SSPeetham Pty Ltd as trustee for the CHB CDI Trust v Marcos Accountants Pty Ltd

Supreme Court of NSW|2020-04-07|Before: Stevenson J, Henry J

Judgment

The first and second defendants, Marcos Accountants Pty Ltd and Mr Magdy Marcos ("the Marcos Parties") by Notice of Motion filed on 26 March 2020 seek further security for their costs of the proceedings.
The plaintiffs, SSPeetham Pty Ltd as trustee for the Coca Cola Hellenic Bottling Company SA CHESS Depository Instruments Trust ("the Trust") and in its own capacity ("SSPeetham"), by Notice of Motion filed on 31 March 2020 seek to set aside a Notice to Produce dated 27 March 2020 served on them by the Marcos Parties.
On 7 April 2020, I ordered that that Notice to Produce be set aside and that the Marcos Parties pay SSPeatham's costs of its Notice of Motion of 31 March 2020. The reasons for making those orders are included in these reasons.
In circumstances not necessary to recount, SSPeetham holds trust funds for beneficiaries of the Trust who have not been able to be located and disburses such funds to beneficiaries who are later located or who contact SSPeetham.
In these proceedings, SSPeetham contends that the Marcos Parties are in possession of "confidential documents" that belong to it and seeks an order restraining the Marcos Parties from using, and an order that the Marcos Parties deliver up, those documents.
Initially, SSPeetham alleged that the Marcos Parties had engaged in the torts of detinue and conversion in relation to the documents and in conduct in breach of confidence.
The latter allegation has been withdrawn in a further Amended Summons and a Further Amended Commercial List Statement that, on 7 April 2020, I granted SSPeetham leave to file.

The Notice to Produce

The Notice to Produce sought three categories of documents.
First, it sought: "Any document that sets out the indictable offences which Nigel Edmund Tolley has been charged by NSW Police (and/or by any other public body) in the period of 1 March 2020 to date."
In his affidavit sworn on 31 March 2020, SSPeetham's solicitor, Mr Gregory Wrobel, deposed: "I am informed by Mr Tolley that he was charged by NSW Police with fraud and money laundering on 24 March 2020."
Mr Zmood, who appeared on behalf of the Marcos Parties, submitted that the Marcos Parties were entitled to see any document which set out precisely what those charges were because, if the charges related to Mr Tolley's conduct as a director of SSPeetham, that might cast doubt on the veracity or truthfulness of Mr Tolley's undertaking to the Court of 13 December 2019.
But that submission is not tethered to any existing application.
The Marcos Parties do not seek to set aside the security for costs arrangements made on 13 December 2019. On the contrary, the security now sought from Mrs Tolley is expressed in the Marcos Parties' Notice of Motion of 26 March 2020 to be "in addition to the signed undertaking given previously by Mr Nigel Edmund Tolley" and on the basis that the National Australia Bank bank guarantee of 18 December 2019 "remains in full force and effect".
In the absence of an application to set aside the regime put in place for security of the Marcos Parties' costs of 13 December 2019, and in circumstances where the Marcos Parties now seek that Mrs Tolley (not Mr Tolley) provide further security, I could not see that a legitimate forensic purpose could be served by requiring production of the documents sought. Nor could I see that there was a "reasonable basis beyond speculation" the documents sought would "materially assist on an identified issue" that was relevant: Marcos Accountants Pty Ltd v Nigtol Pty Ltd [2019] NSWSC 909 at [57]-[58] (Ward CJ in Eq) and the cases there cited.
Next, the Marcos Parties seek: "Any and all periodic bank statements for all of the National Australia Bank Ltd bank accounts held in the name of Nigel Edmund Tolley (whether alone or jointly) as of 13 December 2019 (limited to the bank statements for the period ended 31 December 2019)."
These documents could only be relevant to an investigation of whether confirmation is given by Mr Tolley in the undertaking given to the Court on 13 December 2019 was truthful.
But there is no application made by the Marcos Parties calling for any such investigation nor, as I have said, any application to set aside the regime established on 13 December 2019.
Accordingly, I did not see any legitimate forensic purpose in requiring production of these documents.
Finally, the Notice to Produce sought: "6. Any and all documents that set out the terms of any loan, or any other pledge of assets (including loan agreements, security agreements or deeds) entered into or signed by Nigel Edmund Tolley and/or SSPeetham Pty Ltd in the period from 30 January 2020 to date. 7. A copy of any registered security interest for which Nigel Edmund Tolley is the secured party and SSPeetham Pty Ltd is the grantor in the period from 1 February 2019, to date."
The basis upon which these documents were sought is a search conducted by Mr Attia of the Personal Property Securities Register ("PPS Register"), maintained by the Australian Financial Security Authority, which reveals that on 19 February 2019 a security interest was granted by SSPeetham in favour of Mr Tolley.
Mr Zmood pointed out this registration took place shortly after SSPeetham commenced these proceedings. Mr Zmood submitted that the entry in the PPS Register suggested that Mr Tolley had made a secured loan to SSPeetham which, it was submitted, may put any of SSPeetham's assets beyond the reach of the Marcos Parties.
However, as Mr Zmood accepted, this information has been publically available on the PPS Register since February 2019 and thus available to be deployed in aid of the Marcos Parties' 26 November 2019 application for security.
I was not, in those circumstances, prepared to require SSPeetham to produce those documents at this late stage.
It is for those reasons that on 7 April 2020 I ordered that the 27 March 2020 Notice to Produce be set aside.

