Amiripour v Shahristan Pty Ltd (No 2) - [2021] SADC 156

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Interlocutory Application)
AMIRIPOUR & ANOR v SHAHRISTAN PTY LTD & ANOR (No 2)
[2021] SADC 156
Judgment of her Honour Judge Deuter
21 December 2021
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - STIFLING OF LITIGATION
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - JUSTICE OF CASE
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - PLAINTIFF'S OR APPLICANT'S IMPECUNIOSITY
The respondents seek an order that the applicants provide security for the costs that they will incur defending proceedings relating to a dispute between the parties involving the sub-lease of premises by the applicants, and the operation of a café business previously conducted on the premises by the first respondent.
The leasehold in dispute was entered into by the first respondent on 8 March 2018. The day following, a verbal agreement was brokered by the second respondent, whereby the applicants sub-leased the premises from the first respondent and took over operation of the café business contained thereon. The applicants, with the consent of the respondents, changed the business to a Persian-styled café.
A dispute has arisen regarding the terms of the agreement between the parties, and both allege that the other party has breached the terms, and that monies are owed to them. On 18 November 2020 the first respondent served Notices to Remedy breaches of the agreements by payment of $38,749.30, within 14 days, failing which the first respondent would re-enter, and take possession of the premises. In response, the applicants sought an interim injunction and issued proceedings seeking damages.
On 2 June 2021 an order was made by this Court granting an interim injunction to the applicants restraining the respondents from taking, or causing any action to be taken, to remove the applicants from the sub-let premises and/or to sell the café business. The terms of the injunction included that the applicants were to pay all lease payments for the premises directly to the landlord as they became due and payable; pay all rates and taxes and all other outgoings as they fell due pursuant to the terms of the lease agreement; and pay the respondents a monthly licence fee of $1,500.00 to operate the café business.
On 24 June 2021 the respondents served a letter of demand upon the applicants requiring them to pay the amount of $103,253.93 into Court as security for their costs in defending the applicants' claim up to, and including, the first day of trial. The payment was to be made by 22 July 2021. On 27 July 2021 an application seeking security for costs was filed by the respondents, pursuant to Rule 115.1 of the Uniform Civil Rules 2020 (UCR).
The grounds on which the application for security was brought was that the applicants are ordinarily resident outside of Australia (UCR 115.1 (1)(b)); and/or that such an order is necessary in the interests of justice (UCR 115.12(1)(e)).
Held:
1. The applicants although living in Australia pursuant to a bridging visa, have been ordinarily resident in Australia since August 2013, arriving from Iran as Irregular Maritime Arrivals (refugees). They have no residency in any other country. The applicants' residency status is not sufficient reason for an order for security of costs to be made.
2. The applicants did not adduce any evidence that an order for security will stultify the action.
3. It is necessary in the interests of justice that an order for security be made.
4. As a result of the circumstances of this matter, namely that if the applicants are not successful a café business and fit-out will be transferred to the respondents, in exercising the discretion, it is appropriate to order that the applicants provide security for the respondents' costs through to the commencement of trial in the sum of $35,000.00.
5. The action will be stayed until the applicants pay the security into court.
Uniform Civil Rules 2020 (SA) R 115.1, 115.1(1), 115.1(1)(b), 115.1(1)(c), 115.1(1)(e), referred to.
Reschke v Trevor Reschke Nominees Pty Ltd (Reschke) [2020] SASC 60; Idoport Pty Ltd v National Australia Bank Ltd (No 3) [2001] NSWSC 744 [2001] NSWSC 744; Remm Constructions (SA) Pty Ltd v Allco Newsteel Pty Ltd (1992) SASR 180; Dwyer v Canning Vale [2005] SASC 80; Rivers v Rivers [2004] SASC 295; Adelaide (SA Pools and Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60; Dictating Machine Centre Pty Ltd v Combe (1981) 26 SASR 316; Allison v Harmsworth [2018] SASC 27; ANZ & Ors v Oswal [2013] VSCA 156; Bernie v The Public Trustee and Ors [2007] SASC 175; Ulowski v Miller [1968] SASR 277; Cosenza & Anor. v Gill and Ors [2018] SASC 50, applied.

