Sky Design and Concepts Pty Ltd v Pittwater Council

Civil Procedure Act 2005 LEGISLATION CITED: Corporations Act 2001 (Cth) Land and Environment Court Act 1979 Land and Environment Court Rules 1996

Abraham v Thompson [1997] EWCA Civ 2179; [1997] 4 All ER 362 CASES CITED: KP Cable Investments Pty Limited v Meltglow Pty Limited [1995] 56 FCR 189 Sharples v The Minister for Local Government [2008] 159 LGERA 391; [2008] NSWLEC 67

APPLICANT Mr May, Company Director (in Person)

LEGAL REPRESENTATIVES: RESPONDENT M Carpenter SOLICITORS Mallesons Stephen Jaques

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

11186 of 2007 Sky Design and Concepts Pty Ltd v Pittwater Council

JUDGMENT 1 REGISTRAR: This is an application made by the respondent by way of notice of motion filed on 19 February 2009. The notice of motion seeks orders: "1. That the applicant provide within 14 days security for costs of the respondent in the sum of $15,175 or such other amount as the court deems fit by way of unconditional bank guarantee in a form acceptable to the Registrar.

2. That the applicant pay the respondent's costs of this motion.

3. If the applicant fails to provide security for costs in accordance with order 1 the applicant's notice of motion filed 19 December 2009 be dismissed." 2 The substantive proceedings involve an appeal by the applicant from the decision of council to refuse a development application made by the applicant concerning land at Church Point. The appeal was heard on its merits and dismissed by Commissioner Hoffman on 7 May 2008.

3 The applicant then lodged an appeal pursuant to s 56A of the Land and Environment Court Act 1979 against that decision which was considered by Sheahan J. On 26 November 2008 his Honour dismissed the appeal on the basis that the applicant had not established that there was any error of law on the part of the Commissioner.

4 The respondent to the proceedings then filed a notice of motion seeking its costs of the appeal before Sheahan J. At the return date of that notice of motion, on 19 December 2008, the applicant filed in court a notice of motion seeking to set aside the decisions of the Commissioner and of Sheahan J. The Registrar then listed the latter notice of motion for hearing on 26 February 2009, that date now being tomorrow. It was unclear at that stage whether the respondent's notice of motion had been adjourned pending the result of the applicant's notice of motion. However, orders to that effect were made by consent by e-court communication on 19 January.

5 The matter was brought back for a directions hearing on 12 February as a result of the applicant's failure to comply with a notice to produce. Directions were then made allowing the applicant to file and serve a notice of motion to set aside that notice to produce. At the return date of the notice of motion on 18 February the applicant, through its director, indicated that there were no documents to produce and that it no longer moved on its notice of motion. Accordingly, I dismissed the notice of motion filed 13 February and reserved the question of costs. At that time I also questioned whether the respondent's notice of motion for costs of the s 56A appeal could also be listed for hearing on 26 February. The result of the ensuing discussion was that I listed the notice of motion filed by the respondent for hearing on 9 March 2009.

6 The respondent in its current notice of motion seeks security for its costs of defending the applicant's notice of motion filed in court on 19 December and set down for hearing tomorrow. The written submissions that have been filed by the respondent on 23 February set out the nature of my power to make such an order. Specifically, Pt 42 r 21 of the Uniform Civil Procedure Rules allows the court to make an order for security for costs on such terms as the court thinks fit where "there is a reason to believe that a plaintiff being a corporation will be unable to pay the costs of the defendant if ordered to do so."

7 The power to order security for costs is also provided for under s 1335(1) of the Corporations Act 2001 (Cth). The power to order security for costs has been discussed by the court on a number of occasions and it has been found that the court has an unfettered discretion to award security for costs. Notwithstanding this, in KP Cable Investments Pty Limited v Meltglow Pty Limited [1995] 56 FCR 189, Beazley JA set out a number of guidelines to follow in exercising the discretionary power of the court to award security for costs. Those principles are set out at pp 3 and 4 of the respondent's written submissions.

