DISTRICT COURT OF QUEENSLAND

CITATION:	AAA Property Group Pty Ltd (in liq) v Ozdemir & Anor [2016] QDC 293	
PARTIES:	AAA PROPERTY GROUP PTY LTD (in liq) ACN  138 808 509
(Plaintiff)
v
ZEYNEP OZDEMIR
(First Defendant)
And
ADNAN OZDEMIR
(Second Defendant)	
FILE NO/S:	No 4446 of 2015	
DIVISION:	Civil	
PROCEEDING:	Application	
ORIGINATING COURT:	District Court of Queensland	
DELIVERED ON:	18 November 2016	
DELIVERED AT:	Brisbane	
HEARING DATE:	8 November 2016	
JUDGE:	Searles DCJ	
ORDER:	1.	Plaintiff’s solicitors pay the Defendant’s costs of the Plaintiff’s Application on an indemnity basis.
2.	As to the Defendant’s Application;
a)	Plaintiff to provide the further and better particulars requested by the Defendants on 18 July 2016, specifically particularising the knowledge or state of mind of the First Defendant as at the date of the subject transaction. Plaintiff to pay Defendant’s costs of the Further and Better Particulars Application on a standard basis.
b)	As to the Security for Costs Application, application dismissed. Defendants’ to pay the Plaintiff’s costs on a standard basis.
c)	As to the Waiver of Implied Undertaking Application, application dismissed. Defendants’ to pay the Plaintiff’s cost on a standard basis.
	
CATCHWORDS:	PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – where the Plaintiff seeks to discontinue against the Second Defendant – where the Plaintiff has been granted leave to amend – where the Plaintiff had no basis to positively plead the original cause of action – whether costs should be awarded on an indemnity basis – whether costs should be awarded against the solicitors for the Plaintiff.
PROCEDURE – CIVIL PROCEEDGINS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – POWER TO ORDER – where the Defendant has made an application for security for costs against the Plaintiff company in liquidation – whether security for costs should be awarded
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – PARTICULARS – FURTHER AND BETTER – where the Defendant has sought further and better particulars – where the cause of action of the Plaintiff is the imposition of a constructive trust – whether further and better particulars should be ordered
Corporations Act 2001 (Cth) s9, s588FE, s588FF, s459G, s 1321, s1335
Uniform Civil Procedure Rules 1999 (Qld) r69, r150, 670, r671, r672
Barnes v Addy (1874) LR 9 Ch App 244
Bell Wholesale Co Pty Ltd v Gates Export Corp (No 2) (1984) 52 ALR 176
Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Elliott Harvey Securities Ltd v Raynel [2015] QSC 212
Cherbourg Food Processing Company Pty ltd & Ors v Enterprises (Qld) Pty Ltd & Ors [2012] QSC 162
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440
Process Engineering Pty Ltd v Derby Meat Processing Co Ltd [1977] WAR 145
White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169
Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542
	
COUNSEL:	S Hogg - Plaintiff 
G Clair - Defendants	
SOLICITORS:	JHK Legal - Plaintiff 
Furgan Lawyers - Defendants	

Plaintiff’s Application
[1]	By Application dated 20 October 2016, the Plaintiff applied to the Court to;
a)	remove the Second Respondent, Mr Adnan Ozdemir from the proceeding pursuant to rule 69 of the Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’); and
b)	seek leave for the amendment of the Claim and Statement of Claim to remove the cause of action pursuant to section 588FF of the Corporations Act 2001 (Cth) (‘Corporations Act’) adding a claim for monies had and received to the existing claim pursuant to a constructive trust.
(‘Plaintiff’s Application’)
[2]	The Defendant’s do not oppose the relief sought in the Plaintiff’s Application, except to the extent that the claim and statement of claim are not adequately particularised. This is reflected in the Defendant’s Application in seeking further and better particulars of the claim and statement of claim, which I will deal with shortly. On 8 November 2016, I made an Order granting the Plaintiff’s Application, reserving the costs of the Plaintiff’s Application.
