Barnden v Zulian; Barnden v Commissioner of Taxation

2017/112250 Andrew Barnden (First Plaintiff/First Respondent) Tolco Pty Ltd (Second Plaintiff/Second Respondent) Gabriel Zulian (Second Defendant/Applicant) Representation: Counsel: 2017/112239 R Glasson (First and Second Plaintiffs/First and Second Respondents) F Assaf SC/A Bailey (Defendant/Applicant)

2017/112250 R Glasson (First and Second Plaintiffs/First and Second Respondents) F Assaf SC/A Bailey (Second Defendant/Applicant)

Solicitors: 2017/112239 Dentons (First and Second Plaintiffs/First and Second Respondents) M&A Lawyers (Defendant/Applicant)

2017/112250 Dentons (First and Second Plaintiffs/First and Second Respondents) M&A Lawyers (Second Defendant/Applicant) File Number(s): 2017/112239; 2017/112250 Publication restriction: Nil

Judgment

1. Before the Court are two applications for security for costs, made in two related claims in the Corporations List. I heard the applications on 21 November and, at the parties' request, received supplementary written submissions on 30 November.
2. The proceedings arise out of the liquidation of Tolco Pty Ltd ("the Company") which was the subject of a winding up order in insolvency in September 2015. Robert Boyce Moodie and Will Griffiths were appointed as liquidators. Mr Moodie retired as liquidator in July 2017, leaving Mr Griffiths as sole liquidator. In December 2017, Mr Griffiths resigned and was replaced by Andrew James Barnden, to whom I refer as "the Liquidator". In both actions, the Liquidator is the first plaintiff and the Company is the second plaintiff.
3. The defendant in the first action (2017/112239) is Gabriel Zulian. Mr Zulian was the sole director and secretary of the Company from February 2000 until the winding up order was made. The Liquidator brings an insolvent trading claim against Mr Zulian under the Corporations Act 2001 (Cth), s 588M. The Liquidator alleges that the Company was insolvent from July 2014 onwards and that approximately $3.8 million in unsecured debts were incurred by it over this period.
4. In the second action (2017/112250) the first defendant is the Commissioner of Taxation. Mr Zulian is the second defendant. The proceedings concern payments made by the Company to the Australian Taxation Office totalling approximately $540,000 between February and July 2015, within the relation back period applicable to the winding up. The plaintiffs claim that the payments were voidable transactions under the Corporations Act, s 588FF. They allege that the payments were unfair preferences (s 588FA) or insolvent transactions (s 588FC). Mr Zulian has been joined as second defendant on the basis that if the Commissioner of Taxation is obliged to refund the payments, Mr Zulian will be personally liable for the underlying tax liabilities, and he therefore has an interest in resisting the plaintiffs' claim.
5. In November 2017, consent orders were made in both proceedings to resolve earlier applications for security for costs. The orders provided for security to be given in the sum of $70,000 for the two matters, with the defendants to have liberty to apply to seek additional security. The present applications are made pursuant to that liberty to apply.
6. The interlocutory processes each seek provision of $490,000 in security. In the course of the hearing, the figure was modified to $400,000 to cover both matters.
7. Mr Zulian's application is made under Uniform Civil Procedures Rules 2005 (NSW), r 42.21(1)(e) which provides: (1) If, in any proceedings, it appears to the court on the application of a defendant: … (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so… the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given.
8. The Liquidator wishes to resist the application on the ground that this is not a proper case for any further security to be granted. In particular, the Liquidator seeks to rely on a line of authority to the effect that an order for security should not be made, or should not ordinarily be made, against a company liquidator suing as such: Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120 at 123; Green v CGU Insurance Ltd (2008) 67 ACSR 105; [2008] NSWCA 148 at [27]-[28]. On behalf of Mr Zulian, the contention is that it is too late for the Liquidator to resist the grant of further security. Counsel for Mr Zulian contend that the making of the consent order determined the Liquidator's "liability" for security and the only issue open for argument on this application is the proper quantum of the further security to be provided.
9. The issues which arise in these applications are therefore: (1) whether the previous orders determined the Liquidator's "liability" to provide security; (2) if not, whether the Liquidator is "liable" to provide further security in the circumstances of the case; and (3) if further security is to be ordered, what its quantum should be.

