By notice of motion dated 3 February 2016, the defendant Giuseppi Nitopi seeks an order against the plaintiff Christina Pirrello Nitopi for security for his costs in the sum of $28,720.
Leave was granted to the defendant to amend the orders sought. The order sought is that the plaintiff provide security for the costs of the proceedings in the sum to which I have referred or such other amount as determined. The amendment was to delete the reference to the Uniform Civil Procedure Rules 2005 (NSW), this being an application brought pursuant to the Court's inherent jurisdiction.
The defendant additionally seeks an order staying the proceedings pending payment of the security into court.
Read in support of the motion is an affidavit of Vincent Parisi, the defendant's solicitor, affirmed 3 February 2016. Objection was taken by the plaintiff to discrete paragraphs but I have determined to admit the whole of the document since the issues raised went to weight rather than admissibility.
The motion refers to a statement of claim against the defendant which was filed by the plaintiff on 30 March 2016 in the Equity Division of this Court. In the statement of claim the plaintiff seeks an order against the defendant for a sum of money being the claimed amount of $6.2 million together with interest and costs. The total claim against the defendant is for a sum of almost $6.8 million.
The plaintiff pleads that, in or about 1999 her son (the defendant) asked her if he could borrow the sum of $2 million using a property she owned in Riverstone as security. The plaintiff pleads that her son promised to make all repayments to the bank issuing the loan such that he would be responsible for the repayment of the entirety of the loan and interest. The plaintiff pleads in pleadings and particulars that she relied on his statements.
She subsequently obtained a loan facility in the amount of $2 million from the ANZ Bank and she says that money received from the bank went to her son. The plaintiff pleads that the defendant used the money to purchase a business, Combined Excavations Pty Limited, a property at Drummoyne, and some factory storage to be used for equipment, in furtherance of the defendant's business.
The plaintiff pleads that in or around January 2009, the defendant asked the plaintiff to re-finance the loan indicating he required further funds and the plaintiff did so by arranging a further loan of $4.1 million with the Westpac Bank. When that money was received from the bank, she transferred the whole amount to the defendant who subsequently told her he had used the money for his business and that he would attend to making all repayments on the loan.
The plaintiff indicates in her statement of claim that she at no stage received statements or any document or other correspondence from the bank, believing all such correspondence went directly to the defendant or was in some way intercepted by him. She pleads the defendant frequently asserted he was repaying the loan and attending to it and that there was nothing for her to be concerned about.
On or about 30 January 2009 the plaintiff pleads that the loan facility was increased to the sum of $5 million. In August 2009 an additional $100,000 was borrowed by the plaintiff at the request of her son to fund some development costs associated with the conduct of his business. The plaintiff indicates at paragraph 22 of the pleadings that she was not aware of a variation to the loan, and that she saw no correspondence in relation to the loan.
Subsequently, on about July 2013, the plaintiff pleads that she became aware of problems with the loan and of the appointment of a receiver in relation to the property. The property was subsequently sold, although the amount for which it was sold is in dispute and the plaintiff pleads that the whole of the funds secured on the sale of the property went to the bank to pay the loan obtained for her son.
In a defence filed 15 May 2015, the defendant denies the plaintiff's claim, asserting such moneys borrowed by the plaintiff were for her own benefit, and that the loan moneys were never received by him. He denies responsibility for the loan moneys.
The defendant raises in his defence the operation of the Limitation Act 1969 (NSW) and asserts that the whole of the plaintiff's claim is barred.
There have been earlier motions that the Court has had to determine relating to these proceedings. On 4 December 2015 Adamson J dealt with a show cause hearing that came before her on 3 December 2015. The defendant had raised issues concerning the attestation of an affidavit by the plaintiff and whether or not it was sworn contemporaneously with annexures which were attached. Her Honour ultimately made orders for the affidavit to be re-sworn in identical form save as to date. Her Honour made orders for costs in favour of the defendant, costs which, as of today, are yet to be paid.
