First Plaintiff v Defendants

3 I have concluded for the reasons set out below that this is not a case where an order for security for costs should be made in favour of Emini.

4 Emini relies on three affidavits sworn by his solicitor, Julian Michael Vagg sworn 1 May (two affidavits) and 13 August 2014.

5 Niako and Mitris oppose Emini's application for security for costs and rely upon the affidavit of Gerard O'Hara sworn 6 August 2014.

6 The proceeding was commenced by Writ filed on 10 March 2010. The Counterclaim was originally brought by notice filed on 18 June 2010. Emini entered an Appearance on 20 July 2010. A Defence to the Counterclaim against him was filed by Emini on 28 September 2010. The most recent pleadings begin with an Amended Writ filed 23 March 2012, a Further Amended Defence and Counterclaim filed 6 March 2013, and a Further Amended Defence to counterclaim of Emini filed 8 August 2014. The trial has been fixed to commence before Robson J on 3 February 2015 on an estimate of 11 days.[2]

7 In the primary proceeding brought by Opes Prime Group Ltd (In Liquidation) (Scheme administrators appointed) (Opes Prime) and Opes Prime Global Securities Pty Ltd (In Liquidation) (OPGS), Opes Prime claims some $41 million from Niako pursuant to a Securities Lending Agreement (SLA) it had entered into with Opes Prime Stockbroking Limited (OPSL), and from Mitris pursuant to a guarantee he gave of Niako's obligations under the SLA. The $41 million odd claimed from Niako and Mitris represents the amount by which borrowings from OPSL exceeded the value of securities held by OPSL as security for the borrowings at the time that Niako's account was closed out following the collapse of OPSL. An alternative claim is made by OPGS for over $25 million. The claim that OPSL had was transferred to Opes Prime under a scheme of arrangement approved by the Federal Court in August 2009.[3]

8 The proceeding arises out of the collapse of OPSL and its related companies in March 2008. OPSL conducted a securities lending and borrowing business pursuant to Securities Lending Agreements that it entered into with its clients. Emini was a director and chief executive officer of OPSL. Niako was a client and executed the SLA in June 2007 in respect of which Mitris signed the guarantee securing the borrowings of Niako. Mitris is a director of Niako.

9 In the most recent Further Amended Defence and Counterclaim filed by Niako and Mitris[4] it is alleged that in June 2007, when the SLA was entered into, OPSL made a number of false representations that induced them to enter into the SLA and the guarantee, respectively. The representations are alleged to have been made in meetings attended by, amongst others, Mitris, Emini and one Mark Rice, who is also a defendant to the counterclaim.

10 The somewhat oversimplified effect of the Niako and Mitris defence and counterclaim is to set off the losses alleged to have been suffered by the misleading and deceptive conduct of OPSL (and for which Opes Prime or OPGS are now liable) against the claim (as well as other matters), and to counterclaim against Opes Prime and OPGS for relief (inter alia) under s 1325 of the Corporations Act 2001 setting aside the SLA and guarantee and for damages under s 1041I for contraventions of s 1041H of the Corporations Act. It is said that Emini and Rice aided and abetted, or were involved in, the contraventions of OPSL and are therefore liable to Niako for the loss and damage it suffered arising out of the contraventions of the Corporations Act. There is currently no allegation in the body of the Statement of Claim that Emini is liable to Mitris, as a person involved in the contraventions of OPSL, for the loss and damage he suffered. There is, however, a claim by both Niako and Mitris in the prayer for relief for damages from Emini.

11 Under the SLA, Niako lodged over $100 million worth of shares with OPSL between June 2007 and its collapse. In return, OPSL advanced funds to Niako up to an agreed loan to value ratio of the shares lodged with OPSL. Niako then used those funds to buy further shares which in turn were lodged as security. During the period from June 2007 until the collapse of OPSL, the prices of the shares held by Niako fell significantly, with the result that the amount that Niako had borrowed exceeded the borrowing limit as determined by the loan to value ratios such that Niako was in "margin call". OPSL did not sell Niako's shares and the prices of the shares continued to fall, with the result that the amount that Niako had borrowed exceeded the total value of Niako's shares lodged with OPSL. At the time of the collapse of OPSL on 27 March 2008, Niako's borrowings exceeded the total value of Niako's shares lodged with OPSL by approximately $6 million. Between 27 March 2008 and the date that the creditors of OPSL finally resolved that OPSL should be wound up and liquidators were appointed (15 October 2008), the prices of the shares continued to fall such that by 17 October 2008 Niako's borrowings exceeded the total value of the lodged shares by approximately $41 million.[5]

