William Lawrence (Globe Dye Works) Pty Ltd (in liq) (administrator app'td) v Australian Guarantee Corporation Ltd [2000] VSC 234

11. By summons filed in the Court on 22 December 1998 the defendant sought a stay of the proceeding until such time as either the plaintiff or Plain or another company associated with Plain, gave security for the defendant's costs of the proceeding.

14. For reasons which are not relevant to the present application, the defendant's summons did not come before a Master of the Court until 30 August 1999.

17. By that time the application had been resolved by the parties on the basis that certain undertakings were to be given to the Court by Plain.

20. The parties appeared by their counsel before Master Evans that day and counsel for the plaintiff who also announced that he appeared for Plain gave the following undertakings to the Court. I recite them as they appear under "Other Matters" in the Master's order.

"Upon counsel for Mr. Sidney John Plain, a non-party, undertaking on behalf of Mr. Plain that until the hearing and determination of this proceeding or order of the Honourable Court, he will not without the consent in writing of the defendant: (i) sell, transfer, charge or mortgage beyond $1,200,000.00 the property known as 3518 Nepean Highway, Sorrento ('the property'); or (ii) increase beyond $1,200,000.00 the indebtedness secured by any mortgage over the property; And upon counsel for Mr. Sidney John Plain further undertaking on behalf of Mr. Plain that he will pay such of the defendant's costs as this Honourable Court shall order that the plaintiff pay to the defendant in this proceeding."

24. By consent of the parties the Master then dismissed the defendant's summons.

27. It now transpires that on 20 April 2000 and without any notice to the defendant let alone with its consent, Plain sold the Sorrento property to Glenda Marian Mehrten for $2,100,000.

30. The solicitor acting for Plain in respect of the sale is the solicitor acting for Plain and the plaintiff in this proceeding.

33. In his affidavit of 26 May 2000 sworn in opposition to the defendant's application to have him dealt with for contempt, Plain has sworn that it was solely due to oversight on his part that he did not seek the consent of the defendant before seeking to sell the property.

36. His affidavit also contains the following paragraph:

"In the circumstances I seek that the Court forgive me for my oversight and not proceed with the hearing of the defendant's summons. I would seek that instead the Court: (a) fix an appropriate method of me giving security to the plaintiff; and (b) assess the quantum of that security."

40. Plain's solicitor has sworn in his affidavit of 25 May 2000 that by oversight he did not remind Plain of the undertaking given to the Court on his behalf.

43. It is a well established principle of law that the breach of an undertaking given to the Court by a person in pending proceedings on the faith of which the Court sanctions a particular course of action, is misconduct amounting to contempt.

46. In the present case it is clear beyond question that Plain gave the undertaking, relating to the sale of the Sorrento property, albeit through his counsel, and that the undertaking has been broken.

49. It was because of the undertaking given by Plain that the Master made the order he did dismissing the defendant's application for security for costs without any adjudication on the merits.

52. Whilst the undertaking was in place there was no point in the defendant pursuing the application. If it was ultimately successful in the proceeding its costs of the proceeding would have been secure. As the matter stands at the moment, that is no longer so.

55. As I observed a moment ago - one could not have a clearer case of contempt.

58. Nevertheless it was argued by counsel for Plain that the defendant's contempt application was defective and should be dismissed. Three reasons were advanced in support of the submission.

61. In the first place as there was not personal service of the defendant's summons on Plain, the defendant has not complied with the provisions of Rule 77.06(5) which states:

"The summons or originating motion and a copy of every affidavit shall be served personally on the respondent, unless the court otherwise orders."

65. In the second place the defendant's summons does not specify the contempt with which Plain is charged and therefore the defendant has not complied with the provisions of Rule 75.06(4) which requires that to be done.

68. Finally it is said that the defendant has not complied with the provisions of Rule 66.10 the relevant sub-paragraphs of which state:

"66.10 Service before committal or sequestration (1) A judgment shall not be enforced by committal or sequestration unless - (a) a copy of the judgment is served personally on the person bound; and (b) if the judgment requires the person bound to do an act within a fixed time, the copy of the judgment is so served a reasonable time before that time expires. ... (3) A copy of a judgment served under this Rule shall be indorsed with a notice, naming the person served, that the person served is liable to imprisonment or to sequestration of property if - (a) where the judgment requires the person bound to do an act within a fixed time, the person bound refuses or neglects to do the act within that time; or (b) where the judgment requires the person bound to abstain from doing an act, the person disobeys the judgment. ... (5) A judgment requiring a person to do an act within a fixed time or a judgment requiring a person to abstain from doing an act may be enforced under Rule 66.05 notwithstanding that service has not been effected under this Rule if the person against whom the judgment is to be enforced has notice of the judgment - (a) by being present when the judgment was given; or (b) by being notified of the terms of the judgment whether by telephone, telegram or otherwise. (6) The Court may dispense with service under this Rule."