In support of the defendant's motion, the defendant relies upon the affidavit of his solicitor Mr Parisi. Mr Parisi deposes that he received some instructions from his client in or around December 2015 to the effect that the defendant was concerned that the plaintiff was divesting herself of assets so that any costs orders made against her would not be recoverable. Mr Parisi has undertaken various searches on title and discovered that the plaintiff had, in fact, transferred her real property to her daughter Christina. The transfer of property was for both a property at Croydon and a property in Surfers Paradise.
The plaintiff objected to the affidavit filed by Mr Parisi, specifically paragraphs 9, 10, 11, 12 and 13. Broadly speaking, those paragraphs deal with the costs that the defendant has incurred to date in relation to the claim against him, together with estimates of costs that will be incurred in the future in defending the action. Mr Parisi additionally deposes to the fact that the costs order made on 4 December 2015 have not yet been paid.
The paragraphs that are objected to were said to lack sufficient particularity to permit the Court to make any proper estimate of the costs involved in this litigation. The expertise or experience of Mr Parisi is called into question, in terms of his capacity to provide a proper estimate of costs, in particular costs likely to be encompassed by an award for costs against the plaintiff.
Whilst I accept that there is a lack of particularity to some extent in the impugned paragraphs, it seems to me that Mr Parisi does have some capacity to advise the Court, certainly for costs already incurred, but to give an estimate of those likely to be incurred in the future. The level of particularity in the paragraph is something which, to my mind, is more relevant to weight than to admissibility and on that basis, I determineD to admit the evidence.
Mr Stitt, who appears for the defendant, submits that the court should make the orders sought in the exercise of its inherent jurisdiction. He says the orders should be made in favour of the defendant as sought. It is submitted that the plaintiff's claim will be difficult for her to succeed in. There is the question of the application of the limitation period which, it is contended, renders the action barred.
The question of the plaintiff's financial means is raised as an issue, and it is contended that the plaintiff has no obvious means of satisfying an adverse costs order. It is submitted that the transfer of her Croydon property to her daughter Christina, was done as a means of avoiding any order for costs in the defendant's favour. Additionally, the plaintiff has other litigation on foot in the Probate Division and the costs of the two sets of litigation, together with the ordinary expenses that the plaintiff has for day to day life, will quickly exhaust the cash deposit the plaintiff says she has standing to her credit.
Finally, the defendant argues that his defence is a substantive one and gives rise to further concerns about the plaintiff's claim against him. It was, in summary, contended that the plaintiff has made herself "judgment proof" by her actions in transferring her property.
In reply, the plaintiff relies upon her affidavit of 11 February 2016 together with the affidavit of her solicitor, Mark Smith, of 17 March 2016. As to the transfer of her real property assets to her daughter, the plaintiff deposes that the properties were transferred in accordance with a deed of transfer to her daughter on the basis of a gift made in gratitude of all the care and assistance provided by the transferee, that being the plaintiff's daughter, to the plaintiff throughout her life, and as a reflection of the good relationship between the transferor and the transferee.
The plaintiff deposes in her affidavit that she has no intention of avoiding legal costs should such an order be made in favour of the defendant and that she has the resources to pay such costs should any order be made in favour of her son. She deposes to the contents of a bank account she holds with the National Australia Bank said to be in excess of $40,000 on deposit. This is a fund that the plaintiff uses for her daily maintenance.
Mr Smith in his affidavit produces the deed of transfer as annexure A. The deed dated 31 July 2015 provides for the transfer of two properties for no monetary consideration. The recital in the deed refers to each of two properties, one at Croydon and one at Surfers Paradise, and notes that the transfer was by way of gift with no consideration to be paid by the transferee to the plaintiff. The transfer was effected on 29 July 2015. The deed notes that the plaintiff as transferor is the mother of the transferee and the gift of the two properties are made in gratitude of the care and assistance, and as a reflection of their good relationship. The deed additionally recites that the transferor wished to make the gift of the property during her lifetime specifically to prevent her other children, another daughter and the defendant, from receiving any benefits as beneficiaries of the plaintiff's estate after her death.
