] Therefore instructions had to be given at some point for these distributions to occur.[94] The fact that these were oral instructions would have been known to the plaintiff, as its director did not provide these instructions in writing.[95] Counsel also noted that a wide variety of payments needed to be made before physical work commenced on a site.[96]

43 Hartwig, a director of BCP, deposed regarding the contents of the instructions in his affidavit.[97] It was said that the sole director of Coonwarra, Van Der Burgt, stated to Hartwig before the December 2014 loan was entered into that the loan should be disbursed to Trimont, that further loans would be required at a later time and that BCP should make disbursements of the further loans as directed by Trimont's representatives.[98] It was not disputed by Counsel for the fifth defendant that no further instructions, written or oral, were received from Coonwarra in relation to the three loan facilities taken out on Coonwarra's behalf with BCP.[99]

44 Counsel for BCP also made specific comments about the knowledge and awareness of Hartwig in relation to the payment of funds from the loan facilities to certain entities. Counsel noted Hartwig had deposed that he did not have knowledge of all of the transactions that occurred in relation to the loan facilities and that he was not trying to hide various transactions from the Court which may need to be reviewed in closer detail.[100] Counsel for BCP described Hartwig's situation, prosaically, as 'the Nuremberg defence' and submitted he was 'directing traffic' rather than knowingly assisting with potential fraud.[101]

45 Counsel for BCP also noted Hartwig's affidavit includes an admission that some of the funds from the Coonwarra loan facilities were used to pay debts that were unrelated to the development of the Mernda Land.[102] However, it was submitted the way in which the money was used to progress the development was not within the knowledge of BCP, as it was not responsible for developing the site.[103] Further, Counsel submitted that Hartwig's interests in various joint ventures did not mean he was specifically aware of the application of monies drawn from the Coonwarra loan facilities.[104]

46 Coonwarra submitted that BCP knowingly transferred monies from the three loan facilities for purposes other than to develop the Mernda Land.[105] Coonwarra submits the monies were used to pay debts and provide finance for developments unrelated to the Land.[106] Hartwig is alleged to have had an interest in some of these developments.[107] Hartwig is also characterised by the plaintiff as actively directing the flows of money from the Coonwarra loan facilities, rather than being a passive actor around whom a scheme was being engineered.[108]

47 Broadly, what is being alleged by Coonwarra is that there was a scheme to use the loans taken out with BCP on behalf of Coonwarra for projects other than the development of the Mernda Land.[109] The plaintiff submits that it did not provide any authority, actual, implied or ostensible, to BCP to apply the funds from the three loan facilities in this manner.[110]

48 Coonwarra submits that its only asset was the Mernda Land, and owing to the actions of the defendants it has lost that property, except for the payment $50,000 after the sale of the land.[111] Amazingly, there are no funds available from the sale for the payment of Coonwarra's GST liability arising from the sale.

49 The grounds on which Coonwarra resists BCP's application for security for costs are the strength of its case, and that its impecuniosity was caused by the defendant.[112]

50 As I mentioned previously, there was no dispute that there is reason to believe that the plaintiff has insufficient assets in Victoria (or elsewhere) to pay the costs of BCP if ordered to do so, so that the threshold condition for the exercise of the power under r 62.02 of the Rules and s 1335 of the Corporations Act is satisfied. Therefore my consideration will be devoted to the second limb of the test, namely whether security for costs should be ordered.

51 The principal basis on which Coonwarra resists the making of an order for security for costs is that its present impecuniosity has been caused or contributed to by the conduct of BCP. That was also the basis of the earlier application made by Breckenridge and he was unsuccessful.[113] However, the evidentiary basis to support this claim has grown considerably since this matter was last before me. I have given an account of the three loans and where the loan moneys appear at this stage to have been spent so as to demonstrate the basis upon which Coonwarra contends BCP may have caused or contributed to its impecuniosity. I have not dealt with every matter that Coonwarra brought to my attention, as it is not appropriate for this application to become a voir dire.[114]

52 The law in relation to this area is, briefly, as follows:

(a) The burden of proving this ground lies with the plaintiff.[115]

(b) The fact that the plaintiff's impecuniosity was caused by the defendant must have a strong evidentiary foundation.[116] This includes, in certain situations, the plaintiff proving through evidence that they were in a good financial state before interacting with the defendant.[117]

(c) The conduct of the defendant needs to relate directly to the claim before the court.[118]

(d) It is a very difficult ground to prove, and is related to the ground of reasonable prospects of success.[119]

(e) It requires a basic determination of whether the defendant may have caused loss to the plaintiff, which can stray into the territory of a voir dire.[120]

(f) At most, what it can show is that the defendant's actions may have caused the impecuniosity of the plaintiff.[121]

53 Contrary to the position reached in my earlier decision, in this application the plaintiff's evidence submitted to oppose an order for security makes it possible to conclude that the plaintiff's present impecuniosity may have been caused or contributed to by the conduct of BCP.