[3]	The Defendants have sought the costs of the Plaintiff’s Application on an indemnity basis, relying on the decision of Elliott Harvey Securities Ltd v Raynel [2015] QSC 212 as authority for the proposition that, where a pleading contains false material as a clear matter of law, the solicitors who prepared such a pleading are additionally liable to the parties on an indemnity basis for the costs resulting from that plea. 
[4]	Section 588FF of the Corporations Act 2001 (Cth) establishes a statutory cause of action in relation to voidable transactions covered in section 588FE of the act. This section requires, as an element of the cause of action, that the relevant transaction took place within the four years prior to the ‘relation-back day’. In the circumstances, the ‘relation-back day’ is the date of the first application to wind up the Plaintiff company. 
[5]	The Plaintiff acknowledges that the ‘reasons the plaintiff needs to discontinue against the second defendant is that its claim against him is out of time.’ I do not accept that the fatal flaw in the statutory claim as originally pleaded resulted from the lapsing of time. The Plaintiff argued the flaw, ‘is akin to a defendant raising a limitation defence.’ This statutory claim was fundamentally flawed at its genesis. The Plaintiff says, ‘[it] actively seeks to discontinue its claim against the second defendant and foreshadowed its intention to do so as early as 16 August 2016.’ The Original Claim and Statement of Claim, which included the Corporations Act statutory cause of action was filed on 13 November 2015. The Defendant filed its Defence on 15 December 2015. Paragraph 9.6 of the Defence specifically pleaded:
‘9.6 any cause of action based section 588FDA/section 588FE(6A) of the Corporations Act 2001 contains an element that the transaction sought to be avoided occurred within four years of the relation-back day and the transaction in question occurred more than four years prior to the relation-back day.’
[6]	So the Plaintiff was on notice as to the defect in the cause of action as early as 15 December 2015. In Elliott Harvey Securities v Raynel & Anor, indemnity costs were ordered against a litigant’s solicitors in circumstances where an application to set aside a statutory demand under s 459G of the Corporations Act was unreasonably continued despite not having been served within the permissible time, resulting in the application having no worthwhile prospects of success. Bond J found that the application before him was, ‘doomed to failure and that continuing the application should be regarded as proceeding in wilful disregard of the known facts or clearly established law. An indemnity costs order is appropriate.’ 
[7]	In ordering the indemnity costs against the litigant’s solicitors, His Honour had regard to the decision in White Industries (Qld) Pty Ltd v Flower & Hart (a firm), where it was held that, ‘it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success.’
[8]	On this issue, the Defendants are correct in saying there was never any basis for positively pleading that the transaction was within the four years allow period under section 588FE of the Corporations Act 2001 (Cth). It is not, as the Plaintiff suggests, the mere expiration of a limitation period which renders this statutory cause of action as flawed. This flaw was brought to the attention of the Plaintiff’s solicitors some eight months before the Plaintiff foreshadowed an intention to discontinue this part of the claim. The Plaintiff company has no assets, and it would be unjust for the Defendant’s to be denied their costs on the Plaintiff’s Application by virtue of the liquidator effectively hiding behind the impecuniosity of the Plaintiff company. In the circumstances, the Defendants are entitled to their costs on the Plaintiff’s Application on an indemnity basis, to be paid by the Plaintiff’s solicitors.
