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[2020] VSC 658
General information, not legal advice.
Supreme Court of Victoria
2020-10-08
KENNEDY J
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Security for costs - Appeal from decision of judicial registrar - Application for security for costs against a natural person - Whether reason to believe that the plaintiff will be unable to pay the defendant's costs if he is unsuccessful - Whether any additional factor justifies security for costs being ordered - Appeal allowed - Security for costs granted.
1 This is an appeal by the sixth defendant (Mr Said) under r 84.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules) against certain orders of Judicial Registrar Matthews made on 13 March 2020.
2 In particular, Mr Said seeks to appeal orders that his application for security for costs be dismissed; further, that a notice to produce he issued be set aside.
3 The appeal is an appeal to be conducted by way of a hearing de novo.[1] However, the parties generally relied on the affidavits tendered at the hearing before the judicial registrar,[2] save that Mr Said also sought to rely on an affidavit of a Mr Stents, solicitor, and an affidavit of Mr Said, both dated 28 August 2020 (the two further affidavits).
4 The two further affidavits were admitted into evidence with reasons to be given, below.
6 The plaintiff commenced this proceeding against the Mordialloc Sporting Club (MSC) by statement of claim filed on 3 September 2018 (V1).
7 The plaintiff is a member and former director of MSC which is an association incorporated pursuant to the Associations Incorporation Reform Act 2012 (Vic) (the Act).
8 MSC is also a tenant of property owned by John Barr Investments Pty Ltd (JBI). The lease between JBI and MSC gave MSC a right to purchase the freehold. MSC has subsequently sought to exercise that right and to on sell the property to third parties with a lease back arrangement.
9 The plaintiff in this proceeding seeks orders setting aside the sale. JBI seeks the same relief in a separate proceeding, S ECI 2018 01223.
10 On 4 June 2019 the plaintiff sought to add Mr Said and five others as defendants and exhibited a proposed amended statement of claim (V2).
11 On 5 June 2019 orders were made giving leave to the plaintiff to add Mr Said and the others who are all directors of MSC.
12 On 17 June 2019 the plaintiff's solicitors filed an amended writ and amended statement of claim adding the six defendants (the ASOC). However, the version filed was different to V2 (V3).
13 As highlighted by the judicial registrar,[3] the allegations made by the plaintiff in the ASOC include those concerning:
(a) The conduct of MSC's affairs by the second to fifth defendants;
(b) The circumstances in which he and certain other former directors were 'forced' to resign, which is said to constitute oppressive conduct in contravention of the Act;
(c) The validity of the appointment of Mr Said and the seventh defendant as directors of MSC;
(d) Whether MSC had a validly constituted board of directors at various times, and whether certain acts of MSC at those times were validly undertaken;
(e) The circumstances in which the lease of the premises occupied by MSC and an option to purchase that property under the lease came to be exercised by MSC, followed by a purported sale of the property from MSC to two companies which apparently were to develop the property and lease part of it back to MSC upon completion of that development; and
(f) Conflicts of interest alleged in respect of Mr Said and/or the seventh defendant, who are alleged to have had a material interest in the two companies to whom the property was sold, which matters were not disclosed to members of MSC.
14 Apart from MSC, none of the defendants have yet filed a defence.
15 In the prayer for relief contained in the ASOC, the plaintiff sought injunctions restraining MSC from taking any steps to purchase, sell, transfer, or otherwise deal with its interest in the property, along with various declarations about the acts of MSC which are impugned by the plaintiff. In addition, the plaintiff sought damages against each of the second to seventh defendants.
16 Following correspondence between the parties as to alleged deficiencies in the ASOC, on 29 July 2019 the plaintiff's solicitors sent an email to the court attaching an affidavit of Richard John Ashley sworn 29 July 2019 seeking leave to add six further defendants, and to file and serve a proposed further amended statement of claim dated 30 July 2019, being exhibit 'RJA-2' (V4).
17 On 6 August 2019 Mr Said's solicitors sent a letter by email to the plaintiff's solicitors which requested that the plaintiff, by 12 August 2019, provide credible evidence to show that the plaintiff would be able to meet any adverse costs order made against him in this proceeding, including tax returns and a list of assets. The letter reserved Mr Said's right to make an application for security for costs.
18 On 13 August 2019 Mr Said filed a summons seeking orders that the ASOC be struck out as well as submissions opposing the plaintiff's application for leave to file V4.
19 On 15 August 2019 the plaintiff's solicitors sent a letter in response to Mr Said's solicitors' letter dated 6 August 2019. The letter denied that the plaintiff was impecunious, but did not adduce any information as to his financial position. The letter further stated:[4]
It is our view that if an order for security for costs was made against our client at this stage of the proceedings that this would stultify his ability to pursue his arguable case which has been legitimately instituted.
