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[2019] VSC 638
General information, not legal advice.
Supreme Court of Victoria
2019-09-20
Matthews JR
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Security for costs - Application for security for costs against a natural person - Where application for security for costs made where plaintiffs reside outside of Victoria - Supreme Court (General Civil Procedure) Rules 2015, r 62.02(1)(a) and the inherent jurisdiction of the Court - Whether r 62.02(1)(a) is applicable in this case as a consequence of s 117 of the Constitution Act 1901( (Cth) - Not necessary in the circumstances of the case for this to be decided - Whether circumstances of the case justify order for security for costs being made - Knight v Beyond Properties Pty Ltd [2005] FCA 764 - Von Marburg v Aldred & Anor (No 3) - Security for costs ordered in favour of second defendant but not the first defendant.
1 These reasons concern applications for security for costs by the first defendant, Resi Ventures Leakes Pty Ltd ('Resi Leakes') and the second defendant, GB Projects Pty Ltd ('GBP'). The third defendant, Zhaoqing Dai, has not made an application for security for costs and did not participate in the hearing of these applications.
2 Resi Leakes and GBP made applications for security for their costs of the proceeding pursuant to r 62.02 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules') and the inherent jurisdiction of the Court, by summons filed 11 and 12 October 2018 (as amended on 2 November 2018) respectively.
3 The applications were listed for hearing on 13 December 2018, however prior to that listing the parties reached consent as to the security to be provided up to and including mediation. The proceeding was not resolved at mediation and Resi Leakes and GBP now apply for further security for their costs.[1]
4 Resi Leakes seeks $122,000 as further security for its costs of the proceeding, for the period after mediation up to and including the first day of trial. In support of its application, Resi Leakes relies on the affidavits of:
(a) Benjamin Harold Wyatt, sworn 5 October 2018 ('First Wyatt Affidavit'). Mr Wyatt is a solicitor with Sladen Legal, solicitors for Resi Leakes;
(b) Amara Madden Coleman, sworn 26 November 2018 ('Coleman Affidavit'). Ms Coleman is a paralegal employed by Sladen Legal;
(c) Mr Wyatt, sworn 29 November 2018 ('Second Wyatt Affidavit'); and
(d) Mr Wyatt, sworn 5 July 2019 ('Third Wyatt Affidavit').
5 GBP seeks $82,000 as further security for its costs of the proceeding, for the period after mediation up to and including the first day of trial. In support of its application, GBP relies on the affidavits of:
(a) Benjamin Dowling, sworn 12 October 2018 ('First Dowling Affidavit'). Mr Dowling is a solicitor with Moray & Agnew Lawyers, solicitors for GBP;
(b) Mr Dowling, sworn 2 November 2018 ('Second Dowling Affidavit'); and
(c) Mr Dowling, sworn 5 July 2019 ('Third Dowling Affidavit').
6 The Plaintiffs oppose the applications. In so doing, they rely on the affidavits of:
(a) The First Plaintiff, affirmed 30 November 2018 ('First Robert Liu Affidavit');
(b) The First Plaintiff, affirmed 4 December 2018 ('Second Robert Liu Affidavit');
(c) The Second Plaintiff, affirmed 4 December 2018 ('First Ji An Liu Affidavit');
(d) The Second Plaintiff, affirmed 29 July 2019 ('Second Ji An Liu Affidavit');
(e) Welson Liu, affirmed 29 July 2019 ('Welson Liu Affidavit'). At that time, Welson Liu was a solicitor in the employ of the Plaintiffs' solicitors; and
(f) Raymond Lee, affirmed 27 August 2019 ('Lee Affidavit'). Mr Lee's firm are the Plaintiffs' solicitors.
7 The parties also rely on written outlines of submissions as follows:
(a) Resi Leakes, outlines dated 4 December 2018 ('Resi Leakes' First Written Outline') and 25 July 2019 ('Resi Leakes' Second Written Outline');
(b) GBP, outline dated 28 August 2019 ('GBP's Written Outline'); and
(c) The Plaintiffs, outline dated 3 December 2018 ('Plaintiffs' Written Outline').
(a) Resi Leakes' application for further security for its costs of the proceeding will be dismissed; and
(b) I will make orders that the Plaintiffs provide security for GBP's costs of the proceeding from after mediation up to and including the first day of trial in the amount of $53,000.
9 This proceeding concerns the sale and development of three adjoining lots of land in Rockbank, Victoria ('Land'). During 2015, the First Plaintiff entered into contracts of sale to buy two of these lots, and for himself and as agent of the Second Plaintiff and the Third Defendant, the First Plaintiff entered into a sale contract for the third. He was unable to complete these contracts and in October 2016 he entered into a term sheet with GBP ('Term Sheet') by which he agreed to nominate GBP or a nominee into the sale contracts. The Term Sheet was passed on to Resi Leakes by GBP. A short time later, the First Plaintiff and Resi Leakes executed a deed titled 'Nomination Agreement') ('Nomination Deed') pursuant to which Resi Leakes was nominated as purchaser under the sale contracts for the Land.
10 The Plaintiffs claim that Resi Leakes is obliged to pay approximately $3 million in Lot Fees under the Term Sheet, which was not included in the Nomination Deed, contending that the Term Sheet was binding on Resi Leakes, alternatively it was novated or assigned to Resi Leakes, or alternatively that Resi Leakes is estopped from denying liability under the Term Sheet.
11 The Plaintiffs' claim against GBP is in the alternative to their claims against Resi Leakes. If unsuccessful against Resi Leakes, they say that GBP is liable to them for payment of the Lot Fees on the basis that if liability under the Term Sheet has not been transferred to Resi Leakes then GBP remains liable under it.
12 Resi Leakes and GBP deny these claims. They say that the Term Sheet was non‑binding and that the only enforceable agreement is the Nomination Deed.
13 I have previously summarised in more detail the key issues in dispute in this proceeding, in Liu v Resi Ventures Leakes Pty Ltd [2019] VSC 50, which concerned a summary judgment application against the Plaintiffs by GBP ('Summary Judgment Decision').[2] I adopt that summary here, and it is not necessary to repeat it.
14 As mentioned above, the Plaintiffs, Resi Leakes and GBP proposed consent orders in respect of security for costs up to and including mediation, which were subsequently made by the Court on 7 December 2018. By those orders, the Plaintiffs were to pay the total sum of $60,000 as security for costs for Resi Leakes and GBP up to and including mediation, which was to be paid into an interest bearing controlled money account of the Plaintiffs' solicitors by 4.00 pm on 10 December 2018 ('Previous Security'). In the 'Other Matters' of those orders, it was recorded that:
These orders are consented to by the Plaintiffs without any admission that security for costs is required to be given, and without prejudice to the Plaintiffs' rights to oppose any future application for security.
15 It is convenient to first deal with the issue raised by the Plaintiffs in respect of the Australian Constitution ('Constitution'), which is explained below, followed by the applicable law, before going on to deal separately with GBP's application and then Resi Leakes' application for security for costs.
16 Before doing so, I will note that Resi Leakes and GBP both led evidence suggesting that the Plaintiffs were impecunious, which was said to also be a factor justifying the grant of security. The Plaintiffs conceded for the purposes of the applications for further security for costs that there is a real risk that they would not be able to meet an adverse costs order in this proceeding. As noted in the Plaintiffs' Written Outline, they have ultimately declined to adduce evidence in an attempt to prove otherwise, as they do not consider that such evidence would positively establish an ability to meet such a costs order. They concede that due to the matters raised in the First Wyatt Affidavit, 'there is sufficient doubt as to their finances that they must be treated as impecunious for the purposes of the principles of security for costs applications.'[3]
17 Therefore, there is no need for me to summarise the evidence regarding their financial circumstances or to make any findings in that regard: it is sufficient for me to accept the Plaintiffs' concession as described above.
