Plaintiff v Defendant

3 By order made on 24 July 2015, this proceeding is to be heard together with proceeding SCI 2015 1299. In that proceeding, there are three individual plaintiffs, Ali Dirani, Said El-Khishin and Souhiel Fneich. They sue the Imam Ali Islamic Centre Inc, the defendant in this proceeding, Ali Al Bakiry and Ahmad Yatim. The claims are for a variety of declarations and orders relating to the validity of the appointment of office holders and control of the books and records of, and property owned by, the first defendant, which is an incorporated association ('the Association Proceeding').

4 The defendant initially requested security for its costs by letter dated 2 July 2015, but without any substantiation of the amount of security sought. The parties then corresponded at length before the summons for security (and other relief) was issued on 24 September 2015. That summons seeks security for costs in this proceeding only. This is unsurprising, as the individual plaintiffs in the Incorporated Association Proceeding (assuming them to be resident in Australia) are not likely to be susceptible to an order for security for costs.

5 The plaintiff is ordinarily resident out of Victoria. In accordance with r 62.02(1)(a) of the Rules the threshold for the exercise of the discretion is established. This reflects the principle explained by Justice Gummow in Energy Drilling Inc v Petroz NL[1] that the purpose for ordering security for costs against an applicant ordinarily residing outside Australia is protective, 'so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement.'

6 But residence out of Victoria alone is insufficient. Security for costs will not be ordered against a party simply because that party resides outside the jurisdiction.[2] The court must weigh all of the circumstances of the case.[3] Justice McHugh observed in Chellaram that for many years the practice has been to order a non-resident party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.

7 If the plaintiff resides in a jurisdiction out of Australia in which a judgment could be enforced in accordance with the Foreign Judgments Act 1991 (Cth), or in another way, the Court may, if it does order security, limit the amount to the additional costs which the defendant would incur for the registration (or recognition) and execution (or enforcement) of the judgment in the other jurisdiction. To avoid an order for security for costs being made, the foreign plaintiff must show that it has assets out of Australia against which any order for costs could be enforced under the foreign judgments legislation.[4]

8 A director of the plaintiff and its local solicitor, Anne Stevens swears in her affidavit of 7 October 2015, that the book value of the plaintiff's assets in Ontario, Canada, is CAD $1,510,120.00. She produces other less persuasive, but relevant, evidence that the market value of its assets exceeds CAD $3,600,000.00. She also undertakes on behalf of the plaintiff not to contest the registration or enforcement of any judgment for costs against the plaintiff in Canada.

9 The plaintiff has also submitted evidence of Mr Igor Ellyn QC, a Canadian expert lawyer, as to the processes and costs involved in having a judgment of the Supreme Court of Victoria recognised and enforced in Ontario.[7]

10 Justice may require that an order for security for costs be made in order to protect a defendant against the risk that it will be unable to recover any costs awarded. Such a risk may arise if:

(a) the party against whom the order for security is sought has no assets in the jurisdiction; and

(b) uncertainty attends any prospect of the successful party enforcing costs orders in the country where the appellant is resident.[8]

11 Rule 62.02 of the Rules require the making of a judgment, by assessing the risk that the plaintiff, a resident out of Victoria and a corporation, will be unable to pay the defendants costs if ordered to do so. A risk assessment is, of necessity, imprecise. The Rule calls for a practical, commonsense approach to the examination of the plaintiff's financial affairs and the difficulty of enforcement of any judgment for costs in Ontario.

12 The general approach where a plaintiff has no assets in Victoria is to protect a defendant against this risk. The provision equips the Court with the means to require that the defendant be secured against that risk.

13 This is a case where the evidence and the several relevant factors, when weighed in the balance, point in favour of the Court exercising its discretion to order security for costs against the plaintiff. Such security being limited to the costs of recognition and enforcement of the judgment of this court for costs in Ontario. The following factors are relevant to be weighed in the balance.

14 In principle, a case for security being ordered has been made out. Such is the strong prima facie position in relation to a claim brought by a person outside the jurisdiction of the court with no assets within the jurisdiction.[9]

15 The schedule to the regulations made under the Foreign Judgments Act 1991, does not include Ontario, Canada as a jurisdiction in which Australian judgments may be enforced. It does however, include the province of Alberta and other provinces having common law systems of justice. The evidence of the plaintiff's expert, Mr Ellyn, shows a direct and indirect route for the recognition and enforcement of the judgment of this Court in Ontario, the costs of which are in each case about AU$10,000.00.

