RESPONDENT: Dura (Australia) Constructions Pty Ltd

1. Application for an order under s79 is dismissed.

3. I direct the Principal Registrar to list this matter at the next convenient directions hearing after 25 October 1999.

1. The Applicant in these proceedings is Red Earth Building Maintenance Services Pty Ltd. The Respondent is Dura (Australia) Constructions Pty Ltd.

2. The Respondent, by an application filed on 17 August 1999, seeks an order for security for costs against the Applicant. The amount sought is in the vicinity of $50,000.00 (Supreme Court scale). An alternative figure of about $37,000 has been put forward by the Applicant should security be ordered.

3. The power of the Tribunal to make an order for security for costs is set out in s79 of the Victorian Civil and Administrative Tribunal Act 1998 (the Act). That section provides as follows:

(1) On the application of a party to a proceeding, the Tribunal may order at any time -

(a) that another party give security for that party's costs within the time specified in the order; and

(b) that the proceeding as against that party be stayed until the security is given.

(2) If security for costs is not given within the time specified in the order, the Tribunal may make an order dismissing the proceeding as against the party that applied for the security.

(3) The Tribunal's power to make an order under this section in a proceeding is exercisable by -

4. In its action against the Respondent, which it commenced by Application filed on 11 June 1999, the Applicant is claiming an amount for damages alternatively on a quantum meruit in excess of $400,000.00. It is also claiming damages in the nature of interest pursuant to the principle in Hungerfords v. Walker [1989] HCA 8; (1988) 171 CLR 125. In respect of both (what are called) the 'Latrobe Street Project' and the 'St Kilda Project' there are claims by the Applicant for monies due for variations. As regards both such projects, however, the principal allegation is that the Respondent wrongfully determined the agreements relating to each. By reason of this and the other matters alleged the Applicant claims to have suffered loss and damage.

5. There is also in existence a counterclaim by the Respondent against the Applicant which was filed also on 17 August 1999. It is called a 'Counterclaim' as such and it accompanies the Respondent's Points of Defence. Various of the allegations of the Applicant in its Points of Claim are denied by the Respondent in its Points of Defence. There is a pleading initiative of a set-off of the Counterclaim in para. 17 of the same. The Counterclaim goes on to allege that as a result of an accounting undertaken by the Respondent the Applicant is indebted to the Respondent in respect of the Latrobe Street Project in the sum of $174,439.00 and in respect of the St Kilda Project in the sum of $52,203.00. The Counterclaim then alleges that as a result the Respondent has suffered loss and damage.

6. The Respondent's application for an order for security was supported by Affidavits sworn by Stuart Hendricks, Dennis Pozzebon, Robert Balsdon, Richard Khor and Elias Giannakopoulos. All such Affidavits were sworn on the same day - again 17 August 1999. The Respondent's application was opposed by the Applicant which relied upon Affidavits in opposition sworn by Colin Foreman (30 August 1999), Maria Stockley (31 August 1999) and Guy Jones (8 September 1999). Brian Comport (31 August 1999) Lorraine d'Atri and Mark d'Atri (1 September 1999). No affidavits in reply were filed, subsequently by the Respondent. I have read all such Affidavits, and accompanying exhibits, very carefully. It would be no misdescription of the Respondent's position to say that essentially its argument is that the order for security should be made because of the Applicant's financial position which it regards as precarious. This is stated very clearly, for example, in paragraphs 9 and 10 of the Affidavit of Stuart Hendricks. See also paragraphs 4 to 7 of the Affidavit of Robert Balsdon. On the other hand the argument of the Applicant, in opposition, is essentially that its financial position is or has been one caused by the Respondent. For example see paragraph 12 of the Affidavit of Brian Comport.

7. There are numbers of cases on applications for security for costs. Recent cases include Epping Plaza Fresh Fruit and Vegetables Pty Ltd v Bevendale Pty Ltd [1998] VSCA 43 and Second Lenbourne Pty Ltd v Beagle Management Pty Ltd [1999] FCA 486. See also Keary Developments Ltd v Tarmac Construction Ltd [1995] 3AII ER 534 and Ariss v Express Interiors Pty Ltd (In liq.) [1996] 2 VR 507.

