Brisbane Angels Nominees Pty Ltd & Ors v Stockingham Pty Ltd [2024] QCA 25

SUPREME COURT OF QUEENSLAND CITATION: Brisbane Angels Nominees Pty Ltd & Ors v Stockingham Pty Ltd [2024] QCA 25 PARTIES: BRISBANE ANGELS NOMINEES PTY LTD ACN 122 839 294 (first appellant) JOHN DUGALD MACTAGGART (second appellant) ALAN JAMES MONAGHAN (third appellant) FREDERICK RICHARD HOULT (fourth appellant) v STOCKINGHAM PTY LTD ACN 615 829 082 (respondent) FILE NO/S: Appeal No 10003 of 2023 SC No 11902 of 2020 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane – [2023] QSC 155 (Freeburn J) DELIVERED ON: 5 March 2024 DELIVERED AT: Brisbane HEARING DATE: 22 February 2024 JUDGES: Mullins P and Boddice JA and Applegarth J ORDERS: 1. The appeal be dismissed. 2. The appellants pay the respondent’s costs of the appeal. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – APPEAL OR REVIEW – FACTORS RELEVANT TO EXERCISE OF DISCRETION – where the appellants applied for security of costs – where the learned primary judge found it was appropriate to decline to order security “in the rather special circumstances of this case” – where the primary judge considered other discretionary factors – whether there was error in the exercise of the primary judge’s discretion Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd (2021) 9 QR 141; [2021] QCA 198, applied House v The King (1936) 55 CLR 499; [1936] HCA 40, cited -- 1 of 5 -- 2 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] 2 Qd R 187; [2000] QSC 220, cited United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VSCA 192, applied COUNSEL: D J Pyle and A J Schriiffer for the appellants P D van Eps for the respondent SOLICITORS: GRT Lawyers for the appellants No appearance for the respondent [1] MULLINS P: I agree with Boddice JA. [2] BODDICE JA: On 14 July 2023, the primary judge dismissed the appellants’ application for security of costs. [3] The appellants appeal that dismissal. At issue is whether there was error, of the kind in House v The King,1 in the exercise of the primary judge’s discretion. Background [4] In 2016, the appellants invested $185,000 in a company established to develop a therapeutic product, said to be useful to treat ailments and in weight loss. [5] After some years, the appellants demanded the return of their investment. Ultimately, a complaint was made to police which resulted in criminal proceedings which were subsequently discontinued. The institution of those proceedings has led to separate claims for malicious prosecution. [6] The present proceeding was commenced on 5 November 2020. By it, the respondent claimed the return of information and documentation that had been provided by the respondent to the appellants, which it is alleged was confidential. There was also a claim for damages. [7] On 5 February 2021, the appellants requested security for costs of $50,000. In response, the director of the respondent filed an affidavit exhibiting a deed, whereby he personally guaranteed the payment of costs of no more than $50,000. [8] On 21 October 2021, the parties were ordered to attend a mediation. The respondent did not participate in the mediation. [9] On 16 May 2022, the appellants requested security for costs, in the amount of $240,000. That request was rejected by the respondent. The application for security for costs was filed thereafter. Primary decision [10] The primary judge found that the appellants had established the threshold requirement that there was reason to believe the respondent would be unable to pay an adverse costs order; that whilst there had been delay, it was not significant, and although it was difficult to make an accurate assessment of the strength of the case, the application for security for costs should be determined on the basis that the claim was both bona fide and had reasonable prospects. 1 (1936) 55 CLR 499 at 504–5. -- 2 of 5 -- 3 [11] Whilst those findings allowed for the making of an order for security for costs, the primary judge declined, in the exercise of his discretion, to make that order. In doing so, the primary judge observed that whether or not the information contained in the documents was confidential, the appellants were not entitled to that information and could have no legitimate use for it, as they had withdrawn their investment. [12] Further, the primary judge found that whilst the appellants relied on a number of bases for not returning the documents, the appellants were “really holding the documents because they perceive a tactical advantage in doing so”2. That tactical advantage was the hope of securing a compromise of the damages claim. [13] The primary judge considered other discretionary factors, finding that the respondent’s documents claim could be characterised as a strong and apparently meritorious claim; that the appellants’ counterclaim for the return of its investment, was consistent with “no holds barred”3 litigation; that whilst not satisfied that the respondent had established that its impecuniosity had been caused or contributed to by the appellants’ conduct, the continued retention of the documents was some impediment to further development or exploitation of the therapeutic product; that the proceeding would not be stultified by a security for costs order; that it was relevant the director had offered a personal guarantee, but restricted to personal liability of $50,000; and that at stake in the proceeding were not issues of public importance. [14] Having considered those factors and noting that the court had an unfettered discretion to order security for costs, the primary judge concluded that in circumstances where the respondent had a strong and apparently meritorious