HIS HONOUR: By a further amended notice of motion, Mr Bill Cooke and Mrs Helena Cooke ("the defendants") sought security for costs pursuant to r 50.8 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") ("the application"). The application was sought with respect to an appeal brought by Mr Gary Young ("the plaintiff"), pursuant to s 39(1) of the Local Court Act 2007 (NSW), from a decision of Bradd LCM in the Local Court of New South Wales on 18 June 2015 ("the decision").
The Local Court proceedings concerned a claim by the plaintiff against the defendants for damages for conversion or detinue of a dog named "Apache Jack".
On 3 May 2018, the Court gave judgment in relation to the application: Young v Cooke [2018] NSWSC 588 ("Young v Cooke No 1").
In Young v Cooke No 1, the Court reached the following overall conclusion as to "security for costs" at [93]-[97]:
[93] In Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 ("Lall") at 314, the Court of Appeal emphasised that the courts have traditionally aided litigants in person to ensure the merits of their cases are not lost in technicalities or irrelevances, even of their own making (although it was not suggested individual litigants would not be properly bound to adherence with what is now the UCPR or the pleadings as to their cause of action). However, the Court has been provided power to order security for costs of appeal in special circumstances with respect to appeals, as discussed in Xenos, of an unreasonable or harassing in nature, where the litigant is unlikely to recover his costs of the appeal because of the impecuniosity of an applicant, even where there is a risk of the stultification of the appeal.
[94] As pointed out in Lall, the subject matter of the dispute may sometimes be a single dispute or complaint which is persistently pursued including by many interlocutory processes. There can be no doubt Mr Young has a grievance and the dispute regarding his dog may not be described as trivial, but nonetheless he has reiterated a single issue of that character. The questions raised do not attract public interest issues or the liberty of an individual.
[95] In my view, the Cookes have established special circumstances for the purpose of r 50.8 of the UCPR, Mr Young is an impecunious applicant who is unlikely to meet the costs of any appeal proceedings, if unsuccessful, in circumstances where the appeal, when seen in the light of the three grounds proposed to be advanced, is not reasonably arguable.
[96] Those elements are also applicable to demonstrate why a discretion should be exercised to grant security for costs to which may be added the waste of time and cost occurred by the prosecution of the appeal by Mr Young to date and the failure to pay costs previously awarded to the Cookes.
[97] In those circumstances, security for costs should be awarded, even though there is some risk of a stultification of the appeal proceedings.
The Court reached the following conclusions as to "quantum" at [93]-[97]:
[98] The notice of motion does not ask for security for costs of any particular amount. The evidence of Mr David Eric Thackeray was that, if leave was granted, to proceed on the proposed amended summons (his evidence was prior to the promulgation of the further amended summons), the expected further legal costs in the proceedings would be in the range of $10,000 to $15,000 plus GST. This did not account for the prior costs incurred or ordered in the proceedings. The overall estimate provided by Mr Stewart was $35,000 on a party/party basis.
[99] Mr Coombes did not address the quantum for security for costs other than noting the estimate given by Mr Thackeray. He submitted that any security for costs needed to be proportional and was not intended to indemnify the party obtaining security. It was submitted that the exercise of the Court's discretion in that respect must be impressionistic. I accept these submissions. What may be added is that the assessment of costs needs to take into account the reasonableness of projected costs. Given the lateness of the application, I do not consider there is a proper basis to order security for costs as to past costs incurred by Mr and Mrs Cooke.
[100] Upon the basis of those considerations, I consider the quantum of security for costs should be $8,000.
The Court made the following directions (at [101]-[102]):
[101] The Court proposes to make the following orders:
(1) Security for costs in the sum of $8,000;
(2) The stay of the proceedings until the security is provided by Mr Young; and
(3) Costs of the further amended notice of motion are reserved.
[102] The legal representatives for the Cookes shall bring in short minutes of order reflecting this judgment within 7 days of its publication.
On 10 May 2018, the legal representatives for the defendants provided short minutes of order, reflecting the judgment, as well as a proposed timetable as to the issues of costs. The proposed short minutes of order were as follows:
1. Pursuant to Rule 50.8 of the Uniform Civil Procedure Rules 2005, that the plaintiff provide security for the defendants' costs in the sum of $8,000.00.