18 Rule 62.02(1)(a) of the Rules relevantly provides that where 'the plaintiff is ordinarily resident out of Victoria' ('Residence Requirement'), the Court may, on the application of a defendant, order that the plaintiff give security for the defendant's costs of the proceeding and that the proceeding be stayed as against that defendant until the security is given.
19 It is accepted by the Plaintiffs that they are 'ordinarily resident' out of Victoria, as they are residents of New South Wales.[4] Both Plaintiffs are Australian citizens.[5] At the time both applications were originally filed in October 2018, Resi Leakes and GBP did not know whether the Plaintiffs were ordinarily resident in Australia or whether they were Australian citizens, but they did know that the addresses given for the Plaintiffs in the writ filed 25 July 2018 were in New South Wales.[6]
20 It emerged during the course of the hearing that it was common ground that the Plaintiffs were Australian citizens and ordinarily resident out of Victoria. Resi Leakes accepted, for the purposes of this application, that they were resident in New South Wales from time to time ('Plaintiffs' Residential Status').[7]
21 Section 117 of the Constitution provides as follows:
A subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State.
22 As will be explained further below, the Plaintiffs' position is that the Court has no power under r 62.02(1)(a) or the inherent jurisdiction of the Court (insofar as the Residence Requirement is relied upon) to order security for costs against the Plaintiffs, as the Plaintiffs' Residential Status means that relying on the Residence Requirement would subject them to a discrimination or disability by virtue of them residing in a State other than Victoria, which is inconsistent with s 117 of the Constitution ('Constitutional Issue').
23 Section 78B(1) of the Judiciary Act 1903 (Cth) relevantly provides as follows:
Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys-General, of the question of intervention in the proceedings or removal of the cause to the High Court.
24 As required under the above section and under r 19.01 of the Rules, having raised the Constitutional Issue and seeking to rely on it, the Plaintiffs filed a 'notice of constitutional matter' on 5 December 2018 and served it on each of the Attorneys-General of the Commonwealth, the States and the Territories ('Notice').
25 The Notice was originally served on 6 December 2018 by email, although a follow-up email was sent a short time later advising that the hearing scheduled for 13 December 2018 would no longer deal with the matter. When the applications for further security were first listed for hearing before me on 30 July 2019, it emerged that the Attorneys-General had been given notice via email sent on 25 July 2019 of the new date. I formed the view that reasonable notice had not been given to the Attorneys-General, since there had effectively only been two business days' notice given. Therefore, I adjourned the hearing to 30 August 2019 and directed that the Attorneys-General be given notice of that date.
26 The Plaintiffs have provided evidence of service by email sent on 31 July 2019 of the adjourned on the Attorneys-General.[8] They have also provided evidence of the responses.[9] Resi Leakes queried in oral submissions whether a reasonable time had elapsed since notice was given to the Attorneys-General. In my view, there was no impediment to me hearing the applications for further security on 30 August 2019.
27 Resi Leakes relies on the Plaintiffs' Residential Status to satisfy the Residence Requirement, and therefore relies on r 62.02(1)(a) to invoke the jurisdiction of the Court to order security. Further or alternatively, Resi Leakes also relies on the inherent jurisdiction of the Court. In relation to the Constitutional Issue, Resi Leakes says that the rule is unambiguous and ought be applied.
28 Although its summons referred to both r 62.02 of the Rules and the inherent jurisdiction of the Court, by the time of filing its written outline and the hearing, GBP expressly eschewed any reliance on r 62.02 or the Residence Requirement, relying only on the inherent jurisdiction of the Court. In relation to that, GBP relies on factors other than the Plaintiffs' Residential Status. GBP says that as a consequence, the Constitutional Issue is irrelevant to its application.
29 The Plaintiffs' submissions on the Constitutional Issue are set out in detail in the Plaintiffs' Written Outline. In summary, the Plaintiffs submit that there are a number of cases in which the Supreme Courts of New South Wales and Queensland have held that rules of Court in the same terms as r 62.02(1)(a) violate s 117 of the Constitution insofar as they are directed to interstate residents, as distinct from foreign residents.[10] The Plaintiffs say that the point remains untested in Victoria, but say that the argument is accepted in Williams on Civil Procedure.[11]
30 The Plaintiffs submit that the views reached by the Courts of New South Wales and Queensland are clearly correct and ought to be followed by this Court. Insofar as r 62.02(1)(a) applies to interstate residents, it subjects those litigants to a discriminatory burden that renders their lawsuits vulnerable to stay or dismissal merely by virtue of their interstate residency, whereas plaintiffs residing in Victoria are not subjected to the same burden. Put simply, interstate residents are singled out for special treatment, and are liable to be deprived of access to the Court. The Plaintiffs say that the test set out by Deane J in Street v Queensland Bar Association[12] is satisfied with respect to r 62.02(1)(a). In that case, Deane J said that the application of s 117 requires:
a comparison between the non-resident citizen's actual position under the impugned law and the position in which he would be under the law if he were resident in the particular State. If the non-resident citizen is subjected in that State to discrimination or disability which would not be 'equally applicable to him' if he were resident, the guarantee of s. 117 will, to that extent, be infringed.[13]
31 The Plaintiffs also refer to Ceil which considered the equivalent New South Wales rule, where O'Keefe J stated that it:
gives to the Court an express power to require security for costs because, and solely because, the person at whom the rule is directed is a resident of a State other that [sic] New South Wales. Applying the law as it now stands as to what constitutes a disability or discrimination within the meaning of s 117 of the Constitution, I am of opinion that the [equivalent NSW provision] constitutes such a disability and such a discrimination.'[14]
32 In Ceil, O'Keefe J concludes that this does not mean that the rule is invalid, but that it needs to be read down in the sense that it still applies in circumstances where it would not be inconsistent with s 117 of the Constitution.[15]
33 Further, the Plaintiffs submit that the New South Wales authorities establish that a defendant cannot resort to the Court's inherent or implied jurisdiction to outflank s 117 of the Constitution by utilising that jurisdiction to discriminate against interstate residents for the purposes of applications for security.[16]
34 Resi Leakes submits that the Constitutional Issue is a 'red herring'. It says that r 62.02.(1)(a) is unambiguous and the criteria for its application have been satisfied, as the Plaintiffs are ordinarily resident outside Victoria. It also says that the rule post-dates the authorities relied upon by the Plaintiffs, although I note that I was not taken to anything which would establish that proposition. In any event, Resi Leakes submits that the statements in the authorities which the Plaintiffs rely upon for the proposition that the rule is inconsistent with the Constitution are obiter.[17]
35 Resi Leakes also submits that in the absence of clear authority it would be a 'very brave and bold step' for a judicial registrar of the Court to strike down or declare invalid a clear rule promulgated by the Council of Judges.[18]
36 Further, Resi Leakes says that its application comes down to the concern that the Plaintiffs may not be able to meet an order for costs and to the discretionary factors (which I will consider separately later in these reasons). Resi Leakes says that the jurisdiction has been enlivened by the Plaintiffs being resident outside Victoria and that what really matters is the exercise of the discretion.
37 I do not consider it necessary to decide the Constitutional Issue.
38 The reason for this, firstly and importantly, is that I consider I should follow the established practices of this Court when dealing with the Residence Requirement in r 62.02(1)(a).
