Solicitors:
Australian Law Partners (Plaintiff)
Brown Wright Stein Lawyers (Second Defendant)
File Number(s): 2021/169213
[2]
EX TEMPORE JUDGMENT (revised from transcript)
On about 26 July 2022 the second defendant, Christopher Chapman, filed a notice of motion seeking an order that the plaintiff, Wet Fix Holdings Pty Limited, provide security for costs in the sum of $360,000, and that pending that occurring, the proceedings be stayed, and a further order that if security was not given the proceedings would be dismissed.
On 12 September 2022 a Registrar decided that motion by making an order that the plaintiff provide that security either by payment into court or by way of unconditional bank guarantee and do so by 13 December 2022. The Registrar also ordered the proceedings be stayed until that order had been complied with and otherwise ordered that, "Liberty to apply in respect of prayer 3 of the notice of motion filed 26 July 2022 seeking dismissal [of the proceedings] if security as ordered is not provided".
As events transpired the security was not provided. The second defendant exercised the liberty to apply to have the matter relisted for an order that the proceedings be dismissed. One part of the resistance to that order is the contention that the way in which this has unfolded effected some form of denial of procedural fairness to the plaintiff. I do not accept that. As I will outline, the evidence indicates there was almost no communication by the plaintiff with the second defendant until earlier this week about their ability to comply with the order. Anyone who was familiar with the procedural background of the matter would take it as a given that, if the security was not provided by the requisite date, it was almost inevitable that liberty to apply would be exercised and the dismissal of the proceedings would be sought.
When the matter was called on today, counsel for the plaintiff was granted leave to file in court a notice of motion seeking an order to extend the time to provide the security until 31 May 2023. He did so on the basis that that is the anticipated time at which the proceeds of a sale of the house of the moving force behind the plaintiff, Ms Lisa Miller, is said to be likely to be available.
Some background is required. On or about 11 June 2021 the plaintiff commenced these proceedings. By the amended statement of claim the plaintiff sues the first defendant, a firm of solicitors, and the second defendant, who was an accountant.
At least so far as the second defendant is concerned, the contention is that during the course of negotiations which led to an acquisition of a business by the plaintiff, the second defendant, either acting for the vendor or at least having knowledge of the subject matter of the sale, made various misrepresentations about the business to the plaintiff and otherwise acted in breach of an alleged fiduciary duty that was said to be owed.
I was briefly taken to some material concerning other litigation regarding the acquisition of the business. I am in no position to make any assessment as to the plaintiff's prospects of success. The amount sought by way of damages appears to be substantial. Two matters can be noted about the litigation at this point.
First, the allegations against the second defendant are old and they are serious. He has an undoubted interest in the proceedings being dealt with expeditiously. Second, it seems to me that if the proceedings are dismissed because of the inability to provide security by the requisite time that will be the end of the plaintiff's cause of action in that it will be time barred.
On 12 December 2022 the second defendant wrote to the plaintiff's solicitors advising that the security was required to be provided on the folllowing day. They sought confirmation that it would be provided and advised that steps would be taken to dismiss the proceedings if it was not.
Two days later the plaintiff's solicitor responded. He advised that a property in the name of Ms Miller had been ordered to be sold by the Family Court of Australia and that it had an estimated value of somewhere between $5.5 and $5.75 million. His letter set out various calculations about the use of the proceeds of sale to pay the mortgage and to her estranged husband. Nevertheless, the letter indicated the surplus should be sufficient to provide the security. He requested further time. That led to an immediate response querying various aspects of the information provided and indicating the extension would be opposed.
On 15 December 2022 the plainitff's solicitor responded again, stating inter alia, "Our client was unable to further encumber or sell the Whale Beach property until the proceedings related to the Family Court proceedings were finalised, including a leave application to the High Court of Australia".
