HER HONOUR: By notice of motion filed 18 April 2018, the defendant seeks: firstly, an order pursuant to r 42.21(1)(a) and/or (b) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") that within 28 days, the plaintiff provide security for costs of these proceedings in the sum of $116,575 or such other amount as the Court deems appropriate, with liberty to apply; secondly, that the security be given by way of payment into Court; and thirdly, that until the security is provided in accordance with order (1), these proceedings be stayed.
The first plaintiff is Snezana Kures Tomic. The second plaintiff is Zlata Kures. The third plaintiff is Brenda Ivetic (as executor of the estate of the late Peter Ivetic). The defendant is Lindsay Graham Parker. The parties relied on their joint court book (Ex A). The defendant relied upon a further affidavit of Deborah Morris dated 14 February 2019.
[2]
Background
I gratefully acknowledge and accept that I have adopted most of the defendant's submissions, which are largely common ground.
On 3 February 2000, Ms Rosa Ivetic made her last will and testament. In that will, she appointed Mr Heizer to be her sole executor and trustee, and left the whole of her estate to Mr Heizer, Mr Peter Ivetic and the first and second plaintiff, to be divided equally amongst them. At that time, Rosa Ivetic owned the property at 4/3 Jacques Avenue, North Bondi ("the property").
On 8 April 2002, Ms Rosa Ivetic died and probate was granted to Mr Heizer.
By about 13 June 2002, the property had been transferred into Mr Heizer's name.
On 23 December 2002, solicitors at Selby Levitt wrote to the first and second plaintiffs (c/- the Consulate General of Yugoslavia in Sydney) confirming their instructions to lodge a caveat over the property. On 23 December 2002, solicitors at Selby Levitt lodged a caveat over the property to protect the first and second plaintiffs' interest in the estate of the late Rosa Ivetic. The caveat, with registered dealing number 9243993R, was lodged on or about 27 December 2002 ("the caveat").
On 17 July 2003, solicitors at Levitt Robinson (which appears to have acquired the files previously maintained by Selby Levitt) wrote again to the first and second plaintiffs, noting that no further instructions had been received and that the firm would, in those circumstances, be closing its file. The letter stated:
"There is a caveat presently on title with this firm's address as the address for service. We once again enclose a copy of that caveat. We also enclose a current search of the property. As this firm will no longer be acting for you, you should immediately contact Land and Property Information and have the address for service changed to an address where you can be notified."
It appears that the first and second plaintiffs did not act on that advice, and did not take any steps to notify Land and Property Information of a new address for service of any notices in relation to the caveat.
In October 2003, Mr Heizer commenced proceedings in the Supreme Court seeking an order for family provision out of the estate or notional estate of Rosa Ivetic.
The defendant was retained by the first and second plaintiffs (and subsequently Peter Ivetic) in relation to the family provision proceedings. The parties then reached a settlement which was recorded in a deed of settlement dated 6 April 2006 ("deed of settlement"). Relevantly, the deed provided:
1. Mr Heizer would hold the property in trust for his own use and benefit during his lifetime and, upon his death, an interest in the remainder as to one-third. The first and second plaintiffs and Peter Ivetic thereupon were to have an interest in the remainder as to two-thirds as tenants in common in equal shares (clause 3);
2. Mr Heizer was entitled, during his life, to sell the property and utilise all or part of the proceeds of such sale, after paying usual selling expenses, but was required to hold the net sum so realised on trust:
1. As to one-third, for himself for his own use and benefit absolutely;
2. As to the remaining two thirds, for himself for his life and upon his death, then to the defendants as tenants in common in equal shares (clauses 5 and 6).
1. Mr Heizer covenanted that he would, upon the sale of the property and upon the sale of any property purchased with all or part of the proceeds therefrom, inform the solicitor for the first and second plaintiffs and Peter Ivetic of his intention to dispose of such property and give reasonable written notice of such intention, as well as to provide such information and copies of documents as may be reasonably required (clause 7).
On 2 February 2007, Mr Heizer's solicitor wrote to the defendant responding to a letter from the defendant dated 31 January 2007, stating:
"As far as protection of your clients' interests is concerned, we note that they have lodged a caveat over the Bondi property which is the only asset of any significance."
