BASTEN J: On 28 May 2021 two "defendants" in these proceedings filed a notice of motion seeking an order for security for costs, to be provided by the plaintiff. The proceedings were commenced in 2016; however, there has been some attrition of the parties since that time. Thus, although the notice of motion identified the number of defendants as "4", there is in fact only one defendant, namely Greenhills Securities Pty Ltd. There is also a single plaintiff, Peter Shah Mahommed.
The plaintiff has had some trouble providing an adequate pleading. On 29 September 2020 Parker J delivered judgment rejecting an application to reopen a judgment and orders of Robb J which struck out an earlier pleading with leave to replead. The reopening application was unsuccessful: Mohammed v Unicomb (No 3) [2020] NSWSC 1312. Parker J set out the history of the proceedings up to that point in time, which need not be repeated here. It is sufficient to say that the matter has proceeded in an unsatisfactory and desultory manner so far; it is not necessary to assign blame for that fact.
The response to that ruling appears to have been the filing on 22 January 2021 of what is described as "Second ASOC", that is a second further amended statement of claim. It is by no means easy to follow; it contains allegations which do not provide particulars; it continues to include references to Mrs Unicomb, who is no longer a party to the proceedings, and to Mr Dixon, in the present tense, although Mr Dixon is deceased. In any event, a defence was filed on 11 March 2021.
Relevantly for present purposes, in Part C of the plaintiff's pleading, entitled "Locus Standi of Parties" there is the statement that "As Trustee of the LRUT [Lovedale Ranch Unit Trust] … the Plaintiff is entitled to sue for recovery of any trust assets received or held by Greenhills ATF any Unicomb Family Trust or in its personal capacity." Orders 1, 2 and 3 require that the defendant pay or indemnify the trustee of the Lovedale Ranch Unit Trust. In reliance on those pleadings, the defendant asserts that the plaintiff "is suing, not for his or her own benefit, but for the benefit of some other person", being a criterion for an order for security for costs identified in the Uniform Civil Procedures Rules 2005 (NSW) (UCPR), r 42.21(1)(e). The second limb of that paragraph requires that there be reason to believe that "the plaintiff will be unable to pay the costs of the defendant if ordered to do so."
There is no direct evidence relied on by the defendant as to the plaintiff's financial status. Rather, it seeks to establish that, as a matter of inference, the plaintiff will not be good for a costs order which is likely to be in a substantial amount, given the complexity of the pleadings and the interlocutory steps taken so far. The sum sought is an amount of $341,000, as to which it will be necessary to make some further observations shortly.
The defendant seeks to draw an inference as to the plaintiff's impecuniosity from the following factors, namely that, (i) although suing in his capacity as trustee, there is no evidence that he is indemnified for the costs of the proceedings, nor that the trust has significant assets; (ii) a notice to produce relating to his financial circumstances was not the subject of any challenge, but nor was there any material produced in response to it; (iii) in his affidavit in reply, the plaintiff identified a property, without establishing that it constituted a valuable asset which he owned, as the property appeared to be owned by a trustee under trusts which were not disclosed; and (iv) in October 2020 the plaintiff sought a waiver of the filing fee in relation to a proposed appeal (from the judgment of Parker J referred to above) on the basis of his impecuniosity.
The defendant acknowledged that the application was not made early in the proceedings, but noted that no tenable pleading had been produced until January 2021. It further submitted that there was no reason to suppose that the delay in making the application, in circumstances where there was no clear indication that the proceedings would go to trial, had caused any prejudice to the plaintiff.
In support of his application for security, the defendant also submitted that the conduct of the proceedings by the plaintiff had been vexatious. To some extent the history revealed conduct which might be considered vexatious in relation to Mrs Unicomb, who is no longer party to the proceedings. Nevertheless, and despite the fact that a defence has now been filed, the defendant maintains that many aspects of the statement of claim filed in January 2021 are embarrassing and do not comply with proper pleading practice. Counsel also submitted, with justification, that it might reasonably be inferred that the pleading had not been settled by senior counsel. I accept that submission. That factor is significant because, on 3 April 2017, when directing the transfer of part of the proceedings from the District Court to the Equity Division, the Court of Appeal directed that "the proceedings as transferred to the Supreme Court be listed before the Registrar in Equity for directions as to the further conduct of the proceedings, including as to the filing of amended pleadings…and direct that on the filing of an amended statement of claim the applicant file an affidavit verifying that the amended statement of claim has been settled by senior counsel": Mahommed v Unicomb [2017] NSWCA 65, order 3.
