John Alexander's Clubs Pty Ltd & Anor v White City Tennis Club Ltd [2009] HCATrans 342 (21 December 2009)

Last Updated: 14 January 2010

[2009] HCATrans 342

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S309 of 2009

B e t w e e n -

JOHN ALEXANDER’S CLUBS PTY LIMITED, ACN 097 896 109

First Appellant

POPLAR HOLDINGS PTY LIMITED, ACN 123 945 272

Second Appellant

and

WHITE CITY TENNIS CLUB LIMITED, ACN 000 476 513

Respondent

Summons

HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 21 DECEMBER 2009, AT 9.39 AM

Copyright in the High Court of Australia

MR F.P. HICKS: May it please the Court, I appear with my friend, MR G.A.F. CONNOLLY, for the appellants. (instructed by Colin Biggers & Paisley Lawyers)

MR J.R. CLARKE: May it please the Court, I appear for the respondent. (instructed by Kemp Strang Lawyers)

HIS HONOUR: I have read an affidavit of Michael John Rozdal sworn on 15 December 2009. Do you rely on that?

MR CLARKE: Yes, your Honour.

HIS HONOUR: Do you have any objections to that affidavit?

MR HICKS: No, your Honour.

HIS HONOUR: Do you have any evidence you want to put on in answer to it?

MR HICKS: No, your Honour.

HIS HONOUR: I should also say, I have read the careful and detailed and thoughtful written submissions of both parties. Anything you want to add to your written submissions, Mr Clarke? I understand where you are coming from, as they say.

MR CLARKE: Your Honour, the only thing I think I need to deal with is whether any further evidence is required in respect of the suggestion that we have not met the level of proof in respect of the appellants’ financial position. I actually have some further materials which are a collation of affidavits and transcript and judgments from the Court of Appeal to demonstrate a number of matters. They are in a bundle which, I understand from my instructing solicitor, are still on their way up.

HIS HONOUR: I perhaps should say, I personally did not think that was the strongest point being raised by the appellant. I think the failure of the appellants to deal satisfactorily with the letter from your solicitor in November in that they dealt with one point but they did not deal with the primary question of whether the solicitor’s awareness or belief as to the state of assets was in fact sound. I am more troubled, really, by the fact that there has been no explanation for why the question of security for costs was not agitated until that letter in November and why the application has only been brought on now. As I understand it, the parties have been in litigation for at least two years.

MR CLARKE: Yes, your Honour.

HIS HONOUR: It seems a reasonable inference that any question marks over the appellants’ financial position would have been preying on the minds of the respondent, at least from the time when it became clear that the present appellants were going to seek special leave to appeal to this Court which I think became clear some months ago.

MR CLARKE: Yes, your Honour. Just on your Honour’s first point, I must say I was going to make the point that the failure to respond other than the way in which they responded on the letter was a matter which entitles us to an inference. But dealing with the point your Honour has raised of more significance - - -

HIS HONOUR: That applies both to the letter perhaps and the absence of an affidavit in answer to Mr Rozdal’s affidavit.

MR CLARKE: Absolutely, your Honour. I was actually going to raise Jones v Dunkel. But in answer to your Honour’s other point about delay, the answer is quite simple. The whole question has weighed on our minds for some time but at first instance in front of his Honour – he was then the Chief Judge in Equity – we were the plaintiff and then - - -

HIS HONOUR: Yes, the Court of Appeal.

MR CLARKE: We were the appellant. The authorities are clear that we cannot seek security in respect of a special leave application.

HIS HONOUR: No, but it is something that might have been raised on the special leave application. It is a factor perhaps going actually to the grant of special leave itself.

MR CLARKE: Well, my understanding of - - -

HIS HONOUR: I am sorry to keep interrupting you. I promise to try not to do it any more – but, in any event, I am not saying that this is true of these appellants, but if appellants or applicants for special leave come to appreciate that there might be an application for security for costs, it does tend to affect how much they are going to spend and how they will respond to it.

MR CLARKE: Yes, your Honour. I understand what your Honour is putting to me. Can I say this? Our reading of the authorities was that the fact that one cannot seek security in respect of an application for special leave, and as I read it, it is because one is not an appellant at that point and the High Court has been very clear about the position of an applicant as opposed to an appellant, that was therefore a matter which led to the decision not to raise the question of security. I understand what your Honour puts to me, that if it had been put, perhaps the appellant may have taken a different position. Two responses to that.