On 19 September 2008, the defendant wrote to the first and second plaintiffs and Peter Ivetic. The letter contained an inaccurate statement to the following effect:
"For your future protection we also lodged a caveat on the title of the late Mrs Rosa Ivetic's home to ensure that we are notified if Mr Heizer in the future sells the property…"
In fact, the caveat had not been lodged by the defendant but by Selby Levitt on the instructions of the first and second plaintiffs in 2002. It appears that the defendant recalled the reference to a caveat in the 2 February 2007 letter from Mr Heizer's solicitor at that time, but had forgotten that the caveat had not been lodged by the defendant.
On 5 January 2010, Peter Ivetic died. The third plaintiff in these proceedings is the executor of his estate.
On 4 October 2012, Mr Heizer's solicitor apparently served a lapsing notice on Selby Levitt in respect of the caveat. By that time, the law practice Selby Levitt was no longer in existence. The lapsing notice was returned to Mr Heizer's solicitor.
In about December 2012, Mr Heizer sold the property to Ms Slavica Ristic for $540,000.
In the period leading up to the settlement of that sale, it appears that Mr Heizer instructed his solicitor to deal with the proceeds of the sale in accordance with his obligations under clauses 5 and 6 of the deed of settlement. On 5 December 2012, Mr Heizer's solicitor wrote to him confirming that steps had been taken to contact the first and second plaintiffs and Peter Ivetic, and that steps were required to be taken to preserve sale proceeds "for those beneficiaries". The letter concluded as follows:
"NOTE: We note your instructions that the Proceeds of sale are to be divided as follows:
1. 1/3rd to Mr Heizer $179,148.22
2. 2/3rd to Mr Heizer on trust for IVETIC,
TOMIC & KURES $358,548.10
$537,696.32"
The letter also stated that:
"The proceeds of $358,548.10 will be banked into your In Trust For IVETIC, TOMIC & KURES bank account - YOU WILL NEED TO PROVIDE US WITH BANK ACCOUNT DETAILS."
On 17 December 2012, Mr Heizer's solicitor issued a "Settlement Instructions" document in relation to the sale of the property which, included the following instructions:
"Please bank the following cheques:
Frank Heizer XXX XXX XXXXXX $50,405.94
WESTPAC
Frank Heizer XXX XXX XXXXXXXXX $358,584.10"
ST GEORGE
[3]
On 17 December 2012, banking receipts were issued by both Westpac and St George indicating that cheques in those amounts were banked into those accounts. Accordingly, the available evidence appears to demonstrate that Mr Heizer complied with the terms of the deed of settlement and separately deposited two-thirds of the surplus sale proceeds from the sale of the property to be held on trust for the plaintiffs.
However, while it is clear that the above moneys were paid into the above accounts, further investigations need to be made of Westpac to find out to whom these funds were then paid out to. The plaintiffs' solicitor is to issue a further subpoena to Westpac seeking this information. The claims against the defendant are for negligence and misleading or deceptive conduct. The plaintiffs seek damages.
[4]
Security for costs
The defendant relies upon UCPR r 42.21 and the court's inherent power to order security for costs. UCPR 42.21 reads:
"42.21 Security for costs
(1) If, in any proceedings, it appears to the court on the application of a defendant:
(a) that a plaintiff is ordinarily resident outside Australia, or
...
the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given.
(2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct.
(3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed.
(4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given."
If the Court has power under UCPR r 42.21 or exercises its inherent jurisdiction, the applicable principles are well settled. Beazley J (as she then was) in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196F - 198C identified them as follows:
"The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security....
Notwithstanding the broad unfettered discretion with which the court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are:
1. That such applications should be brought promptly...
2. That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations...As a general rule, where a claim is prima facie regular on its face and 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 a reasonable prospect of success.
3. Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim...
4. Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate...
5. Whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security...
6. An issue related to the last guideline is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking ...
7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate."
The addresses of the plaintiffs are not stated in the statement of claim. Each of their addresses is merely stated to be "c/- Slattery Thompson Solicitors". The first and second plaintiffs are ordinarily resident in Serbia, and the plaintiffs' solicitor has confirmed that they reside in Belgrade.