39 In Nord v Truitt,[19] Ormiston J dealt with a security for costs application where the plaintiff was a natural person resident in New South Wales. Ormiston J stated:
This is not sufficient to justify the ordering of security. Although residence beyond the jurisdiction has always been a ground for ordering security, as a matter of practice residence in another Australian State has not been considered sufficient: Calvert v Melbourne Harbour Trust Commissioners [1939] VicLawRp 14; (1939) VLR 94. The reason is not hard to find. The Court is primarily concerned with ability to levy execution, so that, for example, even residence outside Victoria is not a sufficient basis for security if assets remain in this State which would satisfy any obligation to pay for costs. Likewise the customary order in cases of non-residence is confined to the cost of suing on or registering the judgment in the place of residence [citation omitted]. Further, where the Service and Execution of Process Act 1901 applies, there is not usually thought to be any need to order security for the costs of enforcing under that Act any judgment for costs, as the additional costs are relatively small and may be recovered.[20]
41 I consider it appropriate to follow the approach set out in Nord v Truitt and Von Marburg. In doing so, I note that the Constitutional Issue does not appear to have been raised or considered in either of these cases, but this does not mean I should not follow that approach. The practices of this Court as set out in those two cases result is a plaintiff resident outside Victoria but within Australia effectively being treated in the same way as a resident of Victoria, as residency outside Victoria is not sufficient in and of itself to result in an award of security.[23] That residency outside Victoria was not enough to obtain an order was conceded by Resi Leakes.[24] Further, I note that in Hansens, the Supreme Court of Queensland stated that while the equivalent rule 'may very well be inconsistent with' s 117 of the Constitution, as a matter of practice 'it is unlikely that the discretion would be exercised in favour of an order on that ground alone'.[25]
42 Secondly, I do not consider it necessary to determine the Constitutional Issue since even if the Court's jurisdiction to order security is enlivened under r 62.02(1)(a), which as Derham AsJ notes is 'barely a crack in the door', the Court has a discretion as to whether to order security. After all, the words of the Rule themselves say that if certain conditions (ie one of paragraphs (a) to (f) of r 62.02(1)) subsist, then the Court may order security for the defendant's costs. This has been confirmed in many cases, as referred to by Derham AsJ in Von Marburg.[26] As will be seen, I do not consider that the discretionary factors weigh in favour of granting security in Resi Leakes' favour, such that the Constitutional Issue is not decisive when it comes to Resi Leakes' application.
43 For the sake of completeness, I do not consider it appropriate for the Court as currently constituted to determine whether a Rule of Court made by Judges of this Court is invalid by reason of the Constitution. If it had been necessary, as part of this application, for the Court to decide the Constitutional Issue, then I would have not continued to hear the matter and determine it but would have made arrangements for it to be heard and determined by a Judge, in accordance with my obligations under s 113L of the Supreme Court Act 1986 (Vic). In saying this, I will record that this does not mean that I accept Resi Leakes' submission as set out in paragraph 35 above.
44 Associate Justice Derham in Von Marburg summarised the principles applicable to individual plaintiffs who are impecunious as well as some general principles when exercising the discretion to order security for costs. This is a convenient summary, which I set out here, and I adopt it, noting that it is consistent with the submissions made by the parties:[27]
In the cases in which natural persons have been ordered to provide security, some factor in addition to impecuniosity has been present; cf Barton v Minister for Foreign Affairs [1984] FCA 89; (1984) 2 FCR 463 (Morling J) at 594 (impecuniosity and residence outside Australia); Cunningham v Olliver (unreported, Burchett J, 21 November 1994) (but for delay, security would have been ordered on ground of impecuniosity and bringing of claim to a significant extent for benefit of others); Chang v Comcare Australia [1999] FCA 1677 (Moore J) at [32] (impecuniosity and lack of prospects of success); Loque v Hansen Technologies Ltd [2003] FCA 81 (Weinberg J) (impecuniosity and residence outside Australia); Morris v Hanley [2000] NSWSC 957 (Young J) at [21], [38] and [39] (but for delay, Young J would have ordered security on grounds of impecuniosity and lack of prospects of success and large costs involved to defendants. Young J's decision was reversed on appeal on the ground that defendants had not adequately explained their delay in moving for security, but the Court of Appeal did not consider other aspects of his Honour's reasons: see Morris v Hanley & Ors [2001] NSWCA 374 at [30]- [31]); Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82 (CA) at [132] (per Heydon JA) (impecuniosity and applicant's failure to show that order would stultify proceeding and sum ordered by primary Judge not oppressive).The defendants contended that the plaintiff is a man of straw and, what is more, is a man who generally avoids his creditors and his financial responsibilities.
....
44 It is commonly said in applications of this nature that:
(a) 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 reasonable prospects of success;
(b) assessing a plaintiff's prospects of success is not really a practicable test in any case of reasonable complexity. Although it will ordinarily not be practicable to reach any clear view about the merits of a plaintiff's claim, that is not to say that the merits are always irrelevant (unless totally lacking) or that the bona fides of the claim may be disregarded; and
(c) the Court is not obliged to consider at length the merits of the claim, and to do so would ordinarily be a waste of resources.
45 Several cases have set out a range of factors usually considered by the Court when weighing the discretion to award security. These factors include:[29]
(a) the merits of the claim;
(b) whether ordering security would frustrate the claim;
(c) whether the defendant was the cause of the plaintiff's impecuniosity;
(d) delay;
(e) whether there are any persons standing behind the plaintiff who are likely to benefit from the litigation and who are willing to provide security;
(f) whether any persons standing behind the plaintiff have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking; and
(g) whether the applicant for security is in substance a plaintiff, as an order ought not be made against parties who are defending themselves and thus forced to litigate.
46 As noted above, GBP no longer relies on r 62.02 of the Rules or the Residence Requirement in seeking security. Rather, it relies on the inherent jurisdiction of the Court.
47 Noting that the Plaintiffs concede they are impecunious, GBP accepts that it is well settled that as natural persons, their impecuniosity does not, of itself, enliven the Court's jurisdiction to award security. It accepts that some factor in addition to impecuniosity is required, as set out in Knight's case. If that additional factor is established such that the power is enlivened, then the question turns to whether the power should be exercised in favour of GBP, having regard to the discretionary factors.
48 GBP relies on two additional factors as establishing the jurisdictional basis to award security in its favour, being:
(a) the Plaintiffs' poor prospects of success against GBP; and
(b) the remote and contingent nature of the Plaintiffs' claim against GBP.
49 Although referred to as two additional factors, GBP says that the key point is not so much a bare assessment of the Plaintiffs' prospects of success as it is the remote and contingent way in which the claim against GBP is made.
50 As stated above, I previously dismissed GBP's application for summary judgment in the proceeding. GBP acknowledges that having regard to that decision, the Plaintiffs' claim cannot be regarded as having no real prospects of success. They say that this is not to say that the Plaintiffs' prospects are not low, relying on a passage in the Summary Judgment Decision that there is:
much about GBP's submission that is persuasive. It is difficult to resist a proposition that a party cannot expect to receive the benefit of a contract if it is not in a position to fulfil the burdens it has assumed under the contract.[30]
51 In GBP's Written Outline, GBP goes on to submit that:
At trial, the plaintiffs will carry the burden of advocating for a most unusual state of affairs - that is, that GBP can be burdened with all of the obligations under the Term Sheet (as that was defined in the [Summary Judgment Decision]), whilst an unrelated party has enjoyed the benefits. It is unnecessary to repeat the submissions made at the summary judgment application that demonstrate the weakness inherent in the plaintiffs' claim, however GBP relies on them for the purposes of this application. While the plaintiffs' claim exceeds the low threshold for surviving summary judgment, it did so (having regard to the [Summary Judgment Decision]) barely. As such, the Court can safely regard the plaintiffs' prospects, at least against GBP, as low.
