Christopher Ronald Fitzsimons v Commonwealth Bank of Australia

Judgment - EX TEMPORE 1This is an application by way of Amended Notice of Motion filed in Court before the Commercial List Judge today and referred to me for hearing. 2The defendant, the Commonwealth Bank of Australia (the Bank), seeks an order that the plaintiffs provide within 14 days of today security for costs of the Bank by payment into Court of the amount of $100,000 by way of cash deposit or bank guarantee in a form acceptable to the Registrar or in such other form and/or amounts the Court sees fit. 3The Bank also seeks an order that if the plaintiffs fail to provide the security the proceedings be stayed until such security is provided. The Bank also seeks an order that the plaintiffs pay the Bank's costs of the Motion and finally an order that the costs awarded in favour of the Bank on 26 August 2011 be assessed and payable forthwith. 4In support of its application the Bank relies upon the affidavit of Scott Andrew Atkins sworn 11 November 2011 and that of Jon Lee sworn 23 November 2011. The plaintiffs rely upon the affidavit of the third plaintiff Louisa Danielle Roberts sworn 18 November 2011. 5Mr SW Aspinall, of counsel, appears for the defendant/applicant and Mr MK Rollinson, of counsel, appears for the plaintiffs/respondents. 6The respective counsel have approached the Motion on the assumed basis that if ordered the plaintiffs would not be in a position to pay a costs order. There is accordingly no need for me to determine that threshold question as it is accepted for the purposes of this application. The second basis is that there is no suggestion by the plaintiffs that the Court does not have inherent power to make the orders sought. The plaintiffs' position today is that the circumstances of this case are such that I would not exercise my discretion to make the orders sought. 7The matter has been the subject of numerous attempts to plead a proper cause of action. On 30 August 2011 a Third Amended Statement of Claim was filed with the Court. The title to that pleading belies the reality. It is apparent that there have been six attempts to file a proper pleading in this matter. Some of them have been removed from the file by other judicial officers having regard to the fact that they did not comply with proper principles. In any event, the Third Amended Statement of Claim was filed on 30 August 2011 and the Bank filed the Commercial List Response on 9 September 2011. 8It would appear that notwithstanding the fact that these proceedings were commenced over two years ago this is the first time that the parties have been in a position to join issue properly on the pleadings. It is in that circumstance that the Bank now brings its application for security for costs. It may appear that there has been a delay in bringing this application but Mr Rollinson accepted that this is the first occasion on which the parties have joined issue. Accordingly, there is really no suggestion that the Bank has delayed in bringing its application for security for costs. 9In the Third Amended Statement of Claim the plaintiffs seek an order that the Consent Orders entered into on 2 July 2008 in proceedings in this Court commenced in 2007 and in proceedings transferred to this Court from the Queensland Supreme Court in 2008 (the Earlier Proceedings) be set aside. 10There is a long history between these parties, the detail of which I need not provide other than to say that the first plaintiff, Christopher Ronald Fitzsimons, has been a litigant in this Court in a number of applications, including an application that went to the Court of Appeal, in respect of his gambling addiction. 11It is clear that the Bank has sold the properties the subject of the Consent Orders and has paid down the debts of the plaintiffs, each being an account holder with the Bank, and notwithstanding the payment down of those debts, a debt of $1.5 million still remains. 12The Third Amended Statement of Claim includes a recital of the history in which a freezing order was made in December 2005 in respect of the assets of the first plaintiff and the appointment of a receiver to his legal practice. 13There is a claim that the Bank received notice of the orders and there does not seem to be any issue in these proceedings that the Bank received such notice. What occurred in late 2005 and early 2006 when the Bank received notice of the orders includes a letter from the receiver on 16 January 2006. In that letter Ms Jean Sayer, the receiver, advised the Bank that by order of this Court on 21 December 2005 she had been appointed as the receiver of the legal practice and provided the Bank with a copy of the notice of her appointment. Ms Sayer requested the Bank provide her with copies of the statements of the first plaintiff's trust account that was held with the Bank from when it was opened up to 1 January 2002 and also sought copies for the period 28 March 2005 until the account was closed. 14On 22 February 2006 Patricia Housden, solicitor for the Law Society of New South Wales, wrote to the Bank advising that on 21 December 2005 the Court had made an order with respect to the first plaintiff, including that a receiver had been appointed to his legal practice and that the Court had made an order restraining him from dealing with or disposing of any of his assets within New South Wales. That letter also advised the Bank that pursuant to Order 6 of the order, a copy of which was enclosed with the letter, the first plaintiff was required to deliver an affidavit setting out his assets and liabilities. That letter advised the Bank that the affidavit had included a disclosure of a bank account and a debt to the Bank of $1.95 million. The letter also noted other aspects of the order and included the following: You should be aware that, now that CBA is on notice of the Order, CBA may also be liable in certain circumstances for its breach. CBA may like to take its own legal advice on the issue. 