2. The security in order 1 is to be paid into Court.
3. Until such time as order 2 is complied with by the plaintiff, the proceedings are stayed.
4. The costs of the further amended notice of motion be reserved.
The short minutes of order were dealt with administratively in Chambers, with orders being made on 15 May 2018.
As to the issue of costs, the legal representatives for the defendants sought that the issue of costs be decided on the papers. The proposed timetable was provided with the consent of the plaintiff and was as follows:
1. The defendants to provide to the Chambers of Walton J a short submission as to costs on or before 18 May 2018.
2. The plaintiff to provide any short submissions in reply to the Chambers of Walton J on or before 25 May 2018.
On 15 May 2018, the proposed orders were made, save for an amendment to the dates, as follows:
1. The defendants to provide to the Chambers of Walton J a short submission as to costs on or before 25 May 2018.
2. The plaintiff to provide any short submissions in reply to the Chambers of Walton J on or before 1 June 2018.
The defendants provided a short submission as to costs on 25 May 2018. They are short and are extracted below:
1. The defendants seek a variation of Order 4 of 15 May 2018, to the following:
a. The plaintiff pay the defendants' ordinary costs of and incidental to the further amended notice of motion filed on 3 October 2017, as agreed or assessed, forthwith.
Costs follow the event
2. The defendants submit that this is a case in which costs should follow the event: UCPR Rule 42.1.
3. Although it has been stated that there is no presumed approach one way or the other as to the costs to be ordered following a successful application for security, there are examples of a successful defendant on a security for costs application receiving the benefit of the rule that costs follow the event under UCPR r 42.1: Lex Fitness Pty Ltd ATF Lex Family Trust v Australian Fitness Management Pty Ltd [2017] NSWSC 157 at [72]; MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2002] FCA 821; Jazabas Pty Ltd v Haddad [2006] NSWSC 880.
4. In this case, the defendants were successful on their application for security for costs. It is submitted that there is no reason to depart from the usual order that costs follow the event; the event being the successful obtaining of security.
5. Of particular importance, is that the plaintiff has at all times resisted providing any security for the costs of his appeal; and the Court, when ordering security, held that the plaintiffs appeal is not reasonably arguable: Young v Cooke & Anor [2018] NSWSC 588 at [95]. This is in circumstances where the Court had already, prior to the decision on 3 May 2018, observed that the plaintiff faced a very difficult argument Young v Cooke [2016] NSWSC 408 at [62] per Garling J.
Costs payable forthwith
6 The costs of the security for costs application should be payable forthwith for three reasons.
7. First, as was held in Jazabas Pty Ltd v Haddad [2006] NSWSC 880 at [14]
... the very circumstances that give rise to the order for security for costs also support an order that the costs incurred in pursuing that application should be paid before further costs are incurred.
8. Second, the security motion is a discrete and separately identifiable aspect of the proceedings: Fiduciary Ltd v Morning Star Research Pty Ltd (2002) 55 NSWLR 1 at 4[11].
9. Third, it is submitted that the proceedings will not be finalised for some time: where the security is still to be provided; and, even if it is provided in the foreseeable future, the plaintiff has to date only taken the first step by finalising his grounds of appeal (albeit, the fifth iteration of same). Accordingly, it is unlikely that the matter will come on for hearing before early to mid 2019. It should be noted that the plaintiff commenced the proceedings against the defendants on 15 May 2013: Fiduciary Ltd v Morning Star Research Pty Ltd (2002) 55 NSWLR 1 at 5[13].
10. For these reasons, the defendants seek a variation to the order with respect to costs of the motion as set out in paragraph 1 above.
On 4 June 2018, following the absence of receipt of a submission in reply, a communication was sent to the plaintiff requesting an indication as to whether any submission was to be produced and provided to the Court.
That same day, the plaintiff sent a communication to the Court that contended the provision of submissions "would be an exercise in futility". (The plaintiff, without legal representation by this stage, also utilised the communication to ventilate further frustrations as to his appeal that were for the most part inappropriate or otherwise not relevant to the issue of costs).
On 5 May 2018, the following message was sent to the plaintiff from Chambers:
The below communication to Chambers was not appropriate.
You have received a copy of the defendant's submissions in an email dated 25 May 2018. The judge has given you an additional two weeks to provide reply submissions should you wish to. These may be provided by email on or before 19 June 2018.
In the absence of any reply submissions by that date his Honour will decide the matter off the papers.
I note I have included all legal representatives noted on record in this communication.