AMIRIPOUR & ANOR v SHAHRISTAN PTY LTD & ANOR (No 2)
[2021] SADC 156
Civil
Introduction

The applicants commenced proceedings seeking an injunction and damages in relation to the lease of premises at 42 John Street, Salisbury (the premises). I granted an interim injunction on 2 June 2021 restraining the respondents from taking any action to remove the applicants from the premises and restraining them from selling the café business conducted within the premises (the café business) until further order.[1] A term of that order was that the applicants were to pay to the respondents a monthly licence fee of $1,500.00; all lease payments; and all rates, taxes and other outgoings in relation to the premises.
[1] Amiripour & Anor v Shahristan Pty Ltd & Anor [2021] SADC 64 (the injunction judgment).
By the applicants’ primary claim, they seek orders that the lease of the premises be assigned to them, and that the café business be transferred (the action). In the alternative, they seek damages by the way of equitable compensation for the monies expended on the development of the café business and the value of the business if it is lost to them.
On 27 July 2021 the respondents filed an application seeking an order that the applicants provide security for the costs of, and incidental to, defending the action. They have sought payment into court of the cost of defending the action up to and including the first day of trial. Those costs are claimed at $103,253.93. This is 75% of the costs assessed at $137,671.90 (incl GST).[2] That assessment includes costs incurred from the time the respondents were first served with the applicants’ application for injunction on 11 December 2020, to the date of the affidavit, said to be $50,556.27. The respondents also seek that the action be stayed until the applicants pay the security sought into court.[3]
[2] As set out in the affidavit of Peter George Charatsis, FDN 25, at [21]–[25].
[3] FDN 24.
Security for Costs
The application for security for costs is brought pursuant to Rule 115.1 of the Uniform Civil Rules 2020 (UCR) which provides.
115.1 – Security for costs
(1)The Court may order that an applicant in an action provide security for costs if—
(a)     the applicant is bringing the claim or application for someone else’s benefit;
(b)     the applicant is ordinarily resident outside Australia;
(c)     there are reasonable grounds to suspect that the action has been brought for an ulterior purpose;
(d)     the order is authorised by statute; or
(e)     the order is necessary in the interests of justice.
(2)The Court may order a stay of the action until security is given.
(3)The Court may vary or revoke an order for security for costs and may order further security.
(4)If security is not given, the Court may dismiss the action.
(5)If the action has been stayed under subrule (2) for 6 months without security having been given, the action is automatically dismissed for want of prosecution.
(6)If the action is dismissed under subrule (4) or (5), the Court may, for special reasons, reinstate the action.
The respondents bring the application for security upon the basis that the applicants are not ordinarily resident in Australia, and/or that an order for security for costs is necessary in the interests of justice.
Background and Factual Matters
The background to the dispute between the parties is set out in the injunction judgment. Of importance to the current application is that the applicants were born in Iran and arrived in Australia by boat as Irregular Maritime Arrivals (refugees) on 3 August 2013. They have lived in Adelaide since that time in rental accommodation.
The applicants by affidavit evidence have deposed that they do not intend to return to Iran and would not be able to safely return should they choose to do so. [4] The applicants have a young son who attends school in Adelaide and English is his first language. The first applicant currently works as an Education Support Officer while studying to up-date her qualifications. She also assists the second applicant in running the café.
[4] FDN 36 and FDN 37.
The second applicant has recently formed a second company in Australia, Leyan Busher Pty Ltd, which has leased property in Salisbury from where he intends to operate a second restaurant/café business. He asserts that he successfully operates the café business and that it provides a source of income for the family.
The applicants argue that they have assimilated into life in South Australia. The first applicant’s sister lives in South Australia having been granted a refugee visa.
The applicants do not have a final visa to allow them to reside permanently in Australia. In an email of 11 November 2021, Ms Christian Cifuentes, a lawyer acting for them in judicial review proceedings in the Federal Circuit Court, set out the following detail in relation to the visa status of the applicants:
i.Application was first made for a Safe Haven Enterprise Visas (SHEV) on 29 March 2017;
ii.The SHEV application was made on the grounds that the applicants would be subjected to human right abuses in Iran at the hands of the Islamic Government if they returned;
iii.The SHEV application was refused at first instance;
iv.An application with the Immigration Assessment Authority (IAA) for review of the Department’s decision was unsuccessful;
v.An application for Judicial Review of the IAA decision was lodged with the Federal Circuit Court on 16 October 2018;
vi.Generally judicial review matters take between 2 and 4 years for a final hearing date to be listed;
vii.Counsel have indicated that the applicants’ prospect of success are reasonable;
viii.If successful, the Court will remit the applicants’ case back to the IAA for a fresh hearing. This is usually at least a year after the court decision;
ix.If the application in the Federal Circuit Court is unsuccessful, the applicants can appeal to the Full Federal Court or apply to the Minister, requesting intervention;
x.The visa/migration matters are unlikely to be resolved by 2023 if not longer;[5]
[5] Exhibit FA6 to FDN 37
The applicants are able to remain in Australia on Bridging E visas granted on 21 April 2017,[6] and October 2018[7], respectively.
