Reid's Farms Pty Ltd v Murray Shire Council

(b) the applicant was a proprietary company limited by shares with the issued capital of $2;

(c) the sole director and secretary of the applicant is Mr Christopher John Kinnane, whose address is listed in Victoria;

(d) Mr Kinnane was appointed the director and secretary of the applicant on 27 November 2007;

(e) Mr Kinanne is the sole shareholder of the applicant;

(f) a fixed and floating charge was registered over the applicant by National Australia Bank (created on 16 October 1995 and registered on 27 October 1995); and (g) no taxation returns have been lodged for the applicant since 2002. 13 Mr Rogers stated that further searches revealed that the applicant owns no real property in New South Wales or Victoria. 14 Significantly, Mr Rogers stated that on a number of occasions Mr Kinnane had advised him by way of telephone conversation that he held his shareholding in the applicant on trust for Mr Richard Ham. Mr Kinnane advised Mr Rogers that he takes instructions in relation to the proceedings from that individual. 15 Finally, Mr Rogers stated that he was aware that earlier class 4 proceedings had resulted in an agreement that the council and KSK pay the costs of the applicant in those proceedings. The quantum of those costs was still being assessed, but his estimate was that they would be between approximately $20,000 to $30,000, given that both respondents consented to final orders being made at an early stage of those proceedings. 16 Mr Rogers stated that, in his view, the estimated costs of the first respondent in the current proceedings would exceed the agreed costs to be paid to the applicant in the earlier proceedings. 17 The council also tendered a notice to produce requesting: all document relating to fee disclosure or fee agreements between Chris Kinnane, Solicitor, Matthew Baird, Barrister and the Applicant relating to Land and Environment Court Proceedings 09/40145 and Land and Environment Court Proceedings 07/41317 and any related interlocutory proceedings. 18 The notice was answered with nothing to produce when called upon. Security for Costs Application of Second Respondent 19 KSK relied on affidavits of Mr James Cosgriff sworn 3 September and 30 September 2009. Mr Cosgriff is a director of the incorporated legal practice Cosgriff Orchard Legal Pty Ltd and has carriage of the matter on behalf of KSK. 20 To summarise, the evidence of Mr Cosgriff was that: (a) the evidence of Mr Rogers in relation to the ASIC searches was confirmed;

(b) the company owns no real property in either New South Wales or Victoria;

(c) communications between Mr Kinnane and Mr Cosgriff's legal firm revealed that Mr Kinnane acts as a director of the applicant in a trustee capacity on behalf of Mr and Mrs Richard Ham;

(d) the applicant is not a neighbouring land owner and has no director as a neighbouring land owner;

(e) Mr Richard Ham is, however, a land owner in the vicinity of the development the subject of the proceedings;

(f) the applicant has provided no response to KSK's request that it provide security for costs; and

(g) KSK estimates that its costs, and therefore the quantum of security it seeks, will be in the order of $43,304. 21 Again, during legal argument Mr Eastman, counsel appearing on behalf of KSK, conceded that the sum of $43,304 sought by way of security was an amount estimated on the basis of solicitor-client costs and that this ought to be revised downwards to the sum of $28,995 which would more accurately reflect costs calculated on a party-party basis. Evidence of Applicant 22 The applicant relied on an affidavit of Mr Christopher Kinnane sworn 29 September 2009 which stated as follows: (a) that Mr Kinnane acted for the applicant in the proceedings;

(b) that Mr Kinnane was the sole director for the applicant in the proceedings;

(c) that when matter 07/41317 was heard before Lloyd J in this Court on 12 December 2008 (which upheld an appeal by the applicant and orders were made setting aside the development consent), that costs were reserved, but since then the council has agreed to pay the applicant's costs as agreed or assessed;

(d) that at present those costs have not been settled but the quantum claimed by the applicant is in the order of $57,000;

(e) that from the inquiries that Mr Kinnane has caused to be made, the applicant did not trade or earn any taxable income for the period commencing on 1 July 2002 until 26 November 2007. And from 27 November 2007, when he became the sole director of the company, the applicant has not earned any taxable income and consequently has not been under an obligation to file income tax returns;