12 In the first affidavit of Mr Vagg sworn in support of the application,[6] reference was made to an earlier affidavit sworn by Mr O'Hara on 22 February 2013 in which he deposed:

I am informed by Mr Riccioni that:

(a) Following the global financial crisis and the collapse of OPSL in March 2008 Mr Mitris was financially devastated;

(b) As a result, Mr Mitris has had difficulties in accessing the funds necessary to defend and prosecute the proceeding;

(c) Mr Mitris' most substantial remaining asset is an interest in a prawn farm in Queensland. The prawn farm was operating at a loss and so in late 2009 he moved to Queensland to manage its operations. The prawn farm has recently begun to operate profitably and he therefore expects to have access to the funds necessary to defend and prosecute the proceeding to trial.

13 In response to the suggestion that Emini no longer lives in Victoria, Mr O'Hara deposed that Emini has always resided in Victoria and current lives at 92112 Smiths Lane, Pearcedale where he has lived for about 18 months. Before that he lived at 4 Freemans Road, Mt Eliza. Mr O'Hara also deposed that Mitris manages the operations of a prawn farm in Ayr in Queensland. For a significant part of the year his usual pattern is to leave home on a Sunday or Monday afternoon and go to the prawn farm where he works for the week and returns to his home on the following Friday.

14 In response to this evidence Mr Vagg, in his affidavit of 13 August 2014, exhibited searches of the property at Pearcedale and the property at Mt Eliza showing that they were each owned by companies and that Emini is still enrolled to vote in Victoria at the Mt Eliza address.

15 There was a great deal of evidence introduced on behalf of Niako and Mitris as to the strength of the counterclaim. In his affidavit of 6 August 2014 Mr O'Hara deposed that unbeknown to Niako and Mitris, when Niako opened its account with OPSL, there were inadequate internal control processes which led to the position that Emini was causing OPSL to engage in a range of improper practises that substantially increased the business risk surrounding OPSL. These matters are outlined in three exhibits to his affidavit as follows:

(a) The judgment of Beach J in R v Emini; R v Blumberg[7] in which Beach J sentenced Emini and Blumberg to serve jail terms for breaches of s 184 of the Corporations Act 2001 in respect of the conduct of the OPSL business;

(b) An amended commercial list statement filed by OPSL against two former directors, Alun Stevens and Peter Gillooly, in the Supreme Court of New South Wales (but subsequently transferred to the Supreme Court of Victoria); and

(c) A signed statement by Emini dated 21 June 2011 prepared during ASIC's investigation of OPSL.

16 Both parties took me to various aspects of these documents in order to demonstrate the strength of their respective claims and defences.

17 Rule 62.02 of the Supreme Court (General Civil Procedure) Rules 2005 provides, so far as relevant:

62.02 When security for costs may be ordered

(1) Where -

(a) the plaintiff is ordinarily resident out of Victoria;

(b) the plaintiff is a corporation or (not being a plaintiff who sues in a representative capacity) sues, not for the plaintiff's own benefit, but for the benefit of some other person, and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;

...

(f) under any Act the Court may require security for costs -

the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.

18 Section 1335 of the Corporations Act 2001 relevantly provides:

Costs

(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is a reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

19 The Court retains an inherent jurisdiction to order security for costs as an adjunct to the Court's power to regulate its own procedure: Lines v Tana Pty Ltd,[8] Rajski v Computer Manufacture & Design Pty Ltd.[9] It is also true that the inherent jurisdiction is not restricted to the examples in the decided cases, in the sense of denying the existence of the power for any other case. The fact that the power has been regularly exercised in a limited number of cases and refused in others proves the existence of, but does not restrict, the jurisdiction: per Holland J in Rajski at 449.

20 It was also not in dispute between the parties that the basic rule is that a natural person who sues will not be ordered to give security for costs however poor he is: Pearson v Naydler.[10] The rule does not mean that there are no circumstances in which a natural person without assets will be required to provide security for costs, or subjected to a stay of proceedings until security is provided: per Hodgson JA in Philips Electronics Australia Pty Ltd v Matthews.[11] In that case Hodgson JA instanced a case that might possibly justify an order for security as where a plaintiff with substantial assets transferred them all overseas into the name of another person shortly before commencing expensive proceedings.

