The Council's submissions on the appeal
39The Council contended that his Honour, in refusing the application for security, erred in the following essential respects. First, that he failed to pose and determine the threshold question required by UCPR, r 42.21 and the Corporations Act, s 1335(1). Secondly, that his Honour failed to correctly assess the evidence. Thirdly, that his Honour erred in concluding that there were discretionary considerations that stood against an order for security for costs. Finally, that his Honour failed to give legally adequate reasons for his decision.
40As I have indicated, his Honour's reasons were brief. His Honour did not engage in any dissertation of the legal principles but rather dealt directly with the basis upon which the Council made its application, namely, LBC's impecuniosity. It was not inappropriate for his Honour to approach the application in a summary way. He was dealing with the matter during the course of a busy court day and there is no basis to infer that his Honour misunderstood the legal principles he applied. Accordingly, I would not uphold the Council's first complaint. For the same reason, I would reject the complaint that his Honour did not give legally adequate reasons.
41However, I am satisfied that his Honour erred in his assessment of LBC's financial position and its ability to meet any costs order made against it. The effect of the evidence to which I have referred is that LBC, as trustee for the Harb Family Trust, has a net asset value of virtually nil. In other words, its assets and liabilities are approximately equal. There is no evidence of income other than rental income but its expenses, most particularly in the form of interest payments, have in most years exceeded, in a small amount, the amount of income earned from all sources. To the extent that the real beneficiaries of the proposed development application in respect of the land are Amir Harb and Habib Harb, the evidence as to their financial position is such that they would not be able to pay any order for costs made against LBC and neither have made an offer to do so.
42Accordingly, I am of the opinion that the Council has satisfied the onus of establishing that there is reason to believe that LBC and the parties who stand to benefit from any success in the proceedings will be unable to pay its costs, should the proceedings fail, or should LBC for any reason be made liable for an order for costs.
43LBC submitted that even if the Council had satisfied the preliminary onus under the section, his Honour correctly exercised his discretion, given the delay in the making of the application and the fact that it was the conduct of the Council which has caused its impecuniosity.
44In the present case there was delay in bringing the application for security for costs. The amended statement of claim, which was the first legal process served upon the Council, was served in November 2009. The application for security for costs was not made until 13 January 2012. The Council submitted, however, that the mere passage of time did not provide a reliable guide as to the actual delay in the matter. It is submitted that much of the two years delay since the service of the amended statement of claim upon it was due to inactivity or vacillation on the part of LBC.
45In its written submissions to the trial judge, the Council set out a chronology of the procedural steps in the matter and submitted that the case had not progressed in any substantive way due to LBC's conduct. In particular, it is submitted that some 13 months elapsed from the time the Council filed its defence to the amended statement of claim until LBC served its further amended statement of claim. During that period of time, LBC was in breach of two procedural court orders. The Council contended that LBC wasted the totality of 2010 and a significant portion of 2011 in advancing its claim. The Council pointed out that it first notified its intention to bring an application for security for costs in September 2011. The same submissions were advanced before this Court.
46In my opinion, the Council has delayed in bringing this application. However, delay itself is not a disentitling factor. In the present case, given that the claim is still at the pleadings stage, I am satisfied that the delay involved is not such that an order ought not to be made. However, LBC ought not to be prejudiced by the delay that has in fact occurred. Accordingly, any order for security should be one in respect of future costs, and not those that have been incurred prior to the bringing of the application. It should be noted that, subject to including in its assessment those costs in respect of which orders have already been made in its favour, the Council's application was in respect of costs to be incurred in the future.
47The final question for determination was whether LBC had discharged its onus of satisfying the Court that it was the Council's conduct which caused or materially contributed to its inability to meet an order for costs. In my opinion, that onus was not discharged. LBC became the registered proprietor of the land in July 2005. At that time, the development application was subject to proceedings in the Land and Environment Court. Those proceedings concluded successfully in favour of either Amir Harb and Habib Harb or LBC on 31 May 2006. It is likely, therefore, that any loss sustained by LBC, assuming the existence of a duty of care and a breach of that duty by the Council as alleged, is limited to a period of less than 12 months. Further, there was no evidence to satisfy the Court of the adequacy of LBC's financial position before its dealings with the Council. This is true regardless of whether one considers LBC's claim as being confined to the period to which I have referred or whether LBC is able to establish that it was an assignee of any rights that Amir Harb and Habib Harb had against the Council.