...
We note that in the exercise of the Court's discretion as to whether or not to order security for costs against our client, that it must carry out a balancing exercise. The Court must weigh up the injustice to our client if he is prevented from pursuing his proper claim by an order for security for costs, against any injustice to your client if no security is ordered and our client's claim is unsuccessful at the trial and your client is unable to recover costs from our client.
20 On 3 September 2019 Mr Said's solicitors then filed and served a summons seeking security for costs the subject of this appeal.
21 On 20 September 2019 the plaintiff's solicitors filed and served a summons and affidavit of Richard John Ashley sworn 20 September 2019 seeking leave to join JBI as the second plaintiff as well as to add a further six defendants (the same six sought to be added on 29 July 2019). They also filed and served a second proposed further amended statement of claim exhibited as 'RJA-16', which was the first joint pleading prepared by the solicitors and counsel for both the plaintiff and JBI (V5) (107 pages). Both sought orders setting aside the on-sale deed.
22 On 25 October 2019 the plaintiff's solicitors filed and served an affidavit of Richard John Ashley sworn 25 October 2019 in opposition to Mr Said's application for security for costs. The affidavit did not disclose any evidence as to the plaintiff's financial situation.
23 On 4 November 2019 Mr Said's solicitors served a notice to produce on the plaintiff via his solicitors (the notice to produce).
24 On 18 November 2019 the plaintiff served an affidavit of Richard John Ashley exhibiting a further proposed further amended statement of claim (V6) (112 pages) prepared by legal practitioners for both the plaintiff and JBI. V6 again sought orders setting aside the on-sale deed.
25 At the conclusion of the pleadings contest on 19 November 2019, Randall AsJ refused the plaintiff's application for leave to file and serve V6 and ordered that the plaintiff provide another proposed further amended statement of claim to the defendants on or before 18 December 2019. The various applications were otherwise adjourned subsequently to 13 March 2020.
26 At the hearing of the summons on 22 November 2019 the plaintiff made an oral application to set aside the notice to produce. Matthews JR later reserved her decision in relation to both the plaintiff's application to set aside the notice to produce and Mr Said's application for security for costs.
27 On 19 December 2019 the plaintiff provided a further proposed further amended statement of claim to the defendants (V7). In this proposed pleading the plaintiff sought to join JBI as the 14th defendant, not as the second plaintiff.
28 On 20 December 2019, Matthews JR published reasons to the effect that the notice to produce would be set aside and the summons would be dismissed.[5] She subsequently made orders to this effect on 13 March 2020.
29 On 20 February 2020 the plaintiff provided yet another proposed further amended statement of claim to the defendants (V8).
30 The claim is extensive, spanning some 128 pages. It included claims purportedly made on behalf of MSC and sought relief, inter alia, to set aside the transactions surrounding the sale. Although damages were sought on behalf of MSC, there was no longer a claim for personal damages in the name of the plaintiff.
31 At the hearing of the pleadings contest, on 13 March 2020 and 25 March 2020, Randall AsJ described the pleading as a 'dog's breakfast' . He refused the plaintiff leave to file and serve V8, but said that he would give the plaintiff leave to re-plead.
32 The parties are now awaiting formal reasons and orders from his Honour.
33 Any further pleading will constitute the ninth version of the statement of claim in circumstances where the plaintiff has not yet obtained leave to file any pleading since 5 June 2019.
34 As indicated already, the appeal is conducted by way of hearing de novo. However, r 84.10 provides:
84.10 Evidence
On the appeal, each party may, subject to any proper objections to admissibility -
(a) rely upon any affidavit used before the judicial registrar and upon any evidence given orally before the judicial registrar;
(b) by leave of the Court, rely upon an affidavit or oral evidence not used or given before the judicial registrar.
35 The two further affidavits sought to adduce evidence in three categories as follows:
36 The plaintiff objected to the material. He submitted that acceptance of the material would not discourage the practice of not putting forward one's best case before the judicial registrar.[9]
37 More particularly, the plaintiff submitted that no explanation was provided as to why the evidence in the first category was not obtained prior to the initial hearing. Further, that the evidence was speculative in nature. The plaintiff also alleged that the hearsay evidence the subject of the second category was actually 'triple hearsay'. However, given this was an interlocutory hearing counsel suggested that this went to the 'weight' rather than anything else.