21 In the case of a natural person, usually some other or additional factor to the plaintiff's impecuniosity must be present in order that the plaintiff provide security for costs: Knight v Beyond Properties Pty Ltd.[12] In that case, Lindgren J noted the following (at [33]):

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.

22 In relation to the claim so far as it is made against a corporation, the first question is whether the threshold condition for the exercise of the power is satisfied, that is, whether there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful. That jurisdictional condition must be satisfied before the discretionary power to order security for costs is enlivened: Livingspring Pty Ltd v Kliger Partners.[13]

23 It is well established that the proper approach to the matter is that the Court has an unfettered discretion, although like any discretion it must be exercised judicially. There is no general predisposition in favour of making an order for security once the jurisdictional threshold is passed. But impecuniosity is itself a significant discretionary factor and often a most significant factor: Ariss v Express Interiors Pty Ltd (in Liq) (Ariss).[14]

24 If the Court has jurisdiction to order security, the burden rests on the defendant, from first to last, to persuade the Court that the order for security for costs should be made: Livingspring Pty Ltd v Kliger Partners (Livingspring).[15] There are, however, particular discretionary matters in respect of which the plaintiff must necessarily have the carriage. For example, if the plaintiff asserts that an order for security would impose on it such a financial burden as to stultify or frustrate the litigation, the plaintiff must establish the facts which make good that assertion.[16]

25 In exercising the discretion whether to order a company to give security for costs the Court must carry out a balancing exercise. It must weigh the injustice to the plaintiff if it is prevented from pursuing a proper claim caused by an order for security, against the injustice to the defendant if no security is ordered and at trial the plaintiff's claim fails and the defendant is unable to recover costs from the plaintiff: see the observations of Smithers J in Tradestock Pty Ltd v TNT (Management) Pty Ltd.[17] The Court will properly be concerned not to allow the power to order security to be used as an instrument of oppression, but also it will be concerned not to be so reluctant to order security that an impecunious company can use its inability to pay costs to put unfair pressure on the defendant: Keary Developments Ltd v Tarmac Construction Ltd.[18]

26 In Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd,[19] Winneke P and Phillips JA, made the following observations:[20]

It is thus apparent that the justification for the statutory rule is that the defendant, not being a voluntary litigant, deserves to be protected from the consequences of limited liability. Those who seek to conduct their businesses through limited liability companies expect to receive the benefits which such liability attracts. It seems to us a necessary corollary that they should be prepared to accept the strictures imposed by the section [s 1335] if the company embarks upon litigation: Buckley v Bennell Design and Constructions Pty. Ltd. (1974) 1 ACLR 301 at 304 (NSW Court of Appeal).

It has not been, and could not be, suggested that the section compels the court to order security against an impecunious corporate plaintiff. The court is given an unfettered discretion to do what is justly required by the circumstances of each case. Street CJ made this point in Buckley when he said, at 305:

It seems to me that the discretion could properly be regarded as ordinarily exercisable so as to protect a defendant sued by an impecunious company, but that, if the court in any case takes the view that this protection should not be afforded to the defendant, it has an unlimited and unrestricted discretion to give effect to such view without having to look for special circumstances.

27 The various factors that have been found to be potentially relevant in the exercise of the discretion in an application against a corporation were summarised many years ago, compendiously, by Smart J in Sydmar Pty Ltd v Statewise Developments Pty Ltd.[21] So far as relevant to the present application, those factors include the plaintiff's prospects of success, that the plaintiff's impecuniosity was caused by the defendant, that there has been delay in applying for security, and that a natural person ordinarily resident in the jurisdiction is also the plaintiff.

28 Whether the plaintiff's claim is made bona fide and has reasonable prospects of success, in this regard, the authorities make the following points:

(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;[22]

(b) Assessing the plaintiff's prospects of success is not really a practicable test in any case of reasonable complexity: Interwest Ltd v Tricontinental Corp Ltd;[23] Although it will ordinarily not be practicable to reach any clear view about the merits of the 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: Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd;[24] 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: Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 (QSC).