(f) that the applicant has no outstanding reporting obligations to ASIC or the Commissioner of Taxation; and (g) an amended application and an amended points of claim that were intended to be filed in Court were attached. The Applicant Must Pay Security for Costs 23 There is no question that this Court has the power to order the security sought by the respondents. So much so was made plain by Lloyd J in Burrell Place Community Action Group Incorporated v Griffith City Council [2009] NSWLEC 120 where his Honour stated (at [2]-[4]): [2] The court has jurisdiction under r 42.21 of the Uniform Civil Procedure Rules 2005 to make an order for security for costs and to stay the proceedings until the security is given, in any of the circumstances set out in the rule. The particular circumstance relied upon in the present case is: "(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so.. .". An alternative source of power may be s 1335(1) of the Corporations Act 2001 (Cth) which enables the court to order security against a corporation that is likely to be unable to pay costs ordered in favour of a defendant. In that Act, a corporation includes " any body corporate (whether incorporated in this jurisdiction or elsewhere) ": s 57A(1)(b).

[3] The Council and Duneba also rely upon par (e) of r 42.21: "(e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so".

[4] The court also has an inherent or implied power to make an order for security for costs - which power is unfettered and is not restricted or excluded by rules made on the subject for the purpose of regulating the practice and procedure of the court: Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443, affirmed on appeal, [1983] 2 NSWLR 122. This was confirmed in Sky Design and Concepts Pty Ltd v Pittwater Council (No 4) [2009] NSWLEC 129 at [31]. 24 In Burrell Lloyd J went on to identify the kinds of factors to be taken into account in the exercise of the Court's discretion to order security (at [12]-[14]): [12] Although the courts' inherent or implied power to order security for costs is unfettered and although the statutory power to order security for costs in this Court " is not to be narrowly construed " - see Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82 at [104] and [108] - the courts have identified the kind of factors to be taken into account in the exercise of the court's discretion. Those factors are conveniently set out by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198:

(i) whether the application for security has been brought promptly;

(ii) the strength and bona fides of the case in which security is sought;

(ii) whether the impecuniosity of the applicant results from the respondent's conduct;

(iv) whether the application for security is oppressive, in the sense of denying of an impecunious citizen or organisation a right to litigate;

(v) whether there are any persons standing behind the plaintiff applicant who are likely to benefit and be willing to provide the security;

(vi) whether persons standing behind the plaintiff applicant offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking;

(vii) whether the applicant for security is in substance a plaintiff or the proceedings are defensive in nature. [13] The factors described by Beazley J have been consistently taken into consideration and applied in this Court: see, for example, Belmore Residents Action Group Incorporated v Canterbury City Council [2005] NSWLEC 258, Diamond v Birdon Contracting Pty Ltd [2007] NSWLEC 92; Sharples v Minister for Local Government [2008] NSWLEC 67; (2008) 159 LGERA 391.

[14] Apart from these factors, there is the consideration that in proceedings such as the present, which are brought under the open standing provisions of the Environmental Planning and Assessment Act 1979, s 123(1), an order for security for costs does not deprive the applicant plaintiff of any fundamental right where there are others who might prosecute the case under that provision: Melville v Craig Nowlan at [109]. 25 Mr Baird did not dispute that the applicant presently did not have any taxable income or assets other than, in his submission, the amount owing to it by reason of the costs that the first respondent had agreed to pay that were currently being assessed. 26 Notwithstanding this financial paucity, Mr Baird submitted that an order for security ought not be made because: (a) first, whilst the amended points of claim had not yet been filed, they nevertheless revealed that there was merit in the applicant's contentions and that merely because it had been conceded that the points of claim in their current form were defective this did not mean that the issues that the applicant sought to raise in the proceedings lacked strength. Moreover, he submitted, that as the extensive procedural history of the dispute demonstrated, the applicant was acting bona fide as an objector to the development the subject of the dispute; and

(b) second, the Court ought to have regard to the fact that due to the broad standing provisions applicable to these types of proceedings, under normal circumstances if security is ordered which stultifies the litigation then another applicant can take the place of Reid's Farms, however, because of the application of the time limit in s 101 of the Environment Planning and Assessment Act 1979 this was probably no longer possible. Accordingly, he submitted, the ordering of security could have the effect of stultifying not only the current litigation but any and all litigation in respect of this development. 27 Mr Baird further submitted that if security was ordered by the Court, then the greater the quantum of security to be paid, the greater the amount of time the applicant ought be afforded to pay it. Thus he suggested that four weeks as a minimum would be appropriate. Consideration 28 A consideration of the relevant factors identified by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198, and as applied in this Court in Burrell, leads me to the conclusion that an order should be made for the payment of security for costs. 29 I have come to this view for the following reasons: (a) there is no suggestion that the respondents delayed in making the application;