On 15 June 2018, written submissions were provided by the plaintiff. Those submissions, for the most part, did not engage with the issues raised by the defendant's application for costs. The submissions, in that respect, appear to primarily advance contentions with respect to "a right of appeal". Notwithstanding the fact that the submissions provided by the plaintiff exceeded the scope of the direction of the Court, it may be accepted that the plaintiff opposed the application brought by the defendants, with respect to costs, and contends that is all the circumstances it is unfair.
Two issues arise from the application brought by the defendant:
1. Whether it is appropriate to order costs follow the event in a successful security for costs application?
2. If there is a basis to order that costs follow, what is the authority to order it forthwith?
[3]
THE LEGISLATION
The powers of the Court as to costs are set out in s 98 of the Civil Procedure Act 2005 (NSW) in the following terms:
98 Courts powers as to costs
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount.
…
Part 42 of the UCPR sets out the rules with respect to costs. Rule 42.1 is extracted below:
42.1 General rule that costs follow the event
Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
Specifically as to interlocutory proceedings, r 42.7 provides:
42.7 Interlocutory applications and reserved costs
(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.
[4]
GENERAL PRINCIPLES
Before turning to the question of costs in the context of the issues raised on the present application, I will address the general principles associated with costs orders.
The general principles, with respect to costs orders, were set out in Moseley v AB (No 2) [2017] NSWSC 1812 at [65]-[79], extracted below:
[65] The court's primary task is to determine whether the facts of the case or specific costs provisions impact upon the court's jurisdiction to make costs orders. Unless there are statutory provisions to the contrary, the court's discretion to determine such issues is unfettered: Civil Procedure Act 2005 s 98(1) (extracted above at [59]).
[66] The central and overriding principle in this regard is that of doing justice to the parties in each particular case. This involves a heavily contextual assessment that focuses upon the conduct of the litigation itself. A discretion exercised on grounds unconnected with the litigation, or on no grounds at all, is arbitrary or capricious rather than fair or just (see Peters v Peters (1907) 7 SR (NSW) 398 at 399 (per Street J); Cretazzo v Lombardi (1975) 13 SASR 4 at 11 (per Bray CJ); Scharer v Counting Instruments Ltd [1986] 1 WLR 615 at 621 (per Buckley LJ).
[67] The discretion must be exercised judicially and "according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy": Williams v Lewer [1974] 2 NSWLR 91 at 95.
[68] This discretion may be exercised whenever the circumstances warrant, having regard to the scope and purpose of the s 98 of the Civil Procedure Act: Oshlack v Richmond River Council (1998) 193 CLR 72; Hamod v State of NSW [2011] NSWCA 375 at [813]. However, the discretion must be exercised on a principled basis (see Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 at [11]), and in accordance with the principles of proportionality: Civil Procedure Act s 60.
[69] In Oshlack v Richmond River Council, McHugh J observed the discretion, whilst unfettered, is not to be applied without guidance or qualification (at [65]-[67]):
The discretion must be exercised judicially
[65] Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity.
[66] By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2), when setting aside an arbitrator's costs award:
the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure.
The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the "usual order as to costs".
The usual order as to costs
[67] The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[70] Equally, the "general rule" (or "usual order as to costs") does not amount to a fetter on the court's discretion. The terms of r 42.1, "unless it appears to the court that some other order should be made", clearly envisage that the court may, in its discretion, make a costs order other than one following the event.
[71] The most common circumstance in which the general rule may be displaced is evidence of disentitling conduct on the part of the successful party: Oshlack v Richmond River Council at [40] and [69]; G R Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263. The disentitling conduct does not necessarily need to amount to misconduct; it may simply be any conduct "calculated to occasion unnecessary expense": Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]; Keddie v Foxall [1955] VLR 320 at 323-4.
[72] In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA addressed the principles of fairness underlying the making of a costs order, which may at times warrant departure from the general rule (at [121]):
[121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.
[73] Further factors identified as relevant to informing judicial discretion were identified in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]-[98] (per Campbell JA) (see also, Oshlack v Richmond River Council at [69] (McHugh J); and Ritter v Godfrey [1920] 2 KB 47). They include, but are not limited to, the following:
(1) whether the successful party effectively invited the litigation;
(2) whether the successful party unnecessarily protracted the proceedings
(3) whether the successful party succeeded on a point not argued before a lower court;
(4) whether the successful party prosecuted the matter solely for the purpose of increasing the costs recoverable; and
(5) whether the successful party had obtained relief which the unsuccessful party had already offered in settlement of the dispute.