38 In C Tina Pty Ltd v Barham-Florean,[10] Riordan J considered that the purpose of r 84.10 is to discourage the practice of not putting forward one's best case at the first hearing. However, he went on to consider that the requirements for leave should not be as stringent as under the former r 77.06(7). His Honour ultimately considered that, in the absence of prejudice, it was in the interests of justice to give leave to rely upon further affidavits in that case.[11] This latter approach was consistent with the approach of Derham AsJ in Commonwealth Bank of Australia v Saggese.[12]
39 Although it is preferable that a party bring forward its best case at the original hearing to avoid the need for unnecessary appeals, the discretion to grant leave is unconstricted. Any application for leave is also to be considered in the context of a hearing de novo wherein the date for determination of relevant facts is the date on which the matter comes before the judge on appeal.[13]
40 In such circumstances I consider that the ultimate consideration should be the interests of justice, taken in conjunction with the overarching purpose set out in the Civil Procedure Act 2010 (Vic), as well as the matters contained in ss 9(1) and 9(2) therein (which include any prejudice that may be suffered under s 9(2)(f)).
41 In terms of the first category, Mr Stents originally adduced evidence of a search before the judicial registrar which showed that a 'Raymond John Stuart' is a joint proprietor of a property at 14 O'Keefe Street, Wangaratta, Victoria. However, it was not clear if this person was the plaintiff.
42 In submissions before the judicial registrar, counsel for the plaintiff made various statements about the ownership of this property including:
43 This led the judicial registrar to consider that there was 'no confirmation as to whether the plaintiff is a joint owner of that property'.[14]
44 The evidence sought to be adduced from Mr Said's recent affidavit included:
Following delivery of the Reasons, I caused an online search to be undertaken of the electoral roll in relation to the name Raymond John Stuart (Electoral Roll Search). The Electoral Roll Search disclosed that a 'Raymond John Stuart' is enrolled at O'Keefe Street, Wangaratta, Victoria and at Station Street, Aspendale, Victoria. The address listed by the plaintiff in the Amended Statement of Claim filed on 17 June 2019 is 3/106 Station Street, Aspendale, Victoria (Aspendale address). A copy of the results of the electoral roll search is at page 58.
Based on the electoral roll search and amended statement of claim, I believe that the Raymond John Stuart who owns the Wangaratta property is not the plaintiff.
Given that almost a year has passed since the filing of the summons, in August 2020 I caused searches to be undertaken for any real property owned by the plaintiff in Victoria. The searches show that the plaintiff does not own any real property in Victoria, including the Aspendale address. A copy of those searches are at page 59 to 61.
45 The Australian Electoral Commission searches showed that a 'Raymond John Stuart', with an address at O'Keefe Street, Wangaratta, was enrolled to vote in the federal electoral division of Indi. It also showed that a 'Raymond John Stuart', with an address of Station Street, Aspendale, was enrolled to vote in the federal electoral division of Isaacs.
46 The results of the title search disclosed that the registered proprietor of the Aspendale address was not the plaintiff (ie that he did not own the property he lived in). The only other property shown in the name of a 'Raymond John Stuart' was the Wangaratta property.
47 In oral submission, the plaintiff submitted that all this showed was that a man with that name happens to be on the electoral roll in two different locations. He thereby appeared to be objecting on relevance grounds.
48 The ownership of the Wangaratta property was a matter left in doubt before the judicial registrar. In circumstances where the plaintiff has chosen not to adduce evidence as to the true position, I consider that it is in the interests of justice to admit this evidence so as to provide some clarity as to the ownership of this property on a de novo appeal. I consider that admission of the evidence could rationally affect the assessment of the probability of an important fact in issue namely, whether the plaintiff owned the Wangaratta property.[15] No prejudice was identified in relation to such admission.
49 In terms of the second category the evidence was :
On about 18 October 2019, I had a conversation with Mr Brendon Cox. Mr Cox was then the general manager of the Club and I am informed by him and believe that he was made redundant by the Club on or about 30 April 2020. I know Mr Cox because I am a former director of the Club. During that conversation, Mr Cox said to me words to the following effect:
Mr Cox: Michelle Lia has said to me on a number of occasions that Ray Stuart told her that David Barr was paying his legal costs. I asked Michelle how sure she was that David Barr was paying his legal costs and she said she was 100% sure.
Michelle Lia is the manager of the TAB/Sports Bar at the Club and David Barr is the director of the Landlord.
Further to our conversation on 18 October 2019, on 23 October 2019 Mr Cox sent me a message via 'WhatsApp' restating the substance of what he told me on about 18 October 2019. A copy of the WhatsApp message is at page 284.
50 Although this category of evidence was clearly hearsay, such evidence is admissible under s 75 of the Evidence Act 2008 (Vic) on an interlocutory application. An explanation was also provided for the non-inclusion of this evidence before the judicial registrar, being Mr Said's concern that Mr Cox would face retribution for giving this information given he was, at the time, still employed by MSC. This concern had been removed as Mr Cox no longer works for MSC.