First of all, if they were to take a different position, that would be one of, well, if we have to put up security, we would not actually be able to afford it. In other words, the primary reason that delay is raised in respect of an application for security for costs is that the proceedings are going to be ultimately stultified and that is not the position that has been put forward by these appellants; far from it. They are putting us to proof about financial position. Secondly, if any prejudice is suffered, the prejudice is solely, as the cases have demonstrated, obviously more often at first instance, but the cases demonstrate that the way in which that prejudice is met is by not granting security in respect of costs that have already been incurred. Certainly we would not seek security for any of the costs that preceded the letter that Mr Rozdal sent to the appellants’ solicitors. His affidavit, the amount of the security is not calculated on any other basis than that. So the position, we would say, is that there is no delay in terms of bringing the application. There is no prejudice suffered by not raising the possibility at the special leave application and, in any event, the security for the costs that we seek is costs going forward. So we would say that point does not take the appellants very far.

The only other point that the appellants have raised is that relating to Walker Corporation. It probably does not go far either, in our submission, because whether it is Walker Corporation or Mr Alexander who seek to benefit from these proceedings the most, in neither case has either Mr Alexander or Walker Corporation demonstrated that they could not put up the security and in both cases neither has sought to come around from behind the skirts of the company, to use the wording of some of the cases. Certainly Mr Alexander, who is the controlling mind and owner of both appellants, has not sought to indicate that he could not put up the security and the finding of the Court of Appeal of his Honour Justice Macfarlan was clear that there was an alter ego position here and if anyone was going to put up the security, it might be Mr Alexander. But, in any event, because of the way the deed works, the party who would potentially benefit from a successful appeal by the appellants would be Walker Corporation and neither have they offered to come and stand behind the appellants.

HIS HONOUR: Very well. Unless you particularly want to tender the bundle, which may or may not have arrived by now.

MR CLARKE: It has. I think I should out of - - -

HIS HONOUR: Does Mr Hicks have knowledge of what is in it?

MR CLARKE: No.

HIS HONOUR: Problem?

MR CLARKE: There is the unfortunate position of I only received the submissions late on Friday evening. I understand the position, your Honour. Perhaps I could seek to tender the bundle, or at least hand it up to your Honour and, as I take your Honour to a couple of critical documents – I will not take long on it give what your Honour has already said – but before I ask Mr Hicks to agree to the tender, perhaps I just demonstrate what is in it.

HIS HONOUR: All right. We are sort of getting ready for an opposed tender; the opposition may or may not happen.

MR CLARKE: If I can just first take both your Honour and my learned friend to the index to indicate that the documents are relatively uncontroversial. We have a judgment of Justice Tobias which was on an application before the Court of Appeal that took place in time prior to the hearing; an affidavit of Linda Johnson who is the solicitor from Mallesons Stephen Jaques for Walker Corporation, that that affidavit was read and relied upon by Walker Corporation at the application to join; the transcript of those proceedings before his Honour Justice Macfarlan; the judgment of the Court of Appeal which followed that hearing and the affidavit of Mr Alexander. They are in there in full, but there is only - - -

HIS HONOUR: Mr Hicks was not involved in those proceedings below, was he?

MR CLARKE: He was not.

HIS HONOUR: Mr Clarke, what do you seek to get out of these documents precisely?

MR CLARKE: The points I wish to make are that it was already accepted in the Court of Appeal judgment, that your Honour would have but it is not in that bundle, that Poplar was incorporated for the purpose of exercising the option and we have already established the paid up share capital of each of the appellants. Clause 8.1 of the deed, which is already in evidence, establishes that Walker provided the totality of the funds to Poplar and these affidavits establish that all of the funds required for the purchase and for the costs since for the development have been provided by Walker. That is in the affidavit of Linda Johnson at paragraph 4. The other items that I wanted to take your Honour to was to establish the position of Walker Corporation.

In the transcript behind index tab 3, Mr Jackman at page 4 of the transcript indicates why Walker has taken the position it has taken and in his Honour’s judgment, Justice Macfarlan, in the Court of Appeal, which is behind tab 4, it also accepts the same proposition as to why Walker has taken the position it has taken. Those last two references were really to say that Walker Corporation has an interest in these proceedings and has known that they have been taking place the whole time but have elected to sit back and let the appellants achieve the ends that Walker wished to achieve. That does not go very far other than to establish that Walker Corporation as well as Mr Alexander is another company or another entity which might be relevant to consider whether it has come out from behind Poplar and JACS.

