Reported Decision : (2003) 45 ACSR 542 New South Wales Supreme Court CITATION : Circaz Pty Limited v Manolidis [2003] NSWSC 455 HEARING DATE(S) : 10 April & 15 May 2003 JUDGMENT DATE : 3 June 2003 JURISDICTION: Equity Division JUDGMENT OF : Davies AJ DECISION : Application dismissed. Plaintiffs' costs to be costs in the cause. CATCHWORDS : Practice & Procedure - security for costs - security for undetakings as to damages - whether personal undertaking of individual plaintiff should be accepted - principles considered - whether defendants' motions prosecuted efficiently. LEGISLATION CITED : Corporations Act 2001 (Cth), s 1335 Supreme Court Rules, Pt 15 r 26, Pt 53 r 2 Allen v Jambo Holdings Limited [1980] 1 WLR 1252 American Cyanamid Co. v Ethicon Ltd [1975] AC 396 Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176 CASES CITED : Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 Custom Credit Corporation Ltd v Whitehall Holdings Pty Ltd (unreported, Supreme Court of Western Australia, 7 April 1992) Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 Ilat Nominees Pty Ltd v Murragong Nominees Pty Ltd (1980) 48 FLR 385 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Circaz Pty Limited (First Plaintiff) Montcap Pty Limited (Second Plaintiff) Robert Crossman (Third Plaintiff) Theodore Manolidis (aka Ted Manny) (First Defendant) PARTIES : Coastal Waterfront Developments Pty Limited (Second Defendant) Robert Francis Hooper (Third Defendant) Gizmo Productions Pty Limited (Fourth Defendant) Deidre Bounds (aka Deidre Balfoort) (Fifth Defendant) Anthony Cordato (Sixth Defendant) FILE NUMBER(S) : SC 4990/02 M Orlov (Plaintiffs / Respondents) COUNSEL : A Justice (First Defendant / Applicant) R Eassie (Second, Fourth & Fifth Defendants / Applicant) Gray & Perkins (Plaintiffs / Respondents) SOLICITORS : Dennis & Co (First Defendant / Applicant) DC Balog & Associates (Second, Fourth & Fifth Defendants / Applicant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DAVIES AJ 3 JUNE 2003 4990/02 - CIRCAZ PTY LIMITED & ORS v THEODORE MANOLIDIS (AKA TED MANNY) & ORS JUDGMENT 1 DAVIES AJ: In these proceedings, the third plaintiff, Robert Crossman, and two companies with which he is associated, have sued Theodore Manolidis ("Manny"), Deidre Bounds, Robert Francis Hooper, Anthony Cordato, and two companies in relation to some failed development projects and in relation to the use of monies. Damages and accounts are sought. Security for Costs 2 The defendants, other than Mr Hooper and Mr Cordato who are solicitors, seek orders that the plaintiffs provide security for their costs in the proceedings. 3 Part 53 r 2 provides:- (1) Where, in any proceedings, it appears to the Court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside the State; (b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so; (c) subject to subrule (2), that the address of a plaintiff is not stated or is mis-stated in his originating process; (d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings; or (e) that there is reason to believe that a plaintiff being a body corporate will be unable to pay the costs of the defendant if ordered to do so, the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given. (2) The Court shall not order a plaintiff to give security by reason only of subrule (1)(c) if it appears to the Court that the failure to state his address or the misstatement of his address was made without intention to deceive. 4 Section 1335 of the Corporations Act 2001 (Cth) provides, inter alia:- (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. 5 The hearing of the application took a day and a half. In the general run of cases, and this application was, in my view, in that category, the hearing should not take more than one to two hours. Such an application ought not to be allocated a day's hearing time. It ought to be set down at 9.30am with a view to going on with a substantive matter at 11.00 or 11.30am. If applications for security for costs are looked at as they ought to be, as simply interlocutory applications to be decided upon well-established principles, they should not take much time. If counsel for defendants look upon applications for security of costs as an easy means of stopping a proceeding in its tracks, they approach the application from the wrong standpoint and with the wrong emphasis. Applications for security for costs should, like other interlocutory applications, be disposed of efficiently, taking into account the nature of the application as merely interlocutory. The demands upon the Court's time are too great to justify a day's hearing, let alone a day and a half's hearing, for an ordinary application for security for costs. 6 Relevant principles were stated by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189, where her Honour said at pp 196-198:- "The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security: see the review of the authorities by French J in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 509. See also Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 623-624 and Zeeman J's decision in Weily's Quarries v Devine Shipping Pty Ltd (1994) 14 ACSR 186 at 188. In Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 at 415, Cooper J stated that: '[i]t is not possible or appropriate to list all of the matters relevant to the exercise of the discretion. The factors will vary from case to case. The weight to be given to any circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances which have to be weighed: P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 65 ALJR 642 at 643.' Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are: 1. That such applications should be brought promptly. This is a principle of longstanding: see Grant v The Banque Franco-Egyptienne (1876) 1 CPD 143; see also Smail v Burton; Re Insurance Associates Pty Ltd [1975] VR 776 per Gillard J at 777; Caruso Australia Pty Ltd v Portec (Australia) Pty Ltd (1984) 1 FCR 311 at 313; Bryan E Fencott at 514. I should state immediately that there is no issue of delay in this case. 2. That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations: see M A Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 at 100; Bryan E Fencott at 514. As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success. ( Bryan E Fencott at 514). 3. Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim: see M A Productions v Austarama Television at 100. 4. Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate: see M A Productions v Austarama Television at 100; Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 per Clarke J at 545; Bryan E Fencott at 513. In Yandil Holdings at 545 Clarke J stated the principle in these terms: '[t]he fact that the ordering of security will frustrate the plaintiff's rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order. Nonetheless it will usually operate as a powerful factor in favour of exercising the court's discretion in the plaintiff's favour.' This factor is related to the next, namely: 5. Whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security: see Memetu Pty Ltd v Lissenden (1983) 8 ACLR 364; Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201; Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1; Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120 at 123; Bryan E Fencott at 513; Yandil Holdings at 545. The combined effect of these two principles was summarised by Meagher JA in Hession at 123 as follows: '… a company in liquidation against whom an order for security for costs is sought cannot successfully resist such an order merely by proving that it cannot fund the litigation from its own resources if an order for security is made; it must prove that it cannot do so even if it relies on the other resources available to it (the company's shareholders or creditors) … Finally, whilst it is both true and important that poverty must be no bar to litigation, what that means is that the courts must be astute to see that no person pursuing a claim which is not frivolous is precluded from doing so by the erection of obstacles which poverty is unable to surmount; it does not mean that proof of insolvency automatically confers an immunity from statutory provisions which deal with insolvent plaintiffs.' 6. An issue related to the last guideline is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking: see Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53; Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304; Clyde Industries Ltd v Ryad Engineering Pty Ltd (1993) 11 ACLC 325. 7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate: see Interwest at 626; Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (1979) ACLC 32,446; Sydmar Pty ltd v Statewise Developments Pty Ltd (1987) 5 ACLC 480; Weily's Quarries v Devine Shipping where Zeeman J stated (at 189): '[t]he general proposition that security ought not to be ordered where the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt self-help procedures is no more than that, a general proposition. It ought not to be elevated to being a rule of law. In many cases of that nature it could be considered oppressive to require security and that in itself may be sufficient to refuse to make an order … [see] Sydmar Pty Ltd v Statewise Developments Pty Ltd and Interwest Ltd v Tricontinental Corporation Ltd .' …" See also the careful examination by French J in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 and by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744. 7 I agree with French J and with Beazley J that one should deal with every case on its particular facts without any predisposition to the grant or refusal of security for costs. As Smithers J said in Ilat Nominees Pty Ltd v Murragong Nominees Pty Ltd (1980) 48 FLR 385 at 386, "the ultimate decision must depend upon the balance of justice and common sense." 8 However, there are two inter-related factors of particular importance to the exercise of the discretion. The first is that security for costs is rarely ordered as against an individual. Part 53 r 2 points out the type of circumstance where the requirement that an individual provide security for costs will be considered. The principle behind this is that courts should be open to all, including impecunious people. Individuals should not be prevented from obtaining justice by lack of funds. On the other hand, corporations are artificial creations and, in the case of most corporations, the liability of members is strictly limited. There are many corporations in which the paid up capital is nominal only. Accordingly, it is usually regarded as fair to ensure that, if a plaintiff corporation is impecunious, the individuals who stand behind the company, who are in a position to benefit should the corporation succeed in its claim, should provide security for the corporation's liability for the defendants' costs. See, eg, Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176 at 179-180. 9 This factor is, of course, recognised by Part 53 r 2 and by s 1335 of the Corporations Act, both of which expressly empower a court to make an order for security where it is shown that a plaintiff corporation is not likely to be able to pay the costs of a successful defendant. 10 This point of itself leads to the position that, as a general rule, if a corporation is shown to be not likely to be able to pay a defendant's costs if unsuccessful, then serious consideration will be given to requiring security for the payment of those costs. 11 The second and associated point is that courts are reluctant to make an order for security for costs which is likely to stifle a genuine and reasonably arguable claim. 12 I am grateful to Mr Orlov, counsel for the plaintiffs, for referring me to the judgment of Ipp J in Custom Credit Corporation Ltd v Whitehall Holdings Pty Ltd (unreported, Supreme Court of Western Australia, 7 April 1992). In speaking of undertakings for damages, his Honour said:- "The fact that an undertaking as to damages has little or no value is not conclusive as to the result of an application for an interlocutory injunction. It is only a factor which must be borne in mind: Allen v Jambo Limited [1981] WLR 1252 at 1258 per Templeman LJ. Lord Denning MR said in that case at 1256 to 1257: 'It is said that whenever a Mareva injunction is granted the plaintiff has to give the cross-undertaking in damages. Suppose the widow should lose this case altogether? She is legally aided. Her undertaking is worth nothing. I would not assent to that argument … I do not see why a poor plaintiff should be denied a Mareva injunction just because he is poor whereas a rich plaintiff would get it. One has to look at these matters broadly.' Shaw LJ remarked at 1257: 'Questions of financial stability ought not to affect the position in regard to what is the essential justice of the case as between the parties.' It is of course desirable for an applicant for an interlocutory injunction to provide undertakings as to damages which are of value. Nevertheless, where there is a serious issue to be tried, and when those who stand behind the applicant company have offered undertakings so that the applicant has done the best it can to provide appropriate undertakings, justice may well require the grant of an injunction even though the undertakings are of little or no value. In my view the paramount consideration is embodied in the remarks of Bowen LJ in Cowell v Taylor (1885) 31 Ch 34, where he said at 38: 'The general rule is that poverty is no bar to a litigant. That, from time immemorial, has been the rule at common law and also, I believe, in equity.' In Cayne v Global Natural Resources PLC [1984] 1 All ER 225, Eveleigh LJ said at 233: 'It seems to me that with the risk that this decision will produce an injustice on one side or the other it would be wrong to run the risk of causing an injustice to a defendant who is being denied the right to trial where the defence put forward has been substantiated by affidavits and a number of exhibits in this case.' The injustice in such a case is caused by the denial of the trial. So also it seems to me that with the risk that this decision will produce an injustice on one side or the other it would be wrong to run the risk of causing an injustice to the Whitehall companies, who have demonstrated that there are serious issues to be tried, both of law and of fact, substantiated by affidavit, and who will be denied the right to trial by reason of their financial inability to fund the litigation when that situation would be alleviated by the grant of an injunction. In Cayne v Global Natural Resources , May LJ said at 338: 'Where a plaintiff brings an action for an injunction I think that it is, in general, an injustice to grant one at an interlocutory stage if this effectively precludes a defendant from the opportunity of having his rights determined in a full trial.' So also, in my view, where a plaintiff brings an action for an injunction, it is in general an injustice to refuse one at an interlocutory stage if this effectively precludes the plaintiff from the opportunity of having his rights determined in a full trial. This is particularly the case where the plaintiff has established that there are serious issues to be tried." 13 A similar approach should be taken to applications for security for costs. 14 The result of these factors is that, once it is shown, in a case where the plaintiff is a corporation, that the corporation is unlikely to be able to pay the defendant's costs if unsuccessful, then consideration will be given as to whether there is some form of security for the payment of those costs which can readily be given and the giving of which will not frustrate or stifle the plaintiff's claim. Ordinarily, it is not a difficult task to ascertain whether there is some form of security which can be ordered which will alleviate or minimize the risk to the defendant without frustrating the further conduct of the proceedings. Once these matters are resolved, it is usually not difficult to decide whether it is fair and just to make an order for security for costs and what that order should be. As I have said, this process can often take no more than an hour or two, provided the parties approach the issues with a proper attitude. 15 In the present case, Mr Crossman had, in his affidavit, offered to undertake to the Court to meet any costs which the Court might order against the plaintiff corporations. It was established at an early stage of the hearing, indeed it was not in dispute, that the plaintiff corporations would not be able to meet an order for costs if they were unsuccessful. It also appeared at an early stage that there were no assets which could be put up by way of security. That was Mr Crossman's evidence. At page 16 of the transcript I enquired of Mr Eassie, counsel for the second, fourth and fifth defendants, whether he had identified any assets that could be used for security. He responded, "No". 16 It could be inferred from these facts, and Mr Crossman said in his evidence, that an order for security, other than Mr Crossman's undertaking, would be likely to stifle the proceedings, for it could not be met. Notwithstanding this, the matter proceeded for the remainder of the day and for another half-day. 17 One relevant fact to be taken into consideration is that one of the plaintiffs, Mr Crossman, is an individual and his claims and those of the plaintiff corporations are intertwined. The corporations are the entities which Mr Crossman used in the developments with Mr Manny and his corporations. Moreover, it is the plaintiffs' unproven allegation that it was the misleading and deceptive conduct of Mr Manny in relation to the projects that caused the plaintiffs' loss and that it was the misuse of monies by Mr Manny, Ms Bounds and their companies of monies that ought to have been applied to other purposes which contributed to the loss. 18 Much has been said about the merits of the case. Mr Eassie and Mr Justice, counsel for the first defendant, went into a great deal of detail with a view to showing that the plaintiffs' claims are untenable or scarcely tenable. Mr Orlov, counsel for the plaintiffs, considered he was bound to reply in detail to the many arguments which his colleagues had put. I was referred to much of the Amended Statement of Claim, which covers more than fifty typed pages. I was referred to approximately eleven affidavits. Various bundles of documents which were exhibits to affidavits were tendered in evidence. 19 I do not propose to discuss the many detailed points that were raised. I regard it as quite inappropriate to do so. 20 In relation to the grant of an interlocutory injunction, Lord Diplock, with whom Viscount Dilhorne, Lord Cross, Lord Salmon and Lord Edmund-Davies agreed, in American Cyanamid Co. v Ethicon Ltd [1975] AC 396 at 407-408:- "Your Lordships should in my view take this opportunity of declaring that there is no such rule. The use of such expressions as 'a probability,' 'a prima facie case,' or 'a strong prima facie case' in the context of the exercise of a discretionary power to grant an interlocutory injunction leads to confusion as to the object sought to be achieved by this form of temporary relief. The court no doubt must be satisfied that the claim is not frivolous or vexatious; in other words, that there is a serious question to be tried. It is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial. One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that 'it aided the court in doing that which was its great object, viz. abstaining from expressing any opinion upon the merits of the case until the hearing': Wakefield v Duke of Buccleugh (1865) 12 LT 628, 629. So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought." 21 In an application for security for costs, a court must take the same general approach. The court may form a view about the plaintiffs' case and may take that into account; but it is not the function of the court at that stage to conduct a mini-trial or to hear counsel debating the merits at length when the evidence before the court is incomplete. I prefer the approach enunciated by Lord Denning MR in Allen v Jambo Holdings Limited [1980] 1 WLR 1252 , where his Lordship said at 1257 in relation to undertakings for damages, "One has to look at these matters broadly". 22 Mr Eassie, counsel for the second, fourth and fifth defendants, sought to add to his notice of motion a motion under Pt 15 r 26 of the Supreme Court Rules seeking to strike out the whole or parts of the Statement of Claim on the ground of tendency to embarrass and delay the proceedings and also on the ground that the Statement of Claim discloses no reasonable cause of action or is an abuse of process. I refused Mr Eassie's application to amend to add this claim. Those issues would not in any event have been ready to proceed and could not have been disposed of in the time available. However, I am of the firm view that applications for security for costs should not be used as an opportunity to debate issues arising under Pt 15 r 26. If those issues are to be raised, they should be the subject of a separate application. 23 The plaintiffs' claims are, on their face, regular and disclose causes of action. So far as I can tell, the claims put by the plaintiffs are genuine and they have an arguable chance of success. 24 Mr Crossman gave evidence and was cross-examined with a view to demonstrate that the claims made are unfounded. However, the evidence before the Court is quite inadequate to enable me to form any firm view as to the prospects of success of either the plaintiffs or the defendants. 25 In such a circumstance, it is proper to proceed on the footing that the plaintiffs have a reasonable prospect of success. In Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd, French J said at 514:- "Where there is a claim prima facie regular and disclosing a cause of action, I see no reason why the court would, in the absence of evidence, proceed on the basis that the claim was other than bona fide with a reasonable prospect of success." His Honour went on to hold that he was also satisfied that the respondent had a defence which was bona fide and had a reasonable prospect of success. 26 Mr Crossman's undertaking, given in his affidavit of 9 April 2003 was repeated at the hearing and was formally given by Mr Crossman through his counsel Mr Orlov. Mr Crossman gave evidence that his income is presently $400,000 per year plus superannuation and plus bonuses. He said that, during the last few years, he has had an income of between $500,000 and $1,000,000 per year. He anticipated that his income would be sufficient to enable him to pay costs of $100,000 or more if an order for such costs was made in favour of the defendants. 27 Mr Crossman gave evidence of his assets. An amount of $270,281.68 is held in a solicitor's trust account being the balance of the monies obtained on the sale of his home. Apart from those monies, he has cash, personal effects and investments which are valued in total at approximately $50,000. He leases two motor vehicles. He is not aware of any other assets of himself or of the companies which would be available for use as security. 28 It was not suggested by Mr Eassie, or not suggested with any force, that the miscellaneous assets with a value of $50,000 should be a subject of security. Mr Eassie suggested, however, that Mr Crossman should give a charge over his future earnings. In my opinion, such a charge would be inappropriate. No monies are yet due by Mr Crossman to the defendants. If there were some practical arrangement which ought to be entered into with respect to future income, such an arrangement was not identified by Mr Eassie or by Mr Justice. 29 Mr Eassie submitted that Mr Crossman should undertake not to resign from his current employment and not to substitute for the present direct employment any indirect arrangement whereby Mr Crossman was employed through a company. I see no occasion for requiring any such undertaking. Such a proposition was not put to Mr Crossman. His evidence that, in recent times, he has been earning a substantial income, was not challenged. Mr Crossman understands his responsibilities under the undertaking. He is not only an investment banker, the occupation from which he gains his income, he is a qualified though non-practising solicitor of this Court. 30 Attention was then turned to the funds of $270,281.68. Evidence was given that there is a firm of solicitors, Elliott Tuthill, which carries on, inter alia, a mortgage finance business. A trustee company, Elliott Tuthill Nominees Pty Ltd, lent an amount of approximately $4,300,000 to the plaintiff, Circaz Pty Limited, for use in the subject developments. Mr Crossman estimated that, after the sale of the property 47A Headland Road, the liability of Circaz Pty Ltd to Elliott Tuthill Nominees Pty Ltd will be approximately $2,800,000. Mr Crossman was a guarantor of the company's liability to Elliott Tuthill Nominees Pty Ltd, although he has reserved a possible challenge to the validity of the guarantee. As a result of a demand made upon Mr Crossman to pay the monies due by Circaz Pty Ltd, Mr Crossman, in November 2002 entered into negotiations for the grant of a charge over the net proceeds becoming due from the sale of his home, such charge to be given on the footing that Elliott Tuthill Nominees Pty Ltd would forbear from pursuing proceedings against the plaintiffs while the present proceedings were on foot. 31 By letter dated 12 November 2002, the solicitors for Mr Crossman offered Elliot Tuthill Nominees Pty Ltd a charge over the net proceeds of the home, but indicated that Mr Crossman wished to retain $150,000 to pay the legal costs presently incurred and to be incurred in the subject proceedings. At the time of the hearing, it appeared that Elliott Tuthill Nominees Pty Ltd was agreeable to the proposal but that a formal document by way of charge had not yet been executed. 32 Mr Eassie submitted that the Court should require a charge over the whole $270,281.68 and that the charge should take precedence over any charge which may be granted to Elliott Tuthill Nominees Pty Ltd. In my opinion, it would be inappropriate to interfere with the arrangement which has been worked out with Elliott Tuthill Nominees Pty Ltd. To do so would be likely to result in the bringing of proceedings by that company against both Circaz Pty Ltd and Mr Crossman, which proceedings would stifle the current proceedings. The present position appears to be that Elliott Tuthill Nominees Pty Ltd is prepared to restrain the institution of proceedings while the present proceedings are on foot. To that extent, Elliott Tuthill Nominees Pty Ltd has taken an interest in and is supporting the present proceedings. 33 That situation led Mr Eassie and Mr Justice to submit that the Court should insist that security be provided by Elliott Tuthill Nominees Pty Ltd. Mr Justice went so far as to rely upon Pt 53 r 2(1)(b) which provides that a court may order security where a plaintiff is suing not for his own benefit but for the benefit of some other person. That particular submission necessarily fails. There is no evidence that Elliott Tuthill Nominees Pty Ltd is funding the present proceedings or that proceedings are brought on its behalf. Indeed, the evidence before the Court makes it plain that the proceedings are brought by the plaintiffs for their own benefit. 34 In my opinion, it would be inappropriate to call upon Elliott Tuthill Nominees Pty Ltd, a trustee company, to provide security for the present proceedings. It is not a party to the proceedings. It did not institute the proceedings. Its interest is that of a creditor which is standing back to give the plaintiffs an opportunity to recover the losses which have rendered them incapable of repaying the monies borrowed. 35 As to the $150,000, it appears to me that its disposition has already been arranged as between Mr Crossman and Elliott Tuthill Nominees Pty Ltd and that that arrangement should not be disturbed. In any event, the plaintiffs will need funds for the prosecution of these present proceedings. That source of funds should not be removed from them. Mr Eassie contended that the defendants have no funds to enable them to fund their defence. However, the evidence does not satisfy me on that point. 36 In these circumstances, I am of the view that Mr Crossman's undertaking should be accepted and that the application for security for costs should otherwise be dismissed. Security for undertaking as to damages 37 Similar applications for security were brought with respect to an undertaking as to damages which was earlier given. 38 On 1 October 2002, the plaintiffs gave the usual undertaking as to damages. The second and fourth defendants undertook that they would not deal with or dispose of their interests in a number of properties which were specified. The Court ordered that a caveat lodged by the plaintiffs be extended and that the sixth defendant be restrained from paying or disbursing any funds from any trust account in the names of the plaintiffs without the written authorisation of Mr Crossman. 39 On 18 October 2002, an extensive interlocutory regime was implemented. The undertaking as to damages was continued. The plaintiffs agreed to withdraw all caveats. The plaintiffs and the first, second, fourth and fifth defendants agreed that the identified properties may be sold by the defendants. It was agreed that the net proceeds of sale were to be paid into a trust account maintained by D C Balog & Associates Solicitors and, out of those funds, D C Balog & Associates were to pay certain expenses. The order with respect to the trust funds held by the sixth defendant was continued. 40 The defendants now say that the undertakings as to damages given by the plaintiffs are worthless. They seek an order that security for the undertakings be provided. There are conceptual problems with this application. A judge who is asked to make an interlocutory order may, in an appropriate case, request that an undertaking for damages be given as a prerequisite to the making of the order. An undertaking may also be required for continuing an order. But, once an undertaking has been given and an interlocutory regime has been put in place, there is no power to require a party to give security for the undertaking given in the past. Moreover, as the interlocutory regime was one implemented pursuant to agreement rather than orders of the Court, it is doubtful that the Court has power to interfere with that. 41 There is a further problem in the present case, for the interlocutory regime has been on foot since 18 October 2002. There is no evidence as to what has still to be done under that regime or as to what the likely damages caused to the defendants by carrying it out may be. In other words, despite the point that any action taken by the Court at this stage would apply only to the future, there is no description of the circumstances which the Court should take into account. 42 I need not discuss these matters further. Mr Crossman was one of the plaintiffs who gave an undertaking as to damages. Accordingly, he is personally bound to meet any order as to damages which the court may consider the plaintiffs should pay by virtue of that undertaking. As a requirement for the provision of security would be likely to frustrate the proceedings, for no appropriate form of security, other than Mr Crossman's own undertaking, has been identified, the application for security should be refused. Outstanding Debts 43 The final issue debated in the motion flows from paragraph 4 of an order of 18 October 2002 which records:- "4. Notes the undertakings given to the Court by the second, fourth and fifth defendants by their counsel that the net proceeds from the sale of any of the restrained properties will be paid into a trust account maintained by D.C Balog & Associates, solicitors, after the payment of all amounts necessary to;- (a) discharge all mortgages registered on the title to the properties; (b) pay all costs, fees and disbursements properly incurred in relation to the sale of the properties and the discharge of any mortgages." 44 The Notice of Motion filed 12 March 2003 seeks, inter alia:- "3. The orders and directions of the Court made 18 October 2002 be varied as follows: … (b) Insert new paragraph 4(c) in the following terms: '(c) pay all debts due and owing by the second and fourth fifths defendants, in particular the debts due and owing to: (i) Worldcraft Group Pty Limited in the sum of $74,628.00; (ii) Giles Tribe Pty Ltd t/as Giles Tribe Architects in the sum of $76,874.99; and …' (c) Insert new paragraph 4(d) in the following terms: '(d) pay all costs, fees and disbursements incurred in pursuing, defending, and or staying any proceedings resulting from the non-payment of the amounts referred to in 4(c) above.' " 45 The case presented by Mr Eassie with respect to these debts is that they were debts of the project owed by Circaz Pty Ltd. However, that point was disputed by Mr Orlov who contended that the debts were incurred in the course of a development which was Mr Manny's own development and in which the plaintiffs were not involved. Perhaps, more strictly, the debts were incurred in relation to properties which, at one stage, the plaintiffs owned but in respect of which they transferred their interests to the defendants. On Mr Orlov's contention, the debts were incurred in Mr Manny's development of those properties. 46 There are again grave conceptual problems with this application. Mr Eassie seeks to insert into an agreement, which has been noted by the Court, an order of the Court with respect to a matter which is not agreed by the parties and in respect of which the Court has not adjudicated. 47 It is clear that the Court cannot accept Mr Eassie's application. If the defendants wish to claim that the plaintiffs are liable to pay the sums due to Worldcraft Group Pty Ltd and Giles Tribe Pty Ltd, they must counterclaim seeking an order for payment or a declaration to that effect. 48 I very much regret that this last application was heard with the applications for security. I had suggested to counsel that the applications for security be heard separately. Counsel did not agree. In the result, it was the cross-examination on this issue and the cross-examination on some of the complex facts of the case which brought to an end the attempts which I made at pages 14, 15 and 16 of the transcript to obtain an early resolution of the issue as to security. Orders 49 The Court accepts Mr Crossman's undertaking to pay to the first, second, fourth and fifth defendants any costs which the Court may order that the plaintiff corporation pay to them. The first defendant's motion filed 2 April 2003 and the motion of the second, fourth and fifth defendants filed 12 March 2003 will otherwise be dismissed. The plaintiffs' costs of the motions will be costs in the cause. The defendants should abide their own costs of the motions. ********** Last Modified: 07/07/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.