[6] Exhibit RB4 to FDN 36.
[7] Exhibit PGC2 to FDN 25.
There is no evidence that the applicants have surplus funds beyond their earnings. They do not depose to holding any assets in Australia. This is confirmed by a SAILIS search completed by the respondents’ solicitor on 26 July 2021.[8] As set out below the full extent of the applicants’ earnings has not been deposed to. In a letter of 31 January 2020, their solicitors set out that the second applicant was in receipt of a Newstart Allowance when first negotiating with the respondents regarding the premises in March 2018. The applicants then worked in the café business for no renumeration until seeking to purchase it in January 2020.[9]
[8] Exhibit PGC3 to FDN 25.
[9] Exhibit PGC5 to FDN25.
The applicants argue that any impercuniosity suffered by them is at the hands of the respondents, in not paying them agreed wages from when they began operating the café business in March 2018.[10] It is also caused by the need to fit out the premises for the business at a cost of $70,000.00.[11] It was submitted by the applicants’ counsel that that a security order in the terms sought by the respondents would effectively stultify the action, in that the applicants do not have the funds sought to be paid into court. As set out below no evidence of this was put before the court.
[10] Para [9] of the injunction judgment.
[11] Para [10] of the injunction judgment.
The applicants have provided only limited evidence of their financial position. The first applicant deposed that she and the second applicant had built a successful business, however their wealth is embedded in the café business by both the fit-out and the goodwill.[12] The applicants argue that the respondents will necessarily benefit from the value of the café business if they are not successful in their action.
[12] Paras [13] and [15] of FDN 37.
As outlined in the injunction judgment the extent of the applicants’ contribution to the fit out of the premises is denied, however, that does not assist in determining the application for security.
The respondents did not submit that the applicants were persons of significant means, accepting their status as refugees from Iran. They argue however that without permanent residency status, the applicants could be forced to leave Australia, and the respondents would then not be able to enforce any costs order made in their favour.
Discretion to Grant Security for Costs
The purpose of ordering security for costs is to ensure that if an applicant is not successful in their action, they will be in a position to meet any costs order made against them. As Blue J stated:
A plaintiff may have the means at the commencement of any action to pay costs but those means may be dissipated by the end of the action when a costs order is made. There may be persons standing behind or supporting the plaintiff who are willing to provide security for costs in advance to ensure the action can proceed but who would not do so at the end of the action after the plaintiff has failed.[13]
[13] Reschke v Trevor Reschke Nominees Pty Ltd(Reschke) [2020] SASC 60 at [29].
Justice Blue in Reschke went on to adopt the words of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd (No 3)[14] where the purpose of ordering security for costs was stated to be:
The jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationale in mind, namely that, to the extent it can be avoided, the court should not permit a situation to arise where a party’s success is pyrrhic.
The purpose of a security for costs order is therefore a protective jurisdiction to ensure that the primary purposes for having costs orders themselves, can be achieved. A defendant is protected against the risk that a costs order obtained at the end of the day may turn out to be of no value by reason of the impercuniosity of the plaintiff. The jurisdiction therefore assists both the compensation purpose as well as the public interest objective.[15]
[14] [2001] NSWSC 744 at [51]-[52].
[15] Reschke v Trevor Reschke Nominees Pty Ltd [2020] SASC 60 at [35].
The jurisdiction to grant an order for security is limited to the five categories set out in UCR 115.1(1). There is no inherent jurisdiction in the court to make an order for security for costs.[16] However the court has a general discretion as to the terms of the security ordered, including the amount of such security. Each case depends on its own circumstances.[17]
[16] Dwyer v Canning Vale [2005] SASC 80.
[17] Rivers v Rivers [2004] SASC 295 per White J at [26].