HIS HONOUR: It is common ground that it has not come out.

MR CLARKE: Yes.

HIS HONOUR: What we have is nearly 200 pages of which you have referred to two and they do not seem very controversial propositions.

MR CLARKE: I did not think they were, your Honour. I just did not want to be short of evidence if it came to it.

HIS HONOUR: Mr Hicks, what is your attitude to this belated tender?

MR HICKS: Your Honour, it is true that Walker Corporation has an involvement in this project by reference to the deed which is annexed to the affidavit of Mr Rozdal. I am not sure that this material suggests that their involvement or interest is anything beyond that commercial instrument. If it is, then I have not heard my friend indicate that. If it is not, then we really do not need anything more than the deed, in my submission. There is no doubt that moneys have been advanced pursuant to those terms and there is an obligation that applies to both appellants as a result of those advances which obligation crystallises in June 2010. If there is anything more that my friend wishes from this material, then perhaps he could indicate it and then I will further address you upon it, your Honour.

HIS HONOUR: Is there anything more, Mr Clarke?

MR CLARKE: Thank you, your Honour. The only other point, your Honour, really is that if Mr Hicks would concede that all of the amounts have been funded by Walker. That is the only other point that comes out of Ms Johnson’s affidavit. I think then I do not need to rely upon the material. I only wanted to have the material in case we were going to have an argument about establishing the financial position of the appellants.

MR HICKS: Your Honour, I do not have any difficulty with the matters referred to in paragraph 4. My friend can proceed on that basis, as your Honour can. If your Honour does not propose to admit that passage of the affidavit of Ms Johnson, then I am happy for my friend to put it on record.

HIS HONOUR: Perhaps the simplest thing to do is simply admit paragraph 4 of Ms Linda Ellen Johnson’s affidavit of 10 June 2009.

MR CLARKE: Yes, thank you, your Honour.

HIS HONOUR: Very well.

MR CLARKE: I will not tender the rest of the bundle, your Honour, thank you.

HIS HONOUR: That material will be marked exhibit A.

EXHIBIT: EXHIBIT A.....Paragraph 4 of the affidavit of Ms Linda Ellen Johnson dated 10 June 2009

HIS HONOUR: Now, Mr Hicks, what do you say about Mr Clarke’s principal points?

MR HICKS: Your Honour, could I commence by doing two things. One, I have not provided the Court with the original signed submission, so could I hand those up, please?

HIS HONOUR: Yes.

MR HICKS: We have been asked to address that. I also apologise for Mr Ireland’s absence today. He conveys his apologies to the Court and I shall do my best in his absence to make submissions on behalf of the appellants. Your Honour, as has been outlined in our written submissions, we say that the Court must exercise its discretion having regard to the whole of the circumstances. The financial circumstances of the appellant are addressed by reference to some communications and a single deed. The weight of the evidence needs to be addressed accordingly. I have heard what your Honour says concerning the absence of any detailed response either by way of correspondence or affidavit, but nonetheless we do make the submission that the Court should be satisfied that there is a real and substantive risk of an incapacity to meet an order as to costs.

The deed and the arrangements that have been addressed point to an obligation to pay moneys crystallising in June 2010. As at today, it is December 2009, and the matter is listed for hearing on 10 and 11 February 2010. The potential for any debt that could affect the financial circumstances of either appellants, in our submission, is a small matter to consider in the light of the other factors. Those other factors, as we have sought to address in our written submissions, are, firstly, special leave has been granted, so this Court has been satisfied that there are issues which need to be considered in light of the decision of the Court of Appeal.

Secondly, there has been an unexplained delay at least as and from 3 November to either and both the letter of 27 November 2009 and, indeed, the application of 15 December 2009 which itself came approximately two weeks after the response was received by the solicitors for the applicant. In that context, the preparations in respect of the appeal have been substantially advanced to the point that the appeal books are largely settled and it is the expectation of the appellants that they shall be filed prior to Christmas and the hearing of the matter is close at hand, being listed to commence on 10 and 11 February 2010.

Your Honour, in those circumstances and given the nature and advance of the preparations that have been undertaken and the lack of any explanation as to why this application was not, say, brought in mid-November, the whole of the circumstances, in our submission, do not and should not persuade the Court to make an order for security in the amount nominated. The authorities that we have brought together and identify, your Honour, if I can hand up copies but they are not controversial in terms of the delay and the need for an explanation, in our submission, given what has happened and the fact that the immediacy of the appeal hearing is a significant factor that the Court needs to consider.

