[46.7.5] Surcharge and falsification The practice is to call the charge referred to in r 46.7(1) a surcharge and that referred to in r 46.7(2) a falsification. Both surcharges and falsifications may be based on matters of fact or law. Surcharges are usually dealt with first. The onus is on the surcharging party who begins. With falsifications, the onus is on the accounting party who accordingly begins: Pit v Cholmondeley (1754) 2 Ves Sen 565; 28 ER 360.
See also Gray v BNY Trust Company of Australia Ltd [2009] NSWSC 789 at [14-15]
16 As can be seen from the above, if a non-accounting party files a surcharge then that non-accounting party has the onus and begins the application. If a non-accounting party files surcharges and falsifications the onus remains with the non-accounting party to begin. If a non-accounting party files only falsifications then the onus remains with the accounting party to prove and thus to begin.
17 Einstein J's orders are in a chronological form that suggests that it is up to the first defendant, now PCM, to prove in the accounting process as the moving party, with the plaintiffs filing the falsifications in response and then PCM having the entitlement to file a reply.
18 All of this relates to the applicants' quest to establish that the true moving party in the accounting exercise is PCM and that it can be characterised as the true plaintiff in the proceedings, or alternatively, as another plaintiff in the proceedings.
19 In this regard the applicants relied upon Willey v Synan (1935) 54 CLR 175 per Dixon J, as his Honour then was, at 184 and Latham CJ at 180; Tomlinson v Land & Finance Corporation Ltd (1884) 14 QBD 539, in particular per Brett MR at 541 and Bowen LJ at 542.
20 Mr Branson submitted that the circumstances in the present case are distinguishable from both Willey and Tomlinson. In particular Mr Branson submitted that the interpleader action referred to in Tomlinson is really a hybrid of the rules where parties can ventilate competing claims, and should not be compared to the present circumstances where these parties were truly in very serious and long fought litigation as plaintiff and defendant. He submitted that this is a partnership dispute of a very ordinary kind, or a joint venture dispute of a very ordinary kind.
21 Whilst Mr Branson made his submissions to resist the submissions of Mr Golledge who appears for the plaintiffs/applicants, in respect of the true identity of the moving party, he accepted unreservedly the Court's inherent powers to make an order should it regard it as consistent with the dictates of justice.
22 Accordingly, it is not necessary for me to decide the matter of who the moving party is but I should say that it does seem probable that in this particular instance the company, PCM, is the moving party in the accounting process and could reasonably be described as akin to a plaintiff, consistently with the authorities referred to above.
23 As I have said, it is not disputed that PCM would not be able to meet any costs order made against it arising out of its participation in the accounting hearing. Mr Golledge submitted that this factor provides the jurisdictional basis for an order under the Rules and the Corporations Act and he submitted it is also relevant to the exercise of the discretion if the Court exercises its inherent power.
24 Mr Golledge submitted that the whole of the litigation history should be taken into account. It is not possible in an application such as this to recount the whole of the history between these parties. I should say, however, that Mr Branson has captured much of it in the very succinct and economical submission in writing. Put shortly, the parties had a reasonably lengthy trial before Einstein J; the defendants appealed to the Court of Appeal and then sought special leave to appeal to the High Court. The appeals were unsuccessful.
25 Mr Golledge emphasised the breaches of a long standing kind that had been found against Mr Carantinos the effects of which, he submitted, were to deprive his clients, the applicants, of substantial amounts of money for a very long period of time. He submitted that the disadvantage to the applicants had been exacerbated by the series of expensive and unsuccessful appeals.
26 The next submission put by Mr Golledge in respect of the exercise of my discretion was the inference to be drawn from the assignment by a company in the circumstances of PCM, five weeks before the hearing date and ten months after the bankruptcy of the first defendant. There is no evidence as to the reason for that assignment to such a company. Mr Golledge submits that the irresistible conclusion is that it was done to avoid paying any costs that may be ordered against such a company, or put more brutally, to deprive the applicants of the fruits of a favourable costs order. Mr Golledge submitted that it was curious that the creditors, including Mr Munro, did not take the assignment but rather this two-dollar company.
27 Mr Golledge also submitted that an application made by PCM to Macready AsJ to defer the hearing, which was rejected, may well have been part of an overall strategy designed to enable PCM to put further economic pressure on the applicants. I reject that submission. There is not enough evidence for me to be satisfied to the requisite standard that such a strategy existed. I can understand the applicants perhaps feeling that way and instructing their counsel in that regard but in my view it is an unjustified submission on the evidence before me today.
28 The final submission in relation to the exercise of my discretion was a submission that the claim by PCM in the accounting proceedings is a weak one. Mr Golledge took me to two items in particular in the filed accounts, a figure of $45,301.60 and a figure of $17,002.78 which were described as "various" and "overheads/expenses".
29 In this regard Mr Golledge relied upon paragraph [67] of Einstein J's judgment to demonstrate that such a claim is hopeless. He submitted that the other similar claims in the accounts would satisfy the same description. That, of course, is a matter for Macready AsJ but, prima facie, it appears that Mr Golledge's submission has force. Mr Carantinos claimed, that he and his interests are entitled to 61 per cent of the Fund leaving but 39 per cent for the plaintiffs. That, as I say, is a matter for Macready AsJ but I do accept that there may well be some difficulty for PCM to achieve the 61 per cent as claimed in the accounts.
30 This application needs also to be looked at in the light of the provisions of the Civil Procedure Act 2005 (NSW) (the Act), in particular sections 56-61. I am not suggesting that this application is part of case management, but rather that the lateness of this application is to be viewed in the light of the way in which this Court now administers case management, consistently with the overriding purpose of the Act and the Rules for the just, quick and cheap resolution of the real issues between the parties. I do not know why the particular corporate vehicle was utilised for the assignment. I am satisfied the irresistible inference is, as Mr Golledge has put it, that it protected others from having to pay the costs and from having to "step up to the plate", to use the vernacular, and take the assignment.
31 The matters to which Mr Golledge has referred persuade me that I should exercise my discretion in the applicant's favour to order security for costs. There are alternative ways of meeting such an order. One is to provide a bank guarantee, another is to pay cash into court. I should note that there was an open offer made by the applicants that they would accept an undertaking from Mr Kevin Munro, Solicitor of this Court, that he would meet the costs of the accounting proceedings up to a maximum of $68,000.
32 Now that I have indicated that I intend to make an order, I will let the parties decide what mechanism is to be utilised, and they can prepare some short minutes of order. If there is a dispute about that aspect, of course I will hear further argument.
33 I should say that the amount of $68,000 has been quantified by Stephen John Rockliff, Solicitor, in his affidavit of 12 October 2009. There has been no challenge to that amount and it seems, in the circumstances, reasonable, having regard to the stage that these proceedings have reached.
34 By consent I make the orders in the short minutes of order initialled by me and dated today. That lists the matter before the Registrar on 30 October 2009 and it confirms the hearing date before Macready AsJ on 9, 10 and 11 November 2009.