That statement was incorrect. The author of that letter has sworn an affidavit. The affidavit includes the statement that he was instructed that his client, Ms Miller, was restrained from further encumbering the property while an application for leave to appeal was before the High Court of Australia. That statement was, strictly speaking, correct but needs to be placed in context.
The material I was taken to on this application reveals that in November 2021 orders were made that restrain Ms Miller from encumbering the property, but they also required her to sell the property and take steps to do so. The restraint on further encumbrances merely operated until the property was sold. It was Ms Miller who then sought leave to appeal to the High Court which was ultimately refused. Thus, as was submitted by the second defendant, it was always open to Ms Miller to sell the property to meet various liabilities and address the security.
The balance of the affidavit then indicates the steps that have been taken, I infer very recently, to effect the sale of this property and to use the proceeds to meet the order for security. They include the signature by Ms Miller on a sales inspection report and auction agency agreement, although as was noted by counsel for the second defendant, it was not signed by the agent.
Otherwise, it is evident from the affidavit, as I have indicated, that almost nothing was done during the three-month period that the plaintiff was given to provide security. The sale of the property was not prevented by the Family Court orders. Further, there is nothing in the material to indicate whether or not Ms Miller had any other assets that could be used to support or meet the security order.
The end result is that I am left in the very unsatisfactory position of considering ordering the peremptory termination of what appears to be an arguable claim of some value whose continued existence does cause prejudice to the second defendant in circumstances where the plaintiff has taken relatively desultory steps to comply with an order for security and now gives a not particularly persuasive explanation of the steps that will be taken.
Even so, I am not inclined to make an order that would yield the draconian step of bringing the proceedings to an end. Equally, however, I am not prepared to simply grant the enormous indulgence to the plaintiff of allowing them until the end of May 2023 to provide security. Instead, I will take the following steps.
I will extend the time for the compliance of the security to the middle of March 2023. I do not expect that, even if Ms Miller diligently pursued a sale, the proceeds of sale will be available by then. However, it does seem to me that if no exchange is effected by the middle of March 2023 then that should be the end of the matter and the proceedings will come to an end.
Bringing the matter back at around that time will at least save the second defendant from the likelihood of simply finding themselves here in June of next year with the order not having been complied with. The second defendant will have whatever comfort it has from my observation that this property will need to have been sold by the middle of March.
Further, I will take the step of increasing the amount of security to cover an estimate of the costs of this application and the incidental costs that the second defendant has been put to by the task of reminding the plaintiff what the plaintiff's obligations were and supervising and monitoring what the plaintiff says they will do in selling the property.
Third, I will make various orders that require the provision of information by the plaintiff about the proposed sale so, as it were, to keep the plaintiff focussed and to give the second defendant at least some appreciation of whether this sale is realistically being pursued.
Accordingly, I make the following orders:
1. Vary Order 1 made by the Registrar on 12 September 2022 by substituting the date 17 March 2023 for 13 December 2022 and the figure $390,000 for the figure of $360,000.
2. On or before 9 January 2023 the plaintiff is to provide to the second defendant:
1. (i) a copy of any agreement for the appointment of an agent to sell the property at 230 Whale Beach Road, Whale Beach, which has been executed by both the vendor and any agent;
2. (ii) a statement of all encumbrances over that property, being the identity of the party who is the beneficiary of the encumbrance and the amount owed.
1. On or before 31 January 2023 the plaintiff is to advise the second defendant of the proposed date for any auction of the property.
2. Within three working days of the exchange of any contract for the sale of the property the plaintiff to provide a copy of that contract to the second defendant.
3. Forty-eight hours prior to any settlement of any sale of the property the plaintiff is to provide the second defendant with the most currently available settlement statement in respect of the sale.
4. Stand over the balance of the notice of motion filed on 26 July 2022 by the second defendant to Tuesday 21 March 2023 at 9.30.
5. The plaintiff's notice of motion filed in court today be otherwise dismissed.
6. The plaintiff to pay the second defendant's costs of and incidental to today's listing.
[3]
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Decision last updated: 20 December 2022