British & Malayan Trustee Ltd, Imani Pty Ltd & Dalbor P/L v Browne & Ors [1992] QSC 183

TRA.J'}SCRlPT OF PROCEEDINGS State Rep::>rting Bureau, 4th F1oor, The Law Courts, George Street, BRJSBAN£. 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION WILLIAMS J No 970 of 1990 BRITISH & MALAYAN TRUSTEE LIMITED and IMANI PTY LTD and DALBOR PTY LTD and NORMAN ALFRED STANLEY BROWNE and PETER JOHN EDWARDS and .... ~ ·~· -·--·-... .. ,.~ ·~~ ..... ·-.,.......- .. ~-· . ···~ h'.~\i~: .. ;~· ... ,- ·., ·. , .. L.{ :) I ~:-~··:.:: ~ ~ ,· ·. .-'· .. :} ;,:·~·: ~~~~·,.; ' • . I ! c:::_~;_-~~;:.L_ Co .!..._5..-~·-··-.! Plaintiff Second Plaintiff Third Plaintiff First Defendants ESTATE OF LEONARD JOHN VANN, GEORGE WILLIAM DEEB, ROSS JOHN GRAINGER-SMITH, GEOFFREY NICOLL BARLEY, PHILIP KEITH BERNAYS, PAUL HERMAN HENRI CORBIERE, JOHN DAVID ELLIOTT, RALPH DOUGLAS PRAEGER, PETER JOHN GUTTORMSEN, ARTHUR BRADLEY VANN, DAVID STEWART 1 -- 1 of 13 -- < I RATHIE, JOHN CARL PETRIE and BRUCE RATHIE and Second Defendants HUSSEIN AHMED SALIM BIN TALIB, KAMAL BIN SALIM TALIB AND MUSTAFA BIN MOHSIN TALIB Third Defendants BRISBANE .. DATE 29/5/92 JUDGMENT 2 10 20 30 40 50 60 -- 2 of 13 -- 290592 HIS HONOUR: I have prepared reasons for judgment which Ipublish. On the first defendants' summons I would order that the first plaintiff do within 28 days give security for the first defendants' costs in the sum of $83,200, such security to bein the form of a bank guarantee acceptable to the first defendants. Liberty to apply on giving two days' notice. I order that the first plaintiff pay the first defendants' 10 costs of and incidental to the summons to be taxed. On the second defendants' summons I order that the first plaintiff do within 28 days give security for the cost of the second defendants' costs in the sum of $125,703, such security to be in the form of a bank guarantee acceptable to the seconddefendants. Liberty to apply on giving two days' notice. I order the first plaintiff pay the second defendants' costs of and incidental to the summons to be taxed. / ~/ J 20 30 40 50 60 -- 3 of 13 -- I egg I 'i$' IN THE SUPREME COURT OF QUEENSLAND No. 970 of 1990 Before Mr Justice G.N. Williams BETWEEN: BRITISH & MALAYAN TRUSTEE LIMITED AND: AND: AND: AND: Plaintiff IMANI PTY. LTD. Second Plaintiff DALBOR PTY. LTD. Third Plaintiff NORMAN ALFRED STANLEY BROWNE and PETER JOHN EDWARDS First Defendants ESTATE OF LEONARD JOHN VANN, GEORGE WILLIAM DEEB, ROSS JOHN GRAINGER-SMITH, GEOFFREY NICOLL HARLEY, PHILIP KEITH BERNAYS, PAUL HERMAN HENRI CORBIERE, JOHN DAVID ELLIOTT, RALPH DOUGLAS PRAEGER, PETER JOHN GUTTORMSEN, ARTHUR BRADLEY VANN, DAVID STEWART RATHIE, JOHN CARL PETRIE and BRUCE RATHIE Second Defendants HUSSEIN AHMED SALIM BIN TALIB, KAMAL BIN SALIM TALIB AND MUSTAFA BIN MOHSIN TALIB Third Defendants JUDGMENT - G.N. WILLIAMS J. Delivered the 29th day of May, 1992 CATCHWORDS: Practice - security for costs - plaintiff a foreign company with no assets in Australia - plaintiff suing as trustee for trust with substantial assets in Singapore - trustee right to indemnity against trust assets - order that security in form of bank guarantee be provided. -- 4 of 13 -- Counsel: Solicitors: D. Fraser for First Defendants - Applicants Lennon Q. C. and Bain for Second Defendants - Applicants McMurdo for Respondent - First Plaintiff Phillips Fox for First Defendants - Applicants McCullough and Robertson for Second Defendants - Applicants Clarke and Kann for Respondent - First Plaintiff Hearing date: 21st May, 1992 -- 5 of 13 -- IN THE SUPREME COURT OF QUEENSLAND BETWEEN: AND: AND: No. 970 of 1990 BRITISH & MALAYAN TRUSTEE LIMITED Plaintiff IMANI PTY. LTD. Second Plaintiff DALBOR PTY. LTD. Third Plaintiff NORMAN ALFRED STANLEY BROWNE and PETER JOHN EDWARDS First Defendants ESTATE OF LEONARD JOHN VANN, GEORGE WILLIAM DEEB, ROSS JOHN GRAINGER-SMITH, GEOFFREY NICOLL HARLEY, PHILIP KEITH BERNAYS, PAUL HERMAN HENRI CORBIERE, JOHN DAVID ELLIOTT, RALPH DOUGLAS PRAEGER, PETER JOHN GUTTORMSEN, ARTHUR BRADLEY VANN, DAVID STEWART RATHIE, JOHN CARL PETRIE and BRUCE RATHIE Second Defendants HUSSEIN AHMED SALIM BIN TALIB, KAMAL BIN SALIM TALIB AND MUSTAFA BIN MOHSIN TALIB Third Defendants JUDGMENT - G.N. WILLIAMS J. Delivered the 29th day of May, 1992 Each of the above named first and second defendants has applied pursuant to 0. 33 r. 14 of the Rules of the Supreme Court for an order for security for costs against the first plaintiff. There appears to be no dispute as to the following relevant circumstances: -- 6 of 13 -- ~ (i) The first plaintiff is a foreign company; it is incorporated in Singapore and has no assets in Australia. (ii) (iii) (iv) (v) The second plaintiff is in voluntary liquidation, but has some liquid assets. The third plaintiff is in liquidation and is insolvent; liabilities exceed assets by in excess of $2 million. The first plaintiff is the trustee .