52 GBP submits that the entirety of the Plaintiffs' claim against GBP is expressed in the alternative to their primary claims against Resi Leakes, such that their real suit is against Resi Leakes. In paragraph 10 above, I have summarised the Plaintiffs' claims against Resi Leakes. As GBP submits, it is only if each of the claims against Resi Leakes fail that the claim against GBP will fall for consideration. GBP relies on the following passage from the Summary Judgment Decision:
The plaintiffs' case against GBP is explicitly put as a 'fallback' position if it [sic] does not succeed against Resi Leakes. It is clearly a secondary argument and one which relies on a number of contingencies which will have to be established in order for it [sic] to succeed, and there are a number of difficulties with it that the plaintiffs will have to overcome if they are to succeed against GBP.[31]
The Court should have no difficulty in considering that the contingent nature of a claim can and should be an "additional factor" that, on the facts of this case, justifies the ordering of security. The jurisprudential basis for the principle that impecuniosity is insufficient to warrant an award of security against a natural person is the risk that it will interfere with the litigant's right to "free access to the courts". GBP does not suggest that the plaintiffs should not be able to bring their claim for 'free'. However, here the plaintiffs have chosen to sue two parties. They cannot, and will not, succeed against both. At least one claim will fail (if not both). The price for propounding two inconsistent claims, with GBP as the "fallback" option, ought be an award of security.
The alternative is that GPB is dragged through the courts, merely as insurance against the failure of the plaintiffs' real claim, with no realistic prospect of recovering its costs.[32]
54 In summary, therefore, GBP submits that the remote and contingent nature of the Plaintiffs' claim against it, together with its low prospects of success, are the factors additional to the Plaintiffs' impecuniosity that provide the jurisdictional basis for awarding security in its favour.
55 The Plaintiffs submitted that impecuniosity alone is not enough to enliven the jurisdiction to order security, as they are natural persons and that this principle, often referred to as 'the basic rule', is well established.[33] As noted above, GBP concedes this.
56 The Plaintiffs submitted that counsel for GBP had not pointed to any cases where a summary judgment application by a defendant had failed but the jurisdiction in respect of security had been enlivened on the basis of the merits of the case. Counsel for the Plaintiffs submitted that this was not a viable factor in GBP's favour, saying that if the Plaintiffs' prospects were so low then GBP would have succeeded on its summary judgment application.
57 In oral submissions, counsel for the Plaintiffs submitted that the Plaintiffs were solvent, had already paid $60,000 for the Previous Security, and had costs orders going in their favour. He also submitted that the First Plaintiff has a small amount of equity in a property, is employed, and believes he can satisfy a costs order. In reply, counsel for GBP observed that the Plaintiffs have already conceded impecuniosity for the purposes of this application and he did not see their counsel as having resiled from that concession in oral submissions, but the point of the submission was difficult to ascertain. I agree with this observation. The Plaintiffs cannot have it both ways.
58 The Plaintiffs also submitted that security should not be granted as the evidence in support of the amount of security sought was insufficient. This was raised both as a barrier to the granting of security and as a challenge to the quantum sought. I mention it here for completeness, but will consider matters to do with quantum separately and later in these reasons.
59 The Plaintiffs' submission as summarised in paragraph 56 above ignores the fact that GBP's counsel expressly stated, in both GBP's Written Outline and in oral submissions, that it was the combination of low prospects and the remote and contingent nature of the claim against it which was relied upon as the additional factor.
60 Further, it is too simplistic to suggest that if the prospects were so low then GBP's summary judgment application would have succeeded. One must look to why the summary judgment application did not succeed in this particular case. Apart from the passages I have already set out above, in the Summary Judgment Decision, my reasons for dismissing the application included the following:
... it is not possible for me to conclude, in a summary application and without all of the evidence which would be led and tested at a trial, that there is no real prospect that the Term Sheet has no further work to do so far as GBP is concerned.
...
This is an instance where, in the words of the Court of Appeal in Lysaght, 'the power to terminate proceedings [ie the proceedings against GBP] summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried'.[34] With that in mind, I am not prepared to exercise the power to dismiss the plaintiffs' claim against GBP.
Further, in the circumstances of this case, there are other reasons why I do not consider it appropriate that the questions raised by the [summary judgment application] be determined summarily. Questions such as the interpretation of the Term Sheet; whether the Term Sheet and the Nomination Deed can co-exist such that obligations under the Term Sheet are able to be enforced, and against whom; and whether clause 1 of the Term Sheet was fulfilled via the Nomination Deed, are all questions which will need to be explored and determined in the plaintiffs' case against Resi Leakes. It is not appropriate, therefore, that the Court summarily dismiss the plaintiffs' claim against GBP, when to do so means the Court has to take a view on those questions which will remain live during the trial. It is not in the interests of justice that there be a risk of inconsistent findings. Accordingly, even if I had been minded to grant the [summary judgment application], I would decline to do so pursuant to s 64 of the CPA.[35]
61 I accept, for the purposes of the security for costs application, that the merits of the Plaintiffs' claim against GBP are low. In circumstances where the merits of the Plaintiffs' claim were specifically considered in a separate application, I consider it appropriate to depart from the usual approach when considering merits of a case in a security application as described in Von Marburg.[36] In this instance, the Court has then benefit of that separate consideration of the merits and is entitled to take it into account, and give it more weight as a factor than might be the usual case.
62 I accept GBP's submissions that the Plaintiffs, having elected to sue Resi Leakes and to include GBP as a defendant on the basis of a contingent claim with low prospects, should (subject to consideration of the relevant discretionary factors) have to provide security for GBP's costs of defending the proceeding. The Plaintiffs have elected to involve GBP in this way, and this, along with the Plaintiffs' impecuniosity, enlivens the inherent jurisdiction of the Court to order security. I accept GBP's submissions as summarised in paragraph 53 above.
63 Therefore, there are factors additional to the Plaintiffs' impecuniosity which invoke the Court's inherent jurisdiction to order security for GBP's costs.
64 It remains for the Court to consider the discretionary factors and whether to order security, the jurisdiction having been enlivened.
65 GBP submits that of the discretionary factors referred to in paragraph 45 above, those in sub-paragraphs (e) to (g) are not relevant in this case. Of the other factors, the merits of the claim weigh in favour of the grant of security (factor (a)); there is no evidence that ordering security would frustrate the claim (factor (b)); GBP did not cause the Plaintiffs' impecuniosity (factor (c)); and there was no delay in GBP initially seeking security or further security (factor (d)).
66 GBP acknowledges that the question of whether security would frustrate the claim is a powerful consideration in this case, given that the risk of stifling the litigation underpins the basic rule that poverty should not be a bar to a natural person bringing a claim.
67 However, it is up to the Plaintiffs to lead evidence if they contend that their claim would be stifled by an order for security.[37] Here, not only do the Plaintiffs not lead such evidence, they do not contend that their claim against GBP would be frustrated by an order for security for costs. Conceding impecuniosity for the purposes of the application for security is not the same as asserting that an order for security would stifle the litigation.
68 In my view, there are no discretionary factors weighing against granting security for GBP's costs.
69 GBP relies primarily on the Third Dowling Affidavit for seeking $82,000 (excluding GST) by way of security for its costs after mediation and up to and including the first day of trial.
70 Mr Dowling deposes that he has practised as a solicitor since 2006 in the area of commercial and insurance litigation, having had the care and conduct of numerous proceedings in this Court as well as in other jurisdictions. He says that he is familiar with the costs of proceedings.
71 Mr Dowling then set out his estimate of GBP's costs on a standard basis for the period from 1 July 2019 up to and including the first day of trial. He provides the following particulars for that estimate ('Dowling Table'):
• Preparing witness outlines and any witness outlines in reply
• Conferring with client, counsel, other parties' legal representatives and the Court
• Reviewing and assisting with agreed facts/chronology preparation
• Reviewing and assisting with court book preparation
• Preparation of submissions, including legal research and preparation of authorities
• Attendance at first day of trial by one solicitor
Counsels' fees in preparation for trial and attendance at first day of trial (M Grady $2,070 per day and S Hay $5,000 per day, excluding GST)
Other disbursements, including transcript fees (allowing for a 6 day trial estimate)
72 Mr Dowling also deposes as to the actual costs incurred by GBP up to 28 June 2019, including solicitors' fees, Counsels' fees and other disbursements, covering the period from the inception of the proceeding up to the conclusion of the mediation ('Pre-Mediation Costs'). He says that the actual costs were $77,728.15. Mr Dowling also estimates that GBP's costs of its unsuccessful application for summary judgment were $20,000, so that its actual Pre-Mediation Costs but excluding the costs of the summary judgment application were $57,728.15. He then estimates that the actual Pre‑Mediation Costs (excluding the costs of the summary judgment application) were around $45,000 if calculated on a standard basis.