Effect of previous orders

1. The orders made by Black J followed applications, formally made by way of Interlocutory Process on behalf of Mr Zulian, for orders that the Liquidator provide security for costs. Apparently, the security applications were prepared for a contested hearing and then resolved, but there is no evidence about how that occurred. Nor is it suggested on behalf of Mr Zulian that there was some sort of extra-curial agreement which may be said to prevent the issue of "liability" being raised on this application: cf Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 at 579.
2. The orders made by Black J were relevantly in the following terms: 1. Pursuant to UCPR 42.21 the Plaintiffs give security for costs by Mr Griffiths undertaking to the Court that he will not dissipate or otherwise deal with any current cash at bank in Commonwealth Bank of Australia Account No 200016202025 below $70,000 pending the final determination of Proceedings No. 2017/112239 and 2017/112250, the agreement of the parties or by leave of the Court. ... 3. Defendants have liberty to apply to the Court to seek additional security to that provided for in order 1 above. … 5. Costs of the Interlocutory Processes dated … 28 September 2017 and 11 October 2017 be costs in the cause.
3. The first submission for Mr Zulian was that the terms of the orders themselves precluded further resistance on the part of the Liquidator on the grounds of "liability" for security. Counsel for Mr Zulian submitted that, properly understood, the orders contemplated that the issues on any further application would be limited to quantum. Alternatively, counsel contended that the earlier orders gave rise to an issue estoppel on the question of "liability".

Form of previous orders

1. The Court encourages applications to be made promptly after the proceedings have been commenced, and it is a recognised basis for the refusal of security or the limiting of security to future costs if the application is made at a late stage of the proceedings. Where the application is made at an early stage, most of the defendant's costs will not yet have been incurred. In such circumstances, the Court may be asked to make an order for the provision of security in tranches.
2. Such an approach represents a reasonable compromise between the interests of the defendant who obtains an order for security and those of the plaintiff who has to provide security. But it does not overcome another problem, which is the difficulty of trying to forecast at an early stage of the proceedings how much security should be provided. I considered this problem in Kupang Resources Ltd (subject to Deed Of Company Arrangement) v Elias [2018] NSWSC 1553 and sought to address it by making orders in the following form: 1. The plaintiff provide security for the second defendant's costs in the following tranches: 1.1. $150,000 to be paid within 28 days; 1.2. A further $150,000 to be paid within 42 days of the court setting the matter down for trial. … 4. I direct that within 7 days of the Court setting the matter down for trial the second defendant file and serve an affidavit setting out the costs incurred to date and an estimate of the further costs to be incurred to the completion of the proceedings. 5. Grant liberty to either party within a further 14 days to apply to the Court to vary the amount to be provided in the second tranche of security.
3. The orders made in Kupang contained an obligation on the plaintiff to provide the second tranche of security, subject to variation of the amount on an application by either party in due course. The orders in the present case did not do that. As I read the orders, they simply disposed of the existing security applications by requiring security in the sum of $70,000 to be provided and by providing for the costs of the applications to be costs in the cause. The grant of liberty to apply made it clear that it would not be open to the Liquidator to resist any such further application on the ground that the Court had decided the security question once and for all. But it contained no other restriction. Mr Zulian was free to make a further application; but the Liquidator was free to resist that application. On the evidence before me, there was nothing in the orders, or in the context, to limit any such future application to questions of quantum only.
4. It may be that Mr Zulian's legal representatives had in mind, when the consent orders were made in November 2017, that Mr Zulian would be entitled to "top up" the level of security at a later point in the proceedings by reference to the costs incurred and projected future costs, and that the only debate at the later point would be quantum. But if so, I do not think that the consent orders, as a matter of construction, had that effect.

