Gleeson JA, Mitchelmore JA, Button J, Beech-Jones CJ
Catchwords
[1936] HCA 40
Idoport v National Australia Bank Ltd [2002] NSWSC 18
Idoport Pty Ltd v National Australia Bank Ltd & Ors
Source
Original judgment source is linked above.
Catchwords
[1936] HCA 40
Idoport v National Australia Bank Ltd [2002] NSWSC 18
Idoport Pty Ltd v National Australia Bank Ltd & Ors
Judgment (7 paragraphs)
[1]
Background
It is necessary to set out briefly the history of the underlying proceedings.
On 11 June 2021, Holdings filed a statement of claim against the first defendant, the principal of a firm of solicitors, and the second defendant, Mr Chapman, an accountant. By an amended statement of claim filed 6 April 2022 and served on Mr Chapman on 7 May 2022, Holdings alleged that during negotiations in May 2015 which led to the acquisition of a water supply business by Holdings, Mr Chapman, acting for the vendor, made several false or negligent representations about the business to Holdings and otherwise acted in breach of an alleged fiduciary duty owed to Holdings and in breach of his statutory duties owed to Holdings as company secretary.
Mr Chapman promptly sought security for costs by notice of motion filed 27 July 2022. On 12 September 2022, the Registrar made orders that, (i) Holdings provide security for costs in the sum of $360,000, either by payment into court or by way of an unconditional bank guarantee, by 13 December 2022, (ii) the proceedings be stayed until that order had been complied with, and (iii) Mr Chapman have liberty to apply to seek dismissal of the proceedings if security, as ordered, was not provided.
Holdings failed to provide security for costs by the specified date. Mr Chapman exercised the liberty to apply and sought an order dismissing the proceedings and Holdings sought an extension of time until 31 May 2023. The stated basis for Holdings to provide the amount of security was the proposed sale by Ms Lisa Miller of a property at Whale Beach. Ms Miller was the sole director of Holdings.
On 16 December 2022, Beech-Jones CJ at CL varied the orders made by the Registrar by (i) granting a 3-month extension until 17 March 2023 for the provision of security and increased the amount of security to $390,000, and (ii) made orders that Holdings provide specified information to Mr Chapman in relation to the proposed sale of the Whale Beach property: Wet Fix Holdings Pty Ltd v Chapman [2022] NSWSC 1771.
In granting an extension of time, Beech-Jones CJ at CL observed that whilst the Whale Beach property was the only stated basis for Holdings to provide the amount of security required by the Court's order, "almost nothing was done during the 3-month period that [Holdings] was given to provide security" (at [15]) and that Ms Miller had taken "desultory steps to comply with an order for security and now gives a not particularly persuasive explanation of the steps that will be taken" (at [16]). His Honour concluded that it was not appropriate to grant the "enormous indulgence" sought by Holdings (at [17]) and noted that if Ms Miller had not exchanged contracts on the Whale Beach property by the middle of March 2023 "then that should be the end of the matter and the proceedings will come to an end" (at [18]).
Holdings failed to provide security for costs by the extended date. When the proceedings came before Button J on 21 March 2023, Holdings sought a further extension of time to provide security for costs. Ms Miller deposed in her affidavit of 20 March 2023 that repairs were required to the bathroom and deck after flood damage in 2022, and although the bathroom works were completed, the builder had informed her on 6 March 2023 that he was unable to repair the damaged wooden deck until April 2023.
Button J stood over Mr Chapman's motion for dismissal of the proceedings until 23 May 2023, effectively giving Holdings a further period of 60 days to provide security for costs. His Honour gave the following reasons:
As I say, but for one factor, balancing up the authorities spoken of at [99] and following in Ballard v Brookfield Australia Investments Ltd [2013] NSWCA 82 I would have granted the orders sought in the second defendant's Motion. But the compelling factor that gives one significant pause for thought is that because of a limitation period, if the proceedings were dismissed by me, then they would not be able to be recommenced.
…
Having said that, patently this situation cannot be permitted to continue for very much longer. I am the first to accept that the second defendant is suffering prejudice professionally, personally, and undoubtedly financially by the pendency of these proceedings. What I propose to do is to stand the matter over for 60 more days. It will be placed before me, so that I have complete knowledge of the details of the matter and another judge is not burdened with it. It will be listed at 2pm on 20 April 2023 [as said, in fact 23 May 2023]. If that requires a "Fire sale" of extreme urgency which is financially disadvantageous, so be it.