Plaintiff's impecuniosity caused by the Defendant:

29 Whether the plaintiff's lack of funds has been caused or contributed to by the conduct of the defendant in relation to the transaction the subject of the claim,[25] in this regard, the authorities make the following points:

(a) The plaintiff carries the burden of persuasion on the question whether the conduct of the defendant was the cause of the plaintiff's financial difficulties: BPM Pty Ltd v HPM Pty Ltd;[26]

(b) There must be a solid foundation for that conclusion: Right Home Improvements International Pty Ltd v Imperial Alarm Screens (Aust) Pty Ltd,[27] referred to in Sandl Trading Pty Ltd v North American Oil Co;[28] and

(c) The plaintiff carries the onus of satisfying the court on the basis of admissible evidence, see Ninan v St George Bank Ltd.[29]

30 Delay in applying for security may be ground for refusing to order security. The company, which can be assumed to be in financial difficulties, is entitled to know its position in relation to security at the outset and before it embarks to any real extent on its litigation, and certainly before it makes a substantial financial commitment toward litigating the claim. See Buckley v Bennell Design & Construction Pty Ltd;[30] Smail v Burton; Re Insurance Assocs Pty Ltd (in liq).[31]

31 In Christou v Stanton Partners Australasia Pty Ltd,[32] the Western Australian Court of Appeal observed:

1. It is, however, incumbent upon a defendant who wishes to obtain security for its costs to apply promptly for that relief once it is, or ought reasonably be, aware that the plaintiff would be unable to meet an order for costs. Security for costs is not a card that a defendant can keep up its sleeve and play at its convenience. Delay is an important consideration in the determination of an application for security for costs because it is capable of causing prejudice or unfairness to the plaintiff. A plaintiff is entitled to know at the earliest opportunity, before it has committed substantial resources to pursuing the litigation, whether it will be required to provide security. The later an application is made the greater the likelihood that it will cause substantial disruption or distraction in the conduct of the plaintiff's case, and if the plaintiff is unable to provide security, the greater the costs that will have been wasted. The oftcited words of Moffitt P in Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 are apposite:

The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or commits substantial sums of money toward litigating its claim (309).

1. I would add that in an era when the need to ensure the efficient use of judicial resources has become increasingly important, delay may also be significant in that regard. A late application which frustrates the action will mean that the judicial resources already devoted to the case will have been wasted. Where it results in the adjournment of an imminent trial it will often have the result that the trial dates will be wasted: see Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd [1991] FCA 459.
2. There are, however, degrees of delay and the effect of delay will vary according to the circumstances. The reason for the delay will also be an important consideration. Where delay has occurred it will not necessarily bar an order for security for costs, but generally the longer the delay, the more proximate the hearing and the more that has been done by the plaintiff to advance the case, the greater will be the significance of the delay and the more difficult it will be for the defendant to persuade the court that an order for security for costs will not be unfair or oppressive: Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497, 514.
3. In order to show prejudice it is not necessary for a plaintiff to establish what it would have done differently if the application had been made earlier (although such evidence would be an important consideration in the exercise of the discretion); prejudice will generally be regarded as inherent in substantial delay: Green v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105, [57].

32 Furthermore, the failure of the defendant to bring its application on a more timely basis may have encouraged the plaintiff to continue in the belief that none would be made.[33]

Where a natural person ordinarily resident in the jurisdiction is also the plaintiff:

33 The learned authors of Williams, Civil Procedure Victoria summarise the position where there is a corporation and a natural person suing. They make the following points:[34]

(a) If a natural person ordinarily resident within the jurisdiction is also a plaintiff, the Court will not as a rule require the plaintiff corporation to give security for the defendant's costs. The individual plaintiff will be liable for the defendant's costs if the proceeding fails, but the defendant would not have been entitled to security if that plaintiff had sued alone, even if the plaintiff was insolvent, and there is no reason why the joinder of a company which is insolvent as co-plaintiff should put the defendant in any better position with respect to security: Pearson v Naydler;[35] Drake v Hunter Douglas Ltd;[36] Harpur v Ariadne Australia Ltd (No 2);[37] Interwest Ltd v Tricontinental Corp Ltd;[38] Ravi Nominees Pty Ltd v Phillips Fox;[39] and Uptown Sydney Development Corp Pty Ltd v Bank of New Zealand (No 1);[40]