Issue estoppel

1. Counsel's argument that the earlier orders gave rise to an issue estoppel was based on the judgment of Holmes JA in Castillon v P&O Ports Ltd [2008] 2 Qd R 219; [2007] QCA 364. That was an appeal against a decision of the Queensland District Court extending the time for the bringing of a personal injury claim after the limitation period had expired. The relevant limitation statute, the Limitation of Actions Act 1974 (Qld), s 31(2), gave power to the Court to extend time if "a material fact of a decisive character relating to the right of action was not within the means of knowledge of the applicant until after the commencement of the last year of the limitation period". An extension was granted despite the fact that an earlier application for an extension had, in a reasoned decision, been refused by a different District Court judge.
2. On appeal, it was argued that the decision of the District Court to extend time was an interlocutory one and there could be no issue estoppel. Holmes JA rejected that view. Her Honour saw the question whether a decision gives rise to an issue estoppel as depending, not on a technical classification of the order for the purposes of determining appeal rights, but on the nature of the decision itself. A similar view was taken by Beazley JA (Mason P and McColl JA agreeing) in Inasmuch Community Inc v Bright [2006] NSWCA 99 at [60].
3. Holmes JA pointed out that the exercise of the extension power under s 31(2) was not purely a discretionary matter. Before a discretion could be exercised, a "material fact of a decisive character" must have existed at the relevant time. Her Honour considered that the earlier District Court judge, in rejecting the first application, had made a "positive finding" that the applicant had all material facts of a decisive character within his means of knowledge by the critical date. Her Honour considered that this gave rise to an issue estoppel.
4. The appeal succeeded in Castillon and the decision in the applicant's favour was set aside. But Holmes JA's was not the only judgment. The leading judgment was given by Keane JA (as his Honour then was). His Honour did not consider it necessary to make a final decision on the issue estoppel question, or the appellant's other arguments based on res judicata or abuse of process. His Honour concluded that the trial judge had been wrong in any event in considering that there was further material which amounted to a "material fact of a decisive character". It followed that the statutory test was not satisfied. The third member of the Court, Wilson J, agreed with the reasons of both Keane JA and of Holmes JA. It thus seems that Holmes JA's reasoning on issue estoppel was not part of the ratio of the Court of Appeal's decision.
5. There are two other appellate court decisions on the extension of limitation periods which pre-date Castillon. One is the decision of the Victorian Court of Appeal in D A Christie Pty Ltd v Baker [1996] 2 VR 582. This was an application for an extension of time under the Limitations of Action Act 1958 (Vic), s 23A. An application was made to a judge of the Victorian County Court for an extension of time which was refused because of a lack of explanation for the period of delay. In 1995 the applicant made a second application to a second judge of the County Court supported by further evidence giving an explanation for the delay, which was granted.
6. Brooking JA undertook a lengthy review of the authorities. His Honour considered that an issue estoppel arose. But his Honour also considered that if there was no strict estoppel, then the bringing of the second application was an abuse of process. Hayne JA did not agree that the previous decision gave rise to an issue estoppel but concluded that the second application was an abuse of process. The third member of the Court, Charles JA, dissented. His Honour considered there was neither an issue estoppel nor an abuse of process.
7. A similar case came before the Court of Appeal in this State, on appeal from the District Court, in Nominal Defendant v Manning (2000) 50 NSWLR 139; [2000] NSWCA 80. All of the members of the Court considered that the proceedings were interlocutory in nature and that no issue estoppel arose. Rather, the question concerned the application of a "rule of practice" expressed by Sperling J in Wentworth v Rogers (Unreported, Supreme Court of New South Wales, 28 April 1995) as follows (quoted at [11] in Manning): I hold that, as a general rule, an interlocutory order made after a hearing at which each side has the opportunity to put its case should not be set aside, varied or discharged, except to accommodate a change of circumstances or where evidence has become available which was not available at the earlier time. By the same token, where an application for interlocutory relief has failed, a further application for the same relief should, as a general rule, not be entertained, subject to the same qualifications, at least after a hearing on the merits, particularly where the application is designed to finalise the principle proceedings, such as an application for summary judgment or for a permanent stay. (See also Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at 46 per McLelland J).