72. I shall deal with the objections in the order in which I have enumerated them.

75. In a telephone conversation the process server who had been instructed to effect personal service of the defendant's summons and supporting affidavits on Plain had with Plain, Plain told him that the documents could be served on him via his solicitors who had instructions to accept service of documents on his behalf. That is what the defendant's solicitors did.

78. In their letter of 26 May to the defendant's solicitors Plain's solicitors acknowledged receipt of the documents.

81. In that situation I dispense with the requirements of Rule 77.06(5) that there be personal service of the documents on Plain.

84. When the defendant's solicitors realised that the summons for contempt was defective they gave notice to Plain's solicitors of their intention to make application to the Court to remedy the defect by amending their summons.

87. As Plain and his solicitors were under no misapprehension as to the nature of the contempt, it being spelled out quite clearly in the supporting affidavit, it is appropriate that the defendant be given leave to amend its summons in the manner sought and I now give it that leave.

90. Finally, in my opinion Rule 66.10 has no application in this case.

93. This is not an application to enforce a judgment by committal or sequestration. It is an application to deal with a person for breach of an undertaking given to the Court by that person.

96. In the circumstances of this case, however, even if Rule 66.10 of the Rules did apply I would dispense with the requirements of the rule.

99. Although Plain was not in Court at the time his counsel gave the undertakings to the Master, he was told by his solicitor that the undertakings had been given. In that regard see paragraph 5 of his solicitor's affidavit sworn 25 May 2000. He should never have been in any doubt about the matter; nor should he have been in any doubt as to the consequences of any breach by him of the undertakings.

102. I find therefore that in breaching the undertaking he gave to the Court concerning the Sorrento property, Plain committed a contempt of court. In due course I shall hear anything further counsel wish to say concerning the question of penalty.

105. I turn then to the defendant's summons seeking security for costs.

108. In my opinion the circumstances of this case are such as to justify the making of the order sought.

111. Apart from the aspect of the matter I have already dealt with, which of itself would be reason enough to make an order for security for costs, I have some difficulty in accepting the proposition that the plaintiff's impecuniosity has been brought about solely by the conduct of the defendant in relation to the factoring agreement. It would seem to me from the content of the plaintiff's statement of claim that it may well be that the plaintiff's financial difficulties arose because of the extent of its borrowings and the other financial difficulties it encountered in September 1990 which are referred to in paragraph 10 of its statement of claim.

114. If it is the case for the plaintiff that after that date the defendant wrongly withheld from the plaintiff moneys to which the plaintiff was entitled, why did not the plaintiff take action against the defendant at the time it commenced withholding the moneys, with a view to compelling the defendant to pay the moneys to it?

117. At all events I propose to now make an order against Plain that he give security for the defendant's costs of the proceeding.

120. It is not appropriate that Plain be required, at this stage, to give security for the whole of the defendant's costs of the proceeding. I consider it is sufficient that he be required to give security for the costs to be incurred by the defendant up to and including the costs of a mediation of the proceeding.

123. Those costs have been assessed by the defendant's legal cost consultant at $104,675.55. See paragraphs 5 and 6 of the affidavit of Elizabeth Mary Harris sworn 22 December 1988.

126. The plaintiff's legal cost consultant on the other hand has assessed the defendant's costs to that stage of the proceeding at $36,190. See exhibit CMD1 to the affidavit of Catherine Mary Dealehr sworn 26 August 1999.

129. Clearly I am in no position to determine which estimate is the more accurate.

132. What I can say, however, is that based upon my experience over the years I would be very surprised if the defendant's costs of preparing the proceeding to the stage of mediation will be less than $80,000.

135. Further, I would be very surprised if the defendant's costs associated with discovery will be of the order of $37,423.50 as opined by Mrs. Harris.

138. If that is what discovery is going to cost a litigant in an action of this nature then it is high time the Court gave consideration to abolishing discovery in its present form.

141. At all events, doing the best I can in the matter I propose to order that Plain give security for the defendant's costs of the proceeding in the sum of $80,000.

144. If the proceeding is not settled at mediation then it will be open to the defendant to make a further application to the Court in respect of the costs which it will incur at the trial of the proceedings.

147. I make the following orders in the proceeding:

1. I dispense with the requirements of Rule 77.06(5) of the Supreme Court Rules.

2. I give leave to the defendant to amend its summons filed in the Court on 16 May 2000 so as to specify the contempt with which Sidney John Plain is charged.

3. I order that on or before 30 June 2000 Sidney John Plain give security for the defendant's costs of the proceeding in the sum of $80,000, such sum to be paid into an interest bearing account in the name of the solicitors for the plaintiff and the solicitors for the defendant and not be paid out of the said account without the consent of the parties or the order of the Court. I order that until payment of the sum of $80,000 into the said account this proceeding be stayed.

153. I order that the said Sidney John Plain pay the defendant's costs of the application for security for costs to be taxed on a party party basis.

156. I order that the said Sidney John Plain pay the defendant's costs of the contempt proceeding to be taxed on an indemnity basis.