(b) However, security may be ordered where there are differences between the claim of the corporation and that of the individual such that there is a possibility that if both fail, the Court will not order the individual plaintiff to pay all the costs of the defendant: John Bishop (Caterers) Ltd v National Union Bank Ltd;[41] Hughes v Canon Aust Pty Ltd;[42] Fiduciary Ltd v Morningstar Research Pty Ltd;[43] and Street v Luna Park Sydney Pty Ltd;[44]

(c) The Court must consider the degree of the overlap between the claim of the corporation and that of the individual. If there is very limited overlap, so that the defendant will incur substantial costs in meeting the corporation's claim which it will have no entitlement to recover from the natural person should the defendant succeed against the individual, then, in the absence of other relevant considerations, a proper exercise of discretion would generally require security to be provided by the corporation. Where, however, there is a very substantial degree of overlap between the two claims, then because the defendant has a natural person as plaintiff to whom he or she can look for payment of substantially the whole of the costs he or she is likely to incur if he or she successfully defends both sets of claims, a proper exercise of the discretion would generally result in no order for security being made against the corporation: Drangold Pty Ltd v Woody Enterprises Pty Ltd;[45] and

(d) If the corporate plaintiff is ordered to give security, and its claim is stayed until the security is given, the individual plaintiff will not be prevented from pursuing the claim personal to himself or herself: Interwest Ltd v Tricontinental Corp Ltd;[46] Fiduciary Ltd v Morningstar Research Pty Ltd.[47]

34 Apart from these points, if there is a broad general rule it is simply that the presence of a natural person as a plaintiff with a corporation or corporations is a factor that may tend against the ordering of security against a corporate plaintiff.[48] The simplest example is where an individual plaintiff is a person of substantial means, and that plaintiff's claims largely coincide with those of the corporate plaintiff. In this case the same issues would have to be tried even if the corporate plaintiff's claims were stayed.[49]

35 Where there is an absence of evidence as to the individuals' capacity to pay costs, or where there is evidence suggesting a likelihood that they could not pay, it is appropriate to take those factors into account in exercising the Court's discretion in respect of the corporate plaintiff's claims, while making due allowance for the consideration that an indirect benefit should not be given to the defendant in respect of its defence of the individual plaintiff's claims, for those are not, ordinarily, the subject of any order for security.[50]

36 On the other hand, reliance on the fact that there is also an individual plaintiff who might be able to pay any costs ordered in favour of the defendants would lead to artificial joinder of individuals and would not give effect to the purpose of the section.[51]

37 Thus the presence of an individual plaintiff or plaintiff is often likely to be seen as a factor diminishing the defendant's claims to security, but not extinguishing it.[52]

38 The application for security for costs by Emini is based primarily upon the apparent impecuniosity of Niako and Mitris, but additionally upon the allegation that he resides out of Victoria.

39 Mr Stephen Palmer of Counsel, on behalf of Emini, submitted that because Mitris moved to Queensland to manage the prawn farm, not only did Mr Mitris not reside in Victoria but neither he nor Niako have sufficient assets within Victoria to be able to satisfy any costs order that might be made against them in the event that they are unsuccessful in their claim against Emini.

40 The evidence in the first affidavit of Mr Vagg discloses that Niako has issued and paid up share capital of $100 and that it apparently owns no property in Victoria.

41 It was submitted on behalf of Mitris that the evidence of Mr O'Hara establishes that he resides in Victoria.[53] There was no contention that this evidence should not be accepted. Thus the requirement in Rule 62.02(1)(a) is not satisfied, and the jurisdiction under that part of the Rule is not satisfied.

42 It was submitted for Niako that the evidence of its financial position was limited.[54] It was also submitted that this evidence must be assessed in the context of Niako having defended the primary proceeding (and prosecuted its Counterclaim) for over four years. For these reasons it was submitted that the threshold issue was not made out.

43 Niako has not, however, produced any evidence of its financial position in response to the evidence advanced on behalf of Emini. Once there is credible testimony that there is reason to believe that Niako will be unable to pay the costs of Emini if he is successful in his defence of the claim, the evidential burden shifts to Niako to negative that testimony. It has not done so. Accordingly, the threshold question is satisfied in respect to the corporate plaintiff, Niako.

44 Apart from the admission in 2013 of the effect of the GFC devastating Mitris financially, there is no evidence as to his financial position.