8. The role of a court (or a tribunal) on a security for costs application was set out by Street CJ in Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 304. He spoke of the need to achieve a balance between 'ensuring that adequate and fair protection is provided' to a defendant or respondent and 'avoiding injustice to impecunious companies by unnecessarily shutting them out or prejudicing them in the conduct of litigation'. It is doubtful, however, whether full force and effect can be given to all of these remarks: compare J & M O'Brien Enterprises Pty Ltd v Shell Co [1983] FCA 96; (1983) 7 ACLR 790 at 792,793. The ordering of security is plainly a discretionary matter and factors relevant to the exercise of that discretion were listed by Smart J in Sydmar Pty Ltd v Statewide Developments Pty Ltd (1987) 73 ALR 289 at 299-300. McDonald J in Tenth Anemot Pty Ltd v Colonial Mutual General Insurance Co Ltd [1993] VicRp 56; [1993] 2 VR 48 at 55, referring to these factors, and listing them, noted that a court's discretion to order security is 'unfettered'. Not only is it unfettered, he said, as to whether it will make the order but, if it should do so, it is unfettered also on what terms. The factors listed by Smart J (without the authorities) are as follows:

'(A) Whether the plaintiff's claim is made bona fide and has reasonable prospects of success:

(B) Whether the plaintiff's lack of funds has been caused or contributed to by the conduct of the defendant

(C) Whether the plaintiff's proceedings are merely a defence against 'self-help' measures taken by the defendant:

(D) Whether the making of the order would unduly stultify the plaintiff's ability to pursue the proceedings:

(E) The extent to which it is reasonable to expect creditors or shareholders to make funds available to satisfy any order for security which is made:

(F) Whether the defendant has delayed in making the application for security:

(G) Further, in Heller Factors, Mitchell J said that a consideration of whether the company in question is a true plaintiff or not: '... is one matter which may be placed in the scales in making the decision as to which way the discretion should be exercised"

(H) Whether substantially the same facts are likely to be canvassed in determining the action and the cross-action. The court would be slow to allow a situation where the action is stayed because of the inability to provide security but the cross-action covering substantially the same factual areas proceeds.'

9. Counsel for the Respondent, conceding that my discretion on an application of this nature is an unfettered one, conceded also, as I understood him, and rightly so in my view, that to determine the question of security I should not, as it were, conduct a trial within a trial. In determining an application of this nature I should not have to form concluded views on the evidence. This is not the trial of the matter and I am not in a position to do so in any event. No witnesses were called and no deponents were cross-examined. I take it, though, that I should be required to form such views as may be necessary to enable me to justly dispose of the application for security either for or against the ordering of it. A proper description of my role is, I think, that to order security I should have a view, in light of the factors I think I should consider, that security should justly be ordered, without any bias in favour of it being ordered.

10. Mindful as I am of the factors I think I should consider, I have formed the view that, in the exercise of my discretion, I should decline to order that security be given. I have a view that security justly should not be ordered. In forming my view, I have given due consideration to the materials set out in the various Affidavits and I have taken into account, also, those matters which were submitted to me by Counsel. However, the fact is that on the basis of those materials I am unable to be satisfied that the claim of the Applicant is not made bona fide or lacks reasonable prospects of success. By this, however, I do not want to be taken as saying that the Applicant will necessarily succeed at the hearing. Although I am quite able to be satisfied that the Applicant is or has been experiencing a lack of funds, what also I am unable to be satisfied about on the basis of the materials is whether this has been caused or contributed to by the conduct of the Respondent. No affidavit in reply has been filed by the Respondent. If I have regard to the Affidavit of Guy Jones, I should be satisfied to a contrary effect, namely, that the Respondent does bear responsibility for this.

11. There is, of course, no question of any delay on the part of the Respondent in making the application for security. And it is true, too, that the claim made by the Applicant is no mere defensive measure. But on critical points, those I have mentioned, I am unable to be satisfied in its favour. In summary the Affidavit of the Respondent simply do not take the matter anywhere near far enough in an application of this nature. In such circumstances I consider it would be unfair and harsh to the Applicant if I was possibly to shut it out from the proceeding by ordering a stay on its claim pending security. Any other course, I think, would be unsafe and quite dangerous.