8. Mason P concluded that there was more to the "rule of practice" than the exercise of a judicial discretion. His Honour said that, despite the language used in the authorities describing the rule, the category of reference was abuse of process. He agreed with Hayne JA in D A Christie and concluded that the second extension application was an abuse of process and should have been dismissed; there was no scope for the operation of discretion. But the other two members of the Court, Heydon JA and Foster AJA, took a different view. They pointed out that the "rule of practice" was itself expressed in terms of a "general rule" which implied the existence of exceptions. Their Honours preferred the reasoning of Charles JA in D A Christie and the appeal from the second decision was dismissed.
9. Between them, Brooking JA in D A Christie and Heydon JA in Manning referred to a number of cases concerning security for costs. I will refer to four of them.
10. In Woods v Sheriff of Queensland [1895] QLJ 163 an order for security for costs was made against the plaintiff on the ground that he was out of the jurisdiction. The plaintiff returned to Queensland, stated that he had no present intention of leaving again, and took out a summons to have the order discharged. Speaking for the Full Court, Griffith CJ said (at 164): When an order is made ex parte, the court or judge making it may, upon application of any person prejudicially affected by the order, review and, if necessary, discharge it. This is a rule of natural justice. But, when a judgment or order is pronounced or made after hearing both sides, it is a general rule that the court which pronounced the judgment or made the order cannot reverse or vary it. To this rule, which in my opinion applies equally to all judgments and orders, whether final or interlocutory, and whether pronounced by the Full Court or by a single judge, and whether he is sitting in court or in chambers, there were, before the Judicature Acts, some exceptions.
11. Griffith CJ referred to the former practice in Chancery where a judge had power to review and discharge an order which had been made in chambers, but this had been abolished by the Judicature Acts. He continued (also at 164): In my judgment, therefore, the general rule applies to all decisions of this Court by whomsoever the jurisdiction is exercised, unless where some statutory provision exists to the contrary, or where the alleged error in the judgment or order is not that of the court or judge, but is made by the officers of the court in formulating the decision.
12. But his Honour distinguished the operation of this general rule from the court's power to grant relief against the continued operation of an order "if after it is made new facts come into existence or are discovered which render its enforcement unjust". Griffith CJ said (at 165): An application for a new order which has the effect of suspending in whole or in part the operation of a previous order starts with the assumption that that order was rightly made. There is therefore no question of reversing or varying or rehearing the original decision or order. …If it should turn out that the application is based upon the assumption that the order, the operation of which it is desired to modify, was wrongly made, it must fail. The only question is whether the party applying is entitled under the altered circumstances to be relieved from the operation of the order.
13. In Weiss v "The Sunday Press" Newspaper Co (1903) 5 WALR 157, the defendants made an application to the Chief Justice of Western Australia in chambers for security for costs of the proceedings under the Newspaper Libel Act (52 Vic. No. 18), s 3. That section provided that security could be granted if, relevantly, the plaintiff was "to the belief of the defendant and some other person of repute without visible means of paying the costs of [the] action if unsuccessful". The Chief Justice dismissed the application, deciding that the affidavits only proved the belief of a person of repute that the plaintiff apparently had no sufficient means to pay the costs, and not of a belief that the plaintiff in fact had no visible means of paying the costs. A fresh application was then made to the Chief Justice in chambers on fresh affidavits expressed in the language of s 3, and this application succeeded.
14. The Full Court (consisting of Parker and McMillan JJ) allowed an appeal. Parker J (at 158) cited the following statement of Cotton LJ in In Re May (1885) 28 Ch D 516 at 520-521: It would be wrong in principle if a man having failed upon evidence which he thought was sufficient to establish his case…when he had found that a link was missing in his evidence and knowing exactly where the block is, to try and get the case tried over again with the old evidence and the evidence since discovered which will meet that block.