(and has been since 31st March, 1989) of the Salim Talib Family Settlement, and is a professional trustee company. The Salim Talib Singapore said S$ 63 million. Family to be Most Trust has assets in valued at about of that, namely S$ 59 million, is represented by the value of certain blocks at Orange Grove which were last valued in April 1989. (vi) The above named third defendants were trustees of the Settlement in July 1984 when the trust loaned $2,320,901.00 to the third plaintiff to enable it to acquire property at Redcliffe in Queensland. (vii) The first plaintiff has control of the action and the beneficiaries of the trust have given the second and third plaintiffs an indemnity with respect to any costs which may be ordered against them. -- 7 of 13 -- 1 It is alleged in the statement of claim that the third defendants acted in breach of trust in making the loan to the third plaintiff. It is further alleged that the first defendants (accountants) and the second defendants (solicitors) gave negligent advice to the third defendants with respect to the loan transaction and associated matters. It is then alleged that in consequence of the third defendants' breach of trust and the negligence of the first and second defendants the trust has suffered considerable loss. The third plaintiff was unable to repay all of the loan, and the remaining $841,165.05 will never be paid. The first plaintiff also alleges that there have been other consequential losses amounting to approximately S$ 956, 000. By the action the plaintiffs seek to recover all of those losses from the defendants. By June 1987 the third defendants had been replaced as trustees by Hong Kong Bank Trustee (Singapore) Limited. That trustee caused proceedings to be commenced in this court by writ issued 4th June, 1987 (No. 404 of 1987). The present second and third plaintiffs were also named therein as second and third plaintiffs. The first and second defendants to each writ were identical. The present third defendants were named in the earlier writ both as fourth plaintiffs and third defendants. The endorsement on the writ was in identical terms to that on the current writ. The writ was renewed on 1st February, 1 988, 2nd February, 1989 and 2nd February, 1990 by order of a Master though no attempt had been made to serve the defendants. Ultimately, for reasons which he gave, de Jersey J. set aside those orders for renewal of the writ. His order was made on -- 8 of 13 -- i 12th June, 1991. That effectively put an end to the proceedings commenced by· writ 404 of 1987. But unbeknown to His Honour and the defendants this writ ( 970 of 1990) had been issued on 25th June, 1990. It was served on the defendants in June 1991. It is in those circumstances that each of the first and second defendants seeks an order for security for costs. Each filed a summons, but by agreement both applications were heard at the same time. It was agreed that if security was ordered bank guarantees for the specified amount would be sufficient. Each of those defendants has concluded that the trial would last for ten days and that numerous witnesses would be called. The solicitors for the first defendant have estimated party and party costs for such a trial (including taxation) at $83,200.00. Mr D. G. Searles, the solicitor primarily acting for the second defendants, has assessed his clients' total costs in the sum of $209,506.00 which would give a party and party figure of $125,703.00. It would appear that the second defendant proposes to call a number of witnesses from Singapore and Bangkok, and the increased costs associated with conferring with those witnesses, obtaining statements from them, and bringing them to Australia partly explains the difference between the assessment of costs by the solicitors acting for the first and second defendants. There is in force in Singapore legislation similar to our Reciprocal Enforcement of Judgments Act 1959, namely the Reciprocal Enforcement of Commonwealth Judgments Act which expressly has been extended to Queensland. Further, it appears that, as would be the position in Queensland, the first plaintiff, as trustee, would be entitled under Singapore law to -- 9 of 13 -- ~ indemnity out of the trust assets in relation to any order for costs made against it in these proceedings. The losses which the plaintiffs seek to recover in this action had been substantially incurred by 1987, and in consequence (at least on the material currently before me) it can be said that the plaintiffs have been guilty of delay in prosecuting the claim. There would appear to have been no valid reason why the earlier action could not have been served and steps taken to prosecute that action. There is some basis for a suggestion that there is some dispute, or possible dispute, between the beneficiaries. Having regard to the allegations in the statement of claim it is fairly clear that the primary cause of the loss was the third defendants' breach of trust. The allegation against each of the first and second defendants really amounts to an assertion that they went along with the third defendants' proposals and did not give independent advice to the effect that the course of conduct being followed was in breach of the terms of the trust. Such considerations give rise to concern that any attempt by the first and