New South Wales Supreme Court CITATION : Blazai Pty Ltd & Ors v John Palasty& 1 Or [2009] NSWSC 50 HEARING DATE(S) : 8 and 9 December 2008 JUDGMENT DATE : 17 February 2009 JURISDICTION : Professional Negligence List JUDGMENT OF : Smart AJ at 1 DECISION : See paras 35, 68-69. 121-123 CATCHWORDS : Application for security of costs by Mr Palasty refused - stifling of proceedings - ground of Mr Palasty causing plaintiff's impecuniosity not established - dispute as to causes of action. - Fair Trading Act 1987, time limitation results in claim under that Act not being maintainable against Mrs Palasty - Limitation Act 1969 results in action for deceit not being maintainable against Mrs Palasty - Effect of Statutory provisions in circumstances of this case - Claims struck out Fair Trading Act 1987 LEGISLATION CITED : Fair Trading Amendment Act 2003 Limitation Act 1969 CATEGORY : Principal judgment Fat-Sel Pty Ltd v Brambles Holdings Ltd (1985) ATPR40-544 CASES CITED : Hamilton v Kaljo & Ors (1987) 17 NSWLR 381 Plasdale Pty Ltd v Concrete Constructions 131 ALR 268 Pioneer Park Pty Ltd (In Liq) & Ors v ANZ Banking Group Ltd [2007] NSWCA 334, 65 ACSR 383 AT [50] PARTIES : Blazai Pty Ltd v Maley & 3 Ors Trading As Maclarens Solicitors and Attorneys v John Palasty & 1 Or FILE NUMBER(S) : SC 10646/08 COUNSEL : I Raine (P) C Birch SC & N Allan (D5 & 6) SOLICITORS : A R Martin (P) Ziman & Ziman (D5 & 6) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROFESSIONAL NEGLIGENCE LIST SMART AJ Tuesday, 17 February 2009 10646/08 BLAZAI PTY LTD V MALEY & 3 ORS TRADING AS MACLARENS SOLICITORS AND ATTORNEYS, JOHN PALASTY AND JUDITH KATHERINE PALASTY JUDGMENT 1. The Court has before it these three motions: i) Original Motion filed 15 April 2008 by John Palasty seeking $51,000 by way of security of costs; ii) Amending Motion filed 18 September 2008 by John Palasty seeking $125,000 in lieu of $51,000 by way of security for costs; iii) Motion filed 16 September 2008 by Judith Katherine Palasty seeking to strike out all claims for relief against her sought in the statement of claim or alternatively removing her as a party to the proceedings and alternatively seeking $35,000 by way of security for costs. She also relied on the "extinction of the plaintiff's alleged rights and/or title by virtue of the Limitation Act 1969 (NSW)". Procedural Background 2. Following the filing of the motion of 15 April 2008 the plaintiff filed a fully pleaded Statement of Claim which raised significantly more complex issues than were originally anticipated by John Palasty, the 5th defendant. Hence the amending motion filed 18 September 2008. 3. On 3 August 2007 the plaintiff filed against the four partners of Maclarens, Solicitors and Mr John Palasty in the Commercial List a summons to which was attached a Commercial List Statement. This statement needed to be re-drawn. The matter came before the Commercial List Judge on 19 October 2007. Counsel for the plaintiff stated that counsel appeared for Mr John Palasty and that this exchange occurred: Counsel for Blazai: "Can this matter go over by consent? We need to amend the commercial list statement to fix it up. You can see that one of the parties was amplified when filing, in handwriting, and the defendant numbers don't marry up with the pleading. We anticipate also joining additional party." Judge: "Is that Mrs Palasty?" Counsel for Blazai: "Yes, your Honour". Judge: "Very well" 4. I was told that the transcript of 19 October 2007 does not record this discussion and that counsel for Mr Palasty raised no objection to the proposal to add Mrs Palasty as a defendant to the proceedings. The Associate's Record of Proceedings of 19 October 2007 contains no note of any order granting leave to the plaintiff to file an Amended Summons, Statement of Claim or Amended Commercial List Statement. The matter was transferred from the Commercial List to the Professional Negligence List on 8 February 2008. On 19 March 2008 an Associate Justice directed the plaintiff inter alia, to file and serve a Statement of Claim (S/C) on or before 2 April 2008. The then counsel for the plaintiff said that he raised in open Court the intention of the plaintiff to amend its pleading and to join Mrs Palasty as an additional party and that no objection was raised by Mr Palasty's legal representative. 5. On 2 May 2008 a Registrar directed that the time in which the plaintiff may file and serve its S/C be extended up to 23 May 2008. On 28 May 2007 a Statement of claim was filed. This added Mrs J K Palasty as a defendant and pleaded the various claims in considerable detail. On 8 December 2008 I extended the time for filing the S/C up to 28 May 2008. Claim Against Maclarens (1st-4th Defendants) 6. The S/C alleges that Maclarens, who were the solicitors retained to act on behalf of the plaintiff, on the sale to Gateway Development (St Marys) Pty Limited ("Gateway") of extensive property at St Marys for a stated consideration of $5.3 million were in breach of the terms of their retainer. They were sued in both contract and in tort. The damages claimed exceeded $3 million. Contractual Background 7. This is largely taken from the S/C. The allegations of fact it pleaded are assumed to be correct for the purposes of the motions. On 3 August 2001 a contract for the sale of the property (the Gateway Contract) was executed and parts exchanged by the plaintiff and Gateway. The contract was signed for and on behalf of Gateway by Ilona Horvat as Director. She is alleged to be the mother of Mr Palasty and was the sole director and secretary of Gateway at the time the Gateway contract was signed. 8. The plaintiff alleged that there was a contract between John and Judith Katherine Palasty and the plaintiff collateral to the Gateway contract whereby John and Judith Katherine Palasty agreed to be responsible for and provide written guarantees for the obligations of Gateway in consideration of the plaintiff entering into the contract for the sale of the property with Gateway. Mr and Mrs Palasty did not do so. Nor did they ensure that the entity which purchased the property discharged its obligations pursuant to the contract. 9. The plaintiff further alleged that Mr and Mrs Palasty represented: a) they would be responsible for the obligations of the purchasing entity pursuant to the contract for the sale of the property, and provide personal written guarantees for the obligations of the purchasing entity. b) they were directors of Gateway. c) that the deposit had been paid to Nexus Realty and Investments. It was alleged that the representations were misleading and deceptive or likely to mislead or deceive. 10 The plaintiff alleged that Mr and Mrs Palasty breached s 42 of the Fair Trading Act 1987, that it relied on the truth of the representations and consequently: a) entered into the contract with Gateway. b) entered into a loan agreement with Westpac for the advance of moneys to purchase the Boulevarde Hotel at Enfield, and; c) entered into a contract for the purchase of the Boulevarde Hotel at Enfield. 11. The plaintiff further alleged that Mr and Mrs Palasty perpetrated a tortious act of deceit upon the plaintiff and relied upon matters pleaded earlier in the S/C (paras 16-19, 31, 38-58). 12. The plaintiff relied on four special conditions of the contract: "35. The Purchaser warrants that the Agent named in this Contract is the Agent who introduced the Purchaser to the property and indemnifies the Vendor against any claim for commission by any other agent. The Vendor warrants that at the date of this contract no sole agency agreement with any other agent has effect. This clause will not merge on completion. The Purchaser agrees to pay all agents commissions payable to the agent on completion. The Vendor and Purchaser agree that the Vendor is not liable for any agent's commission herein and the Purchaser indemnifies the Vendor for any claim for commission by the said agent. This Clause shall merge on completion. … … 41. Notwithstanding any other clause contained herein the purchaser shall pay to the Vendor by way of extra consideration the sum of $18,000.00 per month until settlement, such amount to be paid on the date of exchange and each month and time is of the essence of the contract. … … 46 The deposit of $1,250.00 (one million two hundred and fifty thousand dollars) shall be paid as follows under the direction of the Vendor: (a) As the sum of $150,000 to the Vendor or as the Vendor directs. (b) (One million one hundred thousand dollars) $1,100,000.00 to the agent named herein. … … 50. The Vendor warrants that it will lodge and obtain registration of a Primary Application and a Plan of Consolidation 60 days prior to settlement." 