73 The Plaintiffs led no evidence in respect of the quantum of security sought by GBP.
74 GBP submits that Mr Dowling is an experienced solicitor with carriage of this proceeding on its behalf. Mr Dowling has given his opinion of the likely costs and he is well qualified to give that opinion. It says that the amount sought by way of further security is, on its face, modest for litigation in this Court. It relies on what it describes as the 'detailed breakdown' provided by Mr Dowling.
75 GBP says that the Plaintiffs have filed no evidence to question or challenge the appropriate quantification of the security. Further, the amount sought is neither oppressive to the Plaintiffs or unreasonable.
76 The Plaintiffs submit that GBP has not adduced sufficient evidence to support the quantum of security sought.
77 They say that there has been no specification of individual amounts and that the Dowling Table is inadequate. Of the items referred to in the Dowling Table, the Plaintiffs submitted that:
(a) It is not known whether witness outlines will be ordered;
(b) Advices would have been done already;
(c) It is not known whether a chronology will be ordered;
(d) GBP will not have to do very much in respect of the court book, as the Plaintiffs carry much of that burden;
(e) in respect of Counsels' fees, there is no indication of how that estimate is to be broken down; and
(f) Transcript fees of $12,000 (being $2,000 per day) is too much, since it should only be for the first day of trial and the cost of transcript would be split between the parties.
78 As a consequence, the Plaintiffs say that the Court should not order security as there is insufficient evidence of how much that security ought to be. They refer to Dal Pont in Law of Costs, where it is said that there needs to be a 'defensible, and not too vague, estimate of the defendant's costs that the plaintiff, if unsuccessful at trial, would be ordered to pay to the defendant'[38], and say that the Dowling Table does not meet this requirement.
79 The Plaintiffs submit that while GBP has appropriately deducted an amount for its costs of the summary judgment application from the Pre-Mediation Costs, GBP has made no allowance or offset for the costs ordered against it in the Plaintiffs' favour in relation to the summary judgment application. The Plaintiffs say that when considering the amount of security to order, their costs of the summary judgment application should be offset against it.
80 The Plaintiffs also submit that no allowance should be made in the security amount for the application for security. They submit that Dal Pont in Law of Costs says that a defendant who fails in an application for security almost invariably bears the costs of the application, but if the defendant succeeds then the costs of the application are often reserved or declared to be costs in the cause.[39]
81 The Plaintiffs have led no evidence as to their actual or estimated costs of the summary judgment application. Counsel for the Plaintiffs submitted that GBP's estimate of its own costs for that application ($20,000) can be treated as a proxy for their costs in that regard.
82 Further, the Plaintiffs submit that the amount sought should be subject to a substantial discount and that in this instance they should be discounted by one-third. The Plaintiffs rely on Mark Sensing Shanghai Paper Products Co Ltd v Baldock[40] which discounted the amount sought by 20% and Colmax as support for a discount of one-third.
83 The Plaintiffs say that when adjustments are made for the matters referred to in paragraphs 77 and 80 and then a discount of one-third is applied, such that the amount is $20,000 to $30,000, and then the Plaintiffs' summary judgment costs are offset, then the position is 'square'. The Plaintiffs say that at most, the amount of security should be $5,000 to $10,000.
84 In reply, GBP submits that the Third Dowling Affidavit is sufficient and unchallenged evidence. It says that for a Supreme Court proceeding with an estimated 6 day trial, an estimate of $35,000 for solicitors fees is a modest amount and that the actual costs are likely to be much more. It submits that the estimate for Counsel is appropriate. In respect of the costs of transcript, GBP referred to the Third Wyatt Affidavit where it was said that transcript fees were payable up front by each party.
85 GBP says that there are costs orders in the proceeding going both ways, and points to an order that the Plaintiffs pay its costs thrown away by reason of the adjournment of the security application on 30 July 2019 on an indemnity basis as an example.
86 GBP submits that the Plaintiffs could have put on an affidavit saying what their costs of the summary judgment application were, but did not. Nonetheless, it says that it would be fair for the Court to conclude that their actual costs were approximately $20,000 and then to discount that to $15,000 to allow for a calculation on a standard basis.
87 In respect of including in the security amount an estimate for the security application, GBP submits that the extract from Dal Pont relied upon by the Plaintiffs did not make good their proposition that a defendant could not get security for its costs of the security application.
88 In Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd,[41] Tate and Kyrou JJA summarised the relevant legal principles regarding the quantum of security as follows (citations omitted):
89 In Raventhorpe Pty Ltd & Ors v Westpac Banking Corporation,[42] I summarised the principles applicable to the quantum of security, concluding that the approach to be taken by the Court is as follows:
(a) the amount of security is within the Court's discretion;
(b) the amount is that which the Court thinks just, having regard to all of the circumstances;
(c) in ordering security, the Court does not set out to give the defendant a complete and certain indemnity for costs; and
(d) the Court's task is not akin to a taxation of the defendant's probable costs.
90 The Third Dowling Affidavit does not set out the hourly rate used to calculate the solicitors' fees in the Dowling Table, but Mr Dowling does say that the estimate is for costs on a standard basis. The hourly rate for solicitors provided for in the Supreme Court Scale of Costs ('Scale')[43] is $412 per hour.
91 It is the case that the Dowling Table does not set out the estimate, either by time or cost, for each line item. However, in the circumstances of this application and in light of the relatively modest amount claimed, I do not regard that as fatal to GBP's application. Rather, it is something for me to take into account when determining what I consider to be a 'just and reasonable' amount in this case.
92 I do not accept the Plaintiffs' submission that most of the items in the Dowling Table either do not need to be performed or will require very little time. In my experience, Mr Dowling has identified the typical steps required to be undertaken after mediation and in preparation for trial, and there is no reason to expect here that such steps will not be included in pre-trial orders. For example, even if witness outlines are not ordered, it is common for the solicitors and Counsel to take 'proofs' of evidence from their witnesses and to spend time preparing them for trial.
93 I accept GBP's submission that $35,000 for the solicitors' fees, on a standard basis, for the costs of preparing the proceeding for trial and for attending the first day of trial is likely to exceed that amount, even on a standard basis. However, $35,000 at an hourly rate of $412 per hour equates to approximately 85 hours. This seems excessive to me: I would allow 65 hours as a reasonable estimate for the solicitors' costs.
94 I note that the Dowling Table includes fees for two Counsel, both junior counsel. I do not see that as excessive or inappropriate, for these reasons:
(a) The two Counsel allowed for have already been involved in the proceeding, so it is evident that this is how GBP has elected to resource its legal team;
(b) The daily rates claimed for Counsel are less than the maximum allowed for in the Scale; and
(c) The combined daily rates claimed for Counsel are less than the maximum amount allowed for Senior Counsel in the Scale and significantly less than would be the case under the Scale if one Junior Counsel and one Senior Counsel were retained.
95 GBP claims $35,000 for Counsels' fees for preparation and attendance at the first day of trial, which is slightly less than 5 days. There is no breakdown in the Dowling Table as between the two Junior Counsel, and so if I was to assume an even split between them, that is effectively 4 days' preparation each and 1 day each for trial. This seems reasonable to me. Even if it was not an even split (for example, if more of the work was being done by the more junior of the two), $35,000 is a reasonable amount to allow for security for Counsels' fees.
