Plaintiff v Defendants

Supreme Court of Victoria|2016-02-24|Before: SIFRIS J

The application for security must be made promptly - Foss Export Agency Pty. Ltd. v. Trotman, Buckley v. Bennell (supra) at 308.
1. The further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for security for costs, the more difficult it will be to persuade the Court that such an order is not, in the circumstances, unfair or oppressive.
2. The same broad principle holds true where the application is, as in this case, to increase the amount of security already ordered.
3. Its application is mitigated by the fact that the plaintiff will have been placed on notice by an earlier application that security for costs is an issue.
4. In this case the original order was made without opposition by the applicant.
5. Further, the parties were given liberty to apply on 2 days notice.
It has been said that delay on the part of the defendant may give rise to a waiver of the defendant's entitlement to security for costs - Jennings Ltd. (In Holding) v. Cole, Roumeli Food Stores (NSW) Pty. Ltd. v. The New India Assurance Co. Ltd.
In Southern Cross Exploration NL v. Fire & All Risks Insurance Co. Ltd. Waddell J. said that the approach to delay should reflect the following well known passage in Lindsay Petroleum Co. v. Hurd:-

In the context of the broad discretion under s.533 and consistently with that approach delay is best regarded simply as a factor whose consequences are to be weighed in the balance in determining what is just between the parties.
In the circumstances of this case, including the existence of the previous security order, the inclusion of a provision for liberty to apply and the absence of any evidence of prejudice, I do not consider that there is any basis for a finding that the lapse of time since the original order weighs against the making of an order for further security.

44 For present purposes, the relevant principles that emerge from this necessarily brief review of the authorities, are in my view the following:

(a) Delay in making an application for security for costs, or further security for costs, is a most important and often a critical factor, essentially because it unfairly allows a plaintiff to proceed and incur costs on the assumption that no application is to be made.

(b) Delay is more significant, and often critical, in relation to security for past costs although it may also be a relevant factor in relation to security for future costs.

(c) Prejudice to a plaintiff is assumed and presumed because of the delay. However, each side may adduce evidence in support of, or against, such prejudice.

(d) Despite delay, security may be granted for past costs (in whole or in part) where it is established that there is some conduct that negates the prejudice, harshness, or oppression, that is otherwise apparent when there is a delay and substantial costs have been incurred. The Court retains a broad discretion which requires all relevant facts and circumstances to be taken into account. Each case must be decided in accordance with its own peculiar facts and circumstances.

45 The decision of Whelan J - containing the express invitation - was delivered on 24 August 2012 following a hearing on 9 and 17 August 2012. At this point there was $5,007,674.61 in the Yara account and $18,938,117 in the Apache Fertilisers account.

46 In May 2014, the amounts were $2,927,541.76 and $14,436,974.02 respectively. The Deputy Commissioner of Taxation had indicated that amended assessments would be issued. All parties had been joined. The ANZ and Receivers' costs were substantial. The parties with Litigation Indemnity Claims were likely to incur substantial costs payable ahead of ANZ.

47 The Holdback Amount continued to reduce. In December 2014, the amounts were $1,905,757.86 and $11,132,620.35 respectively. This represented a substantial reduction - and clearly changed circumstances - since the decision of Whelan J in August 2012, particularly in circumstances where much more was known in relation to claims on the Holdback Amount, and the resultant inevitable conclusion that nothing would be left for the ANZ and the Receivers in respect of their costs which contemplated a surplus or balance of the Holdback Amount.

48 In April 2015, the amount in the Apache Fertilisers account had halved from the amount as at 24 August 2012. It was $9,049,481.81. In June 2015, it was $6,622,051.84. All parties costs were increasing at a rate that many would consider alarming.

49 The answer to the rhetorical question posed by Mr Solomon QC as to when between July 2014 and November 2015 the application should have been brought is self-evident. It is not necessary to delineate a point in time. It is sufficient to say that it should have been well before November 2015, particularly in circumstances where ANZ and the Receivers did not accept the position asserted by Mr Oswal's solicitor in the 22 July Letter, namely that any application for security for costs would be premature.

50 The proceedings, which are on any view substantial, had been fixed for trial on 11 April 2016. These applications are truly last minute applications (albeit with some justification as set out below) that should ordinarily be discouraged. The applications should ideally have been brought much earlier.