Marcos Parties' application for further security

As I have mentioned at [20] above, Mr Zmood submitted that there had been a "material change in circumstances" in relation to the question of security for costs in three ways.
Two related to the 24 March 2020 charges laid against Mr Tolley.
Thus, Mr Zmood submitted: "(a) The director of the plaintiff trustee company, Mr Tolley, was charged with fraud and money-laundering offences on 24 March 2020 that the Defendants infer are directly related to his role as director/trustee of the plaintiff company. This puts these proceedings on an entirely different footing, particularly where security is secured by way of personal undertaking…; (b) Further or alternatively, Mr Tolley may have breached the undertaking given to the Court on 13 December 2019 as to the source of funds relied upon in providing the bank guarantee (pars 1 (b) and 1 (d), Notation, 13 December 2019). The Defendants had relied upon the truthfulness of Mr Tolley's undertaking when the form of orders was agreed by the parties on 13 December 2019…"
In my opinion, Mr Fox, who appeared on behalf of SSPeetham, was correct to submit that these matters have no bearing on what costs the Marcos Parties are likely to incur in the proceedings.
It was also incorrect for Mr Zmood to submit that the existing "security was secured by way of personal undertaking". The existing security is a guarantee issued by the National Australia Bank.
Mr Zmood's statement that "Mr Tolley may have breached the undertaking given to the Court on 13 December 2019 as to the source of funds relied upon in providing the bank guarantee" is a matter of speculation, and, is again, untethered to any application before the Court.
Further, Mr Zmood submitted that there had been a material change in circumstances in that: "(c) Additionally, as at 13 December 2019, the Defendants could not reasonably have foreseen that the Plaintiffs would on 13 March 2020 abandon their substantive case on Breach of Confidence and propose an amended pleading in the form served on the Defendants on 19 March 2020, in respect of which the Defendants will seek, inter alia, to: i. file further evidence in respect of fresh matters set out in the proposed pleading; ii. strike out the form of proposed pleading (if it is not amended); iii. seek discovery in respect of the additional allegations set out in the proposed amended pleading…"
I do not see these matters as justifying the making of any further order for security for costs.
SSPeetham's case is now articulated in the Further Amended Commercial List Statement to which I referred at [6]-[7].
The case now advanced by SSPeetham is considerably narrower than the case it propounded on 13 December 2019 as it no longer presses its case of breach of confidence.
The allegations of conversion and detinue are maintained and, in that regard, a fresh allegation is made (at [58]) that the Marcos Parties: "…have dealt with the Converted Documents in a manner inconsistent with the plaintiff's rights to possession."
Mr Zmood drew attention to one of the particulars to that allegation which is to the effect that "a reasonable inference arises" that the Marcos Parties have used the "Converted Documents" for the purposes of taking steps to locate beneficiaries of the CHB CDI Trust: "…to seek to charge such beneficiaries a fee (or otherwise derive a pecuniary benefit from the use of the Converted Documents)."
Mr Zmood submitted that the Marcos Parties are now obliged to adduce evidence in relation to that allegation. That may be so, although it is hard to see what evidence, beyond a denial by Mr Marcos, the Marcos Parties could deploy.
In any event, on 7 April 2020 I ordered that SSPeetham pay the costs thrown away by reason of the amendment to the Summons and the Commercial List Statement and have ordered that those costs be assessed and payable forthwith.
Mr Zmood's reference to an application by the Marcos Parties to seek to "strike out the form of the proposed pleading" takes the matter no further.
The pleading said to be amenable to being struck out is that which remains following the amendment the subject of the leave I granted on 7 April 2020. That pleading is substantially in the same form now as it was on 13 December 2019.
So far as the discovery foreshadowed, that may involve the Marcos Parties incurring further expenses.
There is, however, no precise evidence as to what further costs would be so incurred. Nor is there evidence that those costs would outweigh the costs that will now be saved by reason of SSPeetham's abandonment of the breach of confidence claim.
In an affidavit sworn in support of its application, Mr Attia gave an account of his calculation of the further security sought.
To a very large extent, that calculation included costs underestimated at the time of the 13 December 2019 hearing before Henry J.
Thus, Mr Attia deposed that the Marcos Parties' evidence in response was "more lengthy than anticipated", that the costs of the discovery were "not accounted for by the defendants previously", that counsel's fees for the appearance on 13 December 2019 were "not included in the earlier estimate", that other counsel's fees "were not included in the earlier estimate", that certain of counsel's previous estimates had "proven inadequate" and that "no estimate [had been] previously made" for a review of SSPeetham's reply evidence.
As Mr Zmood accepted in argument, costs incurred as at 13 December 2019, but overlooked or underestimated, cannot now be relied upon as a material change in circumstances since then.
Overall, I am not satisfied that the Marcos Parties have established a basis to revisit the question of security for costs.

Orders

I order that the first and second defendants' Notice of Motion of 26 March 2020 be dismissed with costs.

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