45 It was submitted in support of the application that the prospects of success of the counterclaim against Emini were low. Despite the difficulty of the Court determining the likelihood of success of a claim on the making of an application for security, it was asserted that the claims were manifestly weak. In particular, there did not appear, as I have pointed out, to be any claim in the body of the statement of claim made by Mitris against Emini. Paragraphs 25 and 26 of the Further Amended Defence and Counterclaim at present claim damages allegedly suffered only by Niako (and not by Mitris) by contraventions of the Corporations Act and the Australian Securities and Investment Commissions Act by the misleading or deceptive conduct of Emini (and Rice).

(a) In the prayer for relief there is a claim for damages for both Niako and Mitris against Emini;

(b) Counsel for Niako and Mitris stated from the bar table that there had been agreement reached previously between Emini's solicitors and the solicitors for Niako and Mitris that paragraphs 25 and 26 of the Further Amended Defence and Counterclaim would be amended to include a claim that Mitris has suffered loss and damage by the conduct alleged against Emini. This has not yet happened and it is not entirely clear whether the alleged agreement between the parties to allow the amendment still subsists;

(c) It was not suggested that if Niako had suffered loss by the conduct of OPSL in which Emini was involved that Mitris did not also suffer a corresponding loss because of his guarantee obligations; and

(d) It seems to me therefore that there would be no valid reason to deny Mitris leave to amend to raise that claim and I should proceed to assess the case on that basis.

47 Mr Palmer on behalf of Emini submitted in support of his contention that the claim was weak that the material in an ASIC statement made by Emini, which is exhibited to the affidavit of Mr O'Hara, shows that there is a real issue as to causation of loss because (notwithstanding the misrepresentations allegedly made by Emini) it appears that Mitris and Niako continued to trade in shares after the time that OPSL should have, but did not, close out his margin lending facility.

48 Mr Wallis, Counsel for Niako and Mitris, relied on the Emini statement and the reasons of Beach J (as he then was), in particular, to contend that the case was a strong one. The prospects of Niako succeeding in its defence and counterclaim were good having regard to the facts set out in Emini's ASIC statement[55] and the sentencing remarks of Beach J delivered on 27 July 2011.[56] These documents, it was said, show that Emini personally implemented various improper practices of OPSL that involved shares lodged by clients being transferred to other clients' accounts and used as collateral for those accounts so as to avoid margin calls being made on them. In many cases, Emini had personal interests in the accounts to which the shares were transferred.

49 Emini sought to distinguish the usual case from the present because, it was submitted, in this case the material that relates to Emini's evidence for ASIC, his conviction and the NSW proceedings enabled the Court to reach a view as to the lack of prospects of success. These are available at least partly because of the delay in making application.

50 However, despite the extensive materials submitted both in favour and against the strength of the claims and defences to them, the best that can be said is that the claims of Niako and Mitiris (in relation to the latter, providing amendment is made to the statement of claim against Emini) are prima facie maintainable. They disclose causes of action that appear to have substantial support in the facts so far disclosed. The evidence advanced to support the claims, and to contradict them, were derived from the same materials.

51 I am not able to come to a conclusion other than that the claims are bona fide with reasonable prospects of success. Anything further than this is not really practicable and to attempt do so is a waste of judicial time and resources and, in any event, it is not appropriate to attempt to forecast the outcome with the trial coming up early in 2015. As I have pointed out by reference to authority, the Court is not obliged to consider at length the merits of the claim.

52 Niako and Mitris submitted that the delay in making the application is inordinate. As is noted above, Emini filed his Appearance on 20 July 2010. He was represented by his current solicitors from 12 August 2010 to 21 February 2011 and was again represented by that firm from 21 June 2013. During the interregnum he was bankrupt and his trustee in bankruptcy conducted his defence.[57]

53 The delay in this case is significant, indeed decisive. Prejudice is inherent in the delay, as the authorities acknowledge.[58] It is not necessary for Niako and Mitris to establish what would have been done differently if the application had been made promptly. But it is plain that there have been costs, indeed perhaps considerable costs, incurred by them in prosecuting the counterclaim against Emini. Moreover, Emini has obtained an order for costs quite recently against Niako and Mitris arising out of amendments to the defence and counterclaim.

54 There has been no satisfactory explanation given for Emini not making the application for security promptly. Despite his bankruptcy and sentence of imprisonment, he has been represented in the proceeding throughout either by his current solicitors or by his trustee in bankruptcy.