15The Third Amended Statement of Claim recites that those two letters were sent to the Bank. It is not in issue that on 2 July 2008, the third day of the trial in the Earlier Proceedings, a Deed of Settlement was entered into and Consent Orders were entered. It is then pleaded that the first plaintiff pursued Tabcorp in respect of the claim in respect of his gambling problems. 16It is alleged that at the time of executing the Deed of Settlement the plaintiffs believed that the Bank had no knowledge and had not been on notice of the orders made against the plaintiffs on 21 December 2005 until receipt by the Bank of a letter dated 23 June 2006. 17There is then a pleading in relation to the discovery in the Earlier Proceedings, including reference to a category numbered 6 as agreed between the parties which was in the following terms: All files, letters, correspondence, e-mails, faxes and notes relating to and dealing with claims made on the Bank by Jean Sayer and particulars of monies paid to her. 18It is alleged that the Bank by its solicitors prepared and served a List of Documents that did not disclose the two letters to which reference has been made (referred to in the pleading as the "missing documents"). It is alleged that the absence of the disclosure of the missing documents amounted to a representation by the Bank to the plaintiffs that such documents did not exist and such events had not occurred. It is alleged that the omission to discover or otherwise disclose the missing documents was (a) a deliberate and fraudulent misrepresentation, or alternatively, (b) an innocent misrepresentation that those documents did not exist. 19The particulars of fraud are as follows: Particulars of paragraph 29 (a) (i) The fact that the missing documents existed and the Bank had received them on or about the date they bore was known to officers of the Bank when instructions were given by the Bank to HDY in regard to the preparation of the List of Documents. (ii) The fact that the missing documents fell within category 6 was known to officers of the Bank at that time. (iii) Alternatively, the fact that documents of that date and content would, if they existed, fall within category 6 was known to the Bank's solicitors HDY at that time. (iv) The relevant officers of the Bank did not inform HDY of the existence of the missing documents. (v) It may be inferred from the above that the Bank by its officers decided, that the missing documents, although the subject of the obligation to give discovery, should not be discovered. 20It is alleged that had the plaintiffs known of the existence of the missing documents at the time that the Deed of Settlement was entered into they would have known that the Bank, having actual notice of the orders, had acted in disobedience of the orders in allowing Mr Fitzsimons to conduct transactions on the accounts which had caused mortgage repayments on the properties not to be made and, it is alleged, they would not have agreed to enter into the Deed of Settlement. It is in those circumstances that the claim is made for the setting aside of the Consent Orders. 21The Bank admits much of the non-contentious aspects of the plaintiffs' claims relating to the history between the parties. It puts forward a positive claim that the missing documents were not discoverable. It claims that even if the documents were discoverable the failure to discover them would not justify the setting aside of the Consent Order. The Bank also relies upon the Deed of Settlement in support of an estoppel claim against the plaintiffs. 22There is no issue that the third plaintiff is a resident of Singapore. She claims to be an owner of furniture to which there is no value attached in the affidavit. She also claims to hold a caveat over two storerooms in a building in Kings Cross, Darlinghurst in respect of an alleged debt owed to her by her mother, the second plaintiff, in the amount of $80,000. 23Although the Bank seeks these orders under the inherent jurisdiction of the Court, Mr Rollinson has relied on Pt 42 r 21 of the Uniform Civil Procedure Rules 2005 (the Rules) that provide that if in any proceedings it appears to the Court that a plaintiff is ordinarily resident outside New South Wales the Court may order that plaintiff to give security for costs. He submitted that although the Bank seeks the orders be made in the Court's inherent jurisdiction, I should have regard to the principles applicable to Pt 42 r 21 of the Rules. Mr Rollinson relied upon the following from Ritchie's Uniform Civil Procedure NSW at paragraph 42.21.75: Where grounds for ordering security have been made out against only some of several personal plaintiffs, the ordinary principle is that security for costs will not be ordered against any of the plaintiffs. This ordinary principle reflects the entitlement of co-plaintiffs (against whom no arguable basis for security has been established) to have the matter proceed to hearing. But it assumes that the co-plaintiffs' interests are common and that any costs orders that the defendants obtain will be enforceable against all of the co-plaintiffs. 24Mr Rollinson's submissions are based on the proposition that if the Bank had proceeded under Pt 42 r 21 of the Rules there would be no proper basis to make orders for security against the first two plaintiffs because they are resident in Australia and the only basis upon which the Bank would succeed under that Rule would be as against the third plaintiff. 