The court in exercising its discretion must attempt to do justice to both parties. Chief Justice King in Remm Constructions (SA) Pty Ltd v Allco Newsteel Pty Ltd described this as follows:[18]
In considering security for costs the court ought to try to do justice as between the parties. The court should protect a defendant against the loss which may result from the inability to recover costs by reason of the impecuniosity of the plaintiff but should go no further than is reasonably necessary for that purpose. The provision to pay, may place an unreasonable burden upon a plaintiff or those for whose benefit the plaintiff is suing.
[18] (1992) SASR 180 at 189.
In Adelaide (SA Pools and Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd,[19] Doyle J agreed that in determining an application for security the court must balance the potential injustice to an applicant, who is later successful at trial but required to give security, with the potential hardship or injustice to a respondent who successfully defends an action but is unable to recover any costs. He confirmed that such a balancing act meant there was no predisposition in favour of, or against requiring security from an applicant.
[19] [2016] SASC 60 at [12].
Justice Blue in Reschke[20] considered this balancing act and set out seven potential factors that had been earlier identified by Mitchell J in Dictating Machine Centre Pty Ltd v Combe[21] as relevant to the discretion to grant security. They are:
1.The true role of the applicant;
2.The existence of any special relationship between the applicant and the respondent;
3.The time at which the application for security for costs is made;
4.Whether the applicant’s claim is bona fide;
5.The prospect of the applicant’s claim succeeding;
6.The oppressive use of the application for security;
7.The applicant’s want of means induced by the respondent.
[20] [2020] SASC 60 at [41]-[42].
[21] (1981) 26 SASR 316.
In addition to those factors, where an applicant is impecunious the court is to be cautious in making an order for security:[22]
It is well recognised that the financial position of the plaintiff may be relevant to an exercise of the discretion to order security for costs. While somewhat paradoxical, the general position is that if it is established that the plaintiff is impecunious then this will weigh in favour of an order for security; whereas if it established that the effect of ordering security will be to stultify, or prevent the plaintiff from pursuing, the proceedings, then this will weigh against an order for security.
[22] Allison v Harmsworth [2018] SASC 27 per Doyle J at [50].
A similar sentiment was expressed by Blue J in Reschke, where he noted:
It is well established that security for costs ought not ordinarily be ordered against a natural plaintiff if that would stultify the action.[23]
[23] [2020] SASC 60 at [44].
This principle is based upon a long-held rule that poverty should not stop a person from litigating a claim, and the ability to order security not used for that purpose. However, it is for the applicant to prove that such an order for security will stultify the action. The applicant carries the onus of proving that fact. Blue J concluded in Reschke:
… if the plaintiff, on being unsuccessful in the action, will not have sufficient resources to meet an order for costs an order for security will not stultify the action, it may be (depending on all of the relevant circumstances) that it will be necessary in the interest of justice to order that the plaintiff provide security for costs.[24]
[24] [2020] SASC 60 at [47].
Stultification of the Action

Neither of the applicants in their affidavits adduced any evidence that an order for security for costs would stultify their action. Nor did they depose to that fact. This is despite the argument on the respondents’ application being part-heard and adjourned for four weeks to enable the applicants to both file further affidavit material. They have provided limited affidavit evidence in response to the application.
In her third affidavit[25] the first applicant provided detail of her income as a School Support Officer. A pay slip annexed to the affidavit[26] confirms that the first applicant is employed by Playford College, on a part-time basis. Her annual salary is $47,767.00. She also assists the second applicant in the café business.
[25] FDN 37.
[26] Exhibit FA 4 to FDN 37.
The second applicant provides no detail of his income in his second affidavit,[27] beyond deposing that the café business is successful, and he has now leased another property in which he intends to operate another café/restaurant business. He stated that he expects this to be another source of income for him. However, no tax returns or any financial information was annexed to his affidavit. There is no evidence of the extent of his income, and the basis upon which he says the café business is successful. No evidence of the cost of any fit out for the second business has been provided. The applicants have not deposed to whether, although refugees from Iran, they were able to bring any funds or items of value to Australia.
[27] FDN 36.
The lease for the new business is for a 5-year term, commencing on 1 August 2021.[28] The annual rent is $43,500.00 plus GST, to be paid monthly. There is also an agreement that the second applicant’s company pay all rates and taxes, water consumption charges, power and sewage costs, building insurance, repairs, maintenance costs and all like costs of the leased premises. The second applicant is the personal guarantor of the lease for his company, including guarantor of all costs and expenses.