Apparently accepting that that direction had not been complied with, Mr Smits, for the plaintiff, said that no similar direction had been given by Robb J in making orders which eventually resulted in the filing of the second further amended statement of claim. That was not so; order 8 made on 28 November 2018 expressly required that any "draft amended statement of claim be settled by senior counsel". The defendant did not explain why no attempt had been made to require the plaintiff to comply with the direction. Nevertheless, I accept the submission that aspects of the conduct of these proceedings to date has been vexatious, including by the filing of the second further amended statement of claim on 22 January 2021.
As to the amount of the order sought, it is clear that at least some of the work sought to be covered has already been undertaken. How much time would be spent in the future on preparation of evidence is unclear: the bundles of material produced for this application cover approximately 1,000 pages. (Unhelpfully, the material is contained in separate bundles and not consecutively numbered.)
In response, the solicitor for the plaintiff, Mr Leonardus Smits, sought to take issue with each aspect of the defendant's case set out above. The first proposition was that the plaintiff is suing in his personal capacity and not as trustee of the Lovedale Ranch Unit Trust. It is true that Mr Mahommed's affidavit of 19 July 2021 makes that assertion; however, the pleading must be understood in its own terms and not by reference to the plaintiff's statements in his affidavit. On the basis that the pleading was prepared by Mr Smits, who signed it, I infer that the affidavit was also drafted by Mr Smits. The style is convoluted and by no means easy to follow.
Mr Smits' written submissions misrepresented the contents of the pleading. For example, at par 40(5), he states:
"The Plaintiff pleaded that he is entitled at common law to sue for recovery of any trust assets received or held by Greenhills ATF any Unicomb trust or in his personal capacity: para 6 of the Second ASoC".
That proposition is disingenuous. Paragraph 6 of the pleading has been set out above. The reference to "at common law" is by way of an alternative to his claimed entitlement as trustee of the LRUT, "pursuant to s 9 of the Trustee Act 1925". Secondly, the emphasised words "or in his personal capacity" are not found in par 6 of the pleading, which refers to the plaintiff being entitled to sue for recovery of trust assets received or held by "Greenhills ATF any Unicomb family trust or in its personal capacity": the word "its", referring to the defendant, has been replaced by the word "his" intending to refer to the plaintiff. The statement in the submission is patently misleading.
The submissions also stated (par 40(4)):
"Prayers 5 & 6 in the Second ASoC re Debts 4 & 5 only refer to Mr Mahommed (in his personal capacity) and do not refer to his Trusteeship of the LRUT".
It is true that pars 5 and 6 in the section setting out the relief sought do not refer to the plaintiff in his capacity as trustee. However, as the defendant pointed out, the pleading with respect to debt 5 involved an amount paid by the then trustee of the LRUT (a company known as Loire Consultants Pty Ltd): second amended statement of claim, Part W, pars 176 and 177. The identification of debt 4 as a debt to Loire as trustee for the LRUT, was made in similar terms: pars 202 and 203.
The submissions further stated that the "common law rights of action were derived from inter alia the deed of assignment of 12 November 2015: see para 1 of the 2 FASoC." Paragraph 1 of the pleading is purely a definitional provision, containing 42 separate definitions. It did not refer to the deed of assignment dated 12 November 2015.
A key reference to the assignment appeared in par 189(d), where Mr Mahommed is said to be the assignee of debt 5. While it is true that there is reference to Mr Mahommed being the assignee of debt 5, there is no reference to the deed of assignment. More importantly, par 189 alleges liability on the part of Mrs Unicomb, who is no longer a party to the proceedings.