55 Niako and Mitris are entitled to know at the earliest opportunity before committing expense to the bringing of the counterclaim against Emini whether they will be required to provide security for costs. As the authorities clearly establish, the later an application is made the greater the likelihood that it will cause substantial disruption and a distraction in the conduct of the case.

56 There is an additional consequence of the delay in this case. The case has been fixed for trial. The potential for an order for security to disrupt the planning for trial and to give rise to an adjournment is obvious. An application at this late stage has the potential to result in the inefficient use of Court resources and to result in a failure to observe the overarching obligations in the Civil Procedure Act 2010.

57 It was submitted on behalf of Emini that the delay since 2010 gave rise to no prejudice to Niako and Mitris. There was no prejudice because, first, the misrepresentation claims upon which the claim against Emini depends are at the centre of the counterclaim raised against the plaintiffs and are alleged to give rise to rights to set aside the SLA and the Guarantee upon which the plaintiffs rest their claims against Niako and Mitris. In other words all of the substance of the work undertaken in bringing the counterclaim would have been undertaken in any event.

58 The short answer to this submission is that there has been considerable expense incurred, and even expectations encouraged that no application would be brought, by the failure of Emini to bring his application promptly.[59] There have been not inconsiderable judicial resources devoted to the counterclaim. These are significant matters that go against the making of an order for security.

59 Further, in the circumstances of this case, this submission does not persuade me that it is appropriate to make an order for security. It is noted that there is a counterclaim against Mr Rice as well as against Emini. They are substantially the same claims. There is no indication that the claims against Rice will not proceed. The making of an order for security, with a stay until the security is provided, has the potential to disrupt the trial already fixed, and also lead to absurd results, where the trial proceeds against Rice, and necessarily involves a consideration of the conduct of Emini (and perhaps his evidence), without any adjudication of the claim against Emini.

60 It was submitted for Niako and Mitris that there are no special circumstances in the present case that would cause the Court to take the unusual step of ordering Mitris to provide security for the costs of Emini. The evidence as to Mitris's place of residence does not support the application against him personally. He appears to live in Victoria. There is no other circumstance pointed to by Emini of the kind identified by Lindgren J in Knight v Beyond Properties Pty Ltd.[60] Moreover, such evidence as there is suggests Mitris continues to have, or is able to control, assets through other corporate entities (the property on which he lives and has in the past lived, and the Queensland prawn farm).

61 Where, as here, there is a natural person ordinarily resident within the jurisdiction who is also a plaintiff, the Court will not, as I have said, as a rule require the plaintiff corporation to give security for the defendant's costs. This is because:

(a) The claims of Niako and Mitris (as I have said, assuming an amendment to the statement of claim to include a claim by Mitris) entirely overlap;

(b) Mitris will be liable for Emini's costs if the proceeding fails;

(c) Emini would not be entitled to security against Mitris if he had been sued alone, even if he were insolvent; and

(d) There is no reason why the joinder of a company which is insolvent as co-plaintiff should put Emini in any better position with respect to security.

62 This is a case where there is a substantial overlap between the claims mooted by Mitris and made by Niako. They each turn on the same conduct of Emini and rely on the same statutory provisions to give rise to the relief claimed. Because Emini has a natural person, Mitris, to whom he can look for payment of substantially the whole of the costs he is likely to incur if he successfully defends both sets of claims, the proper exercise of the discretion has the result that no order for security should be made against Niako.

63 In any event, it was said that the discretion should not be exercised to award security because Niako's impecuniosity was caused by Emini.

64 Although it appears that Niako was a vehicle for the making of investments funded by margin lending and that its lack of funds and assets is the product of the decline in the share market during the GFC from late 2007, there is not sufficient evidence to conclude that the present impecuniosity is the responsibility of Emini. Niako and Mitris carry the burden of satisfying me on the basis of admissible evidence that the conduct of Emini was the cause of their (particularly Niako's) financial difficulties. There must be a solid foundation for that conclusion. There is not.

65 The second defendant to counterclaim, Emini, has failed to persuade the Court that either the first plaintiff by counterclaim, Niako, or the second plaintiff by counterclaim, Mitris, should provide security for his costs of this proceeding.

66 Accordingly, the summons of the second defendant by counterclaim filed 1 May 2014 will be dismissed with costs.

[3] Paragraph 11 of the Amended Writ filed 23 March 2012.