96 In respect of transcript fees, I do not accept the Plaintiffs' submissions in this regard. The only evidence before the Court as to transcript charges (other than Mr Dowling saying it would be $12,000 for a 6 day trial) was that of Mr Wyatt, which as noted above was that it was payable upfront and by each party who orders it. In the absence of evidence, as opposed to submissions, to the contrary, I accept that evidence.
97 I do not consider it appropriate to offset the amount of $20,000 from the amount of security to be ordered on account of the Plaintiffs' costs of the summary judgment application. I do consider it appropriate that an amount be offset for this, however. If I accept that GBP's costs are a proxy for the Plaintiffs' costs of that application, then $20,000 was the amount estimated as GBP's actual costs. I would only offset an amount calculated on a standard basis (since that is all which the Plaintiffs would be entitled to on a taxation of their costs). Therefore, I consider it reasonable to reduce the amount to be offset to $15,000.
98 I agree with GBP's submissions as to including the estimated costs of the security application in the amount of security to be ordered. The Plaintiffs have not made good their submission that such costs are not included in the security.
99 I do not accept the Plaintiffs' submission that the amount to be ordered as security should be discounted by one-third. Both cases relied upon by the Plaintiffs were considering security for the period from shortly after commencement to the first day of trial. It is common in cases where the security is for the whole of the proceeding for a significant discount to be made for the possibility that the proceeding may settle before trial,[44] however where the security is staged (as it is in this case) to before and after mediation, that is less so. Further, in Colmax part of the discount was on account of some overlap between claim and counterclaim,[45] which is not apposite in GBP's case, along with reductions on taxation. In Mark Sensing, the discount was for some overlap between claim and counterclaim, reductions on taxation, prospect of settlement after mediation, and confining calculations up to the first day of trial. Again, not all of those factors are relevant here. In my view, a discount of 10% is appropriate in this case. The same discount factor of 10% should be applied to the amount of $15,000 allowed as an offset.
100 Taking the 'broad brush' approach as set out in Trailer Trash, I consider $53,000 to be a 'just and reasonable' amount to order as security for GBP's costs. This comprises:
(a) Solicitors' fees in the amount of $26,780; plus
(b) Counsels' fees of $35,000; plus
(c) Disbursements of $12,000;
(d) This produces a figure of $73,780. Applying a 10% discount to that produces an amount of $66,402;
(e) From that, deduct $13,500 (ie $15,000 less 10%) as an offset for the Plaintiffs' summary judgment costs. This produces a total figure of $52,902, which I will round off to $53,000.
Resi Leakes' application for security for costs
101 At the hearing, GBP's application was heard first, and then I moved to Resi Leakes' application, including the Constitutional Issue. After making submissions regarding the Constitutional Issue, counsel for Resi Leakes made submissions regarding the other aspects of its application. Counsel indicated that Resi Leakes relied on the same factors as GBP, with the only difference being that Resi Leakes had not brought a summary judgment application. These same factors, Counsel submitted, were enlivened as to the inherent jurisdiction.
102 At the hearing, Resi Leakes relied on the following: the Plaintiffs' impecuniosity, together with there being no evidence of security stultifying the claim and the Plaintiffs' claim against Resi Leakes being 'particularly weak'.[46] In respect of the first two of these, Resi Leakes relied on GBP's submissions. In respect of the last of these, Resi Leakes says that the Plaintiffs' case against it is particularly weak as it flies in the face of the Nomination Deed, a document signed by the First Plaintiff, which is contrary to any continued effect of the Term Sheet. I note that in Resi Leakes' First Written Outline, it was stated that Resi Leakes 'submits that the Plaintiffs' claim is weak, although Resi [Leakes] recognises that the case is at too early a stage for the Court to make any real determination of the merits of the claim.'[47]
103 As best as I can ascertain, Resi Leakes' submission is that the Plaintiffs' Residential Status is sufficient to enliven the Court's jurisdiction to order security under r 62.02 and that the Plaintiffs' impecuniosity, the lack of stultification and the low prospects on their claims are the discretionary factors which weigh in favour of granting security. Alternatively, they submit that these three factors are sufficient to enliven the Court's inherent jurisdiction such that security should be ordered.
104 The Plaintiffs relied on their submissions in respect of GBP's application that impecuniosity in and of itself is insufficient to enliven the jurisdiction because of the 'basic rule' regarding individual plaintiffs.
105 The Plaintiffs say that Resi Leakes has not pointed to any authority where impecuniosity and stultification were sufficient to order security against a natural purpose. In respect of the prospects of the Plaintiffs' claim, the Plaintiffs submit that the Court is not in a position to form a view on that.
106 In summary, the Plaintiffs contend that Resi Leakes does not have a 'hook' to get an order for security for costs, that is, that the jurisdiction is not enlivened.
107 The Plaintiffs submit that in its submissions and its assessment of quantum of security, Resi Leakes has not taken into account its own counterclaim against the First Plaintiff. Resi Leakes pleads, in its counterclaim, that the First Plaintiff has breached the Nomination Deed and that it has suffered loss and damage as a result, with that loss and damage being at least $1,054,030.91.
108 I will deal with the quantum aspects of that separately, but in relation to whether to award security, the Plaintiffs say that the counterclaim is not a defensive one, and that this is not a situation where Resi Leakes is offering to stay its counterclaim if security is ordered but not paid. The Plaintiffs rely on Sydmar Pty Ltd v Statewise Developments Pty Ltd, where Smart J stated that ordinarily courts 'would be slow to allow a situation where the action is stayed because of the inability to provide security but the cross‑action covering the same factual areas proceeds'.[48] The Plaintiffs say that the existence of the counterclaim, together with there being no offer by Resi Leakes for it to be stayed alongside the Plaintiffs' claim, is a substantial factor going against the exercise of the discretion to award security.
109 In response to this, Resi Leakes submitted that the Second Plaintiff was not the subject of the counterclaim and there is scant evidence regarding his financial position. It was submitted that the matters on the counterclaim are in short compass because they essentially involve an argument over legal construction of the Nomination Deed.
110 In my view, and following the usual practices of this Court as summarised in Von Marburg, whether the jurisdiction is enlivened under r 62.02 as a result of the Plaintiffs' Residential Status or whether it is the inherent jurisdiction which applies, the outcome in this case is essentially the same. That is because residence outside Victoria is insufficient: security will not be ordered just because they are resident outside Victoria.[49]
111 After the parties had completed their submissions, I asked Counsel for Resi Leakes if his contention was that the 'basic rule' regarding a plaintiff being a natural person and impecunious not being barred from pursuing its claim applies to the Plaintiffs. Counsel said that it did not, as it only applies intrastate and the Plaintiffs reside interstate and are calling upon the resources of the State of Victoria and vexing someone within Victoria, such that they become liable to an order for security for costs.[50]
112 I do not accept this submission. There is nothing in any of the authorities to which I was taken which suggest that the 'basic rule' does not apply to plaintiffs residing outside of Victoria. To contend otherwise would be contrary to those authorities and to the policy behind the 'basic rule'. In Nord v Truitt, the plaintiff's 'admitted lack of means' was not a reason for ordering security against him, notwithstanding he was resident in New South Wales.[51] Ormiston J held that:
... merely because a resident outside the jurisdiction is impecunious is not in itself a reason for granting security. Want of means has never been a ground for ordering security against a plaintiff, except in the case of impecunious companies who may be said to have acquired the privilege of limited liability in return for, amongst other things, a statutory obligation, in the Court's discretion, to provide security for costs.[52]
113 As noted above, although the Constitutional Issue does not appear to have been raised in Nord v Truitt or Von Marburg, the Court's usual practice as set out in those cases effectively means that the considerations for the Court, whether under the Rules or the inherent jurisdiction, are effectively the same. The protective purpose behind a grant of security means that impecuniosity must be a factor and I see no reason why the 'basic rule' does not apply here.