51 Given the evidence however was 'hearsay on hearsay' I have, in the result, given it little weight.
52 Finally, it was clearly appropriate to admit updating evidence as to the further costs incurred on a de novo appeal.
53 The result was that the two further affidavits were admitted into evidence.
54 In circumstances where the plaintiff is a natural person, the application for security for costs was made pursuant to the inherent jurisdiction of the court.[16] The principles that guide the court may be expressed as follows.
55 First, the court retains an inherent jurisdiction to order security for costs as an adjunct to the court's power to regulate its own procedure. It permits the court to require security for costs where that is necessary in the interests of justice in circumstances that fall outside the categories found in r 62.02 of the Rules.[17]
57 Thirdly, the burden of satisfying the court that the threshold condition has been met, and that the court should exercise its discretion to order security for costs rests on the defendants 'from first to last'.[20] However, matters that are peculiarly within the knowledge of the plaintiff, such as whether an order will stultify the litigation, must be established by the plaintiff.[21]
58 Fourthly, in determining whether impecuniosity is relevantly established by the defendant, the court generally considers whether there is 'reason to believe' that the plaintiff will be unable to pay the defendant's costs if the plaintiff is ultimately unsuccessful.[22] Although this test has been used in the context of non-natural persons, there is no reason why a similar approach would not be taken in the present case.[23]
59 In Livingspring Pty Ltd v Kliger Partners, Maxwell P and Buchanan JA described this approach as follows:[24]
The phrase "reason to believe" is the touchstone of jurisdiction. It requires a rational basis for the belief - and no more. The wording adopted may be contrasted with other familiar formulations such as 'if the court is satisfied that' or 'if in the view of the court it is likely that'. The section requires the making of a judgment, a risk assessment: is there a risk that the corporation will be unable to pay? (It adds nothing, in our view, to say that it must be a "real risk".) A risk assessment is, of necessity, imprecise. The section calls for a practical, commonsense approach to the examination of the corporation's financial affairs.
60 Finally, as highlighted by the judicial registrar in this case,[25] there are a range of factors usually considered by the court when considering the discretion to award security. These factors include:
61 In the current case Mr Said submits that security for costs should be ordered because there is reason to believe that the plaintiff will not be able to satisfy an order that he pay costs. He also relied upon the following additional factors:
62 Each of these matters will therefore be examined in turn before resolving the question of whether security for costs ought to be ordered.
63 A pivotal threshold issue in the application was whether the test in relation to impecuniosity was met.
64 Mr Said relied on a range of factors which included that the plaintiff:
(a) was subject to an arrangement under Part X of the Bankruptcy Act 1966 (Cth) in 1972;
(b) was bankrupt between 15 July 1991 and 16 July 1994;
(c) was the respondent to a creditor's petition filed in the Federal Court of Australia in 2007;
(d) has previously been a director of 23 companies that are now deregistered; and
(e) was formerly a shareholder of Spectrum CM Landscaping ACN 115 883 264 which was wound up the Court in April 2013.
65 However, I am not satisfied that any of the matters cited above give reason to believe that the plaintiff will be unable to pay Mr Said's costs for similar reasons to those given by the judicial registrar.[26] The matters identified at (a) and (b) relate to matters that occurred too long ago and cannot be said to bear upon the plaintiff's current financial position. The fact that the plaintiff was a respondent to a creditor's petition in 2007 (at (c)) similarly sheds no light on his current financial position and, in any event, did not appear to result in a sequestration order. I also do not accept that the fact the plaintiff was a director of 23 companies that are now deregistered constitutes credible evidence of his financial situation. The fact that the plaintiff was formerly a shareholder of a company which has been wound up is also not relevant.
66 Mr Said also relied on the fact that the plaintiff attempted to join JBI as second plaintiff 17 days after the summons for security was filed by Mr Said. Accordingly, it was reasonable to infer that, in order to avoid an order for security, the plaintiff attempted to join a solvent plaintiff.
67 However, I am unable to draw such an inference from this action. There are a range of other potential explanations for joining JBI and I am unable to be satisfied that it was necessarily done to include a solvent plaintiff.
68 Next, however, Mr Said relies upon the fact that the plaintiff has twice contended that an order for security will stultify his claim. This matter is said to constitute an admission that he will not be able to satisfy an order that he pay Mr Said's costs in this proceeding.
69 The two instances relied upon are first, in the correspondence from the plaintiff's solicitors on 15 August 2019, as extracted above. Secondly, in written submissions made by counsel before the judicial registrar (who also appeared on this appeal), he stated:
If an order for security for costs was made against the plaintiff at this stage of the proceedings that this would stultify his ability to pursue his arguable case which has been legitimately instituted.
70 At the hearing before me, counsel for the plaintiff submitted that he was not relying on these submissions in the case before this court (though they were in the court book). In relation to the correspondence, he also suggested that there was no evidence that the proceeding would be stultified if a security for costs order was made.