The first and second plaintiffs have sworn affidavits that they are not in a position to pay "any security of costs". Ms Kures, the first plaintiff (Aff, 19/7/2018 at [11]) deposes that she is not in a position to pay any security for costs in this matter as she is aged 62, lives in a family apartment and only has a retirement pension of $450 paid into her bank account monthly. Brenda Ivetic, the second plaintiff, deposes (Aff, 18/9/2018 at [11]) that she is aged 79, lives in self-funded accommodation and has $50,000 in her bank account.
The third plaintiff resides in Queensland, but she brings the claim in a representative capacity as executor of the estate of the late Peter Ivetic (who died in January 2010). Peter Ivetic's will left the entirety of his estate to his daughters, not to the third plaintiff. The evidence demonstrates that the entirety of the estate, with the exception of any moneys which might be the subject matter of these proceedings, had been disbursed by July 2012. It is noted that the third defendant has not filed an affidavit.
The plaintiffs' solicitor has sworn an affidavit, dated 19 July 2018, in which he states at [4], "I state from my enquiries the plaintiffs are impecunious".
In respect of the first and second plaintiffs, they are both ordinarily resident outside Australia. The statement of claim failed to state their addresses, and they are impecunious and unable to meet an adverse costs order. The fact that a plaintiff is resident out of the jurisdiction and has no significant assets within the jurisdiction has long been regarded as a circumstance of great weight in determining whether an order for security for costs should be made: PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 at 323 per McHugh J. In respect of the third plaintiff, she is not suing for her own benefit but for the benefit of others, namely the beneficiaries of the estate of the late Peter Ivetic (she is not one of those beneficiaries). As all of the plaintiffs reside out of the State of New South Wales the threshold issue in UCPR 42.21 has been met.
As to the discretionary factors, the application for security for costs was brought promptly. The prospects of success or merits of the claims in the proceedings are currently poor, as it is not known who received the funds withdrawn from the trust account. It seems that the defendant did not know of the lapsing 2002 caveat until 2015. The defendant submitted that he has not been the cause of the plaintiffs' impecuniosity. The application for security is not oppressive, as the first and second plaintiffs have some income. There is no public interest in these proceedings.
Counsel for the defendant submitted that the plaintiffs are unable to meet an adverse costs order. The defendant's costs are currently estimated to be over $170,000 up to the conclusion of the proceedings, and to date, the sum of $73,514.55 in legal fees have been incurred. As currently disclosed, the plaintiffs have funds of $50,000. Hence, I am satisfied that the plaintiffs are unable to meet an adverse costs order.
[5]
Quantum of security
This is a more contentious issue. The defendant seeks an order that security be provided in the sum of $170,000 or such other amount as the Court may consider appropriate. The plaintiffs have not submitted any particular amount that should be provided as security for costs.
Ms Morris, the defendant's solicitor, explained in her affidavits dated 18 April 2018, 28 June 2018 and 14 February 2019 how the amount claimed has been calculated. She is a highly-experienced litigation solicitor who is well placed to estimate the costs likely to be incurred.
The difficulty in making an order for security for costs in the sum of $170,000 is that such an order would stifle the plaintiffs' proceedings. As previously stated the defendant has already incurred the sum of $73,514.55. It seems that the second plaintiff has savings of $50,000, and the first plaintiff has a pension in the sum of $450 per month. Doing the best I can with the limited information provided by the plaintiffs, I order that they provide security for costs in the sum of $30,000 at this stage, as the matter may be capable of resolution once the identity of the receiver or receivers of the trusts funds are known.
In all of the circumstances, in the exercise of my discretion, I order the plaintiffs to provide security for the defendant's costs of the proceedings in the sum of $35,000, which reflects an amount of roughly half the costs that the defendant's solicitors have incurred so far.
[6]
The Court orders that:
(1) The plaintiffs are to provide security for costs for the defendant's costs of the proceedings in the sum of $35,000 by 29 March 2019.
(2) The security, the subject of order 1, is to be provided on or before 29 March 2019, by payment into Court or provision of bank guarantee from an Australian Bank.
(3) In default of compliance with orders 1 and 2, the proceedings are to be stayed.
(4) The defendant's notice of motion filed 18 April 2018 seeking security for costs is stood over for further hearing at 10.00 am on 17 April 2019 before Harrison AsJ.
(5) The plaintiffs are to file and serve affidavits as to their financial circumstances and submissions by 10 April 2019.
(6) Costs of today are reserved.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 19 February 2019