54 The affidavit material before the Court, including Hartwig's affidavit filed on behalf of BCP, provides substantial evidence in support of the contention that BCP has acted in a manner which unjustifiably allowed the funds that were intended to be used for the development of the Mernda Land to be paid to service debts of Trimont and, subsequently, CornoNero. That evidence also supports the contention that BCP was aware that these funds were being used for an improper purpose.

55 In his affidavit in support, Van Der Burgt purports to give evidence, to which no objection was raised, in the following terms:

I have become aware that Ascenzo, Breckenridge, Hartwig, BCP, Trimont Australia Pty Ltd, CornoNero Pty Ltd, Kanyon Pty Ltd, Minc Sallon Pty Ltd, Minc Sallon (Laverton) Pty Ltd, Minc Sallon (Dandenong) Pty Ltd were all involved with each other in property developments unrelated to Coonwarra Pty Ltd. The monies advanced by BCP ostensibly to Coonwarra were not used for the development of the Mernda Property but instead were diverted and paid the costs of commission owing to BCP on completely unrelated loans, payments of subcontractors on these property developments and repayment of loans owing to Kanyon Pty Ltd, a company of which Hartwig was a director.[122]

56 This statement, conclusory as it is, depends on a range of materials produced by Van Der Burgt and his solicitor, Mr Nixon, complemented by the evidence given by Hartwig himself. One of the sources of material is the affidavit sworn by Hartwig on 9 November 2017 as a director of Minc Sallon (Laverton) Pty Ltd in the County Court proceeding (see above at [28]).

I deny that the monies borrowed by Coonawarra were used in the manner alleged. As I have already explained above, most of the advances were made directly to Trimont or CornoNero, who were respectively the developers of the Mernda land. Coonawarra was attempting to develop vacant land into a shopping centre complex. As far as I was aware, it had no assets other than the Mernda land and I know from my own experience that the costs associated with developing such a site, including planning costs, design costs, site investigations for environmental and geotechnical issues and the obtaining of all necessary council approvals, are very substantial and need to be completed before any physical work occur on the land. I believed that the money that Coonwarra was borrowing and that was paid directly to Trimont and CornoNero was being used to pay for such development works. As for the payments to Minc Sallon (Dandenong) and Minc Sallon (Laverton), I agree that I had and have a financial interest in these entities. Trimont owed money to Minc Sallon (Dandenong) and CornoNero owed monies to Minc Sallon (Laverton). I believed that some arrangement had been made with Coonwarra without BCP's involvement to permit these payments to be made. As for the payment to BCP, as already explained above, part of that related to the fees for the Coonwarra loans and part related to other loans obtained by Trimont.[123]

58 Coonwarra submits that this explanation is hardly plausible or credible. I agree. The payments of fees to BCP in respect of loans, comprising in total about $284,900, was said by Hartwig to comprise about $61,600 for loans drawn down by Coonwarra and the balance relating to loans arranged by Trimont. This is not borne out by the material. The fees and costs paid to BCP, in respect of it arranging loans, out of the August 2015 loan was approximately $186,000. The fees and costs were in respect of loans made to either Ascenzo Industries or for the renovation of Katia Ascenzo's property in Templestowe. None of these payments were in respect of loans advanced to Trimont and the evidence showing the loans they related to are tax invoices issued by BCP from June 2013 to August 2015, some of which were signed by Hartwig himself.[124] The other payments made out of the August 2015 loan are self-evidently not payments in respect of the development of the Mernda Land.