[74] The onus lies on the losing party to establish a basis for any departure from the general rule: Waterman v Gerling (Costs) [2005] NSWSC 1111 at [10]. Only in an exceptional case would a successful party both be deprived of costs and also ordered to pay the opponent's costs: Arian v Nguyen (2001) 33 MVR 37.
[75] The fact that the proceedings involve some public interest aspect does not, of itself, necessarily warrant departure from the general rule that costs follow the event: Oshlack v Richmond River Council at [90] (McHugh J); Re Kerry (No 2) [2012] NSWCA 194 at [13], [15]; CSR Ltd v Eddy (2005) 226 CLR 1.
[76] Where there is a divergence of authority on a particular issue, this may be a factor, but in Rinehart v Welker (No 3) [2012] NSWCA 228 the importance of the subject matter did not provide a basis for refusing costs to the successful party in private litigation (at [15]).
[77] The Court should, however, have careful regard to the facts of the case: EKO Investments Pty Limited v Austruc Constructions Ltd [2009] NSWSC 371 at [18]-[23]; Knight v Clifton [1971] Ch 700 at 725.
[78] Additionally, in a case where there are multiple issues litigated, the Court may, in the exercise of its discretion, order that a successful party have only part of its costs. It may be appropriate to order that a successful party be deprived of costs or a portion of the costs if the matters upon which that party is unsuccessful took up a significant part of the trial, either by way of evidence or argument: see Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24].
[79] The appropriate starting point, nonetheless, remains the presumption under r 42.1, and the enquiry then becomes whether in the exercise of the court's discretion, the presumption should be displaced, or whether some other order is to be preferred.
[5]
Security for Costs
The question of whether it is appropriate to order costs follow the event in a successful security for costs application was considered in G E Dal Pont, Law of Costs (Butterworths, 3rd ed, 2013) (at [28.61]) as follows:
Consistent with the 'indemnity rule' that applies to civil proceedings in Australia, a defendant who is unsuccessful in an application for security will almost invariably bear the costs of the application. If, however, the defendant is successful - that is, an order for security is made - the costs of the application are often reserved or declared to be costs in the cause [See, for example, Collignon Developments Pty Ltd v Wurth (1975) 1 ACLR 314 at 316 per Needham J (SC(NSW)); Mignon Cakes Pty Ltd v Hiltide Pty Ltd [2004] FCA 142 at [19]-[21] per Allsop J]. The reason for this is that a court is reticent to order costs against a plaintiff in respect of an application concerning what is to eventuate if the plaintiff loses at trial. If the plaintiff is successful at trial, it is likely that the defendant will bear the costs of the application for security, whereas the opposite is likely to be the case where the defendant succeeds. Yet the matter remains in the court's discretion, and the circumstances in a particular case may justify the trial judge making no order as to the costs of the application for security [Cf Combined Property Industries (Qld) Pty Ltd v Pullenvale Estates Pty Ltd(2001) 19 ACLC 765 at 769; [2001] QSC 76 per Mullins J] or requiring the plaintiff against whom security is ordered to pay the costs of the security application [See, for example, MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2002] FCA 821 at [38] per Sackville J; Jazabas Pty Ltd v Haddad [2006] NSWSC 880]. The latter may be appropriate where the court is concerned that making the costs of the security application costs in the cause (or costs in the appeal) will prejudice the defendant (or respondent) if the action (or appeal) does not proceed [See, for example, Adult Guardian v B (2002) 29 Fam LR 384; [2002] FamCA 874 at [93]-[94] (FC)].
In Plyable Pty Ltd v Go Gecko (Franchise) Pty Ltd (No 2) [2016] QSC 256 ("Go Gecko"), Bond J observed (at [12]):
In my view the authorities cited by Dal Pont do not establish that there is any particular "usual" approach to the question of the nature of the award which should be made in the event of a successful security for costs application. Nor do they provide evidence in support of the proposition the exercise of the costs discretion by reserving costs or making them costs in the cause occurs more frequently than the exercise of the discretion in any other way.