HIS HONOUR: I have read the authorities referred to in your submissions and Justice Toohey’s decision, Chief Justice Mason’s decision in Devenish’s Case.

MR HICKS: Those are the two that I am referring to.

HIS HONOUR: There are quite a large number of decisions, of course, in Mr Clarke’s submissions that are in a general sense in point. I am familiar with those cases. I think there is common ground between the parties on what might be called the state of the law.

MR HICKS: Yes, your Honour. Certainly we do not see it as in any way controversial. Your Honour, in those circumstances and given the nature of the evidence that has been addressed before this Court and directed to us

concerning the financial circumstances of the appellants, we do not see, in our submission, there be any occasion to require that either Mr Alexander personally or Walker Corporation offer any sort of surety or security in respect of the amounts concerned. In our submission, it does somewhat shift the onus to an appellant, or in this case a respondent to a summons for security for costs, for there to be a statement of the kind that is offered by Mr Rozdal in his affidavit as to the financial circumstances of the appellants based on the material that he offers, which is a single deed and two company searches, and then to say, well, the appellants have not challenged that in correspondence, the appellants have not put on any evidence in answer to that and nor has the company or individual that stands to benefit from this transaction offered to make good any potential downfall, therefore the entitlement to security crystallises.

In our submission, we say that somewhat puts the cart before the horse in the sense of relying upon a failure to offer security by the parties said to ultimately benefit as being a reason to order security in the first place. We say that the Court needs to be satisfied first that there is a need for security before pointing to the fact that an individual or a company that may stand to benefit is a reason to grant that. It seems somewhat circuitous, in our submission, and the Court ought proceed upon the basis that, firstly, there needs to be reasonable or rational assessment of the likelihood and the magnitude of the risk that the costs order, if made, will not be met and then, secondly, but no less importantly, to consider those other factors including delay, the immediacy of the hearing and advancement of the preparations in the intervening period. Unless there is anything I can assist you with further, those are our submissions, your Honour.

HIS HONOUR: Thank you, Mr Hicks. Have you anything in reply, Mr Clarke?

MR CLARKE: Yes, your Honour, just briefly. In respect of the delay, the hearing for special leave was on 3 November. My recollection, although I do not have it in front of me, is that the notice of appeal was filed by the appellants very close to the end of their allocated two weeks. So the delay really is between 17 and 27 November, which is only 10 days at a time when we were also required to file any notices of contention, two of which were filed.

On the question of the financial position, my learned friend wishes to leave the belief that there is really only Mr Rozdal’s belief that is being relied upon as to financial position, but in fact, if I can very quickly run through the objective facts, and they are that the appellants were substantially owned and wholly controlled by Mr Alexander as his own personal corporate vehicles. That was established in the Court of Appeal judgment, paragraphs 10, 42 and 94. JACS, the first appellant, has paid up

share capital of $200. It approached Walker Corporation for funding to secure the option land. That is in clause 2.1 of the deed.

Poplar was incorporated for the purposes of exercising the option. That is in the Court of Appeal judgment at paragraph 42. It has paid up share capital of only $100. Walker Corporation provided the totality of the funds to Poplar. That is in clause 8.1. It borrowed all those funds required for the purchase and for the costs since, including development costs. That is in the affidavit of Ms Linda Johnson. That inference also flows from the fact that the amount repayable to Walker is at least $16 million and not the original amount that was borrowed to exercise the option. There is no evidence that Poplar has ever traded. The inference from all the above is that it has never traded and all leads to the inference that any assets Poplar has beyond the land is negligible or borrowed funds subject to repayment being its only source of funds.

It follows that there is a real risk that Poplar could never repay the amount owing to Walker Corporation let alone have funds left over to meet a costs order if it were to be unsuccessful in this appeal. There is no evidence that JACS, John Alexander’s Company, has ever traded except to promote plans for establishing tennis facilities at the site and it can be inferred that there is also a real risk that that company could not make its payment either as guarantor. I thought I should run through those things in case your Honour was swayed by what my learned friend had to say, but that is all I have unless there are any other questions, your Honour.

HIS HONOUR: On 3 November 2009, the present appellants obtained a grant of special leave to appeal. The respondent now seeks an order that the appellants provide security for its costs of the appeal in the sum of $82,650. It does so by a summons filed on 15 December 2009.