claim for the return of its documents, whether they were confidential or not; the documents were likely to have some commercial significance; the appellants continued retention of those documents was for tactical reasons; and the application was in reality an application for further security, it was appropriate to decline to order security “in the rather special circumstances of this case”4. [15] Finally, the primary judge found, in the event that conclusion was wrong, that the appellants had not discharged the onus of adducing material that enabled the court to estimate the costs of litigating the real issues. Consideration [16] The appellants’ contend that the primary judge erred in finding; that the respondent had a strong and apparently meritorious claim for the return of documents; that the appellants’ reason for not returning the documents was an unprincipled ploy in the hope of securing a compromise; that the appellants’ holding documents was some impediment to further development or exploitation of a product; that the appellants had not raised the issue of a counterclaim; that the application was an application for further security; and that the appellants were unable to satisfactorily establish the amount of security. [17] The appellants accept that the principles calling for appellate restraint in respect of matters of practice and procedure5 are applicable. However, they submit appellate 2 AB15 at [44]. 3 AB17 at [52]. 4 AB21 at [78]. 5 United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VSCA 192 at [34], [62]; Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd (2021) 9 QR 141 at [12]–[14]. -- 3 of 5 -- 4 intervention is warranted as the present case gives rise to a substantial injustice. The appellants would be forced to defend the litigation in circumstances where it is highly unlikely they will be unable to recover costs against the respondent if successful. Further, the primary judge assessed the strength of the respondent’s “documents case” on an incorrect basis, took into account a guarantee of which there was no evidence of its worth and impermissibly assessed the motivation of the appellants for not returning the documents and took an overly technical approach to quantum. [18] A consideration of the material as a whole, supports a conclusion that there was no relevant error. The findings reached by the primary judge were consistent with the evidence and the decision to refuse the appellants’ application for security for costs fell within a sound exercise of the relevant judicial discretion. [19] First, whilst the primary judge correctly found that the respondent’s impecuniosity was not attributable to the appellants’ conduct and the proceeding would not be likely stultified by an order for security, it was open for the primary judge to find that there was merit in the respondent’s “documents case”. As the primary judge properly observed, once the appellants had withdrawn their investment, there was no legitimate basis upon which they could retain documents provided to them, whether they contained confidential information or not. The appellants had been requested to return them. [20] Second, it is incorrect to contend, as the appellants do, that the primary judge did not have regard to all of the reasons why the appellants claimed to have properly not returned those documents. The primary judge set each of those reasons out and after casting doubt on their genuineness, observed that the true reason for why the documents had not been provided to the respondent, was that the appellants sought to retain them to assist in a compromise of the entire claim. Such a conclusion was open on the evidence, having regard to the contents of Mr Hill’s affidavit. [21] Third, it was open to the primary judge to observe that the continued retention of those documents would provide some impediment to further development or exploitation of the therapeutic product. The respondent’s former director had sworn that an impediment to exploiting the product was that a prospective investor sought security of the intellectual property and confidential information. [22] Fourth, the primary judge did not err in referring to the appellants’ not having raised the issue of a counterclaim. That observation was relevant, in the context of a consideration of various factors. In any event, it was not decisive to the ultimate conclusion reached by the primary judge. [23] Fifth, although the primary judge observed that an order for security for costs will not generally be made when those behind the corporation bring their own assets into play, that was in the context of recording that was the conclusion reached by White J in Maggbury Pty Ltd v Hafele Australia Pty Ltd.6 The primary judge specifically recorded that that fact, whilst important, was not determinative. In those circumstances, there is no basis to conclude that the primary judge acted on an incorrect legal principle in recording those observations. Significantly, the primary judge expressly recorded that whilst a guarantee had been offered, the director had chosen “to restrict his personal liability to $50,000”7. 6 [2001] 2 Qd R 187 at 192. 7 AB19 at [62]. -- 4 of 5 -- 5 [24] These conclusions render it unnecessary to consider the appellants’ remaining ground as to quantum. Conclusion [25] The appellants have not established any relevant error in the exercise of the discretion. There is no basis for this Court to interfere in what was an application involving practice and procedure. Orders [26] I would order: 1. The appeal be dismissed. 2. The appellants pay the respondent’s costs of the appeal. [27] APPLEGARTH J: I agree with Boddice JA. -- 5 of 5 --