second defendants to enforce an order for costs against the trust would be resisted; it could well be left to the first and second defendants to take legal proceedings in Singapore in an endeavour to enforce the first plaintiff's indemnity out of trust assets. Certainly there is a very real prospect that the first and second defendants would face expense, delay and inconvenience in attempting to 1xecute any judgment for costs in Singapore. -- 10 of 13 -- It should also be noted that there was no suggestion in the material that the first plaintiff had sufficient funds of its own· to meet any order for costs; it appears that it would have to rely on the indemnity in order to satisfy any such judgment. The arguments of Mr. Fraser for the first defendant and Mr. Lennon Q. C. for the second defendant ran along similar lines. The first plaintiff has the carriage of the proceedings and neither the second or third plaintiffs could meet any order for costs. The first plaintiff is a foreign company with no assets in the jurisdiction. Though in a legal sense a judgment for costs could be enforced against the first plaintiff in Singapore additional expense and delay would thereby be incurred, and the enforcement proceedings could become complex if the beneficiaries resisted the first plaintiff's claim to indemnity out of the trust assets. In the light of that it was submitted that this was not simply a case where an order for security for costs should be granted limited to the costs of taking enforcement proceedings in the foreign country. In their submissions reference was made Kohn v. Rinson and Stafford (Brod) Limited (1948) 1 K.B. 327, Harpur v. Ariadne Australia Limited (1984) 2 Qd. R. 523, Connop v. Varena Pty. Ltd. (1984) 1 N.S.W.L.R. 71, Kent Heating Ltd. v. Cook-on Gas Products Pty. Ltd. (1984) 59 A.L.R. 277 and Laundry Coin-Wash Nominees Pty. Ltd. v. Dunlop Olympic Ltd. (1985) A.T.P.R. 40-584. Smithers J. in the last of those cases relevantly observed: "Where the only tangible assets of an applicant company are held in trust for another entity and its solvency depends on its right as trustee to indemnity against that entity it is necessary for the court to have in mind the difficulties which a successful respondent would face in attempting to execute in -- 11 of 13 -- 1 respect of an order for costs. Indeed, unless some step is taken to alleviate those difficulties it is reasonable and just to treat the applicant cdmpany as if it were without assets to meet such a liability." Based on those considerations each asked for an order for security for costs. In answer to those submissions Mr McMurdo for the first plaintiff contended that an order for costs against the first defendant would not be difficult to enforce. There were "plenty of assets" available to satisfy such a judgment as the first plaintiff would, on the evidence, have no difficulty in obtaining the necessary indemnity. It was an experienced, professional trustee and this was not a family trust situation of the type commonly experienced in Australia. He also submitted that I should disregard what had happened with the previous action because the first plaintiff was not a party thereto. Bearing in mind all of the matters to which I have adverted in these reasons I have come to the conclusion that it is an appropriate case in which to make orders for security for costs. The first plaintiff is effectively the only plaintiff against whom an order for costs could be enforced, and that would involve delay and expense associated with possibly complex proceedings in Singapore. It is not a simple situation where the plaintiff has substantial assets of its own to which recourse could be had to enforce such a judgment. The whole history of the litigation gives cause for concern that there could be problems associated with enforcing the trustee's indemnity out of the trust assets. It is not sufficient to say that in all probability such an indemnity would ultimately be enforced; the other parties ought -- 12 of 13 -- ~ not to be put to the unnecessary expense and delay that may be associated-with that. Mr. McMurdo did not make any submission on the quantum of security; as already noted it was agreed that any order made should require the giving of a bank guarantee. I would therefore order on the first defendants' summons that the first plaintiff do within 28 days give security for the first defendants' costs in the sum of $83,200.00, such security to be in the form of a bank guarantee acceptable to the first defendants. Liberty to apply on giving two day's notice. Order that the first plaintiff pay the first defendants' costs of and incidental to the summons to be taxed. On the second defendants' summons I order that the first plaintiff do within 28 days give security for the second defendants' costs in the sum of $125,703.00, such security to be in the form of a bank guarantee acceptable to the second defendants. Liberty to apply on giving two day's notice. Order that the first plaintiff pay the second defendants' costs of and incidental to the summons to be taxed. -- 13 of 13 --