Cocks v Foreman

LEGISLATION CITED: Uniform Civil Procedure Rules 2005

CASES CITED: Brundza v Robbie & Co [No 2] (1952) 88 CLR 171 KP Cable Investments Pty Limited v Meltglow Pty Limited (1995) 56 FCR 189

PARTIES: Keith Foreman (Defendant/Applicant) Richard Cocks (Plaintiff/Respondent)

COUNSEL: G Curtin (Defendant/Applicant) J Trebeck (Plaintiff/Respondent)

SOLICITORS: Mullane & Lindsay, Newcastle (Defendant/Applicant) Priest McCarron, Port Macquarie (Plaintiff/Respondent)

1 HIS HONOUR: This is an application by the defendant for security for costs and the application is brought pursuant to r 42.21(1)(a) which provides as follows: If in any proceedings it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside New South Wales I omit the rest of sub r (1) 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 the proceedings be stayed until the security is given.

2 The action is brought by the plaintiff, Mr Cocks, against the defendant, Mr Foreman, for damages for negligence. Mr Foreman is, and at all material times has been, a solicitor. In May 1997 he received instructions from the plaintiff to act on behalf of the plaintiff in a claim against a Mr Finney, who had been a liquidator of a company in which the plaintiff had been a director and shareholder. That company had sold its assets in 1989. There was another director and shareholder apart from the plaintiff, a Mr Cunningham. Mr Finney was appointed liquidator of the company in 1980. He did not recover any funds on behalf of the company, and Mr Cunningham became bankrupt in February 1994.

3 Mr Finney resigned as liquidator in May 1995. Proceedings against him were commenced, but they were abandoned in 2001 because they were out of time, as I understand the evidence in support of this application. These proceedings were commenced in July 2007. A defence was filed in February 2008, in which the defendant admitted his failure to commence proceedings within the statutory period, but denied that the plaintiff suffered loss and damage by reason of the failure to commence proceedings, and the defendant says that, even if the proceedings had been commenced against the liquidator, the plaintiff would not have recovered anything because the liquidator did not have funds to pursue Mr Cunningham; and even if he did, Mr Cunningham and any other potential defendants were protected by the statute of limitations.

4 The plaintiff, as is clear from the statement of claim, although he resided in Australia, or was in Australia at some time, currently resides in the State of Michigan in the United States of America, and has done so since the commencement of these proceedings, and it is on that basis, and that basis alone, that the defendant moves for an order for security of costs.

5 I should go back to the history of these proceedings. It commenced in mid 2007, and by consent was transferred from the court at Port Macquarie to the court in Sydney in November. The application was filed November 2007, and this application was filed more than one year later, on 24 November 2008. Since the matters were transferred to Sydney there have been attempts to mediate the dispute, and certain orders were made. The matter was before Rolfe DCJ on 11 November, and by consent on that date certain orders were made, one of which was that the plaintiff file any further affidavit evidence by 2 February 2009.

6 Mr Trebeck, who appears for the plaintiff\respondent, has given an explanation that the bulk of the plaintiff's evidence is contained in his affidavit of July 2008, to which I have referred, but there is further expert evidence about which Mr Trebeck has given some information to the court, and he is in a position, if necessary, to provide it by affidavit, which explains the reason why that has not happened.

7 Most applications for security for costs come before the court where the plaintiff or the party against whom the order is sought is a company, and there is a question about its solvency and its ability to pay costs. Most such applications are brought fairly early in the course of proceedings, because the other parties, quite understandably, are concerned that if the proceedings continue and costs are incurred, they need some protection for doing so.

8 The law as to when security for costs should be ordered is of long standing. I have been referred to a decision of Fullagar J in the High Court in Brundza v Robbie & Co. [No 2] (1952) 88 CLR 171. The relevant passages are at p 175. There are two passages that I propose to read. The first is this: "It is also material that, in ordering security for costs, the Court does not set out to give a complete and certain indemnity to a respondent." His Honour cites some authority. "It is not, of course, to be assumed that the appellant will fail.

There has been substantial delay in applying for further security. The application could have been made at any time after 21st July. It is a well settled rule that applications for security for costs must be made promptly: McLaughlin v. Daily Telegraph Newspaper Co. Ltd. [1904] HCA 5, (1904) 1 CLR 143. I would agree that delay, as such, may often be of less importance where the ground of the application is that the appellant is out of the jurisdiction than where the application is based on some other ground." Again his Honour cites some authority. "It may also be said that the recognised ground for such an application is that the appellant is outside the jurisdiction, and that here the application was made immediately it became known that the appellant had left the jurisdiction, and I would gather from the further affidavit filed that the view taken by the respondent's advisers was that an application should not be made until the appellant had actually left the jurisdiction. I was not, however, referred to, and I have not been able to find any authority which supports any such view, and I would think such a view erroneous." His Honour continues in a way that is not directly relevant to the matters before me.

9 More recently the matter was considered by Beazley J in the Federal Court in KP Cable Investments Pty Limited v Meltglow Pty Limited (1995) 56 FCR 189. In particular, at p 196, her Honour sets out a number of principles which govern the application for security for costs, and I intend to read those, omitting citations. Her Honour said: "The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security." She then quotes Cooper J in Gentry Bros Pty Ltd v Wilson Brown and Associates Pty Ltd. I omit the citation. "It is not possible or appropriate to list all of the matters relevant to the exercise of the discretion. The factors will vary from case to case. The weight to be given to any circumstance depends upon its own intrinsic persuasiveness and its impact on other circumstances which have to be weighed."

At the end of the quote Beazley J continues: "Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are: 1. That such applications should be brought promptly. This is a principle of longstanding." I omit some citations. Her Honour continues: "2. That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations. As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success. 3. Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim. 4. Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate." I have omitted some words there. "5. Whether there are any persons standing behind the company…" I will not read that further because this applies only to an application against a company as do para 6 and para 7.

10 In this case there is no question of the bona fide of the plaintiff's claim. There are raised by the affidavit of Mr Lindsay, who is the defendant's solicitor, some questions about the possible chances of success of the plaintiff's claim, because of factual matters relating to what the liquidator might have done, and there is indeed an affidavit from Mr Finney to similar effect.

11 In this case, as Mr Trebeck points out, the defendant, as a solicitor, is insured. Indeed, by statute he is required to be insured, so there is certainly every prospect that any order against him, including an order for costs, would be covered by the insurance that he is required to carry.

12 Mr Trebeck's submission falls into two parts. The first is that, in the circumstances of this case, the discretion, which I undoubtedly have, should not be exercised. Secondly, if I am against him on that basis, the amount of security that I order should be limited.

13 In my view, this is a case where it became apparent, as soon as the statement of claim was served, that the plaintiff resided outside the jurisdiction. Yet, it was some eighteen months before any application was made for security for costs. In my view, that delay, of itself, is fatal to an application for security. It is incumbent on a party, in my view, who seeks security for costs, to do so as soon as practical after the grounds become apparent. If that is not done, the other party will incur costs, and it appears that, if there is a delay, the reason for the application is quite possibly simply a desire on the part of the applicant to delay the proceedings which are under way. I am not saying that is the case here, but there may be a reasonable belief that that is so and, if it is true, it is oppressive. In this case, it seems to me, that the delay is inexcusable.

14 If I am not correct on that matter, it is apparent from the passage that I have read from the judgment of Fullagar J, that any amount ordered by way of security is not a complete indemnity. In this case, the amount sought, which is some $50,000, is, in my view, excessive and any amount that I would have ordered, had I been so minded, would have been roughly forty per cent of that.

15 The application is dismissed for the reasons that I have given.

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