16 Aspects of the process described by Mr Ellyn that make it cumbersome, or give rise to uncertainties, have been overcome by the offer of undertakings by Counsel for the plaintiff. In addition to the undertaking offered by Ms Stevens, the undertakings offered are that the plaintiff, by its Counsel, undertakes to the Court and to the defendant in this jurisdiction and in Ontario, and any other Province of Canada in which recognition proceedings are brought, that:

(a) the plaintiff is the sole legal and beneficial owner of the property located at 120 Bermondsey Road, Toronto, Ontario, Canada ('Canadian Property');

(b) the Canadian Property is unencumbered and there are no registered or unregistered charges over it;

(c) the plaintiff will not, without providing 60 days' notice in writing to the defendant's lawyers, sell or otherwise encumber the Canadian Property;

(d) if the Canadian Property is sold or otherwise encumbered, the plaintiff agrees and undertakes to pay such sums as are ordered by an Australian court for security for the defendant's costs in addition to the security provided by this order ('Security'); and

(e) upon payment of the Security in accordance with the order referred to in paragraph (d), paragraphs (a) to (d) of this undertaking are discharged.

17 I consider that the undertakings provide sufficient protection to the defendant if the plaintiff provides security for the costs of the recognition and enforcement process. These undertakings appear to me to be significant in dispelling some of the risks inherent in the process of recognition and enforcement of a judgment of this Court in Ontario.[10]

18 It is now well established that the ease and convenience of enforcement procedures in the plaintiff's country of residence is the primary consideration in deciding whether or not to order security, and the quantum of the security, where foreign residence is the ground invoked.[12]

19 Notwithstanding the submissions by Counsel for the defendant that the evidence as to the value of the plaintiff's assets in Ontario, against which the defendant may execute a judgment, is subject to doubt and uncertainty (the doubt being whether they are free of encumbrances or charges), I accept the affidavit of Ms Stevens as sufficient and, when combined with the undertakings the position of the defendant is sufficiently protected. True it is that the process of recognition and enforcement will involve some time, but that time will be reduced by the undertakings.

20 The defendant relied on other matters that in other cases are relevant to the exercise of the discretion and need to be weighed in the balance. These included that:

(a) the plaintiff did not suggest that an order for security for costs would stifle its capacity to continue the proceeding;

(b) the claim of the plaintiff is not defensive;

(c) there is no suggestion that the plaintiff is unable to pay security for costs; and

(d) this is not a case where the order is shown to impose an injustice on the plaintiff.

21 In this case, none of the matters raised by the defendant appear to me to outweigh the 'primary consideration' in this case. That is, the significance of the matters arising out of the evidence as to the recognition and enforceability of any judgment in Ontario against assets proven to exist in Ontario.

22 In some cases, the fact that the plaintiff's interests have been placed in the hands of a large firm of solicitors gives rise to an inference that the plaintiff has been prepared to and has transferred funds to Australia for legal costs and disbursements incurred on its behalf by its solicitors.[13] That supports the award of security, but does not affect the primary position established by the enforceability of any judgment in Ontario.

23 The plaintiff did not contend that delay is a factor in this case.

24 This proceeding will be tried together with the Association Proceeding. In that proceeding, the plaintiffs are individuals and there is no claim for security for the defendant's costs in that proceeding. The witnesses in the Trust Proceeding overlap to some extent the witnesses in the Association Proceeding. There is no evidence that enables the costs in the separate proceedings to be disentangled.

25 The defendant submitted that evidence showed the individuals brought the Association Proceeding for the benefit of the plaintiff in this proceeding and that the Trust Proceeding was the 'front door', whilst the Association Proceeding is the 'back door' to control of the Property. It appears from the evidence (which I will not stay to detail) to be well founded that the claims in the Association Proceeding are ultimately for the benefit of the plaintiff. This may give rise to an application, if those individual plaintiffs are unsuccessful in their claims, for an order for costs against the plaintiff. It does not, however, affect the present position that there is no application for security in the Association Proceeding and there is an overlap between the two proceedings which would affect the quantum of costs if I were persuaded that costs in addition to the recognition and enforcement costs were warranted. The fact that the plaintiffs are individuals tends to diminish the quantum of any costs to be ordered against the plaintiff in this proceeding, but does not affect the fact of security and the 'primary consideration' I have described above.