8 Those principles are also dealt with and addressed by the respondent in its written submissions at par 7 through to par 13. Those submissions taken together outline two broad grounds, the combination of which the respondent says should result in an order for security of costs. The first ground is that in the respondent's view there is no prospect of success of the applicant's notice of motion that is listed for hearing tomorrow. The second ground is that the respondent has a reasonable and genuine concern that if it were to successfully defend the notice of motion the applicant could not meet any adverse costs order. This is supported by evidence from the respondent and annexed to the affidavit that is in support of the notice of motion, that is, the affidavit of Trudy Sheehan sworn 19 February 2009. That affidavit annexes the company search of the applicant company which demonstrates that annual returns have been filed with ASIC up to 2003 and that since then there have been no annual returns filed with ASIC. Also annexed to the affidavit is a title search on the property that is the subject of the development application that was considered by the court. That title search demonstrates that neither the company nor the sole shareholder, sole director and sole secretary of the company are the registered proprietor of that land. Not only that but there is a mortgage held by ANZ Banking Group Limited and the extent of that mortgage is unknown.

9 As outlined earlier, a notice to produce documents that relate to the financial status of the company was served on the applicant, and at the return of a notice of motion to set that notice aside, the applicant through its director indicated that the applicant had no documents to produce. Therefore, the respondent says that it has a reasonable and genuine concern that there is no evidence that the applicant has the capacity to pay an adverse costs order in the event that the respondent was successful in defending the notice of motion that is listed tomorrow.

10 Further, the respondent says that it should not be prejudiced by the delay caused to it by the applicant's failure to properly deal with its requests for documents. Those requests are clearly outlined in the annexures to that same affidavit. They show that on 22 December 2008, simply three days following the filing of the notice of motion in court, the solicitors for the respondent wrote to the applicant and attentioned the letter to the director of the applicant, indicating that on their view the applicant's notice of motion has no foundation and indicated their concern in relation to the ability of the applicant to pay the costs of the respondent successfully defending that notice of motion. In that respect the correspondence requests the applicant company provide documents to show that the company has sufficient funds to meet an adverse costs order. 11 Following that correspondence an email was received on the following day from the director of the applicant company who represents the company today saying that "none of the information that you have requested will be provided". This email was directed to the solicitor for the respondent. That email suggests, contrary to the applicant's indication on the previous occasion that there were no documents to produce, not that there are no documents to produce but simply that the information requested, whether or not it is available, would not be provided.

12 Following this there were, I believe, submissions filed by the applicant in relation to its notice of motion on 30 January 2009. On the respondent's submission the filing and serving of those written submissions further caused the respondent to have concern in relation to the prospects of success of the applicant's motion. As a result there was further correspondence with the applicant on 3 February 2009. That is at annexure J of the affidavit that is in support of the notice of motion that I am considering today. That letter clearly sets out the respondent's concern in relation to the possibility of success of the motion, albeit it does not actually deal with a forecast of an application for security for costs.

13 A further email was sent to Mr May, who is the director of the applicant and appears for the company today, on 5 February 2009 drawing the applicant's attention to the previous letter of 22 December and the email of 23 December. That email raises for the second time the concern of the respondent that the applicant company would not have sufficient funds to meet an adverse costs order. On the respondent's submission there has not been any delay in bringing this application on and it should not be prejudiced by any delay caused by the notice to produce being issued on 5 February and the applicant indicating to them not that there were no documents to produce, but that it contested the notice to produce and sought an order setting it aside. It was only at the return of the notice of motion to set aside the notice to produce that the applicant indicated that there were no documents to produce and in the respondent's view it should not be prejudiced by that.

14 There were a number of further points made by the respondent in support of its application. These all really centre around the two grounds that I have earlier outlined. However, I articulate them again for completeness. That is, on the basis that the notice of motion has no real prospects of success, the respondent says it should not be prejudiced by having to incur further risks by incurring costs without the assurance that if an adverse costs order were to be made against the applicant, that the applicant would be able to meet that costs order. In those circumstances and also in circumstances where this application is taken outside of the usual Class 1 application the respondent says that it is appropriate for me to make an order for security for costs.

15 The applicant's submissions fall into three broad categories. The first category is that the respondent did not act promptly in bringing on this application. The director of the applicant has indicated that it was not his intention to mislead the court and the respondent into believing that the documents existed and that he should not be put to the burden of providing security for costs where this application is made, as he says, at the "twelfth hour".

16 The second broad category of submissions that Mr May makes on behalf of the applicant company is that the security for costs that is requested relates to costs that have already been incurred. The only costs that have not been incurred are those of the hearing tomorrow, which Mr May estimates, based on the calculations contained in the affidavit in support of the respondent's notice of motion, to be around $2,000.