In Lex Fitness Pty Ltd ATF Lex Family Trust v Australian Fitness Management Pty Ltd [2017] NSWSC 157 ("Lex Fitness"), Slattery J observed the following with respect to the successful defendant's application for costs following an order for security for costs (at [70]-[73]):
[70] The defendants have succeeded in obtaining an order for security for costs. The parties debated what would be the appropriate costs order in the circumstances. Relying upon Bond J's decision in Plyable Pty Ltd v Go Gecko (Franchise) Pty Ltd & Ors (No. 2) [2016] QSC 256 ("Go Gecko"), Mr DeBuse submitted on behalf of the defendant that the appropriate order for this result should be that the plaintiff pay the defendants' costs of the motion.
[71] The plaintiff submitted that the appropriate order in these circumstances would be that the costs of the motion be the successful party's costs in the cause. Mr Moujalli argued that this was the traditional approach to the costs of such applications in this State, based upon long-standing authorities such as Mignon Cakes Pty Ltd v Hiltide Pty Ltd [2004] FCA 142 at [19] - [21] per Allsop J, Collignon Developments Pty Ltd v Wurth (1975) 1 ACLR 314 per Needham J, and Pacific Acceptance Corp. v Forsyth (No. 2) [1967] 2 NSWLR 402 per Moffitt J at 409.
[72] In reply, the defendants say that Go Gecko at [12] shows that there is no "usual" approach to the award of costs where a defendant is successful in a security for costs application. The defendants are correct that there is no presumed approach one way or the other and there are examples of a successful defendant on security for costs applications receiving the benefit of the rule that costs follow the event under UCPR, r 42.1: MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2002] FCA 821 and Jazabas Pty Ltd v Haddad [2006] NSWSC 880.
[73] On this application the Court will order that the costs of the motion be the defendants' costs in the cause. Although the defendants were successful on the motion, they claimed very substantial amounts of costs and were not successful in obtaining an order for security in anything like the amount of costs which they forecast for preparation of the hearing and the hearing. They were not wholly successful. The order the Court proposes represents an appropriate discretionary balance in the circumstances.
His Honour ultimately ordered the costs of the defendants' motion for security will be the defendants' costs in the cause (Lex Fitness at [74]).
In MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Ltd [2002] FCA 821, Sackville J's commentary on the question of the costs, in this respect, was limited to observing that as "the respondents have largely succeeded on their respective motions. I see no reason why costs should not follow the event" (at [38]). His Honour ordered that the applicant pay the first respondent's costs of the motion for security.
In Jazabas Pty Ltd v Haddad [2006] NSWSC 88, Simpson J made an order that the unsuccessful plaintiff pay the costs of successful defendants' security for costs applications and that the costs and that such costs be paid forthwith (contrary to the default position in that jurisdiction that costs usually did not become payable until the conclusion of the proceedings, discussed under the next heading). Her Honour held (at [13]-[15]):
[13] … The very purpose of an order for security for costs is to protect defendants against the prospect of incurring significant costs which, if the defendants are successful, the plaintiffs are likely to be unable to meet.
[14] The fact that these costs have actually been incurred, as distinct from being putative costs, suggests a further reason that it would be appropriate to make such an order; that is, the very circumstances that give rise to the order for security for costs also support an order that the costs incurred in pursuing that application should be paid before further costs are incurred.
[15] Accordingly, I will make an order of the kind proposed in favour of each of the defendants.
[6]
Costs payable forthwith
Costs orders in relation to interlocutory applications are generally not to be paid until the conclusion of the proceedings "unless the court orders otherwise": r 42.7 of the UCPR. However, the court may order that interlocutory costs be payable forthwith: Solarus Products v Vero Insurance (No 4) [2013] NSWSC 1012; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 ("Fiduciary No 1") at [171]-[173]; Australian Securities and Investments Commission v Rich [2003] NSWSC 297. The question is one of time of enforcement of the costs order. The court must take into account whether the costs in question should be determined prior to the conclusion of litigation, or whether one occasion of enforcement of costs orders at the end of a case, with costs orders going different ways being set off, is preferable: Richards v Kadian (No 2) [2005] NSWCA 373 at [7].
There are a number of circumstances in which the jurisdiction has been exercised in favour of defendants (Ritchie's New South Wales Civil Practice and Procedure under rule 42.7 at [42.7.40] sets out a list of circumstances in which the discretion has been exercised in favour of defendants. None of those appears to concern an order for security for costs), including where the decision relates to the determination of a discrete or self-contained question: Richards v Kadian (No 2) at [6]-[7].