71 Counsel for Mr Said suggested that this was an attempt to withdraw an admission (after Mr Said's submissions were completed) which should not be allowed.
72 In the absence of some explanation, I consider that Mr Said may rely on the submission as an admission made on instructions. However, even without the submission, the correspondence of 15 August 2019 was clearly part of the material admitted without objection on the appeal. It was in fact annexed both to the affidavit of Mr Stents of 30 August 2019, as well as the affidavit of Mr Ashley of 25 October 2019 (relied on by the plaintiff). I accept that this correspondence contains an admission to the effect that an order for security would stultify the claim (the relevant statement). Such a statement must also be taken to be on instructions and valid in the absence of any further evidence.
73 In these circumstances I am satisfied that the relevant statement constitutes an admission that the plaintiff's financial situation is such that he will not be able to satisfy an order for costs.[27] I am fortified in this position given the plaintiff has taken technical objection to Mr Said's attempts to provide the court with information while providing none himself. In such circumstances, it is open to the court to draw inferences more strongly from the material that is available.[28]
74 There was also other evidence that the plaintiff did not otherwise hold relevant assets.
75 Thus, in his affidavit of 30 August 2019, Mr Stents says:
At pages 16 to 28 are copies of searches of the Australian Securities and Investments Commission database in relation to the plaintiff that disclose amongst other things that the plaintiff:
(a) does not currently own any shares in an Australian company;
(b) is a director and secretary of Pinnacle International Advisory Pty Ltd.
76 Mr Said did not explain the relevance, if any, of the plaintiff being a director of Pinnacle such that this takes the matter no further.
77 However, the company searches attached suggest that the plaintiff does not currently own any shares in an Australian company. The plaintiff says that there is no proof that a search has been undertaken in respect of shares in publicly listed companies. However, he was unable to identify a search that should have been conducted which would show any shares in a publicly listed company in circumstances where he could also be expected to have personal knowledge of any such holdings.
78 In terms of his ownership of property, the evidence has been extracted above.
79 The plaintiff submitted before this court that Mr Stent's affidavit of 30 August 2019 'confirms that Raymond John Stuart is registered as a joint proprietor of unencumbered Real Estate in O'Keefe Street, Wangarratta, Victoria.' In oral submission he also suggested that Mr Said cannot prove that the plaintiff does not own the Wangaratta property.
80 It is true that the onus lies on Mr Said. However, this kind of statement, as well as the statements made before the judicial registrar, are somewhat disingenuous in circumstances where the plaintiff must have had personal knowledge of the matter.
81 In oral submission the plaintiff suggested that the fact that there were two people on electoral rolls at two different locations did not prove that they were not the same person.
82 However, s 99 of the Commonwealth Electoral Act 1918 (Cth) provides that (subject to limited exceptions) a person is only entitled to have their name placed on the roll for the electoral subdivision in which they live,[29] and that a person is not entitled to have their name placed on the roll for more than one subdivision.[30] A person also commits an offence if the person votes more than once in the same election.[31]
83 In this case the plaintiff has provided the Aspendale address as his residential address in the ASOC. This corresponds with the address given by the 'Raymond John Stuart' who resides in Aspendale, and who is entitled to vote in the Isaacs division as disclosed in the electoral roll search. Contrary to the submission of the plaintiff, the plaintiff is not also entitled to have his name placed on the roll in Indi. I am therefore satisfied that the 'Raymond John Stuart' who resides at the Wangaratta address, and is entitled to vote in Indi, is not the plaintiff. More particularly, I am satisfied, on the balance of probabilities, that the 'Raymond John Stuart' who owns the Wangaratta property is not the plaintiff.
84 I am thereby satisfied that the searches undertaken by Mr Said show that the plaintiff does not own any real property in Victoria.
85 Taken overall then, the evidence may be summarised as follows:
86 I consider that, taking these matters into account, there is 'reason to believe', on a common-sense approach, that the plaintiff has insufficient assets to pay the costs of Mr Said if ordered to do so.
87 The plaintiff commenced this proceeding more than two years ago.
88 Notwithstanding eight attempts, the plaintiff has been unable to produce a viable pleading. As highlighted already, at the most recent hearing on 25 March 2020, Randall AsJ refused the plaintiff leave to file and serve his most recent version of the pleading (V8), referring to it as 'a dog's breakfast'.
89 The plaintiff accepted that there had been a number of iterations of the statement of claim, but suggested that the reason for two of the amendments was attributable to the landlord.
90 However, the explanation was inadequate even insofar as the two versions involving the landlord were concerned. In particular V5 (of 107 pages) involved substantial amendment as compared with the previous version (V4, which was only some 39 pages).