17 The third broad category of the applicant's submissions is that this application today is an effort by the respondent to vacate the hearing that is on tomorrow in light of what the respondent has learned in relation to the council's authority, that is, the applicant says that it has a bona fide case that should be brought before the court, should be considered by the court, is likely to be successful and this is simply an attempt by the respondent to vacate that date and to delay an inevitable decision that the court did not have power to consider the application brought by the applicant.

18 Other submissions made by Mr May include a submission in relation to previous litigation by the council. In my view that submission is not relevant to the determination of the issues that are before me today. He also refers to conversations he has had with the general manager of council. In my view, again that information is not relevant for the determination of the issues before me this morning. If I were to turn my mind to the prospects of success of the notice of motion that is to be dealt with tomorrow, that conversation is not something that I ought to consider in making a determination of the prospects of success of that notice of motion.

19 The applicant also says that I should not make the order because it will necessitate vacating the date tomorrow in circumstances where all of the documents required to be filed for the hearing tomorrow have been filed. He also relies at the end of his written submissions on various rules and requirements under the Civil Procedure Act 2005. It has been agreed between the parties that Pt 51 r 50 and Pt 50 r 8 do not apply to this application and the applicant has not been able to assist me in relation to why he relies on Pt 40 r 4. The applicant has also set out the nature of ss 56, 57 and 58 in relation to this application. Obviously they are matters that I must take into account in resolving the issues that are before me. However, I cannot see how they support the applicant's case.

20 In my view there is no substance to the applicant's submission in relation to the delay in bringing this application on by the respondent. I have clearly set out the background and the conduct of the applicant which led the respondent to believe that there were documents to produce and the applicant conducting the litigation in such a fashion as to also make the court believe that there were documents to produce in acting to set aside a notice to produce. It was only once the applicant indicated that there were no documents to produce that the respondent immediately put on the notice of motion for security for costs. I accept the respondent's submissions that it should not be prejudiced by the delay that has ensued as a result of the applicant's conduct. 21 I also do not believe that there is any substance to the applicant's submission in relation to the bona fide interest. The applicant referred me to some case law that was referred to in the respondent's submissions at pages 6 and 7. In Sharples v The Minister for Local Government [2008] 159 LGERA 391 at paragraph 8, Biscoe J quotes a principle in Abraham v Thompson. "It is not an abuse of process of the court for an impecunious plaintiff to bring proceedings for a proper purpose and in good faith while being unable to pay the defendant's costs if the proceedings fail."

"The principle of access to justice means that an applicant should not have to provide security for costs as a condition of pursuing the claim unless to allow the claim to proceed without security would be an abuse of process." 22 While I would agree that this principle would apply to an applicant pursuing the substantive application in a Class 1 proceedings, that is, an appeal from a council's decision, I do not believe that an order for security of costs in these circumstances would operate to prevent the applicant pursuing a reasonable claim. In other words, I accept the submission of the respondent in that this application is not within the realms of the usual Class 1 application. The applicant has already exhausted its rights not only to appeal from the council's decision but also to appeal under s 56A of the Land and Environment Court Act. The application to set aside the decision of the Commissioner and of Sheahan J on appeal is outside the usual Class 1 procedure and could in itself - and that is not something I will rule on today - be called an abuse of process.

23 I do not believe that the notice of motion that is for hearing tomorrow is one that is a reasonable step in the proceedings. The court has various case law on whether it has the jurisdiction to re-open proceedings once final orders are made, not only on the substantive issue in the proceedings, but also on appeal under section 56A. For that reason I cannot accept the submission of the applicant that it has a bona fide interest that should be protected by my refusal to provide an order for security of costs. That is, I do not accept that if I make an order for security of costs I am denying the applicant procedural fairness or access to justice because I believe that the notice of motion that is returnable tomorrow is outside the usual procedure and nature of Class 1 proceedings.

24 In my view the matter for my determination is whether the right of the respondent to be protected from incurring further costs, in what is asserted to be an unfounded application where there is no evidence that such costs can be met by an adverse costs order, outweighs the futility in adjourning the proceedings for that purpose where most of those costs have already been incurred.

25 While I accept that most of those costs have been incurred and what is only outstanding to be incurred is the costs of the hearing tomorrow in my view it would be unfair to require the respondent to further defend a notice of motion by appearing tomorrow when there is clearly no evidence before the court that the applicant company would be able to meet any adverse costs order. The respondent has repeatedly indicated to Mr May and to the applicant that it should seek legal advice in relation to its notice of motion. In my view, as I said, the notice of motion falls outside the usual scope of a Class 1 proceedings and there is various case law to suggest that the court does not have the jurisdiction to reopen proceedings to re-consider matters that were before a commissioner and before a judge on a s 56A appeal. As a result, I accept the respondent's submission that it should be protected from further costs being incurred where it is unsure that the applicant has the ability to meet those costs.