13. The settlement date pursuant to the contract was 15 December 2001. Special Condition 37(a) provides that if a party is unable or unwilling to complete the contract on the completion date then the other party can at any time after the completion date serve a Notice to Complete requiring completion to occur on a specified date and making time essential. 14. The plaintiff alleges that the purchaser (Gateway) did not pay the sum of $18,000 per month until settlement. 15. The plaintiff alleges that Mr and Mrs Palasty represented to the plaintiff that the deposit of $1,100,000, payable pursuant to the Gateway contract had been paid to the agent named in the Gateway contract, being Nexus Realty & Investments. 16. The plaintiff alleges: (a) The Primary Application and draft linen Plan of Consolidation for the property which the plaintiff was required to lodge and register 60 days prior to settlement pursuant to special condition 50 of the Contract, were available for lodgement on or prior to 5 July 2001, and (b) About 5 October 2001 Mr and Mrs Palasty for and on behalf of Gateway directed the plaintiff not to lodge the Primary Application and Plan of Consolidation in accordance with special condition 50 of the Gateway contract. (Settlement was not to be delayed by the directed non-compliance by the plaintiff with special condition 50). 17. The plaintiff alleges that Gateway sought to vary the purchase price pursuant to the contract, and/or delay settlement of the Gateway contract allegedly as a result of the plaintiff's non compliance with Special Condition 50. 18. The plaintiff alleges that on 12 December 2001 Mr and Mrs Palasty provided the plaintiff's officer, Mr Loiero with a draft deed between Gateway pursuant to which the deposit of $1,100,000 would be returned to Gateway as the plaintiff's purchase price for shares in Gateway. The plaintiff did not enter the draft deed with Gateway and it alleges that it (via Mr Loiero) advised Mrs Palasty about 13 December 2001 that the plaintiff was not interested in the proposition of Mr and Mrs Palasty. It is alleged that Mrs Palasty advised the plaintiff that they were not in a position to proceed with the settlement and that she no longer was interested or wished to be involved with him (Loiero) or her husband in this purchase. In response to Mr Loiero's enquiry Mrs Palasty told him to lodge the consolidated plan complying with the Original Development Approval, the one with only Lot 1 and A2. On 14 December 2001 the plaintiff lodged the Primary Application and Plan of Consolidation with Land & Property Information NSW (the 'LPI"). 19. The Gateway contract did not settle on 15 December 2001. The plaintiff alleges that on 20 December 2001 Gateway served a Notice on the plaintiff requiring the plaintiff to obtain registration of the Primary Application and Plan of Consolidation by 15 January 2002. The plaintiff alleges that it obtained such registration and on 15 January 2002 provided the solicitor for Gateway with evidence of such registration. 19. About 15 January 2002 the plaintiff served a Notice to Complete upon Gateway. 21. By letter of 21 January 2002 Nexus Realty Investment represented to the plaintiff's then solicitor (R J Thomas) that it had not entered into any Agency Agreement nor received any sum of money with respect to the sale of the property or the Gateway contract. By letter of 22 January 2002 the solicitor for the plaintiff requested the solicitor for Gateway to advise "who is the holder of the deposit monies pursuant to the contract of sale dated 3 August 2001." 22. By Notice of Termination bearing date 23 January 2002 Gateway purported to terminate the contract on the ground of the plaintiff's alleged failure to lodge the Primary Application and Plan of Consolidation and secure its registration in accordance with the notice bearing date 20 December 2001. By letter of 23 January 2002 the plaintiff's solicitor advised the solicitor for Gateway that the plaintiff rejected the Termination Notice, that it was not in breach and that the plaintiff gave "notice and will seek all remedies for damages and causes of action arising from the conduct for 'Breach of Contract'." Financial losses and Sale of Property to Billabong 23. Between 23 January 2002 - November 2002 the plaintiff experienced financial losses and on 21 November 2002 the plaintiff was placed in voluntary administration. On 8 July 2003 the Administrators of the plaintiff caused the plaintiff to enter into a contract (the "Billabong Contract") for the sale of the property to Billabong Hotels (St Marys) Pty Limited ("Billabong Hotels") for $2.5m. On 14 October 2003 the sale was completed. 24. The sole director of Billabong Hotels as at 8 July 2003 was Justin Palasty, the son of Mr & Mrs Palasty (the 5th and 6th defendants). He became the secretary of Gateway on 22 August 2001 and remained its secretary until that company's deregistration by ASIC on 15 January 2006. Mr Justin Palasty became a director of that company on 14 January 2002 and remained a director until its deregistration, and was a person who, on behalf of that company, conducted discussions with Mr Loiero. Westpac 25. It is necessary to return to October 2001 and events involving Westpac. About 10 October 2001 the plaintiff entered into an agreement with Westpac for it to advance to the plaintiff $1.235 million to enable the latter to purchase the Boulevarde Hotel at Enfield. This agreement was founded upon the expectations that: (a) the Gateway contract would proceed to completion (b) upon settlement the plaintiff would entirely expunge its liabilities to Westpac, and (c) if settlement of the Gateway contract did not proceed, the plaintiff's facilities with Westpac would be reduced by an amount equivalent to the deposit payable pursuant to the Gateway contract. 26. The purchase price pursuant to the Billabong contract was $2.8m less than that pursuant to the Gateway contract. The plaintiff alleged that the Billabong contract was exchanged and settled in circumstances where the administrators were compelled to realise the plaintiff's assets urgently. Between 16 May 2002 - 14 October 2003 the plaintiff was charged penalty interest by Westpac on its facilities. If settlement had taken place on 15 December 2001 the plaintiff would have discharged its loan facilities with Westpac. On 8 March 2004 the plaintiff paid $183,139.50 to Westpac to fully discharge the plaintiff's then liabilities pursuant to its loan facilities. Position of plaintiff 27. I have earlier mentioned the sale by the administrators of the property at St Mary's. It is unnecessary to trace the subsequent history of the plaintiff save to note that the plaintiff is described as "Subject to Deed of Company Arrangement." In his affidavit verifying his belief that the allegations of fact in the S/C are true., Mr M A Loiero states that he is the sole director and secretary of the plaintiff. 28. By a deed made on 12 January 2006 between Blazai Pty Limited (In Liquidation) (Administrator Appointed), Brian Dunphy and Mario Loiero it was recited that Mr Brian Dunphy had been appointed as Voluntary Administrator of the Company, that on 23 December 2005 at the meeting of the company's creditors a resolution was passed to enter into a Deed of Company Arrangement and that the Deed gives effect to the creditors' resolution and constitutes the instrument which records the terms of the Deed of Company Arrangement. While the Administrator of the Deed was Mr Brian Dunphy it was provided in cl 5.2 that he "will pass the control and stewardship of the company, to the company's officers, until this Deed terminates in accordance with clause 7.1". It is not necessary to summarise the remainder of the terms of the Deed. Mrs Palasty's Limitation Points 29 If she succeeds on these points it will be unnecessary to consider her application for security for costs. 30 Earlier I have summarised what occurred on 19 October 2007 before the Commercial List Judge and subsequently. No order was made either on 19 October 2007 or subsequently for the joinder of Mrs Palasty That was foreshadowed but the matter went no further. It was not until 28 May 2008, when the S/C was filed, that Mrs Palasty was joined as a defendant, albeit that the S/C was filed five days late and the position was not regularised until 8 December 2008. In my opinion the proceedings against Mrs Palasty should date as from 28 May 2008. 