51 I am not in the circumstances and facts of this case, attracted by the submission that it was necessary to wait the issue of the revised assessments and that this was simply acceding to the warning of those from whom security was sought as to the premature nature of the application. The simple answer is that it was neither necessary, nor desirable, to wait. In July 2014, at the time of the letter suggesting that any application would be premature (a position that the ANZ and the Receivers did not agree with), the position had sufficiently deteriorated since the decision of Whelan J and was deteriorating every day.[30] The Holdback Amount was going down and costs were increasing. The financial position had changed in the two years since the decision of Whelan J. At some point - well before November 2015 - it was incumbent on the ANZ and the Receivers to make the application. In fact, I had made an order to such effect on 13 June 2014.

52 However, notwithstanding such delay, and in relation to the applications before me, the 22 July Letter is of some importance.

53 In my opinion, and in the peculiar circumstances of this case, and notwithstanding the delay, as I have found, it is neither harsh, nor unreasonable, for the ANZ and the Receivers to obtain some security for costs prior to 19 November 2015. The prejudice that ordinarily follows from such delay, namely, the (unfair) incurring of substantial costs by the Oswals while the ANZ and the Receivers stood by, is, in the circumstances, and because of the 22 July Letter (being in fact an invitation or directive to delay), absent.

54 Accordingly, although there has been delay because, as I have found, the applications could and ideally should have been brought earlier, the failure to bring them has not resulted in Mr and Mrs Oswal incurring very substantial costs on the assumption that no such application or further application would be made. In fact, the contrary is the case. They incurred costs well knowing that a later application would be made. In fact, it was the Oswals that encouraged, and indeed insisted, on the later application. The short point is that they knew the application was coming, and that it would have come earlier but for the 22 July Letter. They did not proceed and incur costs in ignorance. The assumption that usually causes the harshness and oppression is to a great extent absent, a position brought about by their conduct.

55 However, in the exercise of my discretion, I consider that there are other factors that are relevant to the extent to which security should be ordered for past costs. Despite the forceful submission made by Mr Solomon QC to the effect that it was artificial and inaccurate to divide the costs into past and future, a submission that does have some basis,[31] I nevertheless consider that it is a useful approach.

56 By waiting until the revised assessments were issued, of course at the suggestion of the Oswals, the applicants risked making the application after or about the time the proceedings were fixed for trial. In a large case such as this, this is not desirable. It is not in the interests of the parties or the Court. In recent times, large litigation has severely tested the resources of the Court. If the resources of the Court are in place and the trial does not proceed, or is unreasonably delayed because of appeals or failure to adequately provide security, if ordered, huge wastage and misallocation of resources may ensue. The interests of the Court are also a proper and entirely appropriate consideration in relation to any application for security for costs. From this point of view the application was made late.

57 The matter is not free from difficulty. However, doing the best I can and taking all matters into consideration, I consider that the ANZ and the Receivers should have security for their costs but not from 22 July 2014, and certainly not from some time in 2012. Notwithstanding the delay which, for the reasons given, is of limited assistance to the Oswals, the application should have been made by the end of October 2014 at the latest. On 3 October 2014, I fixed the proceedings (other than proceeding 804 which had not yet been transferred) for trial on 3 August 2015.

58 Once the proceedings had been fixed for trial, consideration should have been given to making the application, in light of the changed circumstances, the disagreement with the Oswals' solicitor's suggestion that any such application would be premature, and the trial date. The application should have been made by the end of October 2014. In my view, and in light of all of the circumstances, it would be harsh and unreasonable, despite their conduct, to require the Oswals at this late stage to provide security for costs going back four years to 2012. This would not be fair or in the interests of justice.

59 The 22 July Letter was no more than a position taken by a party in adversarial and heavily contested litigation. The adversary and addressee not unexpectedly rejected the position and agreed to wait for a brief period. The wait was far longer than that, and it was unnecessary to wait for the formal assessments. Even without them, it was clear that ANZ and the Receivers were substantially exposed in relation to costs.

60 For these reasons (and subject to paragraph 63), security for the past costs of the ANZ and the Receivers should be ordered only with effect from 1 November 2014.

61 All parties should (subject to paragraph 63) have security for their costs or disbursements in accordance with their respective applications, from the date of their respective applications up to and including the first day of trial. I am not persuaded by the stultification argument which was in any event only faintly pressed. The evidence is entirely lacking.[32]

62 I do not accept the argument that in this case, the issue of stultification could only properly be assessed if the amount of security requested was known. First, the staging of the applications was by consent. Second, and in any event for the most part, the quantum of costs was sufficiently known. Finally, given the matters raised in relation to stultification, it would not have made any difference.

63 In the exercise of my discretion, I am not prepared to order any security for costs in Proceeding 804. The issues that have been fixed for trial in that proceeding are of limited compass and these issues and evidence, to a sufficiently great extent, overlap with the other two proceedings.