25It is submitted that the securities that were sold by the Bank and the Consent Orders that were entered into in the Earlier Proceedings related to properties held by each of the plaintiffs jointly and some separately. Mr Rollinson submitted that the case is one where the interests of all of the plaintiffs are intrinsically intertwined and that it would be unrealistic to suggest that if the third plaintiff were not able to proceed with her proceedings by reason of an inability to meet a security for costs order, that the other two plaintiffs could proceed in the circumstances of the history of this matter. 26It is apparent that two of the securities that were the subject of the Consent Orders were owned separately by the first and second plaintiffs. A third securities was owned by the third plaintiff alone and a fourth security, the Queensland property, was owned by all of the plaintiffs together. 27In support of his submissions Mr Aspinall has referred to the decision of Young J, as his Honour then was, in Bhagat v Murphy [2000] NSWSC 892 at [29] in which his Honour said: The Court needs to make sure that its process is not being abused by putting the defendant in a position where it may have to expend half a million dollars to defend itself against ill-pleaded allegations with no hope of any recovery if the defence is successful. 28Mr Rollinson submitted that this is not an "ill-pleaded" case. Rather this is a case that has now been allowed to proceed, albeit after many attempts to achieve an acceptable pleading, and the parties have now joined issue. He distinguishes this case from Bhagat by submitting that what is put before the Court is a pleading properly defended of serious issues in respect of the Bank's conduct, including a fraud claim. 29I should say something about the fraud claim as pleaded. Mr Aspinall submitted that one of the bases upon which he seeks to embrace the inherent jurisdiction of the Court is that this pleading is "unsatisfactory and unusual". As can be seen from the particulars of the fraudulent misrepresentation claim outlined above, there is no claim that the Bank officers knew that the documents, if discovered, would assist the plaintiffs. However, Mr Rollinson contended that this is the gravamen of the plaintiffs' allegation in the fraud claim. 30Mr Aspinall submitted that there is nothing within the affidavit evidence to demonstrate that there is any case in fraud against the Bank. Mr Rollinson accepted there is nothing directly in the evidence and that it can only be an inference. He submitted that no reasonable officer of a Bank could in the circumstances of knowledge of its obligations of discovery in the Earlier Proceedings withhold the missing documents other than fraudulently. 31I have some difficulty with that proposition. It is equally and possibly more probable that the omission was less than fraudulent but perhaps based on a misunderstanding of the category. That observation is made on the assumption that there was an obligation to discover the documents. That issue is of course alive but not argued on this application by Mr Aspinall. 32Mr Rollinson's submissions that the letters would be of assistance to the plaintiffs if discovered is also a matter with which Mr Aspinall takes issue. In support of that aspect of his submissions Mr Aspinall relies upon Customs and Excise Commissioners v Barclays Bank PLC [2006] UKHL 28; [2007] 1 AC 181. He submitted that the nature of the orders that were made in the Earlier Proceedings did not establish a privity of a contractual arrangement between the plaintiffs and the Bank and did not establish any duties between the Bank and the plaintiffs, but rather imposed on the Bank an obligation to comply with the orders as outlined in the letter of 22 February 2006 in which the solicitor for the Law Society suggested that the Bank "may" be liable if the orders were breached. Of course it would depend very much on the particular circumstances and there is nothing in the proceedings before me to date that demonstrates that such liability would arise. Be that as it may the Third Amended Statement of Claim as allowed by the List Judge is a pleading that would not fall within the description given by Young J in Bhagat . However, Mr Aspinall's epithet of the pleadings being "unusual" is probably applicable to this case. 33It seems to me that Mr Rollinson's approach to the matter of suggesting that I would by analogy apply the principles in Pt 42 r 21 of the Rules is not unreasonable. In other words, that if I were minded to order security I should only order it against the non-resident plaintiff. There is nothing in the evidence to suggest that an order for security against the non-resident plaintiffs would really stultify the proceedings. I am informed that the third plaintiff is in employment in Singapore but has chosen, not to disclose the amount of her earnings in her affidavit. However, it is clear that she is remitting at least $2,000 every second month to Australia to assist with a personal matter pertaining to her mother. 34I am satisfied that it is appropriate to approach the application on the basis suggested by Mr Rollinson and order security only against the non-resident plaintiff. The amount sought is $100,000. There is no issue that the Bank has already expended $180,000 in dealing with the aborted attempts to plead this case over the last two years. The Bank is therefore facing the prospect of not being able to recover its costs if it were to win this case. It is also facing the prospect of not being able to recover the $1.5 million debt. 35However, the assessment made by Mr Atkins in his affidavit of the future costs is challenged by Mr Rollinson. He submitted that the Schedule of Estimated Further Fees and Disbursements, which is annexure "G" to Mr Atkins' affidavit, is unsatisfactory in its generality of claims and he points to at least $15,000 of those fees which are apparently inexplicable. 