91 Rather, I accept that Mr Said, as well as the other defendants, have already incurred substantial costs as a result of the plaintiff's failure to produce a viable pleading in circumstances where the litigation has been stalled.[33] In such circumstances, the plaintiff has been responsible for extensive costs and delay.
92 Randall AsJ will ultimately determine whether this case can go forward. However, the continual inability to properly plead a case means that, as the evidence stands today, the plaintiff has been unable to articulate a properly defined claim of merit despite having extensive opportunities to do so.
93 I consider that this failure, taken together with the associated costs and delay, supply the relevant 'additional factor' on this application.
94 In such circumstances it is unnecessary to consider whether there are other additional factors though I will briefly consider this issue for the sake of completeness.
95 Mr Said relied on four matters to allege that an inference should be drawn that JBI is funding the plaintiff's costs in this proceeding. This was said to provide another 'additional factor' as relied upon in Troiano v Voci.[34]
97 I do not regard the fact that the plaintiff is a man of straw to be sufficient.
98 The fact that two persons are both seeking the same relief is also insufficient to show that one of the persons is funding the litigation of the other person.
99 The fact that there was a joint pleading is also insufficient. If anything, the existence of two sets of legal practitioners suggests that independent arrangements are in place.
100 Finally, the relevant evidence of Mr Said has already been set out, above. Given it is, at least, 'double hearsay', I am unable to be satisfied that I can give it significant weight. The 'WhatsApp' message attached is also unhelpful. It includes the statement that 'Michelle believes Barr is 100% paying Ray's court costs.' This says nothing about what was actually said.
101 One may have serious suspicions about the funding of this litigation. However, given Mr Said has the onus to establish the 'additional factor,' he has not positively satisfied me that JBI is funding this litigation.
102 In Melville v Craig Nowlan & Associates Pty Ltd ('Melville'),[35] the NSW Court of Appeal dismissed an appeal against orders that the plaintiff (an impecunious natural person) provide security for costs. The case concerned an application for security under s 69(3) of the Land and Environment Court Act 1979 (NSW). Heydon JA, in the leading judgment, considered that construing the section to permit security orders against an impecunious natural person would not deprive any persons in the claimant's position of a fundamental right as, in the context of that Act, a meritorious cause of action could be brought equally by anyone else.[36] A similar point was made by Efthim AsJ in Taylor v McLachlan ('Taylor'),[37] where the plaintiff (a natural person) brought a claim for misleading and deceptive conduct under section 18 of the Australian Consumer Law. Efthim AsJ ordered that the plaintiff pay security, noting that this would not stultify the merits of the claim from being determined given the open standing provision meant that any member of the public could bring the claim.[38]
103 In written submission Mr Said submitted that the case 'falls within' the decisions of Melville and Taylor, and that any of the 487 members could bring the claim.
104 The plaintiff claimed that he is one of only six members and former directors who has knowledge of the facts giving rise to this claim. In oral submission he alleged that the nub of the oppression claim turned on his removal from the board which was only shared with five other directors.
105 However, the plaintiff appears to rely on his status as a member to demonstrate standing to bring the oppression claim under s 68 of the Act. As highlighted already, he also no longer claims to have suffered any personal loss. Nor does he seek any other relief personal to him.
106 There are approximately 487 financial and life members of MSC, including the plaintiff. Any one of those members could bring the claim brought by the plaintiff in this proceeding, which could include the relevant claim regarding the removal of the director(s). Thus, the terms of s 68 of the Associations Incorporation Reform Act 2012 (Vic) suggest that any member can apply for orders when an association engages in oppressive conduct. There is no suggestion that it needs to be the member prejudiced or discriminated against.
107 In any event, the plaintiff accepted that there were five other directors who were also impacted by the alleged oppressive conduct.
108 I am therefore satisfied that, to the extent it has merit, another person could bring this claim. I have also given consideration to whether this may then constitute a relevant 'additional factor.' However, although the court is not restricted to finding an 'additional factor' on the basis of a decided case, Mr Said based his submission on specific authority, namely, the cases of Melville and Taylor. As observed by the judicial registrar, Melville concerned the grant of security pursuant to a specific legislative provision rather than the inherent jurisdiction of the court. Further, although Taylor suggested that others could bring the action, there was no suggestion that this of itself constituted a relevant 'additional factor' (the parties appear to have run the application without addressing the need for an 'additional factor').
109 Although, then, the fact that another person could bring this claim is relevant to stultification (as discussed, below), I do not consider that it supplies the relevant additional factor in this case.
110 There was some fleeting reference in oral submission to the litigation being brought to 'benefit others' but the matter was not developed, nor was it the subject of the written submissions. There may well be merit in a suggestion that the litigation is being brought, to a significant extent, for the benefit of others within the principles cited above.[39] However, given I have already determined that there is a relevant additional factor it is unnecessary to consider this issue which was not the subject of any detailed submission.
111 In terms of general discretionary matters, I have already considered the merits of the action. The judicial registrar herself observed that this case was 'quite unusual' in a way which may have tended towards a grant of security if she was otherwise minded to do so.[40]
112 Consistent with the attempt to withdraw the relevant statement, the plaintiff did not rely on stultification as a factor weighing against the order for security. However, insofar as it is necessary to consider, I am not satisfied that security should be rejected on the basis of stultification for two reasons.
113 First, I am unable to be positively satisfied that the claim would be stultified. Thus, although I have considered that the relevant statement constitutes part of the evidence which justifies a finding of impecuniosity, it does not necessarily follow that the litigation will be prevented. Although impecunious, the plaintiff may be in a position to obtain funding, or he may have the benefit of pro bono assistance. It is also the plaintiff who carries the onus of positively demonstrating stultification.[41] The relevant statement of itself is insufficient to positively demonstrate stultification in circumstances where the plaintiff has chosen not to adduce sworn evidence in support of such a claim.
114 Secondly, I have found, above, that others are able to bring the claim such that it would not be 'stultified' in any event.
115 It was otherwise not suggested that Mr Said was, in substance, a plaintiff, nor that there was any relevant delay, or other factor, which weighed against an order for security.
116 I am satisfied that there is reason to believe that the plaintiff will be unable to pay Mr Said's costs if the plaintiff is unsuccessful.
117 I am further satisfied that there is an additional factor present which justifies the exercise of discretion in favour of an order for security. The additional factor is supplied by the plaintiff's failure to articulate a claim of merit which has led to inordinate delay and the incurring of extensive expense.
118 I am therefore satisfied that an order for security should be made, as a matter of discretion.
119 Mr Stents provided evidence on quantum. He had practised exclusively in commercial litigation for some 24 years and had conducted commercial disputes in a variety of jurisdictions, including the Supreme Court. He had often been called upon to estimate legal fees, and had been involved in the taxation of legal costs.
120 In his affidavit of 28 August 2020, Mr Stents says that, as at 20 August 2020, Mr Said has incurred costs in this matter of $196,725.64, being solicitors' fees of $72,904.70, counsel's fees of $121,336.50, and other disbursements of $2,484.44. Mr Said confirmed that he had incurred costs in this amount.
121 Mr Stents also estimated that Mr Said would incur further costs in the amount of $58,014.70 up to, and including, a mediation. He further provided a breakdown in fees of solicitor and counsel for the period up to the hearing of the notice of appeal, and from the hearing of the notice of appeal to a mediation.
122 The significant increase in costs was said to be attributable to the plaintiff's failure to produce a viable statement of claim
123 Mr Stents also said that it would be reasonable for Mr Said to recover between 70% and 80% of his solicitor's fees, and provided a table depicting the total amounts of costs based on 70%, 80%, and 100% recovery, respectively.
124 The test to be applied is that set out in Trailer Trash Franchise Systems Pty Ltd v Fascia as follows:[42]
In determining a sufficient amount for security for costs, the court does not undertake precise mathematical calculations. Rather, it adopts a 'broad brush' approach involving 'guesstimates as much as estimates'. However, the broad brush approach does not involve an abstract process. It must have an evidentiary basis. The court must have regard to the evidence adduced by the parties as to quantum - whether in the form of an affidavit by an experienced litigation lawyer or an expert report by a costs consultant - although it is not bound by the parties' estimates. The court may scrutinise the individual items in the parties' estimates, but not to the extent of minute examination akin to a taxation.
The amount ultimately fixed by the court must not be so low that it fails to provide any real protection to the party seeking security, or so high that it is oppressive to the party required to provide the security. The amount must be 'just and reasonable' in all the circumstances of the particular case.
125 The figures were provided by an experienced commercial litigator who had been involved in the taxation of legal costs.
126 As properly accepted by the plaintiff's counsel, he had no evidence to dispute the quantum. I also consider the amounts to be reasonable, in circumstances where the plaintiff alleged that he had also incurred similar legal costs of $201,769.61 in the proceeding.[43]
127 I consider that security based on 70% recovery to be just and reasonable, which was $227,678.27.
128 Accordingly, I will grant an order for security in an amount of $227,678.27.
129 By the notice to produce dated 4 November 2019, Mr Said sought production of the following documents from the plaintiff:
(a) Documents recording or otherwise evidencing the plaintiff's ability to pay any adverse costs orders made in this proceeding;
(b) Documents identifying the payer(s) of the legal fees for the legal services provided to the plaintiff in this proceeding;
(c) Documents recording or otherwise evidencing any agreement, arrangement or understanding between the plaintiff and any other person or entity in relation to the payment of the legal fees for the legal services provided to the plaintiff in this proceeding, including but not limited to any cost agreement for the provision of legal services in this proceeding between the plaintiff and/or any other person or entity and his solicitors; and
(d) Documents recording or otherwise evidencing any agreement, arrangement or understanding between the plaintiff and any other person or entity in relation to the plaintiff's potential liability for any adverse costs orders made in this proceeding.