Mr Ireland, for the plaintiff, argues that the Court's inherent jurisdiction to order security for costs should only be exercised if necessary to do so to prevent the abuse of the court's process. It is conceded that the Court has the power to make such an order against an actual person and it is submitted an order of that nature can only be made when truly necessary to do so to protect the Court's process.
It is submitted that the plaintiff as a natural person brings a substantial claim against the defendant in her own right and for her benefit.
Reliance is placed on the plaintiff's affidavit in which she asserts she has the means to meet any costs order, and transfered her property for reasons unconnected with the litigation between she and the defendant. It is submitted that nothing in the evidence establishes that the plaintiff's claim could be characterised as an abuse of process.
Issue is taken with the amount of costs claimed by the defendant and the expertise of Mr Parisi to assess the costs in the way he has done. It is submitted that the plaintiff has, in transferring her two real property assets, done no more than attend to estate planning and management by a person of advanced years. It is submitted that there is no basis for the Court to conclude that the transfer of the properties was done as a means of frustrating any adverse order for costs against the plaintiff and the Court could not conclude that there has been any abuse of the Court's process.
The defendant contends that the Court has the power to make orders for security of costs against an individual and, in the circumstances of this case, should do so. The defendant has referred the Court to what are said to be serious difficulties with the viability of the plaintiff's claim, not least being the issue of the application of the Limitation Act. It is submitted by the defendant that the fact that the plaintiff has transferred her only real assets, either at the time or around the time of the initiation of these proceedings, mean it is safe for the Court to infer that the transfer has been done as a means of frustrating any claim by the defendant for costs against the plaintiff should the action be adverse to the plaintiff.
[2]
Determination
The law is quite clear; the Court has an inherent jurisdiction to award security for costs and such an order may be made against an individual litigant in person as opposed to against a corporation.
The decision of Rajski v Computer Manufacturing and Design Pty Ltd [1982] 2 NSWLR 443 ('Rajski'), considers the power of the court to make such an order and conclude that there is a power inherent in the jurisdiction of the Court, independent of any statute or rule, for the Court to make an order for security for costs. It is a power said to be inherent in the Court whether at common law or equity. In Rajski, it was noted that the basic rule that a natural person will not be ordered to pay security for costs is ancient and well established but, notwithstanding that rule, a plaintiff who is a legally assisted person may have security for costs order made against them.
The discretion of the Court to make such an order is wide and unhampered by any special rule as to whether or not security should be ordered. The Court was referred to Morris v Hanley [2000] NSWSC 957, a decision from his Honour Justice Young, as he then was, on 25 August 2000, in which the relevant principles for an order for security for costs are set out. In that decision, the history of the inherent jurisdiction and its origins were discussed together with matters relevant for the Court to consider in determining an application of this nature. Young J indicated that the inherent power to make an order of this nature comes from the same roots as the inherent power to summarily dismiss a proceeding as frivolous and vexatious. It is a power to be exercised relevant to litigation that appears to be without reasonable grounds, and that may be regarded as vexatious or harassing. It is ancillary to the Court's right to protect its processes against abuses of that nature.
In Morris v Hanley, the general principle was noted that the Court can and will interfere wherever there is vexatious and frivolous conduct for an unjust end. At paragraph [23] of the decision, the Court noted the factors that should be taken into account in considering whether or not to make an order for security for costs in the exercise of the court's inherent power. Although the list is not exhaustive the court should consider whether the plaintiff's claim is bona fide and whether the plaintiff has a reasonably good prospect of success; whether or not an order for security for costs will bring proceedings to an end and frustrate the proceedings; whether the plaintiff has a want of assets and how this was brought about; whether there is anyone standing behind the plaintiff who may benefit from the action and the question of delay and the strength of the case.
The court was additionally referred to the decision in Welzel v Francis [2011] NSWSC 477 and another decision, Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251. Each of these decisions consider the same principles and are also useful.
The Court's wide discretion both at common law and pursuant to the Civil Procedure Act 2005 (NSW) and Uniform Civil Procedure Rules 2005 (NSW), although the latter does not apply here, is such that an order need not be made even if there is a basis for making an order. The discretion is a wide one: Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026, at [85] - [86], which make that principle plain.