Defendant’s Application
[9]	By Application dated 1 November 2016, the Defendant made applied to the Court for;
a)	strike out of the Plaintiff’s application brought under section 588FF of the Corporations Act 2001 (Cth). This part of the Defendant’s Application mirrors the Plaintiff’s Application;
b)	further and better particulars of the claim and statement of claim as originally requested by letter dated 18 July 2016 from Furgan Lawyers to JHK Legal (‘Further and Better Particulars Application’);
c)	the Plaintiff to provide security for costs in the amount of $80,000 and that the action be stayed until such time as such security is provided (‘Security for Costs Application’);
d)	a declaration that any communication from the plaintiff or its solicitors to the effect that the plaintiff has accepted that there is a debt owing to the purported creditor in the amount of $539,377.00 is not subject to the implied undertaking of the parties to the Court not to use documents whose production was compelled by the operation of law in the Court proceedings for other purposes, or alternatively that the Defendants are relieved  from that undertaking for the purposes of referring the matter to the Australian Securities and Investment Commission, the Companies Auditors and Liquidators Disciplinary Board or any successor body and to whichever governing body of accountants the liquidator belongs to, or is reasonably believed by their clients to belong to, including Chartered Accountants Australia and New Zealand. (‘Waiver of Implied Undertaking Application’); and
e)	the Plaintiff’s solicitors to pay the Defendants’ costs of an incidental to this application, to be assessed on an indemnity basis.
(‘Defendant’s Application’)
Further Correspondence
[10]	Before dealing with the substantive issues the subject of the Defendant’s Application, it is necessary to deal two preliminary matters which have come to light subsequent of the hearing of the applications.
[11]	After the hearing of the matter on 8 November 2016, my associate received correspondence from Furgan Lawyers (copied to the Plaintiff’s solicitors) (‘Further Correspondence’) enclosing a letter from JHK Legal to Furgan Lawyers dated 16 August 2016 and sealed envelope marked ‘NOT TO BE OPENED EXCEPT BY DIRECTION OF A JUDGE’ (‘Sealed Envelope’). The Plaintiff acknowledged that the letter of 16 August 2016 contained the only offer to settle sent to the Defendants’ solicitors prior to the Plaintiff filing its application to remove the Second Defendant from the proceeding.
[12]	The Further Correspondence also sought to provide further submissions regarding the issue of delay between the amendment of the Statement of Claim and the bringing of an application for security for costs. The Plaintiff, correctly in my view, objected to this portion of the Further Correspondence as an attempt to provide further submissions outside of a formal hearing in circumstances where the Court has not granted leave to do so.  I have disregarded this portion of the Further Correspondence.
[13]	Mr Clair for the Defendant advised the Court on 15 November 2016 when the matter was mentioned that the Defendant did not now seek to have the Sealed Envelope opened. The Further Correspondence and the Sealed Envelope, together with a set of short written submissions of the Defendant relating to the Further Correspondence have now been placed in a sealed envelope on the Court File.
Non-receipt of email correspondence
[14]	When the matter was brought on for mention on 15 November 2016, the following further affidavits were read and filed by leave by the Plaintiff:
a)	Affidavit of Daniel James Johnston sworn 10 November 2016;
b)	Affidavit of Rhonda Grace King sworn 10 November 2016; and
c)	Affidavit of Ming Kee Lui sworn 10 November 2016.
[15]	The affidavits relate to the alleged non-receipt of certain emails by the Plaintiff’s solicitors sent between 6 June 2016 and 18 October 2016 relating to the amendment of the claim and statement of claim and the delay on the part of the Defendant in bringing a security for costs application. The issue of delay, as a discretionary factor in awarding security for costs shall be dealt with later in this judgment. 
[16]	The following emails are alleged to have not been received by the Plaintiff:
a)	Email from Mikhail Furgan to JHK Legal dated 20 April 2016, 4.15pm;
b)	Email from Mikhail Furgan to JHK Legal dated 6 June 2016, 3.25pm;
c)	Email from Mikhail Furgan to JHK Legal dated 18 October 2016, 3.49pm; and
d)	Email from Mikhail Furgan to JHK Legal dated 25 September 2016.
[17]	The Affidavit of Daniel James Johnston also deposes to the fact that the Exhibit GJC-2 annexed to the affidavit of Gregory John Clair sworn 4 November 2016 was never received by JHK Legal. The Affidavit of Gregory John Clair does not contain an Exhibit GJC-2. Mr Clair deposes to the fact that Exhibit GJC-2 was in fact a reference to his Affidavit of 1 November 2016 rather than his Affidavit of 4 November 2016.
[18]	GJC-2, which can be found annexed to the Affidavit of Gregory John Clair sworn 1 November 2016 contains, ‘true correct copies of an email which I forwarded to Dan Johnston at JHK Legal on 25 September 2016 and an affidavit which was filed in support for an application for security for costs in the Supreme Court proceedings which led to the winding up order (less the exhibits to that Supreme Court affidavit) which was attached to the email and 25 September 2016)’
[19]	At the subsequent hearing on 15 November 2016 the Defendant sought leave to read and file the Affidavit of Mikhail Furgan sworn 13 November 2016 and the Affidavit of Gregory John Clair sworn 13 November 2016.  These affidavits depose to the fact that the emails referred to above in paragraph [16] were in fact sent to the Plaintiff. In any event, I do not consider that the receipt or otherwise of the emails is determinative of the relief sought by either party. 
Defendant’s Application
[20]	 I return now to the Defendant’s Application. I have already dealt with the first order of the Defendant’s Application, in striking out the statutory cause of action under the Corporations Act 2001 (Cth). This coincides with the Plaintiff’s Application.
Further and Better Particulars Application
[21]	Rule 150 of the UCPR provides for the matters that must be specifically pleaded. Relevantly, rule 150 states;
150 Matter to be specifically pleaded
 (1) Without limiting rule 149, the following matters must be specifically pleaded:
(f) fraud
(g) illegality; and
…
(k) motive, intention or condition of mind, including knowledge or notice;
[22]	The Plaintiff’s Amended Claim states;
‘The Plaintiff claims:
1. a declaration that the Plaintiff holds an equitable interest in the following property as beneficiary of a constructive trust arising between the Defendant as Trustee and the Plaintiff as beneficiary in the estate in fee simple:
Lot 211 on Registered Plan 229771, County of Stanley, Parish of Capalaba, title reference 17433067.’
[23]	In the Plaintiff’s Amended Statement of Claim, the following is pleaded in support of establishing a constructive trust as a cause of action:
‘Unauthorised Transfer of Monies
2. On or about 19 January 2011, the following amounts of money owed by the Plaintiff were transferred with no reasonable excuse from the Plaintiff’s bank account (‘the Monies’) and paid to a mortgage bank account (‘the Mortgage Account’) in the name of the Defendant;
						Particulars
The amounts transferred and paid to the Mortgage account on 19 January 2011 were:
a)	$398,908.62; and
b)	$541.33
(‘the Transfer’)
3. The Mortgage Account relates to a mortgage registered over the Property of the Defendant.
4. The Transfer resulted in the Defendant receiving a benefit to the detriment of the Plaintiff.
5. As at the date of the Transfer:
a)	The Monies were not owed by the Plaintiff to the Defendant; and
b)	There was no valid reason for the Transfer.
	6. As a consequence of the matters pleaded at paragraphs 1 to 6 hereof, in particular the use of the Monies to reduce the mortgage registered to the bank on the Property of the Defendant, the Plaintiff holds an equitable interest in the Property pursuant to a constructive trust.’
[24]	By letter dated 18 July 2016 from Furgan Lawyers to JHK Legal, the Defendant’s sought further and better particulars of the constructive trust claim in the following terms:
‘4. Full particulars of any allegation in paragraph 6 of the statement of claim that the plaintiff has an equitable interest in the property described in paragraph 1(b) of the statement of claim by reason of a constructive trust including:
	4.1 particulars as to whether the alleged trust is alleged to be, strictly speaking, a constructive trust or a resulting trust;
	4.2 full particulars of how it is alleged that the property represents a discrete asset (separate from the other assets of the defendant not alleged to result from the funds) to which the funds referred to in paragraph 3 of the statement of claim can be traced.’
[25]	The Plaintiff submits that no further particulars are necessary to prevent the Defendant ‘being caught by surprise at trial’. The Defendant submits that in relation to the constructive trust cause of action, the knowledge or state of mind of the recipient, in this case the First Defendant, Mrs Zeynep Ozdemir, must be specifically pleaded in accordance with rule 150 of the UCPR. 
[26]	The Defendant submits that the Plaintiff’s claim for a constructive trust, in circumstances where trust property is transferred in breach of fiduciary duty, must fall within the ‘recipient liability’ limb of the test laid down in Barnes v Addy. This situation can be contrasted with the imposition of a constructive trust as a means of accounting for profits obtained by a fiduciary in breach of its own fiduciary duty. In the present case, the First Defendant was a not a director of the Plaintiff company and as such could not be said to have been in the position of a fiduciary qua director. No other circumstance alleging a fiduciary relationship is pleaded.
[27]	The Plaintiff responds to this submission and rejects the application of the Barnes v Addy conception of a constructive trust, stating:
‘The plaintiff’s case is much simpler than that – it is that the first defendant has received money from the plaintiff which she was not entitled to. She refuses to pay it back, and in the circumstances it would be contrary to equitable principle for the first defendant to retain this money.’
[28]	With respect, this characterisation of the subject transaction is relevant to the Plaintiff’s amended cause of action, being an action for money had and received. It is a restitutionary remedy. On the imposition of a constructive trust, the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, expressly rejected a restitutionary, ‘no fault’ approach with respect to recipient liability. As such, the law in this jurisdiction maintains a fault-based liability approach to the imposition of a constructive trust on the recipient of trust property as a result of a fiduciary’s breach of duty.
[29]	I accept the Defendant’s submission that a restitutionary approach to a constructive trust cannot be used to circumvent the knowledge requirements laid down in Barnes v Addy. The Defendant is entitled to know the precise case which it must answer so that it may properly plead matters in response. The Plaintiff has pleaded the imposition of a constructive trust resulting from a breach of fiduciary duty owed by the Second Defendant. It is accordingly appropriate that the Plaintiff’s provide the further and better particulars as requested by the First Defendant, by particularising the state of mind or knowledge of the First Defendant upon her receipt of the monies the subject of the relevant transaction.
Security for Costs Application
[30]	The Defendant has sought an order that the Plaintiff provide security for costs in the amount of $80,000 and that the action be stayed until such time as security is provided.
[31]	The basis of the jurisdiction to order security for costs is to be found in section 1335 of the Corporations Act 2001 (Cth) and in rule 670 of the UCPR.
[32]	Section 1335(1) of the Corporations Act 2001 (Cth) provides:
‘1335 Costs
(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation 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.’
[33]	Rule 670 of the UCPR relevantly provides:
670 Security for costs
(1) On application by a defendant, the court may order the plaintiff to give the security the court considers appropriate for the defendant's costs of and incidental to the proceeding. 
(2) This rule applies subject to the provisions of these rules, particularly, rules 671 and 672. 
[34]	Rule 671 provides:
671 Prerequisite for security for costs 
The court may order a plaintiff to give security for costs only if the court is satisfied— 
(a) the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant's costs if ordered to pay them; or 
(b) the plaintiff is suing for the benefit of another person, rather than for the plaintiff's own benefit, and there is reason to believe the plaintiff will not be able to pay the defendant's costs if ordered to pay them; or 
(c) the address of the plaintiff is not stated or is misstated in the originating process, unless there is reason to believe this was done without intention to deceive; or 
(d) the plaintiff has changed address since the start of the proceeding and there is reason to believe this was done to avoid the consequences of the proceeding; or 
(e) the plaintiff is ordinarily resident outside Australia; or 
(f) the plaintiff is, or is about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient property of a fixed and permanent nature available for enforcement to pay the defendant's costs if ordered to pay them; or 
(g) an Act authorises the making of the order; or 
(h) the justice of the case requires the making of the order.