26 As a result I am prepared to make the orders that are sought in the notice of motion and I am prepared to make them in the terms suggested in the notice of motion, that is, orders 1 and 3. Given that the respondent has been successful on this notice of motion I would make order 2. So I make order 1, that the applicant provide by 9 April 2009 security for costs of the respondent in the sum of $15,175 by way of unconditional bank guarantee in a form acceptable to the Registrar and order 3, that if the applicant fails to provide security for costs in accordance with order 1 the applicant's notice of motion filed on that date be dismissed. In my view the applicant's notice of motion should be dealt with before the respondent's notice of motion for costs of the s 56A appeal.

27 I will vacate tomorrow's date for the hearing of the notice of motion filed by the applicant. I will also vacate 9 March which was the date set down for the hearing of the respondent's notice of motion and I will list both of those notices of motion for hearing on 27 April 2009. Obviously the applicant's notice of motion is subject to the payment of security for costs. Costs 28 There is an application made for the costs of the notice of motion that I previously determined in favour of the respondent who filed the notice of motion. The respondent says that I should make an order for costs in its favour and that costs should be a fixed sum of $2,500 which not only covers today but also covers appearances on 12 and 17 February. There a couple of principles that the court uses in order to determine costs and one is that the rules provide that costs will usually follow the event, that is, where an applicant on a motion is successful in its notice of motion that it would usually have its costs paid by the respondent to the notice of motion. There are also other principles guiding the exercise of the court's discretion to award costs in the Land and Environment Court. Under the Land and Environment Court rules the applicant for the costs order must establish that it is fair and reasonable for the court to make a costs order.

29 I have previously set out the history of these proceedings in my decision in relation to the notice of motion that was returnable today. That history shows that the matter was brought back before the court on two occasions as a result of the conduct of the applicant in failing to provide documents to the respondent and in also failing to indicate at an earlier stage that there were no documents to produce. Therefore, I think in relation to those appearances it is fair and reasonable for me to make an award of costs. Also, based on that history I would also say that it is fair and reasonable for me to make an order for costs in favour of the respondent in relation to the notice of motion determined by me today given that the applicant has simply failed to co-operate with the correspondence written to it by the respondent's solicitors in relation to proving that it is capable of paying an adverse costs order.

30 Further, another matter for the court's consideration is whether the issues dealt with in the notice of motion can be separated from the issues in the proceedings. The applicant has indicated that I should reserve the question of costs. However, I do not accept that as a proper course given that this notice of motion can be wrapped up in itself and does not depend on the outcome of the proceedings. It would only cause further issues if I were to reserve the costs of this notice of motion. In my view the fixed sum that was proposed by the respondent is quite generous in that the actual costs that would have been incurred by the respondent in my view would be greater than $2,500. I think if I were not to order this fixed cost then the cost of the applicant in having the costs of this motion assessed, in addition to the assessed amount, would be greater than $2,500. In that case I think it would be to everyone's advantage, not just the respondent but also the applicant, if I order that that sum be paid as a fixed sum for the costs of today and of 12 and 18 February.

31 The orders that I have made today are: 1. I make order 1 of the orders sought in the Notice of Motion but it is in the terms that the applicant provide by 9 April 2009 security for costs of the respondent in the sum of $15,175 by way of unconditional bank guarantee in a form acceptable to the Registrar. 2. That the applicant pay the respondent's costs of this motion in the sum of $2,500 by 9 April 2009. I note that that includes the costs of 18 February and 12 February 2009 and so those costs, which were previously reserved, are wrapped up in this costs order and do not need to be further determined by the court. 3. That if the applicant fails to provide the security for costs in accordance with order 1 the applicant's notice of motion filed on 19 December 2008 be dismissed. 4. That the hearing dates that were previously set down of the two outstanding notices of motion be vacated, that is, 9 March and 26 February 2009. 5. That both notices of motion for hearing on 27 April. 32 I note that order 3 is a self-executing order so if the applicant fails to provide security for costs then only the respondent's notice of motion will be dealt on 27 April 2009.

      Joanne Gray
      Acting Registrar of the Court
      ljr

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