[28] Exhibit RB5 to FDN 36.
The applicants have provided no detail of the income being earned from the current café business. Their counsel submitted that they had done well enough to have the funds to secure the further lease, and to fit out other premises for a second business. Those submissions, and the evidence, suggest that the applicants now have an additional source of income that could be used to meet an order for security. In this regard, I take into account that the second applicant signed the lease for the second business premises on 23 September 2021, seven weeks after the respondents had made their application seeking an order for security for costs. This was 13 weeks after the respondents’ solicitors had served a demand upon their solicitors by an emailed letter of 24 June 2021.[29]
[29] Exhibit PGC7 to the affidavit of Peter George Charatsis (FDN 25).
The applicants did not depose in any affidavit that an order for security would have the effect of stultifying their action against the respondents. They did not depose to being impecunious. The submission by their counsel that the action would be stultified by an order for security, was made at the very end of submissions, and was not based upon any evidence. It was simply put that the applicants did not have the funds to meet any order. I was taken to no evidence to establish this.
In all of the circumstances, I find that the applicants have not demonstrated that an order for security for costs will stultify prosecution of their claim. As Blue J noted in Reschke it is not for the Court to speculate about how an applicant would provide security for costs, and that it is not unknown for other sources of funding to be available to them.[30]
[30] [2020] SASC 60 at [56].
The applicants have not satisfied the onus upon them to prove that an order for security will stultify the action.
Grounds for a security for costs order
As I have set out the respondents bring their application for security relying upon two grounds. I will consider these separately.
1. The applicants are not ordinarily resident in Australia
The purpose of ordering security for costs against an applicant who is ordinarily resident outside of Australia, is to enable a successful respondent to have a fund against which they can enforce an order for costs. This is especially so where the applicant has no assets in Australia. The order for security protects the successful respondent from the uncertainties and costs of attempting to enforce a costs order in the applicant’s country of residence.[31]
[31] ANZ & Ors v Oswal [2013] VSCA 156 per Priest JA at [115]; Allison v Harmsworth [2018] SASC 27 per Doyle J at [24].
However, courts of recent time have adopted a more flexible approach, and the decision whether to order security for costs where an applicant ordinarily resides outside Australia is still one to which discretion is applied.[32] The wording of UCR 115.1 makes this clear by use of the phrase “…the Court may order that an applicant…” provide security for costs, if one or more of the five categories listed are met.
[32] Allison v Harmsworth [2018] SASC 27 per Doyle J at [25].
The first threshold that the respondents must meet under UCR 115.1(1)(b) is proving that the applicants are ordinarily resident outside of Australia. In arguing this issue, the respondents’ counsel conceded that at the current time the applicants are ordinarily resident in Australia, however it had not been established that they will permanently be able to reside in the country. The letter of Ms Cifuentes confirms that the applicants have not been granted permanent residency and there is still a lengthy process to be undertaken before that may occur. However, there is no certainty that permanent residency will be granted.
However, this is not a case where the applicants have commenced proceedings in Australia, while hiding assets in another country and where expensive and uncertain enforcement proceedings would have to be commenced in another jurisdiction to recover costs. The applicants arrived in Australia by boat as refugees from Iran. They have lived and worked in Australia since 2013. They have set up a business in Adelaide and continue to work in that business. They are actively resisting a return to Iran due to human rights issue.
I find that the applicants are ordinarily resident in Australia and have been since 2013. They are displaced citizens and have no other home. The first applicant has deposed that their only wealth and assets are in the café business operated from the premises. These are assets in Australia which the respondents will have access to if successful in defending the action commenced by the applicants. They are also assets from which the respondents continue to derive an income, pursuant to the monthly licence fee being paid by the applicants pursuant to the injunction judgment. If the applicants are unsuccessful in the action the café business, including the value of the fit out will remain in the ownership of the respondents.
I find that the applicants’ residency status is not a sufficient reason for an order for security of costs to be made.
2. The order is necessary in the interests of justice
The applicants in this matter are natural persons, and the respondents’ counsel acknowledged that there has been a rule in the past not to order security for costs against non-corporate applicants. However, he also submitted that this rule was primarily applied in personal injuries claims, where respondents are traditionally represented by a corporate insurer, and that the “…interests of justice…” test in UCR 115.1(1)(e) had led courts to take a more expansive approach to security applications involving natural applicants.