31. Mrs Palasty had two limitation points. I will deal with that relating to the Fair Trading Act claim first. Fair Trading Act Claim 32. Paragraphs 101 - 106 of the S/C deal with the plaintiff's claim under the Fair Trading Act. In para 106 the losses occasioned by the conduct of Mr & Mrs Palasty in contravention of the Fair Trading Act are particularised. 33. The difficulty is that there was a limitation period of three years under the Fair Trading Act. It has since been amended to six years with retrospective effect. Section 68(1) of the Fair Trading Act ,1987 provides that a person who suffers loss or damage by conduct of another person that is in contravention of a provision of Part 5 (which includes s 42) may recover the amount of the loss or damage by action against any person involved in the contravention. 34. Section 68(2) provides: " An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. Clause 11D of Schedule 5 of the Fair Trading Act provides: "Section 68(2) as amended by the amending Act does not apply to a cause of action accruing before the commencement of the amendment to that subsection." (The amending Act means the Fair Trading Amendment Act 2003 which was assented to on 22 July 2003. The amendment of section 68(2) extending the limitation period from three years to six years commenced on 25 August 2003). 35 It was Mrs Palasty's contention that by 23 January 2002 at the very latest there had been losses suffered on all causes of action including those under s 42 of the Fair Trading Act. As the Administrators of the plaintiff caused the plaintiff to enter into a contract for the sale of the property on 8 July 2003 for $2.5 million it is apparent that on any view damage was then suffered and any cause of action had accrued, that the plaintiff's action under the Fair Trading Act is caught by the three year limitation period and may not be commenced. Paras 101 - 106 of the S/C must be struck out as against the 6th defendant (Mrs Palasty). There was no application to strike these paras out as against the 5th defendant (Mr Palasty). Contractual and Tort Claims 36. Under s 14(1)(a) and (b) of the Limitation Act 1969 (NSW) an action based on a cause of action founded on contract or on tort is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims. 37. Mrs Palasty relied on the purchaser, Gateway purporting to terminate the contract by notice of 23 January 2002 on the ground of the plaintiff's alleged failure to lodge the Primary Application and Plan of Consolidation in accordance with the Notice, presumably the Notice served by the purchaser on 20 December 2001 upon the plaintiff requiring it to obtain registration of the Primary Application and Plan of Consolidation by 15 January 2002. Registration was allegedly obtained by 15 January 2002. 38. The completion date of 15 December 2001 specified in the contract was not of the essence - see, inter alia, special condition 37. 39. Mrs Palasty submitted that all the contractual causes of action had fully crystallised by 23 January 2002 because for the plaintiff to have a case at all it must contend that the purchaser was not lawfully entitled to terminate and what it did on 23 January 2002 amounted to a repudiation. 40 Mrs Palasty relied on the letter of 29 January 2002 written from the plaintiff (and signed by Mr Loiero) to Westpac stating, amongst other things: "… I am also quite devastated as to the termination notice and the deposit issue with Nexus Reality (sic). Further more my solicitor have conducted searches (on 24th January 2002) and it appears that John & Judith Palasty's (sic) are not directors of Gateway Pty Ltd (sic). Having said that, they did give personal guarantees through their lawyer." Regarding the $1,100,000 deposit, I will peruse (sic) all means to locate and retrieve this deposit for my facilities. I say this as Blazai is not in any way in breach of the sales agreement." 41. The plaintiff had given a Notice to complete on 15 January 2002 on the registration of the Plan of Subdivision. The length of the Notice to Complete is not specified. In para 59 of the S/C the plaintiff particularises breaches of the contract on which it relies. Inter alia, the plaintiff relies on the failure of the purchaser to pay the deposit, and the balance of the purchase price to the plaintiff and the purchaser purporting to terminate the contract. 42. By 8 July 2003 when the Administrators of the plaintiff caused it to enter into a contract for the sale of the property, the contract of sale of 3 August 2001 had unarguably been terminated. 43. A cautious conveyancer may well have preferred to wait for the time specified in the notice to Complete of 15 January 2002 given by the plaintiff to expire before terminating the contract for breach. 44. However, the letter of 23 January 2002 from the plaintiff's then solicitor that it "will seek all remedies for damages and causes of action arising from the conduct for 'Breach of Contract'" rather suggests that the plaintiff was electing to treat the contract as at an end and sue for damages for its breach. 45. Section 14(1) of the Limitation Act refers to the date on which the cause of action first accrues. A major breach of the contract by one party (and repudiation is such a breach) gives rise to the right of the other party to terminate and sue for damages for breach. 46. Mrs Palasty relied on some allegations in the S/C of damage to support her contention as to when the damage and the causes of action arose: (a) In para 60 after earlier detailing the breaches of the purchaser of the Gateway contract the plaintiff alleged that between 23 January 2002 and November 2002 it experienced financial losses. (b) In para 97 the plaintiff alleged that as a result of Mr and Mrs Palasty's breach of the Collateral Contract, the plaintiff has suffered loss and damage as pleaded and particularised in para 106. That was the claim pursuant to s 42 of the Fair Trading Act. Para 106 asserted that the plaintiff had suffered loss and damage by reason of the non payment of moneys payable under the contract for the sale of the property, namely $5.39 million which should have been paid to it at 15 December 2001, loss and damage by reason of the difference between the contract purchase price for the land ($5.3m) and the figure of $2.5m obtained in the contract with the administrators, loss and damage as a result of the non settlement of the Hotel Agreement (Westpac having terminated that agreement about 14 December 2001 - para 50) and moneys thrown away (para 51), loss of the use of moneys which should have been paid to it at 15 December 2001 loss and damage as a result of interest, penalty interest and fees payable to Westpac between 15 December 2001 - 14 October 2003, loss and damage by reason of the Administrators' fees and loss and damage by reason of moneys paid to Westpac about 8 March 2004 to fully discharge the plaintiff's then liabilities. 47. Mrs Palasty contended that the alleged breach of the pleaded collateral contract led to a financial loss on 23 January 2002 and that the plaintiff also pleaded a loss in the form of interest paid to Westpac had occurred beginning on 15 December 2001. Mrs Palasty submitted that as termination of the Hotel Agreement allegedly occurred on 14 December 2001 the action against her had to commence on or before 14 December 2007. 48. It may have been arguable whether the plaintiff can make a claim against Mrs Palasty for the losses suffered as a result of the termination of the Hotel Agreement. I think it must first be determined whether and when a breach of the pleaded collateral contract occurred and the extent of any breach. Then the question of loss and damage should be addressed. It is not sound to proceed on the basis that because an ambitious claim for damages is made the cause of action has arisen from the first date from which damages are claimed. 49. As to the cause of action in deceit raised in paras 107 and 108 of the S/C the plaintiff relies on the facts pleaded and particularised in paras 16-19, 31 and 38-58. Paras 16-19 plead and particularise the representations made and nominate the purchasing entity Mr and Mrs Palasty wished to use. Para 31 conveys that the 5th and 6th defendants represented to the plaintiff Nexus Realty had been paid and held the deposit of $1.1 million. Paras 38-58 deal with various events after the exchange of contracts up to the service of the Notice of Termination on 23 January 2002, including the failure to make payments of the extra consideration as per special condition 41, the preparation of the Primary Application and draft linen Plan of Consolidation, the request not to lodge them, the Palastys' request to vary the purchase arrangement, the refusal of the plaintiff and the consequences and the giving of Notices, the registration of the Primary Application and Plan of Consolidation and the ascertainment that the deposit had not been paid. 50. Mrs Palasty submitted that para 57 of the S/C suggests the discovery on 21 January 2002 of deceitfulness on the Palastys' part when the plaintiff's solicitor was told that Nexus Realty Investment "had not entered into any Agency Agreement nor received any sum of money with respect to the sale … or the Gateway Contract." The submission characterised Nexus Realty Investment as the plaintiff's agent. I doubt if this is entirely accurate in view of Special Condition 35. That provides that the purchaser warrants that the agent in this Contract is the agent who introduced the purchaser to the property and indemnifies the Vendor against a claim for commission by any other agent. The purchaser also agreed to pay all agents commission payable to the agent on completion. The purchaser indemnified the Vendor for any claim for commission by the said agent. In Special Condition 39 the agent is described as the Vendor's agent. On p1 of the Contract "Nexus Realty & Investment" is described as the Vendor's agent. In cl 46 in dealing with payment of $1,100,000, part of the deposit is to be paid "to the agent named therein." The provisions indicate that this was not a conventional vendor-purchaser relationship nor was the relationship of either party with the agent a usual one. 51. Mrs Palasty submitted that there was no pleading of deceit after 21 January 2002 and that an action could therefore not be maintained against her unless it had commenced on or before 21 January 2008. 52. Mrs Palasty also contended that the alleged losses associated with the incurrence of the Administrators' fees in November 2002 and the payment of the balance due to Westpac about 8 March 2004 were secondary to those losses experienced by the plaintiff prior to its voluntary entry into administration. She pointed out that para 100 contends that her oral agreement led to personal obligations in place of those held by Gateway and that the first pleaded liability (at para 106 of the S/C) for those alleged allegations would have crystallised on 15 December 2001 (see, for example, para 106(e) of S/C - interest etc incurred to Westpac between 15 December 2001 - 14 October 2003). 53. In her submission in reply Mrs Palasty contended that the action in deceit against her had been inadequately pleaded, that an action in deceit requires proof of fraudulent intent, and that allegations of fraud must be pleaded distinctly and with particularity. She further submitted that the only pleading of deceit was by reference to paras earlier in the S/C which pleaded various facts and that none of those paras plead a representation made by her at a time that she knew the statement was false. It was submitted that paras 107 and 108 were liable to be struck out. 54. The allegations of fraud could and should have been pleaded more directly. However, they are implicit in the facts pleaded. These included that she knowingly made important representations which were either not true or not honoured (and never intended to be honoured), the conduct relating to the lodgement of the Primary Application and Plan of Consolidation together with serving the Notice of Termination, the manoeuvres relating to the deposit, for example, its non payment, the representation it had been paid and the submission of the deed having the effect of issuing shares in lieu of paying the deposit and part of the purchase price. There is perhaps the inference that there were a series of family moves using a company, Gateway, which had no assets of consequence to enter into a contract to purchase a property for a price it could not pay or did not wish to pay over the months from August 2001 onwards. Then when that purchase did not proceed because of that company's conduct (including its contractual breaches) and the conduct of the Palastys, the Palasty family subsequently used another company (controlled by a close family member) to purchase the property at less than half the contract price. It does not appear if the Palastys were made aware of the vulnerability of the plaintiff and Mr Loiero to Westpac, that is, if the purchase was not settled large sums could be owed to Westpac, which would want payment of the money owed to it. 55. While the pleading difficulties were mainly raised in the address in reply, the plaintiff does need to state in express terms the basis of its action in deceit and not leave it to be gathered from inferences from the many facts that have been pleaded or particularised. If the action of deceit is not statute barred, the plaintiff should have leave to amend its pleading on that count. 56. Putting to one side the pleading difficulties the plaintiff relied on postponement of the bar in s 55 of the Limitation Act 1969. That section provides: "55 Fraud and deceit (1) Subject to subsection (3) where: (a) there is a cause of action based on fraud or deceit, or (b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment. (2) Subsection (1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection. (3) For the purposes of subsection (1), a person is answerable for fraud deceit or concealment if, but only if: (a) the person is a party to the fraud deceit of concealment, or (b) … (4) …" 57. The plaintiff submitted that s 55(1)(a) operates in this matter. It further submitted that the deceitful conduct also forms the basis of the actions for breach of the collateral contract and oral guarantee alleged. In Hamilton v Kaljo & Others (1987) 17 NSWLR 381 McLelland J considered s 55. He held that the expression "fraudulently" in s 55(1)(b) applied to conduct involving some form of dishonesty or moral turpitude. A corresponding meaning should be applied to the word "fraud" in s 55(1)(a). 58. The plaintiff submitted that the first factual indication that it received that the deposit had not been paid to Nexus Realty Investment was when the latter so advised R J Thomas by letter of 21 January 2002. It was submitted that receipt of that information in isolation, does not constitute discovery of the fraud or deceit. On receipt of the letter of 21 January 2002 Mr Thomas promptly wrote to Maclarens (1st-4th defendants), the former solicitors the plaintiff and to Mr D S Harley, the solicitor for Gateway and the Palastys as to who held the deposit. 59. With his letter of 22 January 2002 to Mr Harley, Mr Thomas attached a copy of the letter of Nexus Realty Investment of 21 January 2002. Mr Thomas wrote to Mr Harley that he had communicated to Maclarens, who seemingly advised that on the morning of the exchange of the contractual parts Mr Harley's office stated that that office had forwarded the deposit moneys to Nexus Realty. In his letter of 23 January 2002 to Mr Harley, Mr R J Thomas renewed his request for advice as to the location of the deposit moneys and described this as an urgent matter. On 8 April 2002 Mr Thomas asked Maclarens to advise if they held the deposit moneys and if not to advise in writing the whereabouts of the same. By letter of 11 April 2002 Maclarens advised that their office was not involved with the deposit. They referred to a file note but that was not enclosed. Whether it was sent subsequently in response to a request for it does not appear. 60. By letter of 18 April 2002 to Mr Harley Mr Thomas noted that he had not received any reply as to the location of the deposit moneys. Mr Harley was asked to give the matter his urgent attention. On 24 June 2002 Mr Thomas again wrote to Mr Harley and stated that despite his earlier requests he had received no reply (as to the location of the deposit moneys). The Court was told that Mr Harley was deceased but his date of death was not given. 61. Mrs Palasty submitted that on any possible view, the matter complained of as fraud or deceit must have been discovered if the plaintiff had exercised any degree of diligence well before May 2002. She submitted that the evidence reveals that the principal of the plaintiff, Mr M A Loiero, discovered all the matters of which he makes complaint against her on or prior to 29 January 2002. Accordingly, the discussion as to what would, in the circumstances, be a reasonable period to discover the alleged wrongs is otiose as the period of postponement under s 55 ceases to run where there is actual discovery of the matters complained of. 62. The plaintiff further submitted that s 55(1)(b) also operated in this matter as Mrs Palasty "concealed from the plaintiff by her deceitful statements and misrepresentations that the purchaser company had not lodged the deposit, and that she had not given the written guarantee promised". 63. Once the plaintiff ascertained that Nexus Realty Investment did not hold any moneys by way of deposit it must have been obvious that the purchaser had not paid the deposit to that entity and that any representations made or guarantees given to the contrary were untrue and deceitful. The Palastys were too closely involved not to know what was happening as to the deposit, especially one of $1.25 million. Further by 29 January 2002 the plaintiff and Mr Loiero were also aware that John and Judith Palasty were not directors of Gateway. I can understand the plaintiff and Mr Loiero hopefully trying to ascertain where the deposit moneys were being held but the deceit lay in the representation by the Palastys that the deposit moneys had been paid to or were being held by Nexus Realty Investment. 64. I do not think that it can be argued that the cause of action either in contract or deceit was not first discovered well prior to 28 May 2002. Even if I am wrong in this conclusion the fraud or deceit would, with reasonable diligence have been discovered well before 28 May 2002. The explanation for the lack of activity may well lie in the statement of Mr Loiero in the plaintiff's letter of 12 June 2002 that he was not in any financial position to proceed with any legal action 65. In my opinion there is no reasonably arguable basis on which the plaintiff can rely to contend that there has been a postponement of the limitation bar so as to allow its action against Mrs Palasty to proceed. 66. The plaintiff submitted that where, as here, there is a factual issue raised as to the existence of deceit or fraud or what constitutes a reasonable time in which the plaintiff exercising reasonable diligence could have discovered the fraud or deceit, these are not matters which ought to be factually determined on an interlocutory application. For the purpose of the interlocutory application I have assumed that the fraud or deceit would be established. I think it is beyond argument that the fraud or deceit was discovered well before 28 May 2002 and probably by the end of January 2002. Alternatively, it is beyond argument that any fraud or deceit could, with reasonable diligence have been discovered with reasonable diligence well before 28 May 2002. Any finding to the contrary would be perverse and not reasonably open to a tribunal of fact. 67. The plaintiff submitted that Mrs Palasty was estopped from relying on any time limitations. The plaintiff relied on these matters: (a) the legal representatives of Mrs Palasty are the legal representatives of Mr Palasty and were present in Court on 19 October 2007 and 19 March 2008. In the period between those dates Mr Palasty was pursuing an application that the entire proceedings be struck out. Pending that application the "order" made on 19 October 2007 was not put into effect. (b) No objection was taken by Mrs Palasty's representatives to her joinder as a defendant on 19 October 2007 and 19 March 2008, (when they had been on notice for 5 months that the plaintiff proposed to join her) and when in Court the plaintiff's representative advised the Court that the plaintiff would now proceed to join her, no objection was raised. (c) Mrs Palasty's representatives made no objection to the proposed joinder on either occasion, nor did they seek to raise any issue as to the Limitation Act or time limitations in circumstances where the events giving rise to the causes of action were known to have occurred at least 5 years and some months prior to those occasions. (d) Mrs Palasty through her legal representatives' conduct on 19 October 2007, in the period up to and on 19 March 2008, together with their conduct at subsequent directions hearings where no objection was raised over the period up to 28 May 2008, conveyed a promise or assurance that they would not rely on any time limitations or, in the alternative, on any time limitations which had not run to conclusion prior to 19 October 2007. (e) The plaintiff relied on that conduct and acted on it in defending the joinder pending the outcome of Mr Palasty's motion that was withdrawn on 19 March 2008, and then pending settling the statement of claim ultimately filed on 28 May 2008. (f) The conduct referred to was unambiguous, as no objection was stated. (g) It is unconscionable for Mrs Palasty to resile from that conduct and assert that the pleading against her be struck out on the basis of time limitations or, in the alternative, to time limitations which have expired since 19 October 2007. 68. No relevant order for joinder was made on 19 October 2007 or 19 March 2008 by the Court. Counsel foreshadowed what he was proposing. Mrs Palasty, who was not then a party to the proceedings was not required to be in Court on either 19 October 2007 or 19 March 2008 nor to participate in those proceedings as then established. No adverse inference can be drawn against her on the basis that she engaged the same legal representatives as her husband. She was entitled before taking any action to consider the Statement of Claim served upon her and the case made against her. She cannot prevent herself being sued. She was under no obligation prior to being made a party to the proceedings to raise any objections to any proposed claim, the details of which had not been served upon her. It seems that the terms of the claim against her were not settled until after 19 March 2008. 68. In my opinion there is no sustainable basis on which it can be said that she is estopped from raising time limitations defences and seeking to have the proceedings against her struck out or dismissed on the basis that the proceedings against her are not maintainable. 69. I will hear counsel on the form of the Order that should be made. The question of security for her costs does not arise. Mr Palasty's Application For Security for Costs 70. It was established that the plaintiff was without funds and that it was unlikely to be able to pay Mr Palasty's costs if it was unsuccessful in its claim against him. Thus the Court had power to order security for costs. The issue was whether it should do so. 71. Mr Palasty submitted that the plaintiff had failed to establish that: (a) his conduct was the cause of its impecuniosity, and (b) an order for security for costs would stifle the proceedings. 72. Attention was directed to this statement of Basten JA in Pioneer Park Pty Ltd (In Liq) & Ors v ANZ Banking Group Ltd [2007] NSWCA 334, 65 ACSR 383 at [50]: "Thus it has been said that the existence of a genuine dispute cannot of itself provide cause for disentitling the respondent to security if the circumstances otherwise are appropriate ones for the making of such an order: see Pasdale Pty Ltd v Concrete Constructions 131 ALR 268 at 273." 73. On the basis of the facts pleaded and particularised in the S/C and the evidence Gateway was probably not entitled to serve a Notice of Termination on 23 January 2002 and I do not think a genuine dispute as to this matter exists. Nor can there be a genuine dispute as to the contractual requirement for a deposit to be paid and that it was not paid by or on behalf of the purchaser. 74. The area for dispute is as to the oral guarantees given and the oral representations made by or on behalf of Mr Palasty including those as to the payment of the deposit. It is necessary to examine the whole of the circumstances 75. The contract for sale contains extensive special conditions, some of which have earlier been mentioned and which must be kept in mind. 76. There was a detailed valuation by DTZ Australia (NSW) Pty Ltd (Mr David Torrens) as at 21 June 2000. At p 6 there is a valuation of $5.3m for the market value of the freehold interest in Stages 1 and 2 based upon the approved proposed development plans and subject to vacant possession. The valuer states at p 8: "The property currently comprises a potential development site upon which various older style buildings are constructed. It is proposed that a convenience centre … will be constructed … and this will comprise several freestanding service and retail outlets." 