(emphasis added)
[35]	Hence, at least one of the above threshold criteria must be satisfied before any security can be ordered. The Defendant relies on rule 671(a), namely that there is reason to believe that the Plaintiff will not be able to pay its costs in the event it is ordered to do so. The Plaintiff company has been placed into liquidation. The decision in Process Engineering Pty Ltd v Derby Meat Processing Co Ltd established that the fact that a company is in liquidation is sufficient evidence to overcome the threshold in rule 671(a). It is not in dispute that the Plaintiff company has no assets apart from the monies the subject of this action if successful.
[36]	In Cherbourg Food Processing Company Pty Ltd & Ors v Enterprises (Qld) Pty Ltd & Ors, it was held that, notwithstanding that liquidation will satisfy the threshold test under rule 671(a) of the UCPR, the mere fact a plaintiff company is in liquidation,‘[is] not determinative of the ultimate issue as to whether security should be ordered as it is simply one factor the court should consider. There is no doubt that liquidation is a circumstance of some weight in the Court’s discretion.’
[37]	Once the threshold test under rule 671 has been satisfied, as here, rule 672 then provides for certain discretionary factors which the Court may consider in deciding whether to make an order for security for costs. 
[38]	Rule 672 provides:
672 Discretionary factors for security for costs 
In deciding whether to make an order, the court may have regard to any of the following matters— 
(a) the means of those standing behind the proceeding; 
(b) the prospects of success or merits of the proceeding; 
(c) the genuineness of the proceeding; 
(d) for rule 671(a)—the impecuniosity of a corporation; 
(e) whether the plaintiff's impecuniosity is attributable to the defendant's conduct; 
(f) whether the plaintiff is effectively in the position of a defendant; 
(g) whether an order for security for costs would be oppressive; 
(h) whether an order for security for costs would stifle the proceeding; 
(i) whether the proceeding involves a matter of public importance; 
(j) whether there has been an admission or payment into court; 
(k) whether delay by the plaintiff in starting the proceeding has prejudiced the defendant; 
(l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction; 
(m) the costs of the proceeding.
[39]	The Defendant bears the evidentiary burden of establishing a prima facie entitlement to the order sought. Once that is done, the onus moves to the Plaintiff to satisfy the Court that, having regard to all relevant matters, including those in rule 672, the Court should exercise its discretion in denying the order for security, or if entitlement is established, ordering an amount of security it considers reasonable.
[40]	I turn now to the discretionary factors in rule 672 of the UCPR.  Rule 672(a) provides that the Court may have regard to ‘the means of those standing behind proceeding’. In Bell Wholesale Co Pty Ltd v Gates Export Corp (No 2), it was held that a Court could decline to make an order for security for costs if the plaintiff company was able to successfully establish that those who stood behind the company were also without means. The Full Federal Court said;
‘It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of impecuniosity of those whom the litigation will benefit and prove the necessary facts.’
[41]	It is well established that where a plaintiff company seeks to resist an application for security for costs, the onus is on that plaintiff to place before the Court a full and frank statement of its assets and liabilities, including those if its shareholders.   The statement of assets and liabilities may effectively serve two purposes. It may counter the defendant’s allegation that the plaintiff will be unable to meet an adverse costs order. Alternatively, it may show that the financial resources are insufficient to meet a security order.
[42]	With respect to the present application, the Plaintiff has not provided sufficient evidence as to the means of those standing behind the proceeding, to adopt the wording in rule 672(a). In the absence of such material, I do not intend to speculate as to the potential financial means of third parties. Given the onus is on the Plaintiff to provide such information in order to satisfy the Court that security for costs should not be awarded, this is a factor which weighs in favour of such an order.
