SECURITY FOR COSTS
149 Mr Karis is not a resident of Australia and, according to the respondents, has no assets within the jurisdiction. The respondents submit that it is proper that Mr Karis be ordered to provide security for costs, relying on PS Chellaram & Co at 323, extracted above. They seek an order that he provide security by payment into court of $150,000.
150 In terms of the quantum of the security that is to be provided, the respondents rely on the affidavit of Mr Keating, in which Mr Keating has estimated the total recoverable cost of the work required to be undertaken by the respondents' solicitors up to and including discovery and mediation to be relevantly $212,950 (on the assumption there is no summary dismissal). Those costs are broken down by categories that cover the injunction application the subject of Karis (No 2), this application for summary dismissal, strike out and security for costs, drafting of the defence, preparation for discovery, inspection of discovered documents, preparation and attendances at direction hearings, preparation for and attendance at mediation, correspondence with Mr Karis's lawyers, the rehabilitation trustee and Boutique Capital, and taking instructions and giving legal advice. By 'recoverable costs' I infer that Mr Keating is referring to costs that Mr Karis might be ordered to pay to the respondents on the standard party and party basis. Although they seek costs for the period that precedes the application for security, such an approach is permissible: Norcast S.ár.L v Bradken Ltd [2012] FCA 765 (Gordon J). I add that by letter dated 25 May 2022 to Mr Karis's solicitors, the respondents' solicitors foreshadowed that they would be seeking security for costs. They made inquiries at that time and inferred that no assets were available. Mr Karis's solicitors did not provide any information that dispelled the respondents' concerns in that regard.
151 Mr Karis says the circumstances of the case militate against the making of an order. He says he has assets in the jurisdiction in the form of approximately 9 million shares in DigitalX, valued at USD$190,000 as at 21 October 2022.
152 Mr Karis also submits that at least in relation to the dispute about the Trading Accounts Agreement, Digital CC Management is the true moving party, and his position is in substance defensive. He contends that the commencement of this proceeding was a reaction to the US proceeding commenced by Digital CC Management. On that basis he submitted he should not be required to provide security for costs, relying on National Biofuels Group Pty Ltd v Elbow River Marketing [2009] FCA 613. In that case, Rares J ordered a defendant foreign corporation to pay security for costs, on the basis that although the applicant commenced proceedings and were seeking damages, the defendant was the true moving party because it was positively denying that terms contained within a letter of credit formed part of the contract between the parties, and was itself seeking a large sum of damages. Accordingly, the applicant's position was in substance defensive: at [22]-[23], [25].
153 Otherwise, Mr Karis submitted the claims relating to his employment are sufficiently linked to the Trading Accounts Agreement dispute such that it is unlikely the respondents will incur substantial additional costs because of those claims. He noted that the Equity Representation case will involve determination of the Trading Accounts Agreement dispute in that it will require assessing his shareholding in DigitalX and the basis upon which he was granted those shares, an overlap to which I have also referred above.
154 In response, the respondents argue that the shares referred to by Mr Karis are owned by Digital Man LLC, not Mr Karis, and in any event the shares may be readily disposed of. They also say Mr Karis has not deposed to his beneficial ownership of these shares, relying on an unsworn annexure to his submissions. The respondents say this Court should follow the approach in Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132 and reject Mr Karis's submissions as to his locally held shares. In that case, Newnes J was not satisfied that shares in local entities held by a plaintiff foreign corporation constituted assets within the jurisdiction. His Honour was not confident that those shares would remain unencumbered and available to satisfy a costs order, and not, for example, subject to a third-party security interest: at [70]-[71].
155 I have taken into account all of these matters, but on balance am persuaded that it is appropriate that Mr Karis provide security. Whilst I accept that there may be some defensive elements to his litigation, he is the plaintiff in these proceedings in Australia, has resisted attempts for the proceedings to be pursued in the US, and must deal with the consequences of his chosen course (a course which was properly open to him, I should add), one of which is that he risks an order of this Court that he provide security for costs. The matters to which he has pointed in opposition to the order do not overcome the weight of the circumstance that he is resident out of the jurisdiction and apparently has no assets in his own name, and no assets being offered by way of security, within the jurisdiction.
156 Further, Mr Karis's attempt to characterise the proceedings as defensive oversimplifies the position. He seeks to pursue a range of complaints about conduct under the ACL, and not limited to the Trading Account Agreement. Both parties to some extent have sought to compartmentalise the claims where it might assist their arguments, but viewed objectively, and regardless of the trigger that led to these proceedings being instituted in Australia, Mr Karis is the party in the position of (and in fact) the plaintiff in this proceeding. Having regard to the range of complaints encompassed by his pleadings, I consider the facts of Mr Karis's case sufficiently distinguishable from National Biofuels. In any event, there is no rule that a court will not order security for costs against a party bringing a proceeding if that person is in substance a defendant: Commissioner of Taxation v Vasiliades [2016] FCAFC 170 at [84]. That is merely one of the circumstances to be taken into account, and the discretion to order security for costs remains unfettered and unconfined by rules or restricted by its exercise in other cases: Vasiliades at [88]-[89].
157 I accept the respondents' submission that no comfort can be taken from the fact that companies related to Mr Karis might hold shares. No offer has been made to make those shares available or to otherwise secure them so that they might be made available to the respondents. Mabrouk Minerals is apposite in this regard.
158 Nor do I accept that the level of overlap between the employment dispute within the pleading and all of the other claims made by Mr Karis is so great as to justify refusing or significantly limiting an award of security. There is indeed a level of overlap, as I have touched on above and as the arguments about the crystallisation of loss and the Bonus Representation reveal, but it is artificial to dissect the different claims and allocate a percentage of the requested security amount to each of them and then seek to assess whether the costs of some cancel out the costs of others. It would be rare that security could fairly and efficiently be assessed in such a manner, and an exercise of that nature is not justified in this case. However, I do take into account the prospect of some overlap in work required across the different claims as a matter relevant to my decision to fix the amount of security at a level less than that calculated by Mr Keating: see [163] below.
159 The real driver for the security for costs application in this case is not the assessment of merits and the prospect of success on the part of the respondents. Rather, it is the fact that Mr Karis resides overseas and has no assets available within the jurisdiction to meet a costs order.
160 I add that Mr Karis did not contest the nature of the evidence gathered and deposed to by Mr Keating.
161 However, in oral submissions, senior counsel for Mr Karis suggested that if security were to be granted, the figure claimed was broadly put, and that it should be reduced by about a third.
162 As noted, Mr Keating's calculation came to a total of $212,950. However, by way of security the respondents seek $150,000. That is, they have already discounted the figure they seek.
163 I accept that the information provided, and the quantum sought, are expressed broadly, but having regard to the matters raised so far in this action and the disputes already heard, I am of the view that the estimate of $212,950 is generous, but not extravagant, and has a reasonable basis. However, consistent with the actual amount sought by the respondents in their application, I consider a fair amount by way of security, having regard to the current stage of this litigation, is $150,000, to be paid into Court within 28 days. There is no suggestion that such sum will prevent Mr Karis continuing with his claims or otherwise stifle the litigation.
164 There will be an order to that effect. The action brought by Mr Karis against the first and second respondents will be stayed pending payment of security. If Mr Karis pays the security and the matter proceeds, there is no bar to the respondents seeking further security.