12. There is, however, this further consideration. As I have noted this is not merely a case where the Applicant is suing the Respondent. There is, also, a substantial Counterclaim by the Respondent against the Applicant. In the determination of the claim and the Counterclaim, essentially the same facts are likely to be canvassed. In such circumstances, if I am to follow the observations of Smart J in Sydmar Pty Ltd v Statewide Developments Pty Ltd above, then I should be slow to order security in any event. For, to order security, this could be a case where the claim ends up stayed, perhaps until some later date, because of an inability to provide security, but the Counterclaim still goes ahead. The inconveniences in this are manifest.

13. Counsel for the Respondent sought to counter this by proffering a stay on the Counterclaim. If I was otherwise minded to order security on the claim, so as to overcome the objectionable presence (so to speak) of the Counterclaim, I should accede to the Respondent's request to stay the Counterclaim also. The fact is, however, that I am not otherwise minded to order security. As I have indicated, on critical points I am unable to be satisfied in its favour. But even if, otherwise, I was, the invitation is not one, I think, I could or should take up. For it seems to me that under s79 of the Act the power to order a stay, upon ordering that security be given, extends only to the proceeding in which security is sought. I refer in particular to s79(1)(b) and its words "the proceeding" meaning the proceeding against the party seeking security. The jurisdiction of the Tribunal in matters of this kind is fixed by the Act and is not at large. I doubt, in any event, that in the Tribunal a party can, unilaterally, apply for a stay of its own proceeding. Certainly though, a proceeding can, for instance, be withdrawn (see s.74) or it could end up being dismissed or struck out for some reason. And of course, a proceeding can also be adjourned, but I did not understand the Respondent to be asking for an adjournment. In any event an application for an adjournment would have been misconceived. But a unilateral stay of a proceeding does not seem to be countenanced by the Act.

14. It seems to me, therefore, that there are significant difficulties under the Act (but not confined to difficulties from that source) in the way of what was proffered by the Respondent. I note also the observations of Ormiston J in Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 627 - a case in which, however, his Honour did order security. But the facts in that case are really quite different to those of the present. In addition, in that case there had previously been a consent given to an order for security. In any event, as regards an offer by the defendants to submit to a stay of their Counterclaim as a price for a stay of the plaintiffs' claim, his Honour said, as a matter of principle, that 'it is not appropriate to allow the applicants the luxury of pursuing the Counterclaim and then having it stayed when it suits them'. And as he also said 'The defendants cannot blow hot and cold'. These remarks, I think, apply with equal force in the present case. That is, if, in the first place, there is room for their application, considering the provisions of the Act.

15. An issue also was raised concerning the relationship between s79 of the Act and s109 of the Act. It is unnecessary that I should determine this question now because I am not, for the reasons I have given, ordering security. But I agree that s109 does not militate against the ordering of security under s79 because, it seems to me, each of these provisions is a freestanding provision of the Act. Certainly it is true, though, that under s109(1), subject to Division 8, 'each party is to be bear their own costs in the proceeding". Other provisions of s109, however, set out circumstances when an order for costs may be made. But there is no necessary conflict between s109 and s79 because s109 does not operate to prohibit the ordering of costs. Moreover, it must not be forgotten that, in courts, where also security may be ordered, the ordering of costs in favour of the successful party cannot always be guaranteed. The rule, in courts, that costs follow the event, is only the usual rule. See Tramountana Armadora SA v Atlantic Shipping Co SA [1978] 2 A11 ER 870 at 873. For, as we are so often reminded in the authorities, costs in the courts are always discretionary.

16. For the reasons I have given, I decline to order under s79.

17. In consequence the application seeking such order is dismissed.

18. I reserve the question of costs for further submission. Subject to argument though, I would think, that the Applicant is entitled to its costs for having successfully defended the application.

19. The question of costs, thus reserved, can be dealt with at the next directions hearing in the absence of agreement between the parties.

20. I adjourn the proceedings for directions to the next convenient date after 25 October 1999.