[5] Affidavit of Gerard O'Hara sworn 6 August 2014 at [5].

[7] [2011] VSC 336.

[8] [1987] VicRp 53; [1987] VR 641.

[9] [1982] 2 NSWLR 443 at 447.

[10] [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533 per Megarry VC.

[11] [2002] NSWCA 157; [2002] 54 NSWLR 598 at 610 [48]; [2002] NSWCA 157.

[12] [2005] FCA 764 [33]; see also Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247.

[13] [2008] VSCA 93; (2008) 20 VR 377 at 381 [11].

[14] [1996] 2 VR 507, 514.8 (Phillips JA, with whom Ormiston and Charles JJA agreed). See also Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377, 382 [18].

[15] [2008] VSCA 93; (2008) 20 VR 377, Maxwell P and Buchanan JA at [21];, Colmax v Polytrade at [18].

[17] [1977] FCA 1; (1977) 14 ALR 52 at 56.

[18] [1995] 3 All ER 534 at 540; Op Cit Williams Civil Procedure Victoria [62.02.80].

[19] [1999] VSCA 43; [1999] 2 VR 191.

[21] (1987) 73 ALR 289 at 299-300 (NSWSC); see also Williams, Civil Procedure Victoria [62.02.90].

[22] See Bryan E Fencott and Assocs Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497; KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189; 13 ACLC 437 at 439.

[23] (1991) 5 ACSR 621; 9 ACLC 1218 (VSC).

[24] [1999] VSCA 43; [1999] 2 VR 191 at 199; [1999] VSCA 43.

[25] Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609; [1973] 2 All ER 273, per Lord Denning MR.

[26] (1996) 14 ACLC 857 (WASC).

[27] (1986) ATPR 40-641 (FCA).

[28] [1998] VSC 8.

[29] [2012] FCA 905, [48].

[30] (1974) 1 ACLR 301, 309 (NSWCA).

[31] [1975] VicRp 76; [1975] VR 776.

[32] (2011) WASCA 176, [20]-[23].

[33] Rolfe v Investec Bank (Australia) Ltd & Ors [2013] VSCA 293 at [54].

[35] [1977] 1 WLR 899.

[36] (1983) 8 ACLR 39 (NSWSC);

[37] [1984] 2 Qd R 523; (1984) 8 ACLR 835.

[38] (1991) 5 ACSR 621; 9 ACLC 1218 (VSC, Ormiston J, as he then was).

[39] (1992) 10 ACLC 1313 (WASC).

[40] (1993) 11 ACSR 300 (NSWSC).

[41] [1973] 1 All ER 707;

[42] [1990] FCA 27; (1990) 8 ACLC 209 (FCA).

[43] (2004) 208 ALR 564; [2004] NSWSC 664.

[44] [2006] NSWSC 1317.

[45] Federal Court of Australia, Drummond J, 13 December 1991, unreported, referred to in Stack v Brisbane City Council (1996) 71 FCR 523.

[46] (1991) 5 ACSR 621; 9 ACLC 1218 (VSC).

[47] (1991) 5 ACSR 621.

[48] Interwest Ltd v Tricontinential Corporation Ltd (1991) 5 ACSR 621, 624-625; (1991) 9 ACLC 1218 at 1227-8; per Ormiston J.

[49] Interwest Ltd v Tricontinential Corporation Ltd (1991) 5 ACSR 621, 624-625; (1991) 9 ACLC 1218 at 1227-8; per Ormiston J.

[50] Interwest Ltd v Tricontinential Corporation Ltd (1991) 5 ACSR 621, 624-625; (1991) 9 ACLC 1218 at 1227-8; per Ormiston J.

[51] Interwest Ltd v Tricontinential Corporation Ltd (1991) 5 ACSR 621, 624-625; (1991) 9 ACLC 1218 at 1227-8; per Ormiston J.

[52] Per Ormiston J in Interwest Ltd v Tricontinential Corporation Ltd (1991) 5 ACSR 621, 624-625; (1991) 9 ACLC 1218 at 1227-8;

[54] The first affidavit of Vagg at [6].

[55] Exhibit GOH-3 to the O'Hara affidavit.

[56] Exhibit GOH-1 to the O'Hara affidavit.

[57] Second affidavit of Vagg at [2].

[59] Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; (1990) 64 ALJR 533, 534 (Mason CJ).

[60] [2005] FCA 764; see also Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247.