59 In my earlier decision, I identified a number of reasons for declining to conclude that Breckenridge may have caused or contributed the impecuniosity of Coonwarra.[125] One of the reasons was that the consequences, both legal and factual, arising from the entry into the Development Guarantee and the construction of the Mernda Junction Shopping Centre, meant at that stage that Coonwarra had not lost the value of its sole asset. In this regard, the position has changed. The commencement of CornoNero's proceeding (see above at [16]) shows that it is likely that the Development Guarantee is worthless. It appears from the statement of claim in that proceeding that on 5 April 2017, CornoNero and Mernda Junction Shopping Centre Pty Ltd executed a deed terminating the Mernda Development Contract. As a result, it is not likely that CornoNero will be in a position to make payment under the Development Guarantee as the payment under turns upon the success of the development of the Mernda Junction Shopping Centre. That appears to have been unsuccessful. Further, in CornoNero's proceeding, the giving of the Development Guarantee by CornoNero to Coonwarra is alleged to have been given by Breckenridge without any authority of its board of directors.

60 In its written submissions, Counsel for Coonwarra submits:

1. From both the structure of the ADA and the manner in which it was conducted there was from the outset a scheme to:-

(a) Use the benefit of the Title to the Mernda Land to obtain further funding to complete developments that Trimont/CornoNero was undertaking and had no connection to or relationship with either the Mernda Land, Coonwarra, its Director or Shareholders;

(b) There was the provision of continual assurances to Coonwarra in relation to the progress of the planning for the Development of the Mernda Land under the ADA entered into between the parties whilst deliberately keeping Coonwarra in the dark as to the application of funds;

(c) It is now apparent, the absence of any discovered document being provided by any party, that ALL funds provided by Berkeley Capital using the security of the Title of the Mernda Land for those borrowing the funds were used to:-

(i) Satisfy historical debts of Trimont/CornoNero and Berkeley Capital;

(ii) Assist with the funding of Trimont/CornoNero on then current construction works on projects entirely unrelated to Coonwarra, the Mernda Land or the ADA; and

(iii) Assist with funding of developments being undertaken by companies associated with Breckenridge, Hartwig and others, and in which they held a personal interest.

Schedules of those payments, copies of primary documents and the details of the entities to which those payments were made are exhibits to the affidavit of Martin Van Der Burgt sworn 15 May 2019.

(d) Deny Coonwarra the benefit of its interest in the Mernda Property including a denial of its ability to pay or satisfy its obligations to the Australian Taxation Office in respect of GST;

61 It may go too far to contend that there was a scheme from the outset to use the benefit of the Title to the Mernda Land to obtain further funding to complete developments in which Trimont/CornoNero were involved, and to deny Coonwarra the benefit of its interest in the Mernda Land, but there is a solid foundation for the proposition that it is the effect of what happened.

62 Neither the Rules (r 62) or the Corporations Act (s 1335) compel the Court to order security against an impecunious corporate plaintiff. The court is given an unfettered discretion to do what is justly required by the circumstances of each case.[126] In Buckley v Bennell Design and Constructions Pty Ltd[127] Street CJ said:

It seems to me that the discretion could properly be regarded as ordinarily exercisable so as to protect a defendant sued by an impecunious company, but that, if the court in any case takes the view that this protection should not be afforded to the defendant, it has an unlimited and unrestricted discretion to give effect to such view without having to look for special circumstances.[128]

63 Although there is no evidence in this case that Coonwarra's claims against BCP may be stultified if an order for security is made, I am satisfied that Coonwarra's present impecuniosity has been, or at least may have been, caused or contributed to by the conduct of BCP. I will accordingly refuse to order security for BCP's costs.

64 I will refuse the application for the plaintiff to provide security of costs for the fifth defendant. Subject to any further relevant submission, my view is that the costs should follow the event and BCP should pay Coonwarra's costs of the application.

65 I will hear the parties as to the appropriate orders if necessary.

BERKELEY CAPITAL PARTNERS PTY LTD (ACN 078 247 319)

[1] The application is made by summons filed on the 11 April 2019.

[2] Order made on 20 June 2018. The reasons are published in Coonwarra Pty Ltd v Cornonero Pty Ltd [2018] VSC 333 (earlier decision).

[3] Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311; Cox v Cox & Ors [2013] VSC 318; US Realty Investments LLC #1 & Ors v Need [2013] VSC 590; Opes Prime Group Ltd & Anor v Niako Investments Pty Ltd & Anor [2014] VSC 414; Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2015] VSC 692; Von Marburg v Aldred & Anor (No 3) [2017] VSC 146; and ACN 096 450 770 (formerly AJH Lawyers Pty Ltd) v Mathieson Nominees & Anor [2017] VSC 559.