In Bernie v The Public Trustee and Ors[33] Judge Dart considered what is required to determine that the making of a security for costs order is in the interests of justice. He found that the test “…provides the Court with a broad discretion to be exercised judicially…”.[34] Having considered what Bray CJ had found in Ulowski v Miller,[35] Judge Dart stated:
The starting point then is that there are no fixed rules fettering the exercise of the discretion. It is not the correct approach to start with the proposition that, because the Plaintiff is an impecunious natural person, the Court should not make an order for security for costs. To approach the matter that way would be to improperly fetter the exercise of discretion. The fact that it is an impecunious natural person bringing the action is a significant consideration. It goes into the mix with other considerations such as whether the impecuniosity was caused by any action of the Defendant, whether the proceedings are likely to be stultified if an order is made and the strength of the Plaintiff’s claim. Also relevant is any delay in the bringing of the Application.
When exercising a discretion to act in the interest of justice, it is also necessary to consider the position of the defendants…
It seems probable that orders for security for costs against impecunious natural persons will become less infrequent now that the test is not special circumstances but the interests of justice. That said, it must be recognised that it is a grave thing to prevent a person, who is able to articulate a cogent cause of action from being able to prosecute that action. That will always be a very important significant factor in weighing what is in the interests of justice.[36]
(Emphasis added)
[33] [2007] SASC 175.
[34] Ibid at [14].
[35] [1968] SASR 277 at 280-281.
[36] [2017] SASC 175 at [16]-[17] and [19].
The issue of whether there is a “basic rule” against ordering security against natural persons was also considered by Lovell J in Cosenza & Anor. v Gill and Ors[37] when he responded to a submission of the appellant that such a rule existed:
I reject the appellant’s submission that the “basic rule” remains unless removed by law. The Australian position has always been that the question of a security for costs order is a discretionary one guided by the relevant rules of court.
[37] [2018] SASC 50 at [14].
Justice Lovell also agreed with the observations of Judge Dart regarding the discretion to order security for costs. He confirmed that the discretion to make such an order is unfettered but:
…the starting point in the exercise of the discretion is that the bare fact of impecuniosity is not of itself a reason to order a plaintiff, who is a natural person, to provide security for costs.[38]
[38] Ibid at [18].
However, Lovell J was of the view that unless there were other relevant determinative factors, an order for security for costs should not be made.[39] In my view he was clearly indicating that in exercising the discretion to order security, the impecuniosity of a natural person is still a very significant factor.
[39] Ibid.
In relation to paragraph (e) of UCR 115.1(1), an order for security for costs is only to be made if the Court is satisfied that such order is “…necessary…” in the interests of justice. In Reschke Blue J stated that:
Before the Court can so conclude, it must take into account all relevant circumstances. If the Court concludes that a security order is necessary in the interest of justice, there is no room for the exercise of a residual discretion.[40]
[40] [2020] SASC 60 at [42].
That is, if a Court determines that a security order is necessary in the interests of justice then the Court should not decline to make the order for other reasons. Justice Blue in Reschke concluded by finding:
In conclusion, if the plaintiff, on being unsuccessful in the action, will not have sufficient resources to meet an order for costs, and an order for security will not stultify the action, it may be (depending on all of the relevant circumstances) that it will be necessary in the interests of justice to order that the plaintiff provide security for costs.[41]
[41] [2020] SASC 60 at [47].
Consideration of the Issues
The respondents’ application for security was made very promptly after the injunction judgment. The delay in the matter being listed for argument was caused by the applicants, in particular their failure to meet orders regarding the filing of affidavits. However as set out in the injunction judgment the applicants’ claim is bona fide. I find that there is a serious question to be tried regarding the ongoing occupation of the premises, including their right to operate the café business. By the injunction judgment, I ordered that the whilst the applicants were able to remain in the premises and operate the café busines, they were required to pay all rental costs and expenses, and an additional monthly licence fee of $1,500.00 to the respondents to operate the café business. It was not submitted by the respondents that any of these payments have not been paid by the applicants.
While I have noted that the applicants have provided only bare statements of their financial position, the respondents have not produced any evidence that the applicants have any assets of value by which they could meet an order for security for costs. The respondents’ searches found that the applicants own no real estate property in South Australia. The one issue that I consider relevant in relation to the applicants’ financial situation is that soon after obtaining the injunction sought to continue operating the café business owned by the first respondent, and just after security for costs was sought by the respondents in this action, the applicants entered into arrangements to lease and fit out premises for a second restaurant. This demonstrates some financial capacity to meet a costs order, and a choice being made to instead direct funds towards another venture.