26 The plaintiff criticised the defendant's evidence of its estimate of costs as being insufficiently proven and not properly based. Having regard to my decision that the appropriate order is to order security limited to the cost of recognition and enforcement of any costs judgment in Ontario, the proof of the defendant's costs estimate is not relevant. Nevertheless, in case the matter goes further, I make the following observations:

(a) the estimate is given in a letter dated 18 August 2015, (exhibit JNS7 to the affidavit of Jade Nicole Saunders sworn 23 September 2015) which has been merely produced and is not verified adequately. The subject of costs is, however, an area of expertise in which the Court is equipped to consider, despite the failure properly to prove the estimate, providing a proper basis for the calculation is given. It has not been; and

(b) the defendant rightly complained that this point had not been taken or clearly foreshadowed in the many letters and emails exchanged subsequently to the estimate being given. Had I been persuaded that this was a case in which it was appropriate to order costs beyond the costs of recognition and enforcement, I would have allowed the defendant to put in admissible and properly based evidence as to the quantum of the costs.

27 As a general rule, where a claim 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.[14] The defendant raised matters in this respect arising out of the recent discovery that at a critical time, so far as this proceeding is concerned, the plaintiff had been dissolved (in May 1995), and later revived (in 1998). As I said in argument, the material before me does not enable me to judge the prospects of this matter affecting the outcome of the claim, given that the plaintiff maintains (on authority) that the dissolution and revival has no impact on the plaintiff's claims (exhibit HRR-6 to affidavit of Howard Roger Rapke sworn 1 December 2015). In the result the claim has reasonable prospects of success, as does the defence to the claim.

28 The plaintiff offered $11,000.00 by way security for the defendant's costs of recognition and enforcement of any judgment for costs in Ontario. This is an appropriate sum having regard to Mr Ellyn's evidence.

29 After I announced may decision as to the amount of the security for costs, the plaintiff produced two letters of offer made without prejudice save as to costs, one dated 1 September 2015 the next 28 October 2015. Each letter was, expressly or by implication, a Calderbank letter.[15] Neither letter was accepted or rejected, rather both were ignored. The first letter is prior to the affidavit of Ms Stevens which established the existence of assets in Ontario sufficient to satisfy any anticipated judgment for costs, and the evidence of Mr Ellyn as to the recognition and enforceability of the judgment in Ontario. The first letter does not consider Ms Stevens' evidence or undertaking not to contest the registration (recognition) of enforcement of the judgment. Nor does it take into account the undertakings offered in the course of the hearing. It is therefore not better than the order I will make based on the undertakings.

30 The terms of the second letter do rely on Ms Stevens' evidence and undertaking in addition to the evidence of Mr Ellyn. But it does not consider the undertakings proffered by Counsel for the plaintiff in the course of argument.

31 Those undertakings are highly relevant to the decision I have made, in that they remove any doubt about the status of the plaintiff's assets being unencumbered or subject to charges and protect the defendant from a change of position. To a significant extent, the undertakings give security to the defendant of the kind that an order for security for costs also gives.

32 In my view, the implied rejection of each offer at the time it was made was not unreasonable having regard to the circumstances and evidence then subsisting.

33 This question, like all questions of costs, is in the discretion of the judge and is to be decided according to the circumstances of the particular case. In exercising the discretion as to costs, I am reminded that the court should consider the circumstances existing at the time the offer was made and, in judging the conduct of the offeree, avoid the perils of hindsight.[16]

34 Accordingly, for these reasons, I will not allow indemnity costs in favour of the plaintiff from any date, and will order that the costs follow the event, so that the plaintiff pays the defendant's costs of the application on a standard basis.

[2] CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 at 284-5.

[3] PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321 at 323 ('Chellaram').

[4] Barton v Minister for Foreign Affairs;5 Berry v Innovia Security Pty Ltd,6 Soh v Commonwealth (2006) 231 ALR 425; [2006] FCA 575; Williams, Civil Procedure Victoria, 62.02.30.

[7] Exhibit HRR-1 to the Affidavit of Howard Roger Rapke sworn 25 November 2015.

[8] Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2013] FCA 131 per Tracey J at [12].

[9] Soh v Commonwealth [2006] FCA 575; (2006) 231 ALR 425 at [26].

[10] _Berry v Innovia Security Pty Ltd;_11 Maxim's Caterers Ltd v Magnona Pty Ltd (No 1) [2010] 450 at [3]-[13].

[12] Azmin Firoz Daya v CX Reinsurance Company Ltd [2102] NSWSC 1213 at [26]-[28].

[13] Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd [2013] FCA 131.

[14] Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497; Harmonious Blend Building Corporation Pty Ltd v Keen [2014] VSC 649 at [52].

[15] Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333.

[16] Richfield Investments Pty Ltd v Oversea-Chinese Banking Corp [2004] VSC 351; Baneth v Asteron Life Ltd (No 2) [2005] VSC 394; Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435.