[4] Coonwarra Pty Ltd v Cornonero Pty Ltd & Ors [2018] VSC 333, [6]-[7].

[5] Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311 [20(b)].

[6] Australian Quarry Holdings Pty Ltd (in liq) v Dougherty & Ors (1992) 8 ACSR 569, 570.

[8] Affidavits made on 4 April 2019 (Main's first affidavit) and 19 July 2019 (Main's second affidavit).

[10] Affidavit made on 15 May 2019 (Van Der Burgt's affidavit).

[11] Affidavits made on 15 May 2019 (Nixon's first affidavit) and 24 July 2019 (Nixon's second affidavit).

[12] Coonwarra Pty Ltd v Cornonero Pty Ltd & Ors [2018] VSC 333, [14]-[46].

[14] Third Further Amended Statement of Claim (TFASOC), [7].

[16] Defence of First Defendant to the Second Further and Amended Statement of Claim, [7] (CornoNero defence).

[17] CornoNero defence [10G], [10H], [16], [23], [25], [27], [28], [43], [49] and [55].

[21] Defence of fifth defendant to the TFASOC (BCP defence), [23], for example.

[22] A company controlled by Ascenzo and Breckenridge and which held shares in CornoNero.

[23] By order of Kennedy J in this proceeding made on 29 March 2019, it is stated in 'other matters' that the GJB Building proceeding overlaps in subject matter with this proceeding and it is intended to be managed in conjunction with this proceeding.

[24] Plaintiff's Outline of Submissions, 24 July 2019, [16(4)].

[27] TFASOC [12], [16], [21], [23], [69].

[28] Hartwig's affidavit, exhibit BDH-2.

[29] Van Der Burgt's affidavit, exhibit MVB-5, exhibit MVB-8 and exhibit MVB-9.

[31] TFASOC[15], [18]-[20], [23]-[24]; Transcript 42-3; see also the following clauses in the loan agreements which detail to what purpose the loan monies were to be directed: Van der Burgt's affidavit, exhibit MVB-5, cl 8(a), schedule item 6; exhibit MVB-8, cl 8(a), schedule item 6; exhibit MVB-9, cl 8(a), schedule item 6.

[32] TFASOC [12], [16], [21] and Van Der Burgt's affidavit, exhibits MVB-5, MBV-8 and MBV-9.

[33] A part of the August 2015 loan was used to repay the December 2014 loan, being the so called bridging finance, but there is no evidence of substance that the December 2014 loan was used for work involved in the development of the Land under ADA.

[34] Van Der Burgt's affidavit, exhibit MVB-6.

[36] Hartwig's affidavit, [18]-[19].

[37] Van Der Burgt's Affidavit, [39] and exhibit MVB 12; Hartwig's affidavit, exhibit BDH-3.

[38] Hartwig's affidavit, exhibit BDH-1 and BDH-2.

[40] Hartwig's affidavit, exhibit BDH-1 and BDH-2.

[42] Hartwig's affidavit, exhibit BDH-1 and BDH-2.

[44] Hartwig's affidavit, BDH-2; Nixon's second affidavit, exhibit SN-2.

[51] Hartwig's affidavit, [23]; exhibit BDH-2; Nixon's second affidavit, exhibit SN-3.

[53] Transcript 36; Hartwig's affidavit, exhibit BDH-2.

[54] Hartwig's affidavit, exhibit BDH-3.

[55] Hartwig's affidavit, exhibit BDH-3.

[57] Nixon's second affidavit, exhibit SN-4.

[58] Hunter v Minc Sallon (Laverton) Pty Ltd VCC No CI-17-03879.

[59] Transcript, 30; Van Der Burgt's affidavit, exhibit MVB-7, [18].

[60] Transcript, 43-4; Van Der Burgt's affidavit, exhibit MVB-13.

[62] Van Der Burgt's affidavit, exhibit MVB-17; exhibit MVB-23.

[63] Van Der Burgt's affidavit, exhibit MVB-17. exhibit MVB-23.

[64] Van Der Burgt's affidavit, exhibit MVB-17, exhibit MVB-23.

[65] Nixon's second affidavit, exhibit SN-3; Hartwig's affidavit, exhibit BDH-2.