As set out by Blue J in Reschke an important factor in determining whether it is in the interests of justice to order security for costs is the prospects of the applicant succeeding in their action. However, the court must take great care in assessing the strength of an applicant’s case at the interlocutory stage. The respondents argued in this regard that there are important inconsistencies in the evidence of the applicants as put forward to the Court. These inconsistencies impact upon the credibility of the applicants.
I have already conducted a review of the evidence of the applicants in the interlocutory judgment and set out the inconsistencies regarding the applicants’ case as put forward by the respondents. I said as follows in relation to the inconsistencies:
It is not necessary for me to consider each of those inconsistencies for the purpose of this application, except to note that they are there, and they are serious matters to be determined at trial. The only explanations provided by the applicants’ counsel to the Court were that the first applicant prepared documents and gave instructions in English which was not her first language and without an interpreter, and that some of the inconsistencies arose from the applicants’ legal team attempting to define the verbal agreements in legal terms, when it was a somewhat informal agreement between associates. On the face of the matters contained in the affidavits I am not sure those explanations address all inconsistencies.[42]
[42] [2021] SADC 64 at [30].
In the injunction judgment I noted that the applicants had not produced any evidence of the financial performance of their café business since March 2018.[43] They still have not done so on this application. On 19 January 2020 the applicants served notice upon the first respondent of their intention to exercise their alleged contractual right to purchase the business for $25,000.00. This would be in addition to the fit-out of the premises that they allege is valued at $70,000.00. As at July 2021 the respondents alleged that the amount to be paid to purchase the business was $63,424.16, being an agreed value of $30,000.00 for the business in addition to $33,424.16 of unpaid licence and other payments. There has been no independent valuation of the café business ever provided.
[43] Ibid at [44].
I continue to be concerned by the inconsistencies in the evidence of the applicants. When considering the matter in June I stated:
I accept there are inconsistencies and changes to the evidence of the applicants regarding the nature of their agreement with the respondents and what has taken place since March 2018.[44]
[44] Ibid at [31].
None of those inconsistencies have been addressed by the applicants. A revised claim was filed by the applicants on 5 July 2021,[45] which introduced a new basis for their claim namely that they had entered into a loan agreement with the respondents for purchase of the business, to be paid off by monthly payments of $1,200.00 from December 2018. This is a completely different case to that before the court by way of the affidavits filed in support of the application for injunction, and as discussed by me in the injunction judgment.
[45] FDN 23.
In the revised claim the applicants also now raise a plea of misleading and deceptive conduct on behalf of the second respondent, in relation to representations that he is alleged to have made. No representations are pleaded.[46] There is also now a claim made for equitable compensation,[47] but no facts pleaded upon which such a claim could be made out.
[46] FDN 23 at paragraphs 7, 10 and 24.
[47] FDN 23 at paragraph 29.
I have reviewed once again, all of the affidavit material in this matter and as I found in the injunction judgment, there are inconsistencies in the evidence of the applicants. The revised claim now adds to those inconsistencies as new and different matters are pleaded. The reasons for the change in the applicants’ case has not been provided.
There are concerns on the evidence of the applicants’ likelihood of success in their action. This is a matter where there are no written agreements between the parties and findings of credit of the main protagonists will to a large extent determine the issues in dispute. The further and new inconsistencies in the applicants’ case regarding the terms of the agreement with the first respondent, and what occurred thereafter, casts real doubts over the applicants’ prospects of success in this action.
The applicants argue that the first respondent is currently obtaining benefit from the verbal agreement by way of the monthly fees being paid to them. They also argue that if the applicants are not successful at trial the respondents will retain the café business, including the new fit-out. This is a flawed argument. Firstly, the respondents argue that the cost of the fit-out to the premises was nowhere near the $70,000.00 claimed by the applicants. I set out in the injunction judgment that documents provided in evidence demonstrated a contribution of no more than $20,000.00 by the applicants, and that the respondents had also contributed $17,304.00 for improvements to the premises for the business.[48]
[48] [2021] SADC 64 at [33].
There is also no evidence before the Court that the café business is profitable, and if so what the level of profits are. There is no evidence as to the value of the café business on the open market.
I find the fact that the applicants have not clearly set out their claim but have provided inconsistent evