New South Wales Supreme Court CITATION : Denton Tiling Services v Australian Prestige Developments [2004] NSWSC 884 HEARING DATE(S) : 16 September 2004 JUDGMENT DATE : 16 September 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Money in controlled monies account not released. Guarantee by natural person plaintiff not ordered. CATCHWORDS : PRACTICE - judments and orders - consent orders - consent order settling litigation on terms of payment of money into controlled monies account to abide outcome of other proceedings - application for payment out before other proceedings determined - PRACTICE - costs - security for costs - one natural person plaintiff and one corporate plaintiff - whether unlikelihood of corporate plaintiff meeting costs adequately proved by proof of paid up capital of only one dollar - whether appropriate to order security for costs against corporate plaintiff when natural person is co-plaintiff - whether appropriate to order natural person to guarantee costs obligation of corporate plaintiff Australian Workers' Union v Bowen (1946) 72 CLR 575 CASES CITED : Jones v Dunkel (1959) 101 CLR 298 Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 Paino v Hofbauer (1988) 13 NSWLR 193 Denton Tiling Services Pty Ltd - Plaintiff PARTIES : Australian Prestige Developments - First Defendant Mark William Fricker - Second Defendant Brett Richardson - Third Defendant FILE NUMBER(S) : SC 6474/03 COUNSEL : Whittle SC; S Burke - Plaintiff S Titus, solicitor - Defendants SOLICITORS : Peter Evans & Associates - Plaintiff Carneys Lawyers - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY JUDGE LIST CAMPBELL J THURSDAY 16 SEPTEMBER 2004 6474/03 DENTON TILING SERVICES PTY LIMITED & ANOR v AUSTRALIAN PRESTIGE DEVELOPMENTS & ORS JUDGMENT – Ex Tempore (Revised 20 September 2004) 1 HIS HONOUR: This is litigation which is now brought by two plaintiffs against three defendants. The first plaintiff is a company. The second plaintiff is a natural person, and is the man behind the first plaintiff. The case is one which alleges that one or other of the plaintiffs was involved in a partnership with the second and third defendants for the development of some land in Cooks Hill. The partnership was one which involved constructing strata title units on the land, and selling them. The partnership was, according to the plaintiffs, carried on using the first defendant as a vehicle. 2 The plaintiffs allege in their Amended Statement of Claim that the second and third defendants have received money from the venture to which they are not entitled and that as well the second and third defendants have caused money to be paid to a company called Octobrick Pty Limited, which is a company associated with the second defendant, from partnership funds, which that company was not entitled to. 3 Proceedings were begun at a time when the strata title units had been constructed, and all bar one of them had been sold. Different proceedings to the present ones were instigated when the second plaintiff lodged a caveat over that strata title unit and a lapsing notice was served. The second plaintiff then began some proceedings, which were ultimately not continued, to enforce the interest claimed in the caveat. 4 The first plaintiff then put on a caveat, claiming an interest in the remaining strata title unit, and a lapsing notice was served relating to that caveat. 5 On 22 December 2003 a notice of motion and statement of claim seeking extension of that caveat was taken out. The Statement of Claim named the first defendant as the only defendant. It was listed to come before the vacation Judge on 29 December 2003. On that date, at a hearing before the vacation Judge, some evidence was rejected, but the parties negotiated after court, and came to an agreement, which is now embodied in some consent orders. 6 Pursuant to that agreement, a cheque for $95,000, made out to the first plaintiff, was to remain under the control of some solicitors, until the strata title unit was sold. When the strata title unit was sold, $120,000 was to be placed into a controlled moneys account, operated by the solicitors for the plaintiffs and the defendants jointly: "… for the parties to be applied by them for the purpose of satisfying a verdict in these proceedings or agreement between the parties." 7 An Amended Statement of Claim has now been filed, which adds the second plaintiff as a plaintiff. It also adds, as second and third defendants, the two men who were alleged to have entered the partnership agreement with the second plaintiff, or alternatively the first plaintiff. 8 By their notice of motion, the defendants seek to have the sum of $120,000 contained in the controlled moneys account released to them. 9 That course is justified, the defendants submit, by several factors. One of them is that, when the proceedings started out, the plaintiff had a claim to a right of property, at least on its own case, in the form of an interest in partnership assets. That claim has ceased to exist, and, instead, the plaintiff now has, at best, a claim to be paid a sum of money. As well, the defendants point to the fact that the amended statement of claim has added new defendants. The second defendant has put on evidence to the effect the he has assets which would be sufficient to make good any verdict for $120,000 which might be entered against him or against the first defendant. I note that he does not explain why he would choose, commercially, to pay any verdict which might be entered against the first defendant. The second defendant has provided evidence that he has a portfolio of shares worth in excess of $150,000. He offers an undertaking not to deal with those shares until the proceedings are determined. As well, the defendants point to the fact that there has been some slippage from a timetable which was ordered by consent on 29 December 2003. That timetable envisaged all affidavits being filed and served by the end of February 2004, and the matter being back before the Registrar on 9 March 2004. The filing of the amended statement of claim has put the hearing back, from when it would have occurred had the original timetable been the only interlocutory step which needed to be taken. There is evidence from Mr Fricker that the litigation has taken longer than he was expecting, and that having the money tied up in the controlled money account is an inefficient use of the money. 