15. Parker J continued (at 159): If the contention of Mr Pilkington [counsel for the defendants] be correct, there may be numerous applications by defendants calling upon the plaintiff for security. We might find one affidavit, and that, if not sufficient, another application with two affidavits, which if not sufficient might be followed by a further summons accompanied by three affidavits, and so on, whereby a plaintiff might be harassed to any extent by the defendant under cover of this Act. Again, if the Judge decides wrongly in Chambers there is an appeal to this Court, but notice of appeal must be given within a certain time, five days I think, and so in this case we should be extending the time for appeal indefinitely, if we were to hold with Mr Pilkington, because the defendants might say, "I am not going to appeal to the Court now. I shall take another summons for security six months hence, and appeal upon that, and so keep this matter hanging over the head of the plaintiff for any time I choose." That could not be contemplated by the Legislature, and would be defeating the rule that notice of appeal must be given within five or eight days.
16. In Fisk v Anderson (1915) 19 CLR 518; [1915] HCA 7, an unsuccessful plaintiff in proceedings in the Supreme Court of Victoria filed a notice of appeal in the High Court. It appears that under the High Court Rules, the filing of the notice of appeal carried with it an obligation to provide security. The appellant applied to a judge of the High Court (Powers J) to reduce the amount of, or dispense with, the security. That application was refused. The applicant then took out a fresh summons seeking, among other things, an order reducing or dispensing with the security notwithstanding the previous order. The application was refused by the Full Bench of the High Court. Griffith CJ, with whom Barton, Isaacs and Gavan Duffy JJ agreed, said that the application to reduce or dispense with security was res judicata by reason of the decision of Powers J.
17. In Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890 an application was made for security for costs against a company on the ground of impecuniosity. The first instance judge was not satisfied by the evidence of the plaintiff's financial position that the plaintiff had sufficient resources to meet the costs. The judge noted that the accounts produced were not up to date. He said the plaintiff could come back and get the money out of court if the accounts showed that it was "viable for the costs" but in the meantime he made an order for security to be paid into court. A few weeks later the plaintiff restored the application for security for further argument and sought to have the order requiring the plaintiff to pay the sum of money into court (which had not been paid) set aside. The judge said that the plaintiff's application was tantamount to asking him to hear an appeal against his own order and dismissed it.
18. On appeal to the English Court of Appeal, Mann LJ (with whom Sir Denys Buckley agreed) said that a plaintiff could not return to court and seek to get an order varied or set aside by producing fresh evidence as to the state of affairs extant to the date of the order. But his Lordship considered that it was always possible either for a defendant or a plaintiff to apply for variation or discharge of an order previously made if the circumstances had changed. The judge had therefore erred in refusing to go into the merits of the plaintiff's application and it was remitted to him for further consideration.
19. Where a judicial decision is final for the purposes of the doctrines of res judicata and issue estoppel, the court's decision will give rise to an issue estoppel on every point necessary for the conclusion reached: Blair v Curran (1939) 62 CLR 464; [1939] HCA 23 at 531-533. That will be so, even if the relevant element of the cause of action was not the subject of debate: Hoystead v Commissioner of Taxation (1925) 37 CLR 290; [1925] UKPCHCA 3 at 165-166, 170. Counsel for Mr Zulian argued that the previous order by Black J, although not the subject of a contest, necessarily determined that the Liquidator was "liable" to provide security. If the Liquidator had not been so "liable", so the argument ran, no order would have been made at all.
20. But in truth, it is a misnomer to speak of "liability" to provide security. UCPR r 42.21(1)(e) contains two threshold requirements: (1) the plaintiff is suing not for his or her own benefit, but for the benefit of some other person; and (2) there is reason to believe the plaintiff would be unable to pay the defendant's costs if ordered to do so. If those conditions are satisfied, the Court may award security. But whether it does so, and how much security it awards, are discretionary matters which call for evaluative judgments based on the circumstances as they stand at the time the Court considers the matter, as revealed by the evidence. The Liquidator's "liability" to provide security is a discretionary question which is not an "issue" for the purposes of the doctrine of issue estoppel.