[66] Plaintiff's Outline of Submissions, 24 July 2019, 8 [27].

[67] Van Der Burgt's affidavit, [25].

[68] Van Der Burgt's affidavit, exhibit MVB-17, exhibit MVB-23.

[69] Van Der Burgt's affidavit, exhibit MVB-23.

[70] Hartwig's affidavit, exhibit BDH-2.

[72] Nixon's second affidavit, exhibit SN-3; Transcript 35-6.

[73] Hartwig's affidavit, exhibit BDH-2.

[74] Van Der Burgt's affidavit, [63].

[75] Plaintiff's Outline of Submissions, 24 July 2019, 9 [33].

[76] Plaintiff's Outline of Submissions, 24 July 2019, 9 [34].

[77] Plaintiff's Outline of Submissions, 24 July 2019, 9 [34].

[78] TFASOC, [29]-[30]; Van Der Burgt's affidavit [28]-[31].

[79] Van Der Burgt's affidavit, [64].

[80] TFASOC [32]; Van Der Burgt's affidavit, [31].

[84] Outline of Submissions of Fifth Defendant, 19 July 2019, 12 [22], 12-3 [25]-[26].

[85] Plaintiff's Outline of Submissions, 24 July 2019, 12 [58].

[86] Plaintiff's Outline of Submissions, 24 July 2019, 12 [58].

[87] Outline of Submissions of the Fifth Defendant, 19 July 2019, 3 [8].

[88] Outline of Submissions of the Fifth Defendant, 19 July 2019, 7 [10].

[89] Outline of Submissions of the Fifth Defendant, 19 July 2019, 10-1 [11]-[16], see also 12-3 [21]-[28].

[90] Outline of Submissions of the Fifth Defendant, 19 July 2019, 12 [24].

[91] Outline of Submissions of the Fifth Defendant, 19 July 2019, 12-3 [25]-[26].

[92] Outline of Submissions of the Fifth Defendant, 19 July 2019, 13 [27]-[28].

[99] Transcript, 8; see also Hartwig's affidavit, [15].

[102] Transcript, 49; see also Hartwig's affidavit, [26].

[105] Plaintiff's Outline of Submissions, 24 July 2019, [2].

[106] Plaintiff's Outline of Submissions, 24 July 2019, [2].

[107] Plaintiff's Outline of Submissions, 24 July 2019, [2].

[109] Plaintiff's Outline of Submissions, 24 July 2019, [12].

[110] Plaintiff's Outline of Submissions, 24 July 2019, [16(3)].

[111] Plaintiff's Outline of Submissions, 24 July 2019, [58].

[112] Plaintiff's Outline of Submissions, 24 July 2019, [38], [58].

[113] Coonwarra Pty Ltd v Cornonero Pty Ltd & Ors [2018] VSC 333 [9]-[10].

[114] Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018), [29.100]-[29.101] 1077; citing J H Hames Security for Costs: Extent of Discretion (1976) 120 Sol J 479, 480.

[115] BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339, 345-6 (Anderson J, Ipp and Kennedy JJ agreeing); Ninan v St George Bank Ltd [2012] FCA 905, [37], [48].

[116] Right Home Improvements International Pty Ltd v Imperial Alarm Screens (Aust) Pty Ltd [1986] ATPR 40-641. See also Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664, [86]-[88], [100].

[117] Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664, [86]-[88] see as example Ninan v St George Bank Ltd [2012] FCA 905, [48].

[118] KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189, 197 (Beazley J); Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609, 626 (Lord Denning MR).

[119] Australian Quarry Holdings Pty Ltd (In liq) v Dougherty (1992) 8 ACSR 569, 570 (Ormiston J).

[120] Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018), [29.100]-[29.101] 1077; citing J H Hames 'Security for Costs: Extent of Discretion' (1976) 120 Sol J 479, 480.

[121] Dae Boong International Co Pty Ltd v Gray [2009] NSWCA 1,1 [34] (Hodgson JA).

[122] Van Der Burgt's affidavit, [20].

[124] Nixon's second affidavit, exhibit SN-2.

[125] Coonwarra Pty Ltd v CornoNero Pty Ltd [2018] VSC 333, [59]-[65].

[126] Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd, [1999] VSCA 43; [1999] 2 VR 191, [15] (Winneke P and Phillips JA).

[127] (1974) 1 ACLR 301.