In determining whether or not to order security for costs the competing interests of the parties must be balanced. That principle has been settled in a number of authorities, including Idoport Pty Limited v National Australia Bank Ltd [2001] NSWSC 744 at [47].
The exercise of the Court's inherent power to make an award for security for costs requires consideration of the particular evidence that has been adduced by the parties, applying the principles of law that I have already referred to, to the evidence. If one turns to the considerations identified in the authorities as of relevance, the first is the question of the bona fides of the plaintiff's claim, its strength, and whether it could be said to be a sham. The plaintiff has filed a claim which, on the evidence, is one that, certainly at this stage of the proceedings, I cannot conclude is anything other than a bona fide claim. If the matters the plaintiff asserts are established to the satisfaction of the trial judge to the requisite standard, it is likely that her claim would be, at least in part, successful notwithstanding the issue of the applicability of the limitation period.
Whilst the claim may not be a straightforward one, if only for that reason, it must be regarded as an arguable claim. If it is an arguable claim, then the authorities indicate that the plaintiff should not be shut out from the Court's process to make her claim and seek determination of it. I am unable to conclude on the evidence that the plaintiff's claim is wholly without merit and nor can I conclude that it is brought as a means of harassing her son or putting him to needless expense. There is no basis for the Court to conclude that it is a vexatious claim.
There is evidence capable of establishing that the plaintiff has means, albeit modest means, and is not without the capacity to pay a costs order against her should such an order be made. I accept there must be some concerns about the plaintiff's means overall, given the transfer of valuable real property and the absence of any particular evidence as to the quantum of monies held by her on deposit.
The timing of the transfer of the properties is a factor to which the Court must have regard and I have given it some careful thought. Certainly there is a correspondence between the action taken by the plaintiff to transfer her assets in real property away from herself to her daughter for no monetary consideration, but one must view that action in the context overall of what appears to be a family dispute over a testamentary disposition, and the advanced age of the plaintiff. It is not an uncommon thing for older people to wish to determine the distribution of their estate rather than that being done following death.
Here, the plaintiff deposes that she wished to transfer her properties not just in recognition of her daughter's care and attention to her and the good relationship they share, but also as a means of ensuring that her property did not pass into the hands of two of her other children, one of them being the defendant.
It is not possible on the evidence before the Court to set aside that as a legitimate reason upon which a person might seek to transfer property to a family member and certainly the evidence is not such, in my view, as to establish that the transfer of the properties was necessarily undertaken by the plaintiff as a means of frustrating the Court's processes and rendering a nullity any order for costs which might be made against her. I am mindful that the Court should always be cautious before making any order which could prevent a litigant from pursuing a claim which appears, on its face, to be an arguable one.
An order made in this matter for the sum sought by the defendant, whilst relatively modest, would likely absorb almost the whole of the funds the plaintiff deposes that she has access to, not just to fund the litigation but also for her day to day maintenance. If the Court were to make the order for the sum sought by the defendant there is a basis to conclude that the plaintiff would be placed in personal difficulty in terms of her own day to day living expenses, as well as potentially being unable to continue to fund the litigation which she has commenced. If that is so then necessarily an order for security for costs would cut the plaintiff off from the jurisdiction of the Court. In that light, it seems to me that an order should only be made of the nature sought by the defendant where it is truly necessary to prevent an abuse of the processes of the Court.
Having considered all of the evidence and the legal principles to be applied, I cannot be satisfied that the plaintiff's action in transferring her properties away from her ownership, and her action filed against the defendant, in any way constitutes an abuse of process which requires the Court to exercise its inherent jurisdiction in this regard. That being so, the orders I propose to make are these:
1. The defendant's motion is dismissed.
2. The costs of the motion are awarded on an ordinary basis in favour of the plaintiff.
3. I stand this matter into the Registrar's list on 15 April 2016 for further mention and directions.
[3]
Amendments
19 April 2016 - Amendment to case title.
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Decision last updated: 19 April 2016