130 It is unnecessary to determine this issue given senior counsel for Mr Said accepted that he did not need to rely on the notice if he was otherwise successful on security for costs. I will therefore not set aside the judicial registrar's order which set aside the notice.
131 However, if it was necessary to decide, I would have set aside the notice to produce in any event.
132 A notice to produce is subject to similar principles as a subpoena and may be set aside on the same basis, including if it is 'fishing' for evidence.[44]
133 The plaintiff alleged that the documents sought were clearly fishing ie that Mr Said was seeking documents to establish whether in fact there is sufficient evidence to support his application.
134 For reasons given above, I accept that there is reason to believe that the plaintiff will be unable to pay Mr Said's costs. This effectively opens the door such that the notice is one seeking to obtain evidence to support a case, as distinct from a fishing expedition (as in Equuscorp Pty Ltd v Malcolm).[45]
135 However, I agree with the judicial registrar that category one is too broad, and fails to seek particular documents with any precision.
136 I also consider that categories two to four are fishing in circumstances where I have not been able to be satisfied that any other person is funding the proceeding.
137 Subject to providing the parties with an opportunity to address the precise form of order, I consider that the following orders are appropriate, consistent with the Reasons, above:
1 The appeal is granted.
2 Orders 2 - 4 of the orders made by Judicial Registrar Matthews on 13 March 2020 are set aside.
3 The plaintiff provide security of $227,678.27 for the sixth defendant's costs up to, and including mediation, by payment of that amount into Court, or by provision of such other form of security as is acceptable to the Associate Judge who is the Senior Master.
4 If the plaintiff does not comply with order 3 within 14 days, the proceeding be stayed.
5 The plaintiff pay the sixth defendant's costs of and incidental to the sixth defendant's application for security for costs made by summons filed 3 September 2019, and of this appeal, on a standard basis.
138 The parties should also give consideration to whether any certificate should be granted under the Appeal Costs Act 1998 (Vic).
[1] Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('the Rules') r 84.05(4).
[2] Mr Said relied upon the affidavit of Evan Anthony Stents dated 30 August 2019, and two affidavits of Anthony Peterson dated 2 October 2019 and 8 November 2019. The plaintiff relied upon two affidavits of Richard John Ashley dated 3 October 2019 and 25 October 2019.
[3] Stuart v Mordialloc Sporting Club Inc (No 2) [2019] VSC 847, [12] ('Stuart').
[6] Affidavit of Kevin Francis Said affirmed 28 August 2020, [9]-[14].
[8] Ibid [28]-[31]; Affidavit of Evan Anthony Stents sworn 28 August 2020.
[9] Citing C Tina Pty Ltd v Barham-Floreani [2019] VSC 819, [27] (Riordan J).
[12] (2018) 55 VR 241, 244 [4], Derham AsJ also citing the overarching purpose in the Civil Procedure Act 2010 (Vic).
[13] Southern Motors Pty Ltd v AGC Ltd [1980] VicRp 23; [1980] VR 187, 191.
[15] See Evidence Act 2008 (Vic) s 55.
[16] It was not suggested that any of the grounds in r 62.02 of the Rules applied.
[17] Von Marburg v Aldred & Anor (No 3) [2017] VSC 146, [39].
[19] Knight v Beyond Properties Pty Ltd [2005] FCA 764, [33]; Troiano v Voci [2019] VSC 859, [23] ('Troiano').
[20] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377, 383 [21] ('Livingspring'), cited in Troiano (n 19) [24].
[23] The plaintiff accepted that this was the correct test: Submissions by plaintiff, 8 September 2020, [30].
[27] And see Michos v Eastbrooke Medical Centre Pty Ltd [2019] VSCA 282, [26].
[28] Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82, 114 [119].
[32] See, eg, Bodycorp Repairers Pty Ltd v GDG Legal Pty Ltd [2017] VSC 621, [30]; Troiano (n 19) [7].
[33] The court was also advised that other defendants intend to seek security if this application succeeds.
[37] (Supreme Court of Victoria, Efthim AsJ, 28 July 2017).
[42] [2017] VSCA 293, [64]-[65].
[43] See V8, 20 February 2020, [158].
[44] Crown Joinery Pty Ltd v Lyleho Pty Ltd [2007] VSC 214, [31].
Stuart
Mordialloc Sporting Club Inc [2020] VSC 658
(2018) 55 VR 241
(2008) 20 VR 377
(2002) 54 NSWLR 82
(2001) 54 NSWLR 82