(b) while neither of the respondents have challenged the bona fides of the applicant's current class 4 application, the fact that the applicant conceded that the points of claim were defective is a powerful factor in favour of the conclusion that the strength of the applicant's claim, as currently framed before the Court, is weak. While I accept that there is an intention to amend those points of claim and as a consequence of that process the strength of the applicant's claim may be enhanced, as they presently stand they lack not only detail but substance. It cannot be said therefore, that the applicant's case is strong. On the contrary, at least at this stage, it is inherently flawed;

(c) while the applicant did not concede that it was impecunious, it did concede that there was no evidence of it having any assets or taxable income before the Court. In relation to the earlier agreement for the payment of outstanding costs, whilst I take this factor into account, I do not give it much weight because: (i) first, the quantum of those costs is not presently known; (ii) second, I accept the submissions of the council that the costs cannot properly be considered to be an asset of the applicant. These costs are an indemnity for the professional fees incurred by the applicant upon the successful completion of the earlier proceedings. Any costs paid to the applicant will be used to pay the fees of the applicant's legal representatives. In this sense they are not the property of the company and are not held as such. Indeed, given that there were no documents produced in answer to the notice to produce, no costs may be forthcoming in any event in the absence of any retainer agreements by the applicant's legal representatives; (iii) third, I accept the submissions of the council and KSK that the costs of these proceedings are likely to materially exceed the assessed or agreed costs of the earlier proceedings; and (iv) fourth, in any event there is no evidence that an order for security for costs would be oppressive in the sense of denying the applicant, or any party standing in its shoes, the ability to litigate. And moreover, there is no evidence before the Court that another objector would have commenced these proceedings but for the fact that the applicant had already done so; (d) there is, however, evidence that there is a person standing behind the applicant, namely, Mr Richard Ham. The applicant did not refute this contention. There is no evidence that Mr Ham is willing to provide security. He has not offered any personal undertaking to be liable for the costs; and

(e) finally, the applicant for the security is not in substance a plaintiff and the proceedings are not defensive in nature. 30 These factors, together with the fact that the applicant has no assets, no taxable income and neither it nor its sole director, Mr Kinnane, is a resident in this state compel the conclusion that security ought to be ordered. The question remains in what amount? Quantum of Security to be Ordered 31 The first respondent now seeks an order for security in the amount of $35,000. The second respondent now seeks an order for security in the amount of $28,995. Both these amounts are reductions on that which was originally sought in the notices of motion. 32 The applicant has brought no evidence nor made any submission to suggest that these reduced amounts are particularly excessive or that some lesser sum would be more appropriate. Accordingly, I propose to order security for the first respondent in the amount of $35,000 and for the second respondent in the amount of $28,995. Terms of Orders 33 The Court makes the orders that were handed up as short minutes of order by the respondents (and as amended by the Court). The Court notes that these orders are made bearing in mind that the matter is listed for final hearing on 16 November 2009 and that all parties submitted to the Court during the hearing of the Motions that they wished to maintain this date. The orders are that: (1) the applicant, Reid's Farms Pty Ltd, provide security for costs of the first respondent of and incidental to the proceedings in the amount of $35,000, in a form satisfactory to the Registrar, by 15 October 2009.

(2) the applicant, Reid's Farms Pty Ltd, provide security for costs of the second respondent of and incidental to the proceedings in the amount of $28,995, in a form satisfactory to the Registrar, by 15 October 2009.

(3) leave granted for the first and/or second respondent to apply to the Court for an order pursuant to Rule 42.21(3) of the Uniform Civil Procedure Rules 2005 to dismiss these proceedings if the applicant fails to comply with orders 1 and/or 2.

(4) the applicant's Points of Claim are struck out without prejudice to the applicant seeking leave to re-plead.

(5) the applicant to serve on the respondents proposed Amended Summons and Amended Points of Claim by 7 October 2009.

(6) the respondents to notify the applicant of their position on the amendments by 8 October 2009.

(7) if no respondent objects, list the matter on 9 October 2009 before Pepper J for further directions at 9.30am.

(8) if the respondents object, applicant to file and serve a Notice of Motion for leave to amend by 9 October 2009 and the matter is listed before Pepper J on 9 October 2009 at 9.30am to hear the motion.

(9) the applicant is to pay the costs of the first and second respondents' Notices of Motion, as agreed or assessed.

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