77. The plaintiff's case against Mr Palasty is that in about June 2001 after negotiations with him and Mrs Palasty they offered to purchase the property at St Marys for $5.3m (para 4 of S/C). The plaintiff also alleges that in about mid July 2001 Mr and Mrs Palasty represented to it that the name of the purchaser of the property would be changed to Cerza Pty Ltd that they, (the Palastys) were directors and that they would give personal guarantees for the performance by that company of the purchaser's obligations. 78. The plaintiff alleges that on or about 19 and 20 July 2001 at the property at St Marys Mr and Mrs Palasty represented to Mr Loiero on behalf of the plaintiff that the purchaser would be another company owned by them renamed Gateway and that they were directors of Gateway. The plaintiff alleges that the Palastys each gave an undertaking to the plaintiff to enter into respective personal written guarantees for the obligations of the entity which purchased the property from the plaintiff. 79. The plaintiff alleges that on 18 July 2001 it wrote to Mr and Mrs Palasty to confirm the undertakings and that by virtue of their undertakings Mr and Mrs Palasty have each entered into an oral guarantee for the obligations of the entity, which ultimately contracted with the plaintiff to purchase the property. At first blush, unless the letter of 18 July 2001 is ambulatory in its terms and extends to future events and contracts, it is not easy to see how that letter picks up what took place on 19 and 20 July 2001. The letter of 18 July 2001 was not tendered. Perhaps it relates to the agreement reached as to Cerza Pty Ltd being the purchaser and it is contended that the arrangements mentioned applied to any purchaser subsequently nominated by the Palastys. That letter appears to be evidentiary and the plaintiff relies on the alleged oral guarantee. 80. As to the non lodgement of the Primary Application and Plan of Consolidation and obtaining registration thereof 60 days prior to settlement (originally to occur on 15 December 2001) the terms of the contract were varied and the varied arrangements were allegedly confirmed by the plaintiff's letter of 10 October 2001 and by the letter of 15 October 2001 of Gateway's secretary (Justin Palasty). 81. Standard condition 2.1 of the contract provided that the purchaser must pay the deposit ($1.25m) to the deposit holder as stakeholder. See also the balance of Standard Condition 2. This term has to be read with special condition 46. 82. Mr Palasty submitted that the most substantial allegation made by the plaintiff was the unlawful termination of the contract by Gateway and consequently it was repudiating the contract. If that were so, the plaintiff had ancillary actions available against Mr Palasty based on the alleged collateral agreement that Gateway would perform its obligations under the contract or on the alleged oral guarantee that Gateway would do so. 83. In a case where the contract price is $5.3m and the deposit is $1.25m and the purchaser does not pay any of it, that is a substantial breach that goes to the root of the contract entitling the vendor to terminate. See standard condition 2 of the contract. 84. Mr Palasty submitted that the affidavit evidence does not establish that the plaintiff suffered loss as a result of the Palastys' conduct. He contended that the value it attributed to its assets prior to the Palastys' alleged wrongful conduct was not their then actual value, but the value they would have had, had the whole project intended by the plaintiff been effectuated. Mr Palasty contended that on the plaintiff's own case, the Palastys' conduct only deprived it of a potential profit or increase in value. I do not agree. Mr Palasty relied on the decision of Beaumont J in Fat-Sel Pty Ltd v Brambles Holdings Ltd (1985) ATPR40-544. In that case Brambles Holdings Ltd (Brambles) sought security for costs, Fat-Sel Pty Ltd (Fat Sel) having brought proceedings alleging misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act. Fat-Sel relied on a deed with Brambles and claimed that Brambles covenanted to deliver to Fal-Sel all grease-trap waste material collected by Brambles within certain areas. Fat-Sel alleged that Brambles made a series of representations as to the volumes of material that would be available and that it proposed to commence operations to facilitate the collection of grease-trap waste for processing by Fat-Sel. Fat-Sel had given a charge over certain plant and equipment to Brambles securing payment of $300,000 then advanced by Brambles to Fat-Sel together with all other moneys owing on any other account. 85. Contraventions of s 52 were alleged and a declaration avoiding the deed of charge and consequential injunctive relied were sought. In addition "damages" for loss of profit under s 82 of the Trade Practices Act were claimed, that is, the statutory jurisdiction to award damages was not confined to "reliance damages". Beaumont J declined to determine that point of principle in an interlocutory application. The judge added: "… [Fat-Sel] has failed to demonstrate, as a matter of economic causation that [Brambles'] alleged conduct was in any material sense responsible for [Fat-Sel's] impecuniosity." 86. Mr Palasty relied on this further passage: "Moreover, there are difficulties in making out a case of impecuniosity attributable to the respondent's conduct as a ground for denying security for costs where the applicant relies on an alleged loss of a promissory kind rather than 'reliance' damages of the type conventionally awarded under sec. 82: it is one thing to refuse security where the party claiming relief can show that the party sued brought about the impecunious party's insolvency by causing him to act to his detriment and to lose funds in that connection; it is a different thing where, as here, the applicant has not thrown away funds in reliance on the respondent's conduct but rather seeks to recover profits which the respondent's representations are alleged to have led it to expect to earn in the future. In the latter class of case the respondent's conduct may not have improved the applicant's financial position but, in contrast to the former class of case, the conduct complained of has not worsened the applicant's financial condition. It follows, in my view, that the applicant has failed to bring itself within the exceptional class of case of which Lucas v Yorke , supra, is an example." 87. The present case, which differs from Fat-Sel, involves the sale of a large parcel of land for $5.3m with a Development Approval. Special Condition 40 provides for the DA plans with Penrith Council consent of 1 February 2000 to be assigned to the purchaser along with related documents as enumerated, together with any other available documents. Any further works or adjustments required were to be at the purchaser's own cost. By Special Condition 53 the Vendor acknowledged that the land was sold with the Development Approval as approved by Penrith City Council for the erection of commercial premises, petrol station and fast food outlets. 88. Special Condition 32 provides that the purchaser purchases the property "as is". Special Condition 33 provides that the vendor does not represent the property is fit or suitable for any particular purpose. 89. Mr Palasty contended that the plaintiff had not thrown away funds in reliance on the Palastys' conduct but was rather seeking to recover profits which their representations are alleged to have led it to expect to earn in the future. 90. This is not the correct analysis where there is a contract for the sale of land at a fixed price with development approval. It should not be assumed that the contract price at the date of the contract was not the market value of the land. The plaintiff's case is that it has lost moneys to which it was contractually entitled by the non-completion by Gateway of the contract. It is true that as against Mr Palasty the plaintiff is relying on the representations which it alleges he and his agent, Mrs Palasty made. However, the damage which it suffered does not primarily arise from the loss of profits which Mr Palasty's representations led them to expect to earn in the future but from the purchaser's non-completion of the contract. On the plaintiff's case the Palastys were the moving parties behind the purchase. They negotiated the purchase price and were the initial purchasers. Ultimately, they selected the purchasing entity. 