The essential case of the respondent is that the appeal is being conducted for the benefit of a person or persons other than the appellants and that person or persons is able to provide security even if the appellants, in view of their apparently impecunious position, are not able to. The affidavit of Mr Rozdal filed in support of the summons states that, so far as he is aware, the appellants have no assets other than those which are heavily encumbered. That awareness was expressed in a letter of 27 November 2009 to the solicitors for the appellants. In their reply of 11 December 2009, although those solicitors dealt with one aspect of what the solicitors for the respondent had raised, they did not otherwise deny what the solicitors for the respondent asserted.

Despite the contrary arguments advanced today on behalf of the appellants, that is a suspicious circumstance as is the failure of the appellants to file an affidavit proving that the awareness of the respondent’s solicitor is defective. However, in my opinion, the order sought must be refused for the following reasons.

First, the case is of public importance in the sense that special leave was granted not to remedy a particular injustice to the appellants, but to clarify some of the rules of law considered by the Chief Judge in Equity and the Court of Appeal and the application of those rules of law; see Devenish and Others v Jewel Food Stores Pty Ltd [1990] HCA 35; (1990) 94 ALR 664 at 666 per Chief Justice Mason.

Secondly, without seeking to prejudge the outcome of the appeal, it must be said that special leave having been granted it cannot be said that the appeal has no merit. That was a relevant factor in Justice Toohey’s opinion in Webster and Another v Lampard [1993] HCA 20; (1993) 112 ALR 174 at 175 to 176.

Thirdly, special leave was granted on 3 November 2009. The parties have been involved in litigation for more than two years and it must be presumed that the respondent has been aware of any financial infirmities in the appellants for some time. The affidavit filed on behalf of the respondent does not state when the awareness of the deponent or of the respondent came to be as it is. For all that appears, that awareness may have existed for a long time.

The special leave application was filed on 16 June 2009. Counsel for the respondent points out that it was not possible, in a practical sense at least, to obtain an order for security for costs of that application or before that time. However, it would probably have been appropriate to acquaint the Court with the possibility of the security for costs application either at that time or soon after that time before the costs of the appeal began to be incurred.

The delay in filing of the present application which is being heard in vacation is unexplained. The applicants complain of delay since 3 November 2009. The selection of that date is perhaps too kind to the respondent. As it is, some costs have been incurred both in relation to the special leave application and since then. That is a factor pointing against granting the application for security; see Devenish and Others v Jewel Food Stores Pty Ltd [1990] HCA 35; (1990) 94 ALR 664 at 666 per Chief Justice Mason. Although security is not sought for those past costs, that is to say, the costs before the time when the application was filed, they have been incurred on the appellants’ side and incurred wastefully if it turns out that a stay becomes necessary.

Further, a hearing of the appeal has been fixed for 10 February 2010 for a day and a half. If security were ordered and not provided, the list for the February sittings would be disrupted at such short notice that no other appeal could be listed to the overall disadvantage of other parties seeking to litigate in this Court.

The fourth matter is this. The respondent argues that there is no problem about the appeal dates being wasted and no problem about the costs which the appellants have incurred so far being thrown away because the person or persons for whose benefit the proceedings will ultimately enure can always provide the security which it is the duty of the appellants to supply if an order were made. If the person referred to is Walker Corporation, there is no difficulty in concluding that Walker Corporation is capable of providing security for costs. If the person in question is Mr Alexander, there is no evidence on his financial position filed and tendered in this application. In particular, there is no evidence as to the willingness of Walker Corporation to provide security.

The respondent tendered evidence to show that Walker Corporation had advanced all the moneys needed by the appellants to advance the project which underlies the dispute between the parties, but there was no evidence as to the attitude of Walker Corporation beyond that. Accordingly, it is not clear that an order for security may not render the appeal a dead letter. For those reasons, the summons is dismissed.

Do you want to say anything about costs of this summons?

MR HICKS: We say they are costs of the summons in the event.

HIS HONOUR: Mr Clarke?

MR CLARKE: I do not think there is anything I can say, Your Honour.

HIS HONOUR: Yes. The summons is dismissed with costs.

MR HICKS: May it please the Court.

MR CLARKE: Please the Court.

HIS HONOUR: Thank you very much. The Court will now adjourn.

AT 10.11 AM THE MATTER WAS ADJOURNED