Holdings failed to provide security for costs by 23 May 2023. At the hearing before Button J on that date, Holdings sought a third extension of time until 12 June 2023 to provide security for costs in the form of an unconditional bank guarantee, rather than payment into Court from the proposed sale of the Whale Beach property. In support of this new plan, Holdings relied on affidavit evidence:
1. that the builder had informed Ms Miller on 6 March 2023 that the deck was currently safe and secure, but he could not start work on the deck until the second half of the year; note, however, the discrepancy between that statement and the April date stated by Ms Miller in her affidavit of 20 March 2023, par 30: see [9] above; and
2. that Mr Bradley Leffler, a friend of Ms Miller, had agreed to provide a bank guarantee in the amount of $390,000 as security for costs, and that he had "started the application process for the issue of a bank guarantee" on 19 May 2023 by establishing a term deposit in that amount with the Manly branch of the National Australia Bank (NAB); and
3. that it would take either between 5 and 8 business days, or up to 10 business days for NAB to issue a bank guarantee.
In refusing to grant a further extension of time and making the dismissal order, Button J succinctly stated his reasons in his ex tempore judgment given on 23 May 2023 as follows:
Really on the last occasion, I think it is fair to say that I granted, to use the vernacular, a "last chance" indulgence. It was founded on my diffidence in permanently ending the proceedings as a result of the limitation period that intervenes.
But regrettably, things remain contingent, in terms of the objective reality of the funds actually being available. As well as that, a new asserted plan, of which I was told nothing on the last occasion, is now said to be the basis of compliance with the order for security for costs.
To repeat myself, the funds, as things stand today, are simply not available in reliable form.
I respectfully think that Ms Elizabeth (counsel for the plaintiff) has said realistically all that can be said in the circumstances that have arisen here.
I think that things have gone beyond - perhaps well beyond - the point where this state of affairs should be permitted to continue. Indeed, I think it needs to be brought to an end, even though I am well aware of the significant consequences of that.
…
[2]
Proposed appeal
The first proposed ground contends that the primary judge "erred in the exercise of a discretion to dismiss the proceeding". This proposed ground is uninformative, as it does not identify any asserted error. Accordingly, it is necessary to turn to Holdings' summary of argument to identify the basis of the proposed appeal.
The second proposed ground contends that the primary judge erred in refusing to grant a stay of the order dismissing the proceedings because of an error of law that to do so would not extinguish the cause of actions. Although briefly referred to in Holdings' written summary of argument, this proposed ground was not the subject of any substantive submissions.
[3]
Disposition of leave application
Addressing the usual criteria for the grant of leave, it is plain that no issue of principle or any question of general public importance is identified in Holdings' summary of argument: Cheng v Motor Yacht Sales Australia Pty Ltd t/as the Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]. Thus, it is necessary to consider whether Holdings has demonstrated a reasonably clear injustice going beyond something that is merely arguable.
[4]
Dismissal decision
The starting point is that the dismissal decision pursuant to UCPR, r 42.21(3) involved the exercise of the Court's discretion. Accordingly, the "constrained" or "deferential" standard of appellate review of the exercise of a judicial discretion in House v The King applies: (1936) 55 CLR 499 at 504-505; [1936] HCA 40. In addition, as the dismissal decision pertains to a matter of practice or procedure, there is the "added restraint" and the "particular caution" which an appellate court should exercise in reviewing a judgment on such matters: Hassan v Sydney Local Health District (No 2) [2020] NSWCA 356 at [25] (Bell P, Basten and Leeming JJA agreeing); McInnes v Rheem Australia Pty Ltd [2021] NSWCA 89 at [22]-[23]. As was said in PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [5] (Bell P, Simpson AJA) (citations omitted):
Discretionary decisions, whether in the context of substantive or procedural relief, also engage the strictures against over-ready appellate interference and the correlative need for "added restraint" associated with House v The King with the consequence that a "heavy burden" lies on an applicant seeking leave to appeal from a discretionary judgment on a question of practice or procedure: ….
Senior counsel for Holdings fairly acknowledged in this Court that the delay by Holdings in complying with the Court's order has been "if not wanton at least egregious". However, it is said that the dismissal decision involved "punishing" Holdings for its delay. That characterisation of the decision ignores that the dismissal power conferred by UCPR, r 42.21(3) is only engaged on non-compliance with the Court's order to provide security for costs. His Honour assessed the materiality of the delay by Holdings, observing that matters had "gone beyond - perhaps well beyond - the point where this state of affairs should be permitted to continue". In exercising the Court's discretion to dismiss the proceedings, his Honour was not punishing Holdings for its default.
It is said with reference to the seeming inability of Holdings to fund the proceedings, being one of the factors referred to by Einstein J in Idoport v National Australia Bank Ltd [2002] NSWSC 18 at [24] as relevant to the exercise of the discretion, that this case is one of timing, not availability of the security. It is also said that the dismissal decision was made because "a court deadline was missed - essentially, for a lack of quickness". These submissions misstate the position and his Honour's reasons.
First, it is well-established that the discretion conferred by UCPR, r 42.21(3) is broad and unfettered by any express limitations. There is no minimum period established by legislation, rules, or practice within which an application for dismissal might be made following default in compliance with an order for payment of security: Idoport Pty Ltd v National Australia Bank Ltd; Idoport Pty Ltd v Argus [2002] NSWCA 271 at [51] (Mason P, Stein and Giles JJA agreeing).