21. Counsel's argument would, at best, allow for an issue estoppel on the two threshold questions. Even so, that would be of limited continuing relevance. An estoppel in Mr Zulian's favour on question (1) would not affect the argument on whether, as a matter of discretion, security should be awarded against the Liquidator: cf Green v CGU Insurance Ltd at [45]-[46]. And an estoppel in Mr Zulian's favour on question (2) would only determine the question at the particular point in time when the security was first granted; it would not prevent the Liquidator contesting impecuniosity as at a later date.
22. But it is by no means clear that issue estoppel applies at all. McLelland J said expressly in Brimaud that it does not apply to procedural decisions. Although Holmes JA would have applied the doctrine in Castillon, her Honour was careful to emphasise that the Queensland limitation statute was distinguishable from the limitation statutes considered in D A Christie and Manning on the ground that it turned on factual, not discretionary, considerations. In D A Christie, Brooking JA in turn distinguished the extension application before the Court from applications involving the exercise of procedural powers concerning a "matter under the control and within the discretion of the Court" (the language is that of Barwick CJ in Hall v Nominal Defendant (1966) 117 CLR 423; [1966] HCA 36 at 429). Heydon JA in Manning likewise emphasised (at [45]) that different types of interlocutory applications are governed by their own rules concerning repeated applications. Everyone agrees that the rules are no more strict for repeated procedural applications than they are for repeated applications for an extension of time. They may well, it appears, be less strict.
23. In Fisk, Griffith CJ used the language of res judicata. But his Honour's language in Woods, and the language of the Western Australian Full Court in Weiss, is equally, if not more, consistent with the applicable doctrine being abuse of process. That was what Mason P expressly said in Manning. Moreover, the majority in Manning treated the rule restricting repeated applications as something less than a strict rule of law. I think the balance of appellate court authority, including binding authority of the Court of Appeal, requires me to treat the making of a second application for security as, at most, raising a question of potential abuse of process.
24. In the present case, the "issue" of the Liquidator's "liability" to provide security was not submitted to the Court and decided in November 2017. Rather, the parties agreed to a consent order which made it unnecessary for the Court to consider the question. The Liquidator is not now seeking to vary or set aside the order for security made by Black J in November 2017. That order stands. Indeed the Liquidator is not making any application at all; all he is doing is resisting an application for further security by Mr Zulian.
25. It may be accepted that the categories of abuse of process are not closed; and there can be an abuse of process even where there has been no decision on the merits (UBS AG v Tyne (2018) 92 ALJR 968; [2018] HCA 45 at [52]-[59], [75], [79]-[81]). But I do not think that the Liquidator's conduct in this application, in resisting "liability" to provide security, is an abuse of process. No question of duplication of Court resources, delay, expense or vexation arises. Rather the contrary.
26. It is easy to see why the Liquidator might have agreed to the orders made in November 2017 which only obliged him to retain $70,000 in the liquidation bank account rather than proceeding with a full-scale contest involving both "liability" and quantum. I see nothing wrong, when Mr Zulian returns to Court with an application for security for a further $420,000, in the Liquidator taking the "liability" point.
27. In my view, the settlement of interlocutory applications by the making of a consent order should be encouraged. Sometimes that may lead to a point, which could otherwise have been deployed, being shelved. If that means that at a later stage the point may be raised and have to be dealt with, so be it. The Court should be slow to adopt an approach which would lead to arguments that parties are fettered in the line they can take in procedural applications because of their consent to earlier procedural orders. Such an approach would only increase disputation and costs, and reduce the flexibility which is an important element of modern case management.
28. For these reasons, the order made by Black J did not give rise to any issue estoppel or render the Liquidator's resistance to providing security on this application an abuse of process. There is no obstacle to the Liquidator contesting his "liability" to provide security for the purposes of this application.