114 Consequently, Resi Leakes has to establish factors additional to the Plaintiffs' impecuniosity in order to attract an order for security, whether there be power to do so under r 62.02 or the inherent jurisdiction.
115 I accept the Plaintiffs' submissions in relation to the additional factors relied upon by Resi Leakes, being the lack of stultification and 'particularly weak' prospects. Unlike the Plaintiffs' claim against GBP, the merits of their claim against Resi Leakes has not received judicial consideration. Nor were detailed submissions made about merits by either party. I note the concession in this regard made by Resi Leakes in its First Written Outline (see paragraph 102 above), and observe that there was no submission made that the situation so far as the stage of the proceeding is concerned is markedly different now, in terms of the Court being in any better position now to assess prospects. I am not in a position to determine the merits of the Plaintiffs' claim against Resi Leakes and I consider that it is appropriate to follow the Court's usual approach in [53]is regard.53 Accordingly, I consider the merits of the Plaintiffs' claim to be a neutral factor in the exercise of the discretion. That being the case, that leaves lack of stultification as the additional factor to impecuniosity, and I was not taken to any authorities where this was sufficient. I note from the cases referred to in Knight's case that none of those relied solely on lack of stultification in addition to im[54]cuniosity.54
116 In conclusion, Resi Leakes has not established factors additional to impecuniosity which would warrant an order for security in the case of plaintiffs who are natural persons.
117 In relation to the counterclaim, I am at somewhat of a disadvantage in considering the impact of this on the security application as there was little argument before me as to the connection between the Plaintiffs' claim against Resi Leakes and the latter's counterclaim between the First Plaintiff. I was not taken to the detail of either the claim or the counterclaim by either party and did not have the benefit of any substantive submissions on this issue.
118 I have already indicated that I do not consider it appropriate to order security in favour of Resi Leakes, as I do not consider that it has sufficiently established factors additional to impecuniosity which would warrant the Court departing from the usual rule that natural persons will not ordinarily be deprived of the opportunity to pursue their actions because of their impecuniosity. As such, I do not need to make any definitive statements in respect of the impact of the counterclaim, but suffice to say that in these circumstances I regard it as a factor weighing against granting security.
119 Since I have found that it is not appropriate to order the Plaintiffs' to provide security for Resi Leakes' costs, it is unnecessary for me to consider how much security should be ordered. However, in deference to the parties having argued this, I will set out my views as to how much security I would have ordered, if I had decided to award security. The applicable law in respect of Resi Leakes' quantum is the same as that set out in paragraphs 88 and 89 above.
120 Resi Leakes relies on Mr Wyatt's affidavits in support of its application for payment of $122,000 as security for its costs from after mediation up until the end of the first day of trial.
121 Mr Wyatt deposes as to his qualifications and experience. Since his admission to practise in November 1981, he has practised as a litigator and has had extensive experience of litigation, including the operation of relevant scales of costs and contested taxations of costs. He has prepared hundreds of cases for trial and has acted in many trials and appeals, including the costing of proceedings.[55]
122 Mr Wyatt has also participated in the preparation of bills of costs, objections to bills of costs, and contested taxations. Since around December 1989 he has been a member of the Litigious Costs Committee of the Law Institute of Victoria (now called the Costs Law Section of the Law Institute of Victoria).[56]
123 Mr Wyatt provides an estimate of Resi Leakes' costs from after mediation up to and including the first day of trial, calculated according to the Scale, as follows ('Wyatt Table'):
Any subpoenas being issued and served and any disputes in relation to documents being inspected
Costs incurred in this application seeking further security for costs
Reading and reviewing witness statements of the Plaintiffs
Reviewing and assisting counsel in the preparation of submissions
Transcripts (allow approximately $2,000 per day with costs having to be paid in advance as per Supreme Court transcript provider requirements allow six day trial)
Counsel's fees including preparation, assistance in witness statements, submissions and day one of trial at $5,000 per day inclusive of GST
Counsel's fees for security for costs application (inclusive of GST)
Attending Court on day one and instructing counsel (two solicitors)
124 Apart from Counsel's fees, Mr Wyatt does not say whether the solicitors' fees are inclusive or exclusive of GST.
125 The Plaintiffs led no evidence in respect of the quantum of security sought by Resi Leakes.
126 Resi Leakes submitted that Mr Wyatt sets out his expertise and knowledge and is well qualified to provide an estimate of its costs. Resi Leakes says that a broad brush approach is followed in respect of quantum and that sometimes a discount is required, but that is usually where the estimate is done on an actual, rather than standard, basis.
127 Resi Leakes submits that the Plaintiffs' claims against it are not simple and that Mr Wyatt's estimate is reasonable for the amount of work required.
128 The Plaintiffs make very similar submissions in respect of Resi Leakes' quantum as they did for GBP.
129 They say that the costs claimed are excessive, as:
(a) It is not known whether subpoenas will be issued;
(b) The amounts claimed for reviewing the Plaintiffs' statements and preparing Resi Leakes' statements are too high;
(c) It cannot be the fact that everyone is buying transcript at $2,000 per day each;
(d) Too much is claimed for Counsel preparation, and it is more than that being claimed by GBP; and
(e) Only one solicitor should be claimed for attending and instructing at trial, not two.
130 In terms of the figures set out in the Wyatt Table, the Plaintiffs say that:
(a) Transcript should be reduced by $8,000;
(b) The amount for security for costs should be deducted ($17,000);
(c) Reply statements should be reduced by $10,000; and
(d) Counsel's preparation should be reduced to 5 days.
131 The Plaintiffs also submit that Mr Wyatt does not say how much of the work/costs relates to the counterclaim, so it should be assumed that it is 50% for the Plaintiffs' claim and 50% for the counterclaim. On this basis, the Plaintiffs say that the adjusted amount should then be reduced by 50%.
132 The Plaintiffs also say that there should be an overall discount.
133 Without taking me to any more detail in respect of the figures, the Plaintiffs then submitted that when these deductions were made and the discounts applied, the figure comes out at around $20,000.
134 From the Wyatt Table, a total of $44,000 is claimed for solicitors' fees, $66,000 for Counsel's fees and $12,000 is claimed for transcript.
135 I do not accept the Plaintiffs' submissions that the amount claimed for Counsel's fees is excessive because it is more than that claimed by GBP. The cases against each defendant are different and it is to be expected that the costs for Resi Leakes, including Counsel's fees, may be higher as that is the Plaintiffs' primary claim.
136 Nonetheless, 13 days for Counsel (including two days for the security application) does seem excessive and I would reduce it by 2 days. Further, as it is standard for GST not to be counted when ordering security for costs, I would use the rate of $5,000 per day rather than $5,500, as the Wyatt Table lists Counsel's fees as GST inclusive.
137 I would take the same approach regarding transcript as I took in respect of GBP's application.
138 In terms of the solicitors' fees, as referred to above, I do not know whether the Wyatt Table includes GST or not. I note that $44,000 is claimed for solicitors' fees. If that is GST exclusive, then that equates to approximately 107 hours at the Scale rate of $412 per hour. If it is GST inclusive, then that equates to approximately 97 hours at that rate. Either way, that seems excessive to me. I consider 80 hours to be a reasonable estimate for the solicitors' fees.
139 Whether I look at the solicitors' fees from that overall perspective or from each line item in the Wyatt Table, I consider the claimed fees to be excessive. In particular:
(a) I would allow one solicitor to attend and instruct at trial;
(b) I would reduce the amount claimed for the security for costs application to half that claimed; and
(c) I would reduce the reply witness statements by $3,000.
