Hague v Cordiner

District Court of NSW|2020-02-13

The application before the court

The defendant, by notice of motion filed on 13 November 2019, seeks an order for security for costs against the plaintiff pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), on the basis that the plaintiff is ordinarily resident outside Australia and/or has misstated his address in Australia with intent to deceive.

Issues not in dispute

The plaintiff denies he has misstated his address in Australia, but acknowledges that he is ordinarily resident outside Australia and submits the issue is the quantum and form of the security to be given.
As to quantum, Mr Keleher (for the defendant) agrees with Mr Goldsmith's estimate that the costs of this trial (for the defendant) will be between $45,000 and $58,000, of which 75% will be recoverable on assessment unless an indemnity costs order is made. These may seem to be small sums when compared to estimates for costs in superior courts, but it is a realistic sum given the economies of scale possible in a specialist list where the emphasis is on sorting out problems as they arise, with the result that solicitors can, and do, appear on behalf of their clients not only on interlocutory applications but also at the trial (although Mr Goldsmith states that he will be briefing counsel for the trial on this occasion).

The issue for determination

The sole issue left standing, after the parties' submissions, is whether an undertaking from the plaintiff to the court in relation to an investment account for this sum is sufficient. This challenge to the form of security requires a consideration of the value of undertakings to the court and whether an account representing the dollar value of cryptocurrency is in fact a reliable security.
I now set out my reasons for accepting the plaintiff's undertakings in the form offered, as well as for being satisfied that the plaintiff has not sought to deceive the court as to his address.

The evidence before the court

The defendant relies on the following evidence: 1. Affidavit of the defendant sworn on 20 November 2019 (Exhibit A); 2. Affidavit of Barry Goldsmith sworn on 20 November 2019 (Exhibit B); and 3. Affidavit of Bronte Spencer Sellers sworn on 3 February 2020 (Exhibit C).
The plaintiff relies on the following evidence: 1. Affidavit of Sean Keleher sworn 5 February 2020 (Exhibit 1); and 2. ASIC extract snapshot of MainTraining Pty Ltd, a company for which the defendant was at certain relevant times the sole director and shareholder.
Mr Goldsmith complained, with some justification, that the plaintiff's affidavit was not served in accordance with the timetable. However, as the plaintiff did not challenge the entitlement of the defendant to an order for security, or the costs estimates of Mr Goldsmith, and restricted the submissions to issues of quantum, I permitted the tender of this material, as the original agreed timetable had not been drafted on this assumption.

The defendant's evidence

As the defendant sets out in her affidavit, she provides online course creation services to the public through her company, MainTraining Pty Ltd (at paragraph 3). This is an important admission, for reasons set out later in this judgment.
The defendant goes on to say that she met the plaintiff, who is also involved in online marketing and training, in 2015, and he later enrolled in one of her courses (in October 2016). In the course of these transactions, he told her that he lived in Thailand; this was in fact where he undertook the course she was offering.
The defendant says the plaintiff suggested they go into business together in Hong Kong because he considered the Australian tax system to be a "fucking rip-off"; as a result, he channelled as much Australian business as he could to Hong Kong.
Unfortunately, while he was completing the course the defendant conducted for her customers, "the plaintiff made an unwanted sexual advance towards me" (paragraph 13). The business discussions broke down "for a number of reasons" (paragraph 14), of which this was one.
The defendant then states: "Subsequently there was litigation between the plaintiff and my company." (Paragraph 14)
This company is MainTraining Pty Ltd. The result of this litigation is not stated, but the impression conveyed is certainly not to the effect that the plaintiff was successful.
Attached to this affidavit are extracts from the plaintiff's social media pages, which state that he "lives in London", a post headed "How I feel about living in Thailand", which he said he did "off and on for over 11 years" and a statement that "I regularly travel between UK, Australia, Thailand and Hong Kong - where I am now based." His company is, however, called "AustraliaWOW! Pty Ltd", a company he established "to design, develop and produce our web-based health and fitness".
Mr Goldsmith's affidavit attaches documents he had received from the plaintiff's solicitor which state that the plaintiff holds both a UK and Australian passport, has a New South Wales residential address and driver's licence, and has had an account with the ANZ Bank since 1996. Mr Goldsmith's affidavit sets out in some detail material to the effect that the plaintiff appears to have other addresses, not only in other countries, but different to the address stated in this litigation.
At that stage, the giving of security for costs was opposed on the basis that the plaintiff was sufficiently an Australian resident for the purposes of a security for costs order and on the basis that he had misstated his address. In those circumstances, if there had been litigation between the parties as referred to in the defendant's affidavit, copies of pleadings and correspondence would have been of significance.
Ms Sellers' affidavit attached solicitors' correspondence and a copy of a Notice to Produce returnable at the hearing of this application.

