Berry v Innovia Security Pty Ltd

REASONS FOR JUDGMENT 1 These proceedings have been on foot since December 2013. They are moving very slowly. 2 On 8 April 2014, I ruled upon an application by the respondent that the applicants should provide security for costs before the matter proceeded any further (Berry v Innovia Security Pty Ltd [2014] FCA 357). For reasons explained in the judgment, I accepted arguments on behalf of the applicants that it was not necessary, in order to protect the legitimate interests of the respondent, to order that more than $20,000 be provided as security for costs. That sum represented the amount which might be necessary to enforce a judgment in favour of the respondent in the United Kingdom, where the first applicant resides and where the second applicant is registered. The relationship between the applicants was described in earlier proceedings as follows (at Transcript 25/03/2014, p 9): DR WARD: … The second applicant is a dormant company which is at the moment essentially in existence only for the purpose of trying to recover its loss through the litigation. The first applicant is the applicant with means. 3 The order for security for costs limited to $20,000 was conditional upon the first applicant providing two undertakings. Those undertakings, which were filed on 28 April 2014, were in the following terms: UNDERTAKINGS GIVEN TO THE COURT BY THE FIRST APPLICANT: The First Applicant undertakes to the Court that: 1. He is the sole legal and beneficial owner of the property identified as Chestnut Cottage, Barnet Lane, London N20 8AP, title number NGL228130 ("the Cottage"). 2. The Cottage is unencumbered and there are no registered or unregistered charges over the Cottage. 3. He will not without providing 60 days notice in writing to the Respondent's lawyers, sell or otherwise encumber the Cottage. 4. If the Cottage is to be sold or otherwise encumbered, the First Applicant will pay such sum as is ordered by the Court by way of security into such account as the Court may order. [Signature of the First Applicant] UNDERTAKING GIVEN TO THE COURT BY THE FIRST APPLICANT: The First Applicant undertakes to the Court that: 1. He will not seek security for costs in any proceedings that may be commenced in the United Kingdom for enforcement of an Australian costs order by the Respondent in these proceedings. [Signature of the First Applicant] 4 Both undertakings were accepted over the opposition of the respondent. 5 The respondent had sought security for costs in the sum of $175,000 against estimated costs of preparing the respondent's case, including all aspects of discovery, up to a contemplated mediation in the total amount of $248,295. There was no active challenge, in the proceedings concerning the application for security for costs, to that estimate or that the sum of $175,000 would be an appropriate amount of security to provide against such an estimate. Rather, the applicants' efforts were directed (successfully as it happened) to making good the proposition that an order for security in that amount was not necessary, even though the applicants were out of the jurisdiction, because the respondent's interests would adequately be safeguarded by its right to enforce a judgment in their favour in the United Kingdom, supported by undertakings. 6 Thus things remained while further interlocutory steps, including steps concerning discovery, were taken until an interlocutory application was filed by the applicants on 28 September 2015, seeking leave to file a further amended statement of claim. That application was opposed. It was listed for hearing on 16 October 2015. 7 On 13 October 2015, the respondent filed an interlocutory application seeking that hearing of the applicants' interlocutory application be stayed and that further security be provided by the applicants in an unspecified amount. The respondent's interlocutory application was supported by an affidavit which deposed that in June 2014 the solicitors for the respondent obtained a property search which confirmed that the property in the United Kingdom, the subject of one of the undertakings, remained unencumbered at that time. However, a further search on 9 September 2015 revealed that it had been encumbered by a charge in favour of London Bridging Finance Limited. 8 In a further short affidavit it was explained that, for reasons internal to the solicitors for the respondent, the solicitor in charge of the matter did not become aware of the contents of the search until 30 September 2015. That, however, does not explain why the matter was not raised immediately with solicitors for the applicants or why it was raised in the first instance with the Court. Regrettably, in this and some other respects, courteous co-operation between the two firms of solicitors appears not to be occurring. 9 However, those matters are peripheral to the issues which now require attention. 10 On 16 October 2015, I made orders that the applicants file evidence responding to the matters described in support of the respondent's interlocutory application, and listed that application for hearing on 28 October 2015. Meanwhile, the applicants' interlocutory application seeking leave to amend their pleading was adjourned by consent. 