64 It is not necessary to deal with this aspect. The suggested basis, namely that I expressed a negative view or a bias against certain proposed arguments intended to be raised by the Oswals (and refused documents relating to such arguments) has no force because the arguments were not pressed during the hearing of the applications.

65 At the commencement of the hearing Mr Solomon QC applied for leave to cross-examine Mark Gerald Popplewell, primarily on his affidavit of 3 February 2016, dealing with stultification issues. I refused the application. On interlocutory applications it is only in exceptional circumstances that cross-examination should be permitted. This is not such a case or application where leave should be granted. Having read the affidavit, I formed the view that it was not sufficiently probative and of such weight that required - in fairness given its late filing - further exploration by way of cross-examination.

[1] Proceeding 4653 of 2011 is the claim made by Mrs Oswal. The basis of the claim is set out in previous judgments (See [2014] VSC 209 and [2013] VSC 615). I assume familiarity with the judgments. Defined terms bear the same meaning as in the judgments. Proceeding 1995 of 2012 is the claim made by Mr Oswal. The basis of the claim is set out in the judgments. Proceeding 804 of 2015 was transferred by the Federal Court of Western Australia. The Oswals are defendants and have made significant counterclaims. The basis of the claim and relevant background is set out in [2015] FCA 49. I assume familiarity with this judgment.

[2] Affidavit of Kenneth Alexander Adams sworn 25 November 2015 ('Adams 1995 affidavit'); tabs 20 (Apache/Chemical Holdings) and 21 (Yara). The Deeds also comprise exhibits to the Adams affidavit in Proceeding 4653.

[3] Adams 1995 affidavit, paragraph [22]; tabs 23 and 25-26 (Yara); tabs 22 and 24 (Apache/Chemical Holdings).

[4] Adams 1995 affidavit, paragraph [23].

[5] Adams 1995 affidavit, exhibit KAA-1, tab 32.

[6] Adams 1995 affidavit, exhibit KAA-1, tab 33.

[7] Adams 1995 affidavit, exhibit KAA-1, tab 34.

[8] Adams 4653 affidavit, exhibit KAA-1, tab 35.

[9] Adams 1995 affidavit, exhibit KAA-1, tab 35.

[10] Adams 1995 affidavit, exhibit KAA-1, tab 41.

[11] Adams 1995 affidavit, exhibit KAA-1, tab 42.

[12] Adams 1995 affidavit, exhibit KAA-1, tab 27 (page 456).

[13] Adams 1995 affidavit, exhibit KAA-1, tab 27 (page 462).

[14] Adams 1995 affidavit, exhibit KAA-1, tab 27 (page 466).

[15] Adams 1995 affidavit, exhibit KAA-1, tab 27 (page 474).

[16] Adams 1995 affidavit, exhibit KAA-1, tab 30.

[17] Adams 1995 affidavit, exhibit KAA-1, tab 31.

[18] Adams 1995 affidavit, exhibit KAA-1, tab 38.

[19] Adams 1995 affidavit, exhibit KAA-1, tab 43.

[20] Adams 804 affidavit, exhibit KAA-1, tab 6 (to Mrs Oswal's solicitors); tab 7 (to Mr Oswal's solicitors).

[21] [2013] NSWSC 611 (citations omitted).

[22] [2013] NSWSC 324 (citations omitted).

[23] [2012] NSWSC 385 (citations omitted).

[24] [2012] NSWSC 511 (citations omitted).

[25] [2011] FCA 1041 (citations omitted).

[26] [2011] WASCA 176 (citations omitted).

[27] [2010] NSWSC 886 (citations omitted).

[28] [1995] 19 ACSR 68 at 71 (citations omitted).

[29] (1987) FCR 497 at 514-5 (citations omitted).

[30] Legal costs and disbursements of the ANZ and (presumably) the Receivers as at 24 August 2012 were about $2.2m. By 22 July 2014 they were about $17m.

[31] According to Mr Solomon, given the procedural history in relation to security for costs, and in particular the decision of Whelan J, and the specific basis of such decision (at [63]), all costs would be and were intended to be secured if the Holdback Amount was insufficient. In this sense, it was unnecessary to distinguish between past and future costs.

[32] The Oswals have incurred costs to date in excess of $38m. The litigation funder stands to gain an enormous amount, if the claims succeed. The evidence as to the financial position of the funder, the potential beneficiary, is entirely lacking. Further, the Oswals are running numerous actions in other Courts.

At a glance

Court

Decision date

Before

Source

Judgment (61 paragraphs)

Cases Cited (1)