Mr Smits conceded that although there were two references to an assignment to the plaintiff in the pleading, but that the deed was not referred to. The written submissions for the plaintiff claimed that certain particulars were "inadvertently" omitted from par 189. The particulars read as follows:
"(1) The inability of Greenhills to repay Debt 5 is pleaded in paragraph 185;
(2) On 12 November 2015, in a deed of assignment, Loire, Mr Dixon and Mr Smits, in each capacity, assigned absolutely and respectively to Mr Mahommed all right, title and interest in, in respect of and in relation to debts numbers 1-5 as defined in the recitals to that deed;
(3) A copy of the deed is available upon request and at the hearing, will be relied upon for its fuller force and effect."
This appeared to foreshadow an application to amend. However, such a suggestion made as to particulars of one paragraph in a 69 page statement of claim in response to an application for security for costs so as to support an allegation that all of the claims made by the plaintiff were made in his personal capacity and not as trustee of a trust, is disingenuous. It is also futile. Paragraph 189 identifies liability only on the part of the Mrs Unicomb who, as noted above, is no longer a party to the proceedings.
Apparently against the possibility that the pleading might be read as the plaintiff making a claim as assignee, the defendant made two further submissions. One was that, even as assignee, he was not bringing the proceedings in his own interest, but on behalf of others, so that r 42.21(1)(e) was nevertheless engaged. In the alternative, counsel relied upon the inherent jurisdiction of the Court. As I do not read the second further amended statement of claim as pleading a case against the defendant on the basis of a pleaded assignment of the debt, such alternative bases need not be pursued. However, had it been necessary to rely upon the inherent jurisdiction of the court, applying the considerations relevantly identified in r 42.21(1A), I would have reached the same conclusion as to the appropriate orders, being those set out below.
As has been noted, in his affidavit of 19 July 2021, Mr Mahommed stated that he was the beneficial owner of a residence in East Maitland "pursuant to a deed of vesting of trust fund under Greenhill Finance Trust dated 5 September 2016." That may be true, but it provides no evidence as to the value of the property, the terms of the trust by which it is held, nor the level of debt it may presently secure. Realising the omission of evidence as to value and liabilities, Mr Smits attached further documentation to his submissions. The defendant did not raise an issue as to reliance on this material. One document, apparently obtained from the ANZ Bank, provided a bank valuation. A second was a recent statement of a Westpac investment property loan, which lacked a name of the borrower and provided no indication as to whether it is secured against any property. This material was unhelpful and I do not take it into account.
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Findings
In the circumstances set out above, I am satisfied that the plaintiff is suing as the trustee of a trust which is not identified as holding any assets of value. It might be inferred that its principal assets were the debts which the plaintiff seeks to recover. If that is so, and accepting the evidence in the plaintiff's affidavit that he has received an assignment of those debts, one would expect to know if any value had been paid for the assignment. None is suggested. Further, I am satisfied on the evidence that the plaintiff is probably not able to meet an adverse costs order of the kind which might be incurred if the matter went to trial and if he were unsuccessful. There is no evidence that he has a right of indemnity from the trust to cover those costs. Even if there were, as noted, I am not satisfied that the trust has assets which would make such an indemnity valuable.
It is clear that there has been significant delay in bringing this application. One consequence of that delay is that no part of any payment by way of security should be made in relation to work which has already been undertaken. Because it is not possible to assess how much work has been undertaken which would be relevant as preparation for the trial, the plaintiff is entitled to the benefit of an assumption that much of the preparation is already in hand. I make that assumption.
Nevertheless, the significance of the delay must be discounted in circumstances where the application was made some four months after the filing of the second amended statement of claim, all previous attempts at drafting such a claim having failed. A defence has been filed, but it seems likely that at least parts of the claim will prove untenable if the matter goes to trial. A special leave application in the High Court, with respect to the refusal of leave to challenge an order removing Mrs Unicomb from the proceedings, was dismissed a few days ago. No part of the present pleading which relates to her (and which may have been retained in the hope that she would be reinstated as a defendant) can be relied on.
Further, there appears to be a serious risk that a further attempt will be made to amend the present statement of claim. Given that the pleadings commenced five years ago in the District Court, such an application may prove challenging for the plaintiff. In particular, an application by which the whole basis of the relief sought were to be recast might well meet with a frosty reception from the remaining defendant and the Court. Nevertheless, the possibility of yet further interlocutory skirmishing gives support to the defendant's application for the plaintiff to provide security for costs. In my view such an order should be made.