The plaintiff's evidence

Mr Keleher's affidavit sets out that the plaintiff has the following assets in his own name within Australia: 1. An investment account with BTC Markets which is a cryptocurrency exchange account. BTC Markets trades on cryptocurrency. The value of the plaintiff's holdings, as at 4 February 2019, is $20,331.64. 2. An ANZ Access Select Account where the current balance is $1,802.19 (the address for the plaintiff identified by the Bank in its statement is the same address as the address on the statement of claim). 3. A judgment from the Local Court of New South Wales, recording the plaintiff as having obtained judgment against MainTraining Pty Ltd (the defendant's company) on 20 August 2018 for the sum of $20,587.47, plus interest ($2,102.46), filing fees ($239) and service fees ($40), making a total of $22,968.92. In addition, the court notes the additional order that the defendant is to pay the plaintiff's costs on the ordinary basis as assessed until 3 January 2018 and thereafter on an indemnity basis. A letter from Keleher Lawyers to the defendant (in her capacity as director of this company) dated 21 August 2018 estimated these costs at $36,300 including GST, making a total of $59,268.93.
Mr Goldsmith told the court he had no idea that there were proceedings in the Local Court of New South Wales which had resulted in a judgment in favour of the plaintiff against the company identified in paragraph 14 of the defendant's affidavit. He told the court his client now had no association with MainTraining Pty Ltd, notwithstanding his client's statements to the contrary in her affidavit.
The correct situation may be ascertained from the ASIC search of MainTraining Pty Ltd tendered by Mr Keleher. This search demonstrates that, on 11 September 2019 (which, he points out, is a date after commencement of this claim for defamation but before the date of the plaintiff's affidavit, which describes her as still trading through this company), the defendant resigned as director and secretary. To this extent, Mr Goldsmith is correct. However, the person who replaced her and who took over her shareholding, Alex James Cordiner, resides at the same address in Western Australia as the defendant. He is, Mr Goldsmith and Mr Keleher agree, the defendant's husband.
The financial position of the debtor company appears uncertain, in that the Risk Data Summary refers to a Notice of Insolvency, but I was not given any further information about this.
It was unwise of the defendant to omit these details from her affidavit. Not only in ex parte applications (Kostov v Nationwide News Pty Ltd [2018] NSWSC 1289 at [12]), but in any interlocutory application where the judge must assume the facts, parties have what Rein J terms "a duty of candour" to be frank with the court. That includes applications for security for costs, for the reasons explained by Flick J in Stapleton v Fairfax Media Pty Ltd [2019] FCA 1418.
The applicant in Stapleton v Fairfax Media Pty Ltd commenced proceedings for defamation in the Federal Court and the defendant brought an application for security for costs. The applicant provided an affidavit and outline of evidence in which he asserted that he had been a resident of Australia, including for taxation purposes, since 2007. Flick J, however, noted that the applicant had been less than frank in that material, leaving the space for his current address blank and had failed to state that his Outline of Evidence was true and correct. Although in Stapleton v Fairfax Media Pty Ltd the party with the unacceptable affidavit material was the party against whom the security for costs order was made, the principle is the same. Courts can have no confidence in litigants whose affidavit material is less than frank.
The tender of this material substantially undermines the defendant's claims that the plaintiff has no assets in the jurisdiction and that he has misstated his address. It would have been open to the defendant to raise any concerns it had with the plaintiff's ability to conduct litigation (not only in a financial sense, but in terms of complying with timetables or other obligations to the court, such as providing a correct address) by setting out relevant details of this now concluded action. That was not done.
In addition, in Stapleton v Fairfax Media Pty Ltd, Flick J took into account (at [7]) that the party against whom adverse findings were sought had not paid costs orders in relation to concluded litigation in another court, even though those costs were owed to a third party. In the present case, the party against whom those orders are sought is owed a substantial sum by a company the defendant acknowledges to be a trading vehicle used by her. In carrying out the "risk management" exercise described by French J in East Grace Corporation v Xing (No 1) [2005] FCA 219 at [6], I consider this a relevant factor.
The fact that the plaintiff has already successfully conducted litigation in a NSW Court suggests that his allegedly dilettante travelling lifestyle and unreliable conduct, as described by the defendant in her affidavit, has not affected his ability to conduct litigation conformably with the objects set out in s 56 of the Civil Procedure Act 2005 (NSW) or that he has been prepared to misstate his address to the court.
Taking the above into account, I am satisfied that the plaintiff has not misstated his address and that, in making an order for security for costs, I should not assume that he would lightly disregard his obligations to the court. This latter finding is relevant in relation to the form of the security.

What form should the security take?