[43]	Rule 672(b) provides that the court may have regard to ‘the prospects or merits of the proceedings.’ In relation to this discretionary factor, I refer to the amended pleadings and to the Affidavit of Ashley Leslie sworn 7 November 2016 (‘Leslie Affidavit’) and the Affidavit of Adnan Ozdemir sworn 7 November 2016 (‘Adnan Affidavit’). Given that I have ordered further and better particulars be provided for the Amended Statement of Claim, and an Amended Defence has not yet been filed, one must assess the merits of the proceeding in the context of pleadings with caution.
[44]	At paragraphs 6 and 7 of the Leslie Affidavit, Ms Leslie, deposes to the following:
‘6. During the Initial Investigation, I determined that on 19 January 2011, $399,449.95 had been paid by the Plaintiff towards the First Defendant’s personal mortgage account (the Payment) over the Property located at 4 Poplar Street, Capalaba in the State of Queensland which I also verily believe to be the First Defendant’s residential address (the Property).
7. As a result of my initial investigations into the affairs of the Plaintiff, I also determined and I verily believe that the First Defendant has never loaned the Plaintiff any funds previously, and that the Payment was not a repayment of any loan or advance nor does the Plaintiff hold any records or written documentation that evidences a loan from the First Defendant to the Plaintiff that would give rise to a valid reason for the Payment.
8. For the reasons deposed above, I verily believe that the Plaintiff has an Equitable Interest in the Property, and or in the alternative, that the First Defendant is indebted to the Plaintiff in the sum of $399,499.95 (the Debt) for monies had and received.’
[45]	In response, the Adnan Affidavit provides a chequered history of the financial arrangements of the Plaintiff company and associated entities. It also provides some evidence, without any degree of specificity, that the funds the subject of the transaction were being utilised for business purposes. At paragraphs 26 to 28, Mr Ozdemir deposes to the following:
’26. Immediately prior to the transfer of the warehouse Ozdemir Group Pty Ltd was the sole shareholder of the first respondent and I decided to instead put the land into a super fund. It appeared there would be tax advantages in doing so. That was the reason for the transfer.
27. At the time two appraisals were obtained for the purposes of stamping the transfer. Both were substantially less than the mortgage debt.
28. In order to obtain the land and eliminate the debts of the first respondent, I and my superannuation company Zeyno Pty Ltd in fact paid (the best of my memory) over $455,000 to cover the mortgage to National Australia Bank Limited and further body corporate fees.’
[46]	Without more, the Adnan Affidavit is not an answer to the allegations of the liquidator. In the decision of Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd it was held that;
‘Where there is a claim prima facie regular and disclosing a cause of action, I see no reason why the court would, in the absence of evidence, proceed on the basis that the claim was other than bona fide with a reasonable prospect of success.’
[47]	For the purpose of this interlocutory application, it is neither appropriate nor possible to express a concluded opinion on the Plaintiff’s claim against the First Defendant. This will be done at trial. I have made the above observations as a logical result of a perusal of the extensive affidavit material that was relied on at the hearing of the Defendant’s Application in support of the Plaintiff’s submission that it has a genuine, strong and meritorious case against the Defendant. I am satisfied of the Plaintiff’s strong prima facie case against the First Defendant. This finding weighs against the granting of security for costs.
[48]	Rule 672(e) provides that the Court may have regard to ‘whether the plaintiff’s impecuniosity is attributable to the defendant’s conduct.’ In the decision of Impex Pty Ltd v Crowner Products Ltd it was held that consideration of the merits of a plaintiff’s claim is particularly relevant when the plaintiff claims that its impecuniosity has been caused by the defendant’s conduct which is the subject of the claim. In view of the strength of the prima facie case that the Plaintiff has shown against the First Defendant, it follows that the Plaintiff has shown, prima facie, that its impecuniosity is due to the conduct of this Defendant. That warrants taking this factor into account and weighs against ordering security for costs. 
[49]	Rule 672(g) provides that the Court may have regard to, ‘whether an order for security for costs would be oppressive’. There is no suggestion that the Defendant has brought its application for security for costs for an improper or ulterior purpose. It was an appropriate application to make in the light of the current financial state of the Plaintiff company. However, this is not determinative of whether ordering security for costs in this matter would be oppressive, in the sense of being used to deny an impecunious plaintiff the right to litigate.. What is oppressive must be judged in the broader context of the relationships between the parties to the proceeding. 
[50]	An order for security for costs would effectively paralyze the current proceeding. There are no assets in the liquidation and the liquidation is unfunded. If security for costs were ordered against the plaintiff, it would prevent the plaintiff from pursuing its claim against the First Defendant. I consider that would be oppressive having regard to the history of the dealings that are the subject of this proceeding. Linked to this notion is a consideration of whether ‘an order for security for costs would stifle the proceeding’ as envisaged by rule 672(h). In Yandil Holdings Pty Ltd v Insurance Co of North America, Clarke J held that the mere fact an order for security for costs will frustrate the plaintiff’s ability to litigate its claim because of its financial condition does not automatically lead to a refusal of an order for security but that it will usually operate as a powerful factor in favour of exercising the Court’s discretion in the Plaintiff’s favour. 
[51]	Notwithstanding that the Plaintiff did not expressly state that the proceeding would be discontinued if security for costs were ordered against the Plaintiff, I am satisfied, as I have said, that the inference should be drawn that there is a high probability that the proceeding would be stifled by an order for security for costs in favour of the First Defendant.
[52]	Rule 672(k) states that the Court may have regard to, ‘whether delay by the Plaintiff in starting the proceeding has prejudiced the defendant’. Despite the numerous submissions made by both sides on the issue of delay, I do not consider there has been delay with respect to the issue of security for costs. The pleadings have not yet closed. I do not consider that either side has been prejudiced, in the appropriate sense, by a delay.
[53]	The above analysis reveals that the discretion to award security for costs in the present circumstances is finely balanced. In all of the circumstances however, I do not consider it is appropriate to order security for costs against the Plaintiff. 
Waiver of Implied Undertaking Application
[54]	The basis of this part of the Defendant’s Application is that the Plaintiff’s liquidator accepted a debt owed to a purported creditor that was significantly higher than a claimed debt in a related Supreme Court proceeding. The Plaintiff submits that the liquidator has not yet adjudicated on this proof of debt, being the only submitted proof of debt. The Defendant submits that the liquidator has breached its duty to examine and adjudicated any purported debts as an officer of the Court. Accordingly, the Defendant submits the implied undertaking with respect to disclosed documents should be waived so that the Defendant may provide such material to an appropriate authority, presumably to investigate the conduct of the Plaintiff’s liquidator. 
[55]	The Plaintiff says, correctly in my view, that any concerns the Defendant may have as to any decision of a liquidator (a decision which the Plaintiff submits has not yet occurred) may be pursued through an alternate avenue under section 1321 of the Corporations Act which provides a specific method to reverse or modify the decision of a liquidator. This part of the Defendant’s Application is refused.
Orders
[56]	I make the following orders:
1.	Plaintiff’s solicitors pay the Defendant’s costs of the Plaintiff’s Application on an indemnity basis.
2.	As to the Defendant’s Application;
a)	Plaintiff to provide the further and better particulars requested by the Defendants on 18 July 2016, specifically particularising the knowledge or state of mind of the First Defendant as at the date of the subject transaction. Plaintiff to pay Defendant’s costs of the Further and Better Particulars Application on a standard basis.
b)	As to the Security for Costs Application, application dismissed. Defendants’ to pay the Plaintiff’s costs on a standard basis.
c)	As to the Waiver of Implied Undertaking Application, application dismissed. Defendants’ to pay the Plaintiff’s cost on a standard basis.