Whether further security should be ordered

1. In Devine v Liu [2018] NSWSC 1453, I considered applications for security for the costs of proceedings very similar to these ones. As in this case, the proceedings arose out of the liquidation of a company and proceedings were brought both in the name of the liquidator and the company for insolvent trading and for recovery of payments made out of the company during the relation back period on the grounds that such payments were voidable transactions. One of the points taken by the defendants in that case was that the solicitors for the liquidator and the company were conducting the proceedings on a "no win, no fee" basis. The defendants contended by reference to the decision of the Court of Appeal in Green v CGU Insurance Ltd that this circumstance justified the making of an order for security for costs against the liquidator personally.
2. In the present case, too, there was evidence that the Liquidator's solicitors are conducting the proceedings on a "no win, no fee" basis. Counsel for Mr Zulian contended that, should I reject the argument that it was not open to the Liquidator to contest "liability" for security, the circumstance that the proceedings were being "indirectly funded" by the solicitors in this way was a reason to make an order for security.
3. This contention was based, at least primarily, on UCPR 42.21(1)(e). Counsel for Mr Zulian recognised, as counsel in Devine had also recognised, that the point would only arise if it were first established that there was "reason to believe" that the Liquidator would be unable to pay Mr Zulian's costs if successful.
4. The evidence on this application showed that the Liquidator owned no property in NSW, apart from a 5/1000th share of a property at Turramurra in Sydney, presumably his matrimonial home. There was no evidence, in the form of financial statements, tax returns and the like, concerning his financial position or that of his firm. But there was evidence that the Liquidator, through his firm, holds a professional indemnity insurance policy issued by Lloyds of London which apparently would respond to any personal liability he might incur in these proceedings for Mr Zulian's costs.
5. I summarised the evidence in Devine v Liu on this question at [125]. It was similar to the evidence in this case, except that in Devine there was no evidence that the liquidator had insurance cover. I said (at [128]): But in the end, the evidence shows that Mr Devine is an established professional liquidator and a member of an apparently substantial firm. If a costs order were made against him in these proceedings which he was unable to satisfy he would be faced with bankruptcy, which would end his professional career. It would also cause immense difficulties for his partners who would be liable for the costs as liabilities incurred by Mr Devine in the course of the partnership business. I think I can infer that in these circumstances Mr Devine would do what he could to avoid bankruptcy and that his partners would do what they could to assist him to do so. On the estimates of costs in these proceedings, Mr Devine's liability would be in the hundreds of thousands of dollars, not the millions. On balance I am not satisfied that there is reason to believe he will be unable to meet an adverse costs order. It is not necessary to consider the issue of principle posed by counsel's submission.
6. Similar observations apply in the present case. It is true that in Devine I said (at [127]) that I was not impressed by a submission that there was no evidence as to the liquidator's financial position when the liquidator could have given evidence about that matter. On reflection, I think it must be recognised that the onus does lie on the defendant making the security application to establish that there is "reason to believe" that the plaintiff will be unable to pay. In circumstances such as the present, if the threshold impecuniosity question is in issue, I think it is for the defendant to issue notices to produce or subpoenas concerning the income and financial affairs of the liquidator (and, probably more to the point, the liquidator's firm). This may prove intrusive for the liquidator, but if impecuniosity has been put in issue the liquidator cannot complain about the intrusion.
7. In the present case I simply have no evidence about the Liquidator's capacity, or the capacity of the firm of which he is a member, to meet a costs order out of the firm's assets and income. To the contrary, what I do have is evidence that any such liability would likely be covered by insurance.
8. In Australian Worldwide Pty Ltd v AW Exports Pty Ltd [2018] NSWSC 1632 at [35] I said that an indemnity provided by a funder of litigation being brought in the name of a company in liquidation was irrelevant to the threshold question whether there was "reason to believe" that the plaintiff would be unable to pay the costs of the defendant if successful. I said that the question was whether the plaintiff company could pay the costs, not whether someone else could pay the costs on its behalf.
9. In my view, the indemnity provided by the insurance policy in the present case is different. The policy was not obtained for the purposes of this litigation but as part of the ordinary course of the Liquidator's professional activities (cf Australian Worldwide at [20]-[22]). I think it can properly be taken into account in assessing the Liquidator's apparent ability to meet any costs which may be awarded against them.
10. Counsel for Mr Zulian submitted that, in the current financial environment, even the ability of an institution such as Lloyds of London to meet its obligations is questionable. I think this submission goes too far. While it is always possible that any insurance underwriter, no matter how large, could unexpectedly collapse, that mere possibility is not enough to give rise to "reason to believe" that claims made on the policy issued by Lloyds may not be met. In any event, I am not satisfied on the evidence that there is reason to believe that the Liquidator's personal resources would be inadequate to meet the costs which might be awarded in favour of Mr Zulian, essentially for the reasons given in Devine.
11. For these reasons, as in Devine, the threshold condition is not satisfied and the question whether the fact that the proceedings are being conducted on a "no win, no fee" basis is sufficient reason to award security against the Liquidator does not need to be considered. It is also unnecessary to consider the various other grounds put forward on behalf of the Liquidator for why security, or further security, should not be awarded.

Quantum

1. Having regard to these conclusions, it is unnecessary to consider the issues debated concerning the quantum of security.

Conclusions and orders

1. For these reasons, Mr Zulian's applications for security fail and must be dismissed. I see no reason why costs should not follow the event.
2. The orders of the Court in matter number 2017/112239 are:
3. Order that the defendant's Interlocutory Process filed 10 August 2018 be dismissed.
4. Order that the defendant pay the plaintiffs' costs of that Interlocutory Process.
5. The orders of the Court in matter number 2017/112250 are:
6. Order that the second defendant's Interlocutory Process filed 10 August 2018 be dismissed.
7. Order that the second defendant pay the plaintiffs' costs of that Interlocutory Process.

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