Mr Goldsmith sought an order that the plaintiff pay security for costs in the sum of $20,000 into court, for two reasons. The first of these is that, while the account from which these funds would come is in Australian dollars, it represents a highly unstable form of investment, namely cryptocurrency. The second is that the plaintiff is such an unreliable person that he would be unlikely to honour an undertaking to the court.
I am unaware of any other orders for security being made in relation to cryptocurrency, but I am prepared to assume that these are volatile sources of investment, even when the proceeds are recorded in Australian dollars. However, this is a recognised form of investment. In Noicos v Dawson [2019] FCA 2197 White J noted (at [12]) that the applicants for freezing orders were cryptocurrency investment dealers, but they were nevertheless considered to be able to offer an undertaking as to damages in relation to injunctive relief (at [29]).
The issue of cryptocurrency volatility can best be addressed by requiring the plaintiff to provide copies of his monthly bank statements to the solicitor for the defendant and by requiring him to notify drops below the secured amount.

The undertaking to the court

The giving of an undertaking to the court, if breached, may lead to an application for the defaulting party to be dealt with for contempt of court. The procedure which the court should adopt is set out, in general terms, in Court of Appeal, Registrar of v Maniam (No 1) (1991) 25 NSWLR 459 at 469F and in Mohareb v Palmer [2017] NSWCA 281.
It should be acknowledged that this can be an expensive process, both for the party complaining of the conduct (see Johnston v Nationwide News Pty Ltd [2005] NSWCA 17 at [23] - [25]) and the party resisting the order (KT v Google LLC (No 2) [2020] NSWSC 14).
Additionally, it can be a complex process, as there are conflicting decisions as to the procedure for the party complaining of the breach to follow. For example, what would be the role of the defendant in bringing her complaint? The approval of Killen v Lane [1983] 1 NSWLR 171 set out in Johnson v Nationwide News Pty Ltd suggests that her role should be restricted to the tender of evidence. Would she have to make submissions as well, or should the court simply determine the issue "on the papers" (Turner v NSW Forensic & Analytical Science Service [2017] NSWCATAD 181 at [27]-[31])? If there is to be a contested application, which party should "go first"? Is the party complaining of the alleged contempt entitles to "prosecute" the contempt, either in this court or in the Supreme Court? While that appears to be the correct procedure, as reflected in the opening words in Scholefield Goodman (Australia) Pty Limited v Rutkowski [2018] NSWSC 19, that is not the case, as Young JA explains in Lin v Borrowdale [2011] NSWCA 65 at [3]-[5].
I agree with Mr Goldsmith that the remedies for breach of undertakings are exhaustive and unsatisfactory but, given the plaintiff's compliance with court procedure in his Local Court action against MainTraining Pty Ltd, I consider the risk to be slight.

The form of the undertaking

The form of the undertaking was agreed between parties except for paragraph 8, which was the subject of further submissions on 13 February 2020.
I can see the desirability of the defendant receiving prompt notification of any drop in the value of the account. These are uncertain financial times, and it is a small step for the plaintiff's solicitor to take to keep Mr Goldsmith apprised of such possibilities by emailing him his client's monthly bank statement.

Orders

I make orders in accordance with the Short Minutes of Order handed up in court by the parties on 13 February 2020 as follows: 1. Pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), the plaintiff give security for the defendant's costs of the proceedings by, within 7 days from the date hereof, filing in Court and providing a copy to the defendant's solicitors an undertaking in the form of the copy annexed hereto marked "A". 2. On or before 19 March 2020, the defendant file any Defence. 3. On or before 16 April 2020, the plaintiff file any Reply. 4. The matter be listed for further directions on 23 April 2020 in the Defamation List. 5. The parties shall be at liberty to apply to vary order 1 upon giving to the other 48 hours' notice. 6. The costs of the defendant's motion filed on 13 November 2019 be reserved. 7. The court accepts the undertaking by the plaintiff to the court as follows: "I, NATHAN HAGUE, undertake to the Court as follows: 1) I am the legal and beneficial owner of account numbered 100176421 with BTC Markets ("the account"). 2) The nature of the account is a crypto-currency exchange account. 3) As at the date hereof, there is a balance in the account to my credit of about $21,990. 4) There are no limitations on my ability to withdraw, either now or at any time in the future, all or part of any funds to my credit in the account. 5) To provide to the defendant by way of security for her costs of the proceedings an amount of $20,000 ('the relevant amount") as part of the funds in the account. 6) I will not dispose of, deal with or diminish, or cause or permit to be disposed of, dealt with or diminished, the value of the account below the relevant amount, pending any further order of Court. 7) I will, within 24 hours of this occurring, should it occur, notify the defendant by her solicitor if the balance of the account shall reduce below the relevant amount. 8) I will, before 4 pm at the end of each month, commencing at the end of February 2020, provide to the defendant by her solicitor a copy of a statement of the BTC account, such statement evidencing the amount standing to my credit during the entirety of that month" 1. Costs of today and of 6 February 2020 reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 February 2020

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Judgment (11 paragraphs)

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