91. The conduct primarily complained of is the non completion of the contract by the purchasing entity. That has worsened the plaintiff's financial position. The plaintiff did not receive the payments it had contracted to receive. Similarly, the refusal of Mr Palasty to be responsible for the obligations of the purchaser pursuant to the contract of sale has resulted in the plaintiff not receiving the benefit the subject of the contract and this has worsened the plaintiff's financial position. Essentially the claim is not a loss of profits claim but one for loss of a contractual bargain. 92. In my opinion the principle in Fat-Sel does not apply in the context of this case. 93. Although I have not accepted the argument based on Fat-Sel that does not end the matter. I return to the question whether the plaintiff has established that Mr Palasty's conduct was the cause of the plaintiff's impecuniosity. 94. On the materials presently before the Court I think it is probable that the plaintiff will establish that the purchaser, Gateway, was not entitled to terminate the contract. There was a second major issue; the plaintiff must establish that Mr Palasty, gave the guarantees or made the representations. I have referred to the Palastys, on occasions, because Mrs Palasty is alleged to be a party to many of the important alleged conversations and they appeared to act together. When it is stated that it must be established that it was the conduct of the party seeking security for costs that was the cause of the opposing party's impecuniosity, I have proceeded on the basis that such conduct must be at least unlawful or actionable. That would include conduct in breach of contract or making knowingly untrue representations including those never intended to be kept. Obviously, it was not unlawful or actionable to give guarantees or make representations without more. 95. In my opinion, while a basis has been shown for the plaintiff's claims and the basis does not appear to be entirely unsupported, there appears to be a genuine dispute as to the plaintiff's collateral contract claims and those based on knowingly untrue representations. Of course, if Mr Palasty did not give the guarantees alleged nor make the representations alleged the plaintiff has no case against him. Those issues remain to be resolved. 96. Because there is a genuine dispute as to the collateral contractual claims alleged against Mr Palasty, his alleged misrepresentations and whether they were knowingly false, the plaintiff has not established that the unlawful conduct of Mr Palasty has caused the plaintiff's impecuniosity. Stifling of Proceedings 97. The next question is whether the plaintiff has established that an order for security for costs would stifle the proceedings. The person standing behind the plaintiff is Mr M A Loiero and, effectively, he is the only person standing behind the plaintiff. 98. It is necessary to examine his financial affairs. Mr Loiero said that he was indebted to various creditors on certain accounts, including the Westpac accounts and that his indebtedness was secured by mortgages upon a number of properties which he previously or presently owned, namely at Shoal Bay, NSW, Buderim, Queensland and Gilgandra, NSW. These properties were otherwise free from encumbrances. Mr Loiero said that the Buderim property was disposed of about four years ago for approximately $380,000 to $400,000. Most of the proceeds of sale went to Westpac. He retained about $100,000 to live on and pay bills with. 99. Mr Loiero said that the Shoal Bay unit was sold in December 2007 and that the proceeds of sale were used to discharge some of the plaintiff's then debts and pay some of the ordinary living expenses of his family. He still owns the rural piece of land (about 400 hectares) near Gilgandra. There is a very old cottage on the property which is drought affected and cannot support stock or crops. He has given extensive consideration to selling the property. Agents have told him that he would get around $250,000 for it. He has a mortgage upon it with a limit of $220,000 with the National Australia Bank (NAB) and repayments are about $1200 per month. He thought that if he sold the Gilgandra property he would, after paying out the mortgage, possibly obtain $20,000 to $30,000. He accepted that this would save the company $1200 per month. These repayments are being made out of the funds advanced to him by NAB. It was apparent that he was using the moneys he drew under the mortgage to meet family living expenses. 100. Much of the affidavit of 20 August 2008 of Mr Loiero was directed at showing that the plaintiff's present lack of funds and highly unsatisfactory financial position was due to the conduct of Mr and Mrs Palasty and that, if the Gateway contract had been completed, the plaintiff would have comfortably met all its financial obligations. 101. Mr M A Loiero filed two affidavits (10 October 2009 and 13 November 2008) dealing with his personal financial position. 102. He states that he has not been employed since the plaintiff entered administration in November 02 and that he is currently unemployed. Before becoming unemployed he was self employed as a property developer. He detailed the medical conditions which prevented him from obtaining and maintaining employment within the ordinary workforce. He said that his household currently received $500 per fortnight, being child allowance and that it does not receive any other income. Some of the balance of the family expenses appears to come from drawings under the NAB mortgage. Previously some of those expenses had come from moneys lent by close relatives. Mr Loiero has three young dependant children. Mr Loiero estimated that his expenses are about $1164 per fortnight. He also pays $1118.66 per month by way of hire purchase payments for a four door Nissan Patrol utility suitable for the family and able to accommodate the children's bikes and other equipment and items when the family goes to the Gilgandra property. Since the commencement of these proceedings he has paid no money to any of his legal representatives for the services they have provided. 103. In about August 2006 Mr Loiero received a loan of about $100,000 from his family. It is his understanding that his mother's real property (her home) was provided as security. The interest payments were met by his sister who was a guarantor of the loan. Mr Loiero's mother is a pensioner and his sister died on 3 August 2007. This debt remains outstanding. It was repayable on 31 December 2008. Mr Loiero anticipated that if he was not able to repay the debt by the due date, which was probable, his family would accommodate him further. Mr Loiero annexed to his affidavit a bank statement for AI Waterproofing Pty Ltd for August 2006. Mr Loiero said that this company was controlled by his sister and he did not profess to be familiar with its affairs. He was unable to give, nor would I expect him to be able to give, any explanation for two major entries, namely a deposit on 4 August 2006 of $424,700.98 and a transfer to another account on 8 August 2006 of $310,000. If his sister had lived she would have probably been able to explain these entries. Mr Loiero said that his sister's husband was running the company's business, the market has quietened and there was not much work available. His sister's husband had been much affected by her death. Mr Loiero said that he did not get on well with his brother-in-law, who had gone to pieces since his wife's death and was on medication. Mr Loiero conveyed, and probably correctly, that he could not expect further financial help from his family. 104. Mr Loiero stated that he is liable to Royal Guardian Mortgage Corporation Pty Ltd for $165,311.71 and this is supported by a statement issued by that company. The loan was initially secured by first registered mortgage over the Shoal Bay unit. In 2007 the Shoal Bay unit was sold by the mortgagee in possession. There is an unusual story lying behind this loan. 105. Mr Loiero is currently the plaintiff in District Court proceedings against the estate of Claude Tolomeo or alternately the executors of that estate. Those proceedings were heard in November 2008 and judgment is currently reserved. He is seeking to recover about $364,000. That represents the amount of the loans made plus interest. 