It should also be noted, circumstances where an order has been refused include that the party is legally aided (Richards v Kadian (No 2), above, at [5]), or that the final outcome is sufficiently uncertain to warrant deferring costs to the trial judge, or that the costs of the interlocutory application should be costs in the cause: Megna v Marshall [2005] NSWSC 1326 at [27];. Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 ("Fiduciary No 2").
The decision in Fiduciary No 2 also concerned the jurisdiction of the Court to order that costs be payable forthwith and the relevant factors to be considered. Barrett J identified three relevant factors, which may be summarised as:
1. the subject matter of the interlocutory application is discrete and self-contained making it a suitable vehicle for a separate order for costs;
2. whether some of the conduct of the unsuccessful party to the motion may be seen as being unreasonable; and
3. that there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order now.
In Fiduciary No 2, Barrett J concluded "that the interlocutory hearing may be regarded as a separate and completed phase of the proceedings… - [which] represents a sufficient reason, in the interests of justice, for departing from the general rule reflected by Part 52A rule 9(1)" (at [18]). In doing so, his Honour placed weight upon, inter alia, the timing between the interlocutory proceedings at the final hearing as a basis for making costs payable forthwith.
The principles derived from Fiduciary No 2 (noting that s 52A has been repealed), were considered relevant to the Court's determination under r 42.7(2) and applied as such in Solarus Products v Vero Insurance (No 4) at [4]-[7].
As to interlocutory applications for security for costs, in Jazabas Pty Ltd v Haddad, Simpson J observed: "the very circumstances that give rise to the order for security for costs also support an order that the costs incurred in pursuing that applicant should be paid before further costs are incurred" (at [14]). Her Honour also noted "[t]he very purpose of an order for security for costs is to protect defendants against the prospect of incurring significant costs which, if the defendants are successful, the plaintiffs are likely to be unable to meet" (at [13]).
[7]
CONSIDERATION
With those general principles in mind, I now turn to the defendants' application for an order for costs against the plaintiff.
The plaintiff was represented in the hearing of the security for costs application but not on the application for costs. I consider that the plaintiff has received ample opportunity to be heard on the defendant's application for costs. It is appropriate, in the circumstances, however, that consideration be given to the plaintiff's opposition to an order for costs; not only as an outright opposition but in terms of an order for costs in the cause which, as discussed above, is an order often (but no invariably) made where a defendant is successful in seeking an order for security for costs. I have also considered whether costs should be reserved.
The following circumstances, particular to the motion, should be noted:
1. the application for security for costs occurred prior to the determination of the appeal proceedings;
2. the appeal proceedings were commenced by the plaintiff on 15 May 2013;
3. the defendants' were successful in obtaining for security for costs on 15 May 2018 but not, as I will discuss below, the full quantum of security sought;
4. the appeal proceedings are stayed until the security is provided;
5. the security, at the time of the defendants submissions on costs, is still to be provided;
6. having regard to the plaintiff's submissions as to the present application it seems most likely the substantive appeal will remain stayed at least for the foreseeable future.
I shall elaborate on the circumstances described at [37(3)] and [37(6)], below.
[8]
Quantum of Security for Costs
A specific quantum sought by the defendants was not set out in the amended notice of motion filed 23 June 2016.
In written submissions filed on 21 June 2016, the defendants sought "security for costs from the Plaintiff in the sum of $35,000.00 to be paid into the Court, or in such sum and on such terms as the Court thinks fit".
The defendants' solicitor, Mr David Eric Thackeray, by his affidavit affirmed 16 June 2016, deposed the following:
1. On 13 April 2016, Garling J ordered, inter alia, that the plaintiff pay the defendants' costs of the proceedings with respect to:
1. The defendants' notice of motion file 27 August 2015; and
2. The plaintiff's notice of motion filed 31 October 2015.
1. As to further costs, in light of the costs incurred on the motions and using the Court of Appeal proceedings as a guide, "I estimate that the further costs to be incurred up to and including a hearing in these proceedings is likely to be in the range of $15,000.00 to $22,500.00 plus GST. This estimated range is in addition to the costs incurred on the Motions to which the Plaintiff is liable following the order of Garling J on 13 April 2016".