11 On 23 October 2015, an affidavit by the first applicant was filed. That affidavit confirmed that the property had been encumbered, pursuant to documents signed by the first applicant, in July 2014. The first applicant's explanation was that he had been misled by his staff about the identity of the property which was the subject of the undertaking to this Court as compared with the identity of the property which was encumbered by him in July 2014. The first applicant deposed in his affidavit that when he was made aware that the undertaking had been breached he took steps to discharge the encumbrance. He offered to put a restriction on the title which would require the UK Land Registry to notify the respondent directly prior to the registration of any charge or encumbrance on the title. I shall return to that issue shortly. 12 The respondent notified the applicants' solicitors that they desired to cross-examine the first applicant on his affidavit. It was suggested that such cross-examination could take place by videolink. The solicitors for the applicants resisted the idea that the first applicant should be cross-examined and indicated that if the Court required such cross-examination then separate arrangements would need to be made for that to occur, necessitating an adjournment of the proceedings. 13 The cross-examination of the first applicant is not necessary because for present purposes I am prepared to accept his affidavit at face value. Nothing in it dissuades me against the course which, in my view, should now be taken. 14 Any breach of an undertaking to the Court is serious. The breach which has admittedly occurred in the present case seems to me to be particularly serious. I find explanations based upon an attribution of responsibility to others in the employment or family of the first applicant to carry very little weight. It was the first applicant who, through his solicitors, offered to give undertakings to the Court. The undertakings were personal undertakings. It was the first applicant who executed the documents which breached one of those undertakings. It was the personal responsibility of the first applicant to take appropriate and adequate steps to ensure that his undertaking was not breached. 15 Furthermore, I regard the proposal now made for some further form of restriction on title (presumably to bolster the undertaking already in place) to be unpersuasive and, indeed, unattractive. 16 The only evidence of the nature of the proposed restriction on title consisted of a partially completed (but not yet lodged nor executed) "Application to enter a restriction". It appears from the terms of the partially completed application that the first applicant would give his consent (as registered proprietor) to his own application (as registered proprietor). Presumably, any restriction thus entered could be as readily removed. The process is entirely outside the control of the Court, or the respondent. 17 The only restriction proposed was that no charge could be registered (although no doubt it could still be given) without 30 days' notice to the solicitors for the respondent. This is a lesser period than the undertaking itself provided. Suggestions in argument that the period could be adjusted to meet any concerns the Court might have do nothing to allay my impression that the first applicant does not sufficiently appreciate the significance of the undertaking itself, or the contingent nature of the Court's acceptance of his earlier assurances. 18 I do not regard the proposal now made as a satisfactory one. I will certainly not settle its possible terms. 19 In light of what has happened, I can have no confidence that the undertakings to the Court will in future be observed, whether by decision of the first applicant or through some form of inadvertence. I therefore regard it as desirable that an appropriately full amount of security be now paid into Court. 20 As a first step, the breach of the undertaking must be addressed in a way which leaves no doubt about the seriousness with which it is viewed. This is not the occasion to revisit the estimates upon which the respondent relied when it first sought security for costs. The applicants filed no evidence at that time raising any dispute about the basis for the calculations made by the respondent, except by annexing to an affidavit correspondence between the rival solicitors, to which no further reference was made, either in the affidavit or in submissions. I do not regard that as raising an evidentiary contest about the reliability of the calculations which were supplied by direct evidence to the Court. 21 One adjustment to the estimate made of the respondent's costs is, however, required. In the proceedings dealing with that issue on 25 March 2014, an estimate for the likely cost of discovery of a little under $105,000 was replaced by a figure of costs incurred for discovery to that date of approximately $50,000. Applying the 70% figure used as the basis of the claim for security (as against the total estimate) the respondent's claim was restated as $35,000 less - $140,000 (or put another way - 70% of $200,000). 22 I propose to order that the applicants provide further security for costs in the sum of $120,000 within 14 days, failing which the proceedings will be stayed. If such security is not provided by 30 November 2015 the proceedings will stand dismissed. The earlier undertakings will be discharged. They have no further significance. The applicants must pay the respondent's costs of the present application. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.