106. Mr Loiero said that initially he lent the late Mr Tolomeo $140,000 and that he died. Mr Tolomeo's executor asked him (Loiero) to advance another $50,000. Mr Loiero said that he lent that money to Mr Tolomeo's wife after Mr Tolomeo died. Mr Loiero said that Mr Tolomeo was a business associate whom he had known for 15 years. Mr Tolomeo was in the building industry. 107. To lend Mr Tolomeo the money he sought, Mr Loiero said that he took out a loan on his property at Shoal Bay. Mr Tolomeo was to make the loan repayments (including interest) to Royal Guardian. Mr Loiero said that a few years previously the plaintiff had sold Mr Tolomeo a truck. His executor asked him to take the truck back. There were some costs associated with that which brought the total to $200,000. 108. As I understood the evidence as it was given, Mr Loiero was to receive a premium of $30,000 for lending Mr Tolomeo $140,000 for 3 months. Mr Loiero's English speaking skills were tolerable but it was not always easy to follow what he was saying. I do not regard the transcript at p17, lines 5-7 as adequately capturing what he conveyed. He was to receive a real benefit of $30,000 for lending Mr Tolomeo $140,000 on a short term basis. See also T51, lines 40-47. 109. Mr Loiero was cross-examined about the entries in his bank account from 16 May to 15 November 2006. The opening balance was a credit of $70,000 and there was a deposit of $100,000 on 1 August 2006 (see earlier). It also showed total credits during the period of $105,960 and total debits of $150,960. He said that this latter sum was not paid out just to support his normal living expenses. At least part of this sum was used to meet restaurant renovation expenses, his wife owning a restaurant. It is probable that part of the $100,000 borrowed from his family was invested in the restaurant business of his wife. That business was sold in 2007 for about $200,000. A satisfactory account of the disposal of that sum and the liabilities of that business was not given. His wife is now fully occupied caring for 3 children, one aged 1½ years and twins aged 5½ years. 110. Mr Palasty attacked the credibility of Mr Loiero in that: (a) he initially failed to disclose that he had an action against the Tolomeo estate in the District Court for about $350,000. He did not include it in his first affidavit because the debt he claimed was disputed. The District Court action was heard in November 2008 and judgment has been reserved; (b) he claimed to have been unemployed since November 2002 yet in his application to Royal Guardian his gross income per annum was shown as $140,000. He said that this was a "no doc" loan and that this was his anticipated income. The lender's only concern was that the loan repayments would be made. While he signed that application, it was completed by a staff member of Royal Guardian; (c) he did not adequately explain that his family's advance was to be used to carry out substantial renovations to his wife's restaurant and the disbursal of the proceeds of sale of that business. 111. These criticisms have substance but it is probable that the Court now has a reasonably full picture of the financial position of the plaintiff and Mr Loiero. 112. Mr Palasty drew attention to the Deed of Settlement of 12 August 1996 creating the "Tony Loiero Family Trust" and constituting Blazai Pty Limited as the first trustee of the settlement and the wide range of potential beneficiaries. It was not suggested that the trust fund held any moneys or property or that the trustee held any assets in the trust fund that could be applied for the benefit of any potential beneficiaries. It was suggested that if the litigation was successful the Trust Fund could be the beneficiary. 113. There are a large number of potential beneficiaries under the discretionary trust. It is unrealistic to expect potential beneficiaries who are not entitled to, or guaranteed, a payment as of course or absolutely under the Trust and who may never receive a payment to help in providing security for costs. 114. Allied with Mr Palasty's reliance on the discretionary trust and his submission that the potential beneficiaries should help provide security for costs was his criticism of Mr Loiero not providing an affidavit and submitting herself for cross-examination on her financial affairs and those of the family. She has her hands full with three young children and she did not strike me as a source to provide security for costs. She disposed of her restaurant business in 2007. Her husband is unemployed and the household income is modest. 115. Annexed to Mr Loiero's affidavit of 13 November 2008 was a copy of a letter of 3 November 2008 from the Australian Taxation office advising that its records showed that his 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008 Income Tax Returns remain outstanding for lodgement. He was advised of the penalties payable. Mr Loiero stated that he had an arrangement with the Tax Office which was aware of this litigation. He had been advised to await its outcome before he filed any tax returns. He stated that he had significant tax losses and that he did not owe the Tax Department any money. His accountant has been attending to the matter on his behalf. 116. Mr Loiero said that any money he received in his District Court litigation would be used to liquidate his debts and that if the plaintiff is successful in this litigation, it would settle all its debts. 117. I am satisfied that Mr Loiero is without funds to provide to the plaintiff for it to provide security for Mr Palasty's costs. Nor is there any other available source of funds that he can tap. 118. Mr Loiero's wife is unlikely to be able to work in the foreseeable future. A principal source of income for the family is the child allowance of $500 per fortnight. Mr Loiero's medical disabilities prevent him from obtaining employment. He seems to be living on amounts being drawn down under a mortgage over the Gilgandra property. He appears to have very little equity in that property and it is unlikely that the sale of the property will yield much, if indeed it can be sold while it remains drought affected. 119. Judgment is presently reserved against the Tolomeo Estate. Even if Mr Loiero is wholly or partly successful in those proceedings he still has to recover the moneys, if any, for which he obtains judgment. Further, any moneys he obtains are likely to be consumed in repaying existing debts and in meeting, to some extent, his family's living expenses. 120. While I have not overlooked some unsatisfactory features of Mr Loiero's conduct and his less than frugal management of his slender resources, there is no prospect of any person providing or assisting to provide security for costs. The main person to benefit from the proceedings, if successful, would be Mr Loiero. He is without any appreciable means and has no income of any consequence. If an order for security for costs were made it would stifle the proceedings. That should not occur as, despite the difficulties they face, the proceedings do not appear to be without some merit. 121. I dismiss Mr Palasty's applications for security for costs. Tidying Up 122. There are at least two matters which appear to require attention. First, it is difficult to see, but I am open to be persuaded to the contrary, how the plaintiff's claim under the Fair Trading Act against Mr Palasty can survive if the three year limitation period applies to it. There is no Motion on foot as to this from Mr Palasty. Does he wish to amend his second Motion? Secondly, the plaintiff's action in deceit against Mr Palasty probably needs to be more fully pleaded to comply with the rules. Does the plaintiff wish to amend this aspect of its claim.? 123. I suggest that counsel consider these matters. Within 6 days Mr Palasty should submit a draft of the Short Minutes of Order to give effect to this judgment to the plaintiff. The plaintiff should have a further 4 days to submit a draft of the Short Minutes. I will list the matter at 9.30 am on 6 March 2009 to deal with all outstanding matters or on such other day as may be mutually arranged by counsel with my Associate. ********** 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.