10 I do not regard any of these reasons as providing a justification for changing the orders which have been made relating to the $120,000. Those orders are ones which were made for the settlement of litigation which was then on foot, relating to the extension of the caveat. There is some difference between English and Australian authorities, about whether the Court will only interfere with a consent order based on a contract on the grounds that it interferes with any other contract. The authorities are discussed in Paino v Hofbauer (1988) 13 NSWLR 193 at 198, and Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 at 579. Assuming, without deciding, that the court has jurisdiction to vary such a contract, on grounds other than those on which it interferes with contracts other than those relating to the making of consent orders, I see no reason in the present case to do so. Effectively, what the defendants are asking the Court to do is to excuse the first defendant from paying the price it agreed to pay for the settlement of the proceedings on 29 December 2003. I see no reason to excuse it. 11 Another order which the defendants seek is that the second plaintiff personally guarantee the obligations of the first plaintiff in respect of any costs order made against the first plaintiff in favour of the defendants in the litigation, and in default of that personal undertaking within seven days the proceedings be stayed. 12 I should say at the outset that this is a most unusual order for a court to make. The court has undoubted power to order a plaintiff to provide security for costs, in circumstances where there is doubt about whether the plaintiff would be unable to meet an order for payment of costs. Sometimes, when such an order for security is made, a satisfactory form of security is found to be that a natural person guarantees any obligations of the corporation to pay costs. However, an order which is made for security is usually one which is limited to a particular sum. In the present case, there has been no attempt on the part of the defendants to provide evidence of a type one commonly encounters in applications for security for costs, estimating the likely costs of running the litigation. The order which is sought is one under which the liability of the second plaintiff is completely open ended. 13 The defendants have established that the first plaintiff is a company which has a paid up capital of one dollar. They have not put on any evidence about what the assets and liabilities of the first plaintiff are. The plaintiffs claim that this is a fatal defect in the defendants' application. I do not agree. All information about the financial standing of the first plaintiff is within its own control, and from the failure of the first defendant to itself put on evidence on that topic, once there had been evidence of it having a tiny paid up capital, a Jones v Dunkel (1959) 101 CLR 298 inference can be drawn. Thus, I would conclude that there are reasonable grounds to expect the first plaintiff will not be able to pay costs if ordered to do so. 14 The second plaintiff is, however, a natural person. The case which the plaintiffs made is that one or other of them was party to a partnership agreement concerning development of the Cooks Hill land. If there was to be success by either plaintiff, in recovering a verdict, one would expect, in the ordinary course of things, that the defendant would be ordered to pay the costs of the successful plaintiff. It would be unlikely that there would be any separate order for costs against the unsuccessful plaintiff, precisely because of the way that the claim is pleaded in the alternative, and which of the alternatives is right – assuming that either of them is right – will be a matter of analysis of the one body of evidence. If, however, both plaintiffs fail, in the ordinary course of things there would be an order for costs against both plaintiffs. That order would impose on them a joint liability, with the consequence that each would be fully liable to pay on the order: Australian Workers' Union v Bowen (1946) 72 CLR 575 at 591 per Williams J. 15 In those circumstances, the court would not make an order for security for costs against the first plaintiff. It is a fortiori that the unusual order which is claimed will not be made. 16 The notice of motion contains another prayer for relief, which I was told had been disposed of and did not need my decision. 17 I order the Notice of Motion filed 13 August 2004 be dismissed. (Mr Whittle sought costs.) 18 I order the defendants to pay the costs of the plaintiff of the Notice of Motion. 19 I stand the matter over for further directions before the Registrar on Thursday 14 October 2004. ********** Last Modified: 09/28/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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