Brisbane Broncos Rugby League Club Ltd v Lang Park Trust [1991] QSC 199

10 20 IN THE SUPREME COURT OF QUEENSLAND CHAMBERS BEFORE MASTER WHITE BRISBANE, 29 MAY 1991 No. 421 of 1991 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: BRISBANE BRONCOS RUGBY LEAGUE CLUB LIMITED -and.- THE LANG PARK TRUST JUDGMENT Plaintiff Defendant MASTER: In this application the defendant seeks an 10 20 30 30 order that the plaintiff provide security for ita costs in the event that such an order is made at the determination of the trial of this matter. The action has moved with expedition having commenced on 11 March 1991 with the issue of the writ. Mutual 40 40 50 60 undertakings were given on 12 March 1991 before Lee J.; the !statement of claim was delivered on 19 March 1991; the defence on 27 March 1991, and a reply on 19 April 1991. On 11 April 1991 the action was listed as a commercial cause by Senior Master Horton Q.C., and on that day he gave directions for the further conduct of the action, including a direction that the defendant bring an application for security for costs by 24 April 1991. For reasons that I will consider shortly, the defendant Printer, Qld. 1 50 60 -- 1 of 8 -- 10 did not do so and sought an extension of time from the Senior Master on 7 May 1991 for bringing that application, and the order made was that the defendant have leave to apply in Chambers for such extension of time and to bring the application. The action arises out of a dispute between the plaintiff and defendant as to whether an agreement was reached between the representatives of the parties at or about 6 December 1990 for the use by the plaintiff of the sporting complex at Lang Park, so that the plaintiff could 20 provide a home ground venue as a participant in the New South Wales Rugby League competition for playing football matches. It is the plaintiff's case that agreement was reached, and the defendant's that this did not occur at that meeting. The undertakings permit the games to be held at 30 Lang Park during the 1991 rugby league season. The plaintiff seeks relief by way of declaration and injunction but, in effect, it seeks specific performance of the alleged agreement. It is not appropriate that I make more than passing reference.to the prospectsof success. The 40 evid.ence as to t:-ie agr:ee.,1ent is said. to ~ a copy 0f the minutes of t.c't'-~· rel2v2u1t ,neetin<;: sic:mec. by represent2.';::ives of bo.£:hparties, a letter of Mr. Barry Maranta, the chairman of the plaintiff, and lnotes of that meeting. The latter was submitted to be inadmissible because the deponent, whilst identifying them 50 i as no':2s taken of the rr.eetin:?, a': ':he rneetinc:;, on j_n~o:c ,2.tion anc he)_ ;_ef : die. not swear tha-':. he ·w?.s infomted and beJievec. ':...~c:.~ they were a true ind 60 i I correct record of what was said/or agreed at that meeting. I would find that the minutes, as evidence, are admissible, but the failure to swear to their correctness would go to "rinter, Qld. 2 10 30 40 50 60 -- 2 of 8 -- _weight should 2-t r2ve been necessary to consider them in detail. In any event, I have concluded that the prospects for the plaintiff are evenly balanced for the purposes of this application, so that I would not find that it was a hopeless case, and nor would I find that the plaintiff is quite 10 clearly bound to be successful, so that the application for security remains largely uninfluenced by any perception now as to the outcome of the action. 20 30 The test for a court awarding security for costs is to be found in s.1335 of the Corporations Law, namely: "Where a body corporate is plaintiff in any action or other legal proceeding under this Law, the Court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the body corporate will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given." No issue arises on this application as to the jurisdiction of the Court to consider the application. It appears from the affidavit of Mr. Maranta, the chairman of the plaintiff, that the plaintiff is the operating entity for the football team known as the "Brisbane Broncos". It 40 employs the players and coaches and leases the club grounds, and owns plant and equipment used to operate the licensed club. The plaintiff is described in Mr. Damien Cronin's affidavit as the "linchpin" of a group of companies with common shareholders and directors whose joint purpose so is to operate the "Brisbane Broncos". Mr. Cronin further deposes to being informed by Mr. Maranta that the group has been trading successfully for approximately four years and has an annual turnover in the vicinity of $7m. Other matters are set out in the material ;nter, Old. 3 10 20 30 40 50 -- 3 of 8 -- 10 indicate•~ that the defendant collects on behalf of the plaintiff all gate-takings, deducts.it~ outgoings and rent therefrom, and remits any balance due to the plaintiff and that that will 1 continue throughout the season in accordance with the I 1 undertakings. The plaintiff's accounts to 31 October 1990 are exhibited to an affidavit of Mr. Anthony Deane, solicitor for the defendant. Those accounts reveal that the company has no operating losses but has an arrangement with a company or companies within the group whereby it is 20 reimbursed to a break-even position. This is confirmed by a letter dated 27 May 1991 from Mr. Ross Walker of the plaintiff's auditors, which is exhibited to Mr. Cronin's affidavit. The plaintiff is a company limited by guarantee; 30 namely, $50. It has buildings and improvements on leasehold land, the lease of which is due to expire in September 1991,. _ wh!ch, it is confidently expected will be i 40 i i renewed. It has plant and equipment situated at the leased premises with a book value of $177,359. In short, because of the way in which the affairs of ithe group have been arranged, the plaintiff does not itself have sufficient funds to meet its needs but is kept in a solvent state by another or other companies in the group. The position seems to be fairly summarised in so Mr. Walker's letter, which I referred to above, and I set it 60 out in full: "We act as auditors of Brisbane Broncos Rugby League Club Ltd. (the company). We note that the company's 31 October, 1990 accounts, an extract of which we have previously 0 rinter, Qld. 4 10 30 40 50 60 -- 4 of 8 -- forwarded to you, shows that the company: (a) has not incurred losses but, rather, has an arrangement with a related company whereby it is reimbursed to a break-even position, (b) had receivables of $1,322,281 of which $916,945 was owing by related parties, (c) had no secured liabilities, and 10 10 20 30 40 (d) had unsecured liabilities of $2,047,315 of which $1,313,376 was owing to related parties. The accounts also show that the company has net assets of $nil. This is expected because of the nature of the company (i.e. being a company limited by guarantee), its activities and the arrangement mentioned in (a) above. At 31 October 1989 the company had a secured loan of $760,000 from NZI Securities Australia Ltd. This loan was paid out during the year ended 31 October 1990. Given the above, and our knowledge of the Brisbane Broncos group, we believe that the company is currently able to meet costs of $40,610 should such a liability be incurred." It thus depends upon the will of other companies (or company) to keep the plaintiff in its healthy condition. I do not regard the unparticularised assets at the leased premises of any comfort for the defendant. Nothing more is known of them than their appearance in the books of account. The arrangement which is set out in the books and in Mr. Walker's letter is an arrangement for operating the Brisbane Broncos which has commended itself to those involved. There is not the slightest element of criticism involved in my making that comment. It is rather like the so trustee company of a trading trust where, on an application for security for costs, the very nature of the arrangement makes access to the asset difficult in theory for a defendant (see Laundry Coin-Wash Nominees Pty. Ltd. v. Dunlop Olympic Ltd & Ors (1985) A.T.P.R. 40-584). 60 , · >rinter, Qld. 5 20 30 40 50 60 -- 5 of 8 -- Accordingly, no matter how successful the group might be, the assets of the group are not accessible to the defendant should it be successful in obtaininc- 2. costs order as-ainst the plc>.:l.~.tL::'.:. It shol,.ld be saic' '.:hat ·':here is no or li·::':J.e info:r:ITlcl.tion as tc the -::rocp anc·. i-'-:.s cc:--:.sti tuent cornp2u,5.es (apc1f:. :f:ro::-:-. the plain':i::f) and 10 their financial position. I would hold that by credible evidence before me it appears that the plaintiff will be unable to seetany order for costs. Certainly it is asserted that those standing behind the plaintiff can pay. There is no suggestion that 20 any order for costs would stifle the litigation. It has been urged that as an exercise of my discretion I ought not to make the order because of delay by the defendant. By letter dated 21 March 1991 the defendant raised concerns about the financial position of the plaintiff, 30 referring to a company search which revealed some $810,000 owed to NZI Capital Corporation from loans advanced in 1988 and 1989, and from the annual return of the company. A letter of 28 March 1991 from the plaintiff's solicitors intimated that they would deal further with the matter. By 40 letter of 5 April 1991 the defendant's solicitors continued to ask for assurances. In its letter of 9 April 1991 the plaintiff's solicitors stated that the NZI loan had been paid out in full in mid-1990, and raised other matters. By their letter of 23 April 1991 the defendant's solicitors so indicated to the plaintiff's solicitors that they would not be able to meet the timetable with respect to the application for security in view of the conflicts between inquiries made by them and the plaintiff's solicitors' information. The inquiries had been made at the Corporate 10 f, 30 40 so 60 60 :inter, Old. 6 -- 6 of 8 -- Affairs records and by way of real property searches. The solicitors for the plaintiff had earlier indicated that the plaintiff owned real property but those searches had been unsuccessful, and the defendant's solicitors invited the lplaintiff's solicitors to provide details if the public 10 records to which they had had recourse were incorrect. By a letter of 15 May 1991 the plaintiff's solicitors provided details of leases said to constitute the real property interests, and noted that the date of discharge of the NZI security was in March 1990. Thus, it was not until 20 after the time limited for bringing the application that the defendant was satisfied as to the NZI debt, and learnt of the nature of the interest in the real property. The action, although almost ready for trial but for the allocation of trial dates, has moved very quickly. Since 30 the defendants from the inception of the action have indicated a concern about security for costs, and have pursued that concern with due regard for a matter moving with speed to conclusion, I would not find that there has been delay of the kind referred to in the cases so as to 4 o cause me to exercise my discretion against the application. It, therefore, seems to me that in the exercise of my discretion, bearing in mind all the matters which I am required by the cases to bear in mind, it is appropriate that an order for security for costs be made against the so plaintiff. 60 It was suggested that another company, Brisbane Broncos Pty. Ltd., ought to be required to provide a guarantee for the costs. However, nothing in the material reveals the financial state of Brisbane Broncos Pty. Ltd., and in the Printer, Qld. 7 10 20 30 40 50 60 -- 7 of 8 -- 10 20 30 50 60 absence of that,_ and the fact that counsel for the defendant was not prepared to accept that as an appropriate source of guarantee without more information, it seems to me that I ought not to make that part of the order. The quantum of $40,610 sought by the defendant has not been contested by the plaintiff in any way. Accordingly, it is ordered that the plaintiff give security for the defendant's costs in the action in the amount of $40,610 in a form satisfactory to the Registrar of this Court within 14 days hereof. MASTER. In view of the invitation by th~ defendant's solicitors to the plaintiff's solicitors to provide a bank guarantee, it is probably not inappropriate then that the plaintiff/ ! respondent should pay the applicant/defendant's costs of and incidental to the application, to be taxed and it is so ordered. · Govt. Printer. Qld 8 10 30 40 50 60 -- 8 of 8 --