On 3 October 2017, during the hearing, counsel for the defendants made the following submission as to quantum:
Finally, your Honour, the impressionistic approach, my solicitors have estimated to get to a completed hearing on an appeal - once the submissions are done there still needs to be the evidence and the transcript put together - with Mr Coombes involved I expect that that would be more efficiently done. A figure of $35,000 was estimated on a party/party basis by my solicitors but your Honour of course I can take your Honour to that evidence but it is the, where it is found, but ultimately we are not looking for a figure greater than $35,000 to get to a completed appeal. [Emphasis added.]
The amount ordered for security for costs, for projected costs, was $8,000 (less than that sought by the defendants for future costs, even aside of any amount for past costs). It follows that the defendants were not successful in obtaining the quantum sought although the defendants did accept that the assessment of the same was "impressionistic".
[9]
Prejudice to the defendants
In circumstances where the Court may be concerned that making the costs of the security application costs in the cause will prejudice the defendants if the action does not proceed, the Court may find it appropriate to utilise its discretion to order the plaintiff pay the defendants' costs (see Law of Costs at [28.61], and Adult Guardian v B (2002) 29 Fam LR 384; [2002] FamCA 874 at [93]-[94]).
The judgment of the Family Court of Australia in Adult Guardian v B concerned an application brought by, inter alia, the Adult Guardian for an order that B provide security of costs of an appeal lodged by B. The observations of that Court, as to costs in the appeal (at [93]-[94]), are analogous to the present consideration as to whether or not an order for costs in the cause should be made, and are extracted below:
[93] The difficulty with B's proposal that the costs of the successful security applications should be costs in the appeal, is that if the appeal does not proceed, either because the orders for security are not met or for any other reason, then the opportunity for the successful applicants for the orders for security to recover the costs of those applications will be lost.
[94] Accordingly, we consider that the more appropriate course is that we determine finally at this time the applications for costs in respect of the successful applications for security.
Here, as I have observed, it is unlikely that the appeal will proceed because security for costs will not be paid by the plaintiff.
[10]
Conclusion: Costs of the Security for Costs Application
The Court is required to exercise its discretion as to costs in the context of the operation of the presumption and in the particular circumstances of this case (see Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 at [97]-[98] (per Campbell JA); EKO Investments Pty Limited v Austruc Constructions Ltd [2009] NSWSC 371 at [18]-[23]; Knight v Clifton [1971] Ch 700 at 725 (see also, Oshlack v Richmond River Council at [69] (McHugh J); and Ritter v Godfrey [1920] 2 KB 47). The purpose of an order for costs is to compensate the person in whose favour it is made, not to punish the person against whom the order is made: Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33 at [34].
Here, there is a substantial likelihood that the security for costs ordered will not be paid and the appeal will, therefore, remain stayed. In the result the defendants will be prejudiced in circumstance where the Court has found the plaintiff's appeal not reasonably arguable.
In my view, this is a very substantial factor weighing in favour of the award of costs to the defendants.
On balance I consider that, notwithstanding the defendants were not wholly successful in the quantum of costs sought, the appropriate order in the interest of justice is that the plaintiff pay the defendants costs of the amended motion.
[11]
Costs payable forthwith
The motion concerned a discrete interlocutory application, namely, security for costs, to be determined separately and prior to any final proceeding or any final order as to costs.
The defendants in the present proceedings contended that the proceedings would not be finalised for some time in circumstances where the security is still to be provided. The above findings suggest that security for costs may not be paid or certainly not paid in the near future. Further, as to the appeal proceedings, the plaintiff had only finalised his grounds of appeal by fifth iteration. In this respect, the defendants noted that the plaintiff commenced the proceedings against the defendants on 15 May 2013. Further, the appeal has been found not to be reasonably arguable.
It is appropriate that costs be ordered to be paid forthwith.
[12]
CONCLUSION
The central and overriding principle in determining an application for costs is that of doing justice to the parties in the particular circumstances of the case.
The general rule expressed in r 42.1 does not fetter the discretion of the Court in that respect, provided it is recognised that the general rule is that costs will follow the event unless it appears to the Court that other orders should be made. Rule 42.7 does not fetter the discretion of the Court to make costs payable, with respect to an interlocutory application, before the conclusion of the proceedings.
For the aforementioned reasons, I consider this is an appropriate matter for costs of the amended motion to be ordered in favour of the defendants, payable forthwith.
[13]
ORDER
I make the following order:
1. The plaintiff shall pay the defendants' ordinary costs of the further amended notice of motion filed on 3 October 2017, as agreed or assessed, payable forthwith.
[14]
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: 29 November 2018