140 Since Mr Wyatt does not say whether his estimate includes the counterclaim or not, I have to proceed on the basis that it possibly does, primarily because the purpose of security for costs is not to give a defendant a complete immunity. If I do not make an allowance for the counterclaim, then it is possible that Resi Leakes may be 'over-secured'. Although counsel for Resi Leakes accepted that Mr Wyatt does not expressly deal with the costs of the counterclaim, he submitted that it is not a significant factor for the reasons set out in paragraph 109 above. As I said above, I am not in a position to evaluate the extent (if any) of the overlap between the claim and the counterclaim. I do not consider a 50/50 split to be appropriate here, but instead would apply a discount of 30% on account of the counterclaim.
141 I would apply the same discount factor here as I did for GBP, being 10%.
142 Therefore, if I was minded to order security for Resi Leakes' costs, I would order it in the amount of $63,000, comprising:
(a) $32,960 for solicitors' fees (ie 80 hours x $412 per hour); plus
(b) $55,000 for Counsel's fees (11 days at $5,000 per day); plus
(c) $12,000 for transcript fees;
(d) This produces a figure of $99,960. This should then be discounted by 30% for the counterclaim, which produces a figure of $69,972, which should be further discounted by 10% for the reasons already stated, leaving a figure of $62,974.80, which I would round to $63,000.
143 For these reasons, I do not consider it necessary to decide the Constitutional Issue and I consider it appropriate to follow the approach set out in Von Marburg which I have set out above.
144 In my view, GBP has established factors additional to the Plaintiffs' impecuniosity which attract the inherent jurisdiction of the Court to order security against natural persons, and there are no discretionary factors weighing against the grant of security. I consider that in the circumstances of this case, $53,000 is a 'just and reasonable' amount to order as security for GBP's costs.
145 On the other hand, Resi Leakes has not established factors additional to the Plaintiffs' impecuniosity which warrant security being ordered. Although it is not necessary for me to have then considered the quantum of security, if I was to order security for Resi Leakes' costs I would do so in the amount of $63,000.
146 Once the parties have had an opportunity to consider these reasons, they should contact my Associate to have the proceeding listed so as to deal with the appropriate form of orders and as to costs, as well as further directions for the conduct of the proceeding. If the parties reach consent as to those matters, they may submit proposed consent orders to my Chambers.
[1] By orders made on the Court's own motion on 12 December 2018 and 29 July 2019, both the original summonses and the applications for further security were referred to me for hearing and determination pursuant to r 84.04 of the Rules.
[2] Summary Judgment Decision, [9]-[23].
[3] Plaintiffs' Written Outline, [11].
[4] Plaintiffs' Written Outline, [3]. See also First Ji An Liu Affidavit, [1]-[2]; Second Ji An Liu Affidavit, [1]; and Second Robert Liu Affidavit, [1]-[2].
[5] First Ji An Liu Affidavit, [1]-[2]; Second Robert Liu Affidavit, [1]-[2]
[6] First Wyatt Affidavit, [9]; First Dowling Affidavit, [3].
[8] Lee Affidavit, [5]; Exhibit RL-3 to the Lee Affidavit.
[9] The Attorneys-General for Queensland, the Australian Capital Territory and Victoria each sent letters to the Plaintiffs' solicitors to say that they would not be intervening in the proceedings: Exhibit WL-3 to the Welson Liu Affidavit; Exhibit RL-5 to the Lee Affidavit; letter from the Attorney-General for Victoria dated 28 August 2019. Emails from the Attorneys-General for the Northern Territory, South Australia, Western Australia and New South Wales acknowledging receipt of the 31 July emails from the Plaintiffs' solicitors were received on 31 July 2019 by the Plaintiffs' solicitors - in respect of South Australia, it was stated that it would usually respond within 20 business days; and in respect of Western Australia it was stated that it would usually respond between 4 and 6 weeks: Exhibit RL-4 to the Lee Affidavit.
[10] In this respect, the Plaintiffs rely on Australian Building Construction Employees' and Builders' Labourers' Federation v Commonwealth Trading Bank [1976] 2 NSWLR 371 ('BLF'); Williams v Nationwide News Pty Ltd [1965] NSWR 1517; Hansens Pty Ltd v Adco Constructions Pty Ltd (1991) 4 ACSR 347 ('Hansens'); Morris v Hanley [2000] NSWSC 957; Ceil Comfort Insulation Pty Ltd v ARM Equipment Finance Pty Ltd [2001] NSWSC 28; (2001) 159 FLR 310 ('Ceil'); [2001] NSWSC 28; Corby v Channel Seven Sydney Pty Limited [2008] NSWSC 245; and Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32.
[11] Neil J Williams, LexisNexis Butterworths, Civil Procedure: Victoria, vol 1 (at Service 315) [62.02.25].
[12] [1989] HCA 53; (1989) 168 CLR 461 ('Street').
[16] In this regard, the Plaintiffs rely on Helsham J's statements in BLF at 374. They acknowledge that this reasoning was doubted by Holland J in Rajski v Computer Manufacture and Design Pty Ltd (1982) 2 NSWLR 443 at 451, but say that Holland J's approach was not followed in Ceil as O'Keefe J took the view that such approach had been refuted by the High Court in Street: Ceil, [52]-[55].
[17] For the reasons which follow, I do not need to resolve the question of whether or not these statements were obiter. However, on my reading of BLF and Ceil, I do not consider them to be obiter.
[19] (Supreme Court of Victoria, Ormiston J, 25 November 1987) ('Nord v Truitt').
[21] [2017] VSC 146 ('Von Marburg').
[22] Von Marburg, [37]-[39] (citations omitted).
[23] In any event, that approach appears to me to be consistent with the Plaintiffs' submission that if r 62.02(1)(1) is inconsistent with s 117 of the Constitution then it should be read down rather than treated as invalid.
[27] Von Marburg, [40]-[42], [44]-[45] (citations omitted).
[28] [2005] FCA 764, [33] ('Knight's case').
[29] This description is taken from Croft J's judgment in Trility Pty Ltd v Ancon Drilling Pty Ltd [2013] VSC, [14]-[16]. See also Colmax Glass Pty Ltd v Polytrade Pty Ltd [2013] VSC 311 ('Colmax') at [20], which is a useful summary of the authorities regarding the discretionary factors.
[30] Summary Judgment Decision, [47].
[31] Summary Judgment Decision, [51].
[32] GBP's Written Outline, [12]-[13].
[33] Relying on Pearson v Naydler [1977] 1 WLR 899, 902.
[34] [2013] VSCA 158; (2013) 42 VR 27, [35(d)].
[35] Summary Judgment Decision, [49], [52]-[53].
[38] G E Dal Pont, Law of Costs (Lexis Nexis Butterworths, 4th ed, 2018) [28.34].
[39] G E Dal Pont, Law of Costs (Lexis Nexis Butterworths, 4th ed, 2018) [28.61].
[40] [2010] VSC 124 ('Mark Sensing').
[41] [2017] VSCA 293 ('Trailer Trash').
[43] The Scale is Appendix A to the Rules.
[44] Farmitalia Carlo Erba SrL v Delta West Pty Ltd [1994] FCA 950; (1994) 28 IPR 336.
[47] Resi Leakes' First Written Outline, [24].
[48] (1987) 73 ALR 289, 300.
[55] First Wyatt Affidavit, [4], [7].
[56] First Wyatt Affidavit, [4]-[8].
Liu
Resi Ventures Leakes Pty Ltd
(1984) 2 FCR 463
(2002) 54 NSWLR 82
(2001) 159 FLR 310
(1989) 168 CLR 461
(1982) 2 NSWLR 443
(2013) 42 VR 27
(1994) 28 IPR 336
(1987) 73 ALR 289