Second, the non-compliance by Holdings with the Court's order to provide security for costs is not fairly described as a "lack of quickness". Notwithstanding two extensions of time, Holdings had failed to provide security for costs over an 8-month period. It was on notice of the application for dismissal. Having sought and obtained the second extension of time based on the asserted delay in effecting repairs to the Whale Beach property before it could be sold, Holdings belatedly changed tack (without providing any explanation for the discrepancy in the evidence of Ms Miller concerning the delay in the repair works to the deck of the Whale Beach property (see [9] and [11(1)] above)), and sought a third extension on the basis that it needed more time to provide security in a different form, namely, a bank guarantee.
The finding by the primary judge that the funds to support the issue of a bank guarantee "are simply not available in a reliable form" was well-open to his Honour. That is for several reasons.
First, there was no explanation by Holdings why the funds said to be available from Mr Leffer had not been paid into Court as security for costs. Second, although Mr Leffler had undertaken in his affidavit to provide the bank guarantee for Holdings to the Court once it had been issued by NAB, Mr Leffler did not proffer an undertaking directly to Mr Chapman and the Court to provide a bank guarantee within any specified period. Third, there was no evidence that Mr Leffler's so-called "agreement" with Ms Miller to provide a bank guarantee was binding or that his promise to do so was irrevocable. Fourth, there was no evidence that Mr Leffler had entered into a binding agreement with NAB for the issue of a bank guarantee; his evidence went no higher than that he had started that process by opening a term deposit.
It is said that the primary judge erred in exercising the discretion to dismiss the proceedings because that decision was disproportionate to the harm that will be suffered by Holdings by reason of the dismissal being the loss of an arguable claim of some considerable value. The difficulty with this submission is that it merely described the consequences of the dismissal decision; it did not identify any alleged error of the House v The King type.
It is also said that by dismissing the proceedings potentially valuable causes of action were extinguished, and this is a "draconian" result and produces a harsh and unjust outcome, which unduly preferences the "quick" aspect of the Court's overriding obligations at the expense of the "just"; being a reference to the Civil Procedure Act 2005 (NSW), s 56. This complaint is unjustified.
His Honour did not unduly preference the "quick" over the "just" resolution of the proceedings. Nor is the "just" resolution of proceedings to be viewed solely through the eyes of one party alone; regard must be had to the position of both parties. In exercising his discretion, his Honour took into account the competing considerations, including the significant consequences for Holdings that the limitation period for a new claim against Mr Chapman had expired.
On a fair assessment of the circumstances, notwithstanding the significant consequences for Holdings of the limitation point, (i) the period that had elapsed since security was ordered was lengthy - eight months, (ii) Holdings was on notice of the application for dismissal since December 2022, (iii) the seeming inability of Holdings to fund the proceedings was readily apparent, given (a) the non-compliance with the Court's order as extended on two occasions, (b) the discrepancy in the explanation given for the delay in the sale of the Whale Beach property (see at [20] above), and (c) the absence of evidence that funding was available in a reliable form, and (iv) the prejudice to Mr Chapman arising from being exposed to long unresolved allegations involving serious challenges to his personal honesty and commercial reputation, were all matters which assumed importance on the dismissal application. The proposed appeal, in substance, is nothing more than an invitation for this Court to substitute its own discretion for that of the judge: Durham v Durham [2011] NSWCA 62 at [84] (Campbell J). Since no reasonably arguable error has been identified, the first proposed ground of appeal does not warrant a grant of leave.
[5]
Refusal of stay
The separate reasons given by Button J for refusing the stay application were not included in the White Book. However, nothing turns on this omission. The refusal of the stay application does not warrant a grant of leave for two reasons: (i) this ground is derivative of and assumes a grant of leave in respect of the first proposed ground, and (ii) in any event, as indicated, no substantive submissions were advanced in support of this proposed ground.
[6]
Conclusion
For the reasons set out above, the Court refused leave to appeal and made the order indicated above.
[7]
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Decision last updated: 13 October 2023
THE COURT: On 23 May 2023, Button J made orders in the Common Law Division dismissing proceedings brought by Wet Fix Holdings Pty Ltd (Holdings) against the second defendant, Mr Chris Chapman, pursuant to r 42.21(3) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). That rule provides that if the plaintiff fails to comply with an order under r 42.21 for the provision of security for costs, the Court may order that the plaintiff's claim for relief in the proceedings be dismissed. His Honour also refused an oral application by Holdings for a stay of the order dismissing the proceedings against Mr Chapman.
Holdings seeks leave to appeal against the orders made by Button J. Leave is required because the orders are interlocutory: Supreme Court Act 1970 (NSW), s 101(2)(e); Goodman v Lorenzen [2000] QCA 11 at [11]. At the conclusion of oral argument on 9 October 2023, the Court dismissed the summons seeking leave to appeal with costs. These are our reasons why leave to appeal was refused.