36Mr Atkins' affidavit includes a claim that if the Bank is successful in the proceedings there would be an expectation of recovering between 55% and 75% on assessment of its costs. On that basis he considered that the Bank would recover between $156,000 and $214,000. Mr Rollinson submitted that there should be a further reduction by reason of the matters I have referred to earlier in respect of annexure "G". 37Mr Rollinson also submitted that if the $100,000 was the figure to be accepted then it should be apportioned equally between the three plaintiffs. I do not accept that the apportionment is justified. It is also against Mr Rollinson's earlier submission that the claims are intrinsically intertwined. 38However I am of the view that I should reduce the amount of security as requested and I would allow the Bank to make any further application for security should that be thought appropriate in the circumstances. 39I am satisfied that I should make an order for security for costs in the amount of $75,000 by way of cash deposit or bank guarantee. 40The other aspect of the Bank's application is that the plaintiffs pay the Bank's costs of the Motion and that the costs awarded in favour of the Bank on 26 August 2011 be assessed and payable forthwith. 41Dealing with that latter matter first, Mr Rollinson submitted that costs orders have been made in favour of the Bank and it is effectively protected by those costs orders and this is not a matter in which an order of this kind should be made. I have been informed from the Bar Table that the costs as ordered on 26 August 2011, which were for the appearance on 29 July 2011 and 26 August 2011, and for the costs thrown away by reason of the further amendment of the pleading, are the subject of an assessment process yet to be completed. These are costs that are lost irrespective of whether the plaintiffs succeed in their action. 42The history to the pleadings is quite extraordinary. The evidence before me on this application demonstrates that indulgences were granted on so many occasions that it led the List Judge to describe the process as being like "Ground Hog Day". His Honour said that the unsatisfactory pleading had been dealt with on so many occasions "day after day after day and this document keeps on coming back with all this impermissible material". 43An application was not made to the List Judge for an order that the costs be assessed and payable forthwith. It is accepted by Mr Rollinson that this is the first occasion on which the application has been made and the Bank is entitled to make such an application. The Practice Note that guides the operation of the Commercial List provides that unless otherwise ordered costs may be assessed forthwith (SC Eq 3 paragraph 57). This is an application for costs to be payable forthwith. It is necessary to establish circumstances that warrant such an order being made during the course of litigation rather than at its conclusion. 44One of the applications made for the amendment came before Windeyer AJ on 3 June 2011. His Honour observed that the last document on the file had already been struck out and that there was then no pleaded Statement of Claim. His Honour observed that there was an entirely new action to be brought and rather than order the plaintiffs to commence new proceedings his Honour allowed the matter to proceed within the Commercial List proceedings. His Honour observed on that occasion that the Bank had submitted that the litigation was costing it money that it was unlikely that it would be able to recover. 45It does not seem to me to be appropriate to refuse to make an order which is justified because the party against whom the justifiable order is to be made claims not to have the wherewithal to pay the costs. In any event, as I have said, one of the plaintiffs is in employment in an overseas country and has chosen not to disclose the amount that is being earned for that employment. The history of the attempts to plead this case is such that I am satisfied that it warrants an order as sought by the Bank. 46That brings me then to the final order sought by the Bank that the plaintiffs pay the costs of this Motion. 47Two of the plaintiffs have been successful in resisting an order for security. The order sought by the Bank has not been made. Accordingly, I am satisfied that the order that should be made in respect of the costs of the Motion is one that should be apportioned so that the Bank can only recover one-third of its costs of the Motion. 48Accordingly I make the following orders: (1)The third plaintiff is to provide security for costs in the amount of $75,000 by way of either payment into Court of that amount, or by way of bank guarantee in a form acceptable to the Registrar by no later than 31 December 2011. (2)Should the third plaintiff fail to provide the security by 31 December 2011 the proceedings brought by the third plaintiff will be stayed. (3)I order that the costs awarded in favour of the defendant on 26 August 2011 be assessed and paid forthwith. (4)I order that the plaintiffs pay one-third of the defendant's costs of this Motion. (5)I order that the defendant serve its evidence in respect of the first and second plaintiff by 23 December 2011. (6)I order that the defendant serve its evidence in respect of the third plaintiff by 17 February 2012. (7)I list the matter for directions on 16 December 2011 before the Commercial List Judge.