Mr Smits submitted that such an order would stultify the proceedings. That submission may be understood, not as a concession that the plaintiff is relevantly impecunious, but rather that an order in the amount sought by the defendant would stultify the proceedings. I accept that that may be so. I also accept that, for the reasons already noted, the amount sought must be significantly reduced so as not to cover expenses already incurred. Further, despite the complexity and verbosity of the pleading, I am not persuaded that a trial would be permitted to run for 10 days. Finally, recoverable costs must be proportionate to the amount in issue.
In my view an appropriate amount to be paid by way of security is $160,000. Given the stage the proceedings have reached, there is little merit in requiring it to be paid in tranches, but the defendant accepted that such an order would be appropriate. As the next stage appears to be the filing of a reply (if any) to the defence and the preparation and filing of the plaintiff's evidence, the stay will not affect directions with respect to those matters.
That amount should be provided either by payment into Court or by provision to the Court of an appropriate security. Subject to the qualification noted above, the proceedings will be stayed until such time as the security is provided; if not provided within three months of the time fixed for the second tranche, the plaintiff's proceeding should be dismissed.
There are three further matters which should be noted. First, if, as the plaintiff asserts in his affidavit, and Mr Smits asserts in his submissions, the plaintiff should be allowed to run a claim under the deed of assignment of 12 November 2015, there is an issue as to the propriety of Mr Smits continuing to represent the plaintiff. One of the three assignors under the deed was Mr Smits himself. The assignee was Mr Mahommed. If there were an issue as to the effectiveness of the deed, there would appear to be a significant conflict of interest between the lawyer and his client. However, the issue may not arise.
The second matter relates to the filing of pleadings by the plaintiff without compliance with the directions that they be settled by, or accompanied by an affidavit of, senior counsel. Such directions are not to be disregarded. Nor is it appropriate for the defendant effectively to waive compliance with such a direction. They are partly to protect the defendant, but also to protect the processes of the court from delay and abuse. However, because pleadings are routinely e-filed, steps must be taken after a document is filed to have them removed from the record. Accordingly, it is appropriate to give directions in that regard in this proceeding.
The third matter concerns a proposal put forward by Mr Smits in the course of oral submissions today. The suggestion was that the proceedings could be stayed other than the pleading contained in Part W of the second further amended statement of claim (pars 176-189) relating to debt number 5 in an amount of $207,594.27. (The pleading of that claim covers 16 pages of the document.) The proposal was patently fraught with difficulties and, as counsel for the defendant submitted, should have been the subject of notice. I agree. The prospect of splitting the proceeding is not only unattractive, but cannot be dealt with in this manner. Given the orders proposed with respect to further pleading, any such proposal will have to await compliance with the orders for security.
The Court makes the following orders:
1. In matter number 2016/53923, the Court orders that the plaintiff give security in the amount of $160,000 to be paid into court in cash or by deposit of an unqualified bank guarantee, such security to be provided in the following tranches:
1. as to $25,000, by 16 October 2021;
2. as to a further $65,000, by 16 December 2021, and
3. as to the balance of $70,000, by 14 days after the defendant has given notice that it has completed the service of its evidence.
1. Subject to order (3) below, the proceedings, including motions as to the further conduct of the proceedings or any part of them, shall be stayed pending provision of all three tranches of the security.
2. Order (2) will not affect compliance with directions as to:
1. the filing by the plaintiff of a reply (if any) to the defence;
2. the preparation and service of the plaintiff's evidence, and
3. the hearing and determination of any motion brought pursuant to order (4).
1. Order that the plaintiff not file, whether by way of its reply or a proposed amended statement of claim, any pleading which purports to raise a new cause of action, further basis for an existing cause of action or any claim by the plaintiff otherwise than in his capacity as trustee of the Lovedale Ranch Unit Trust, unless the pleading has been settled and signed by senior counsel, with the intention that any motion by the defendant seeking to strike out part or all of such pleading on the basis that it does not comply with this requirement be determined without consideration of the merit of the pleading.
2. Pursuant to r 42.21(3), if the first two tranches of the security have not been provided by 16 March 2022, the proceedings are dismissed.
3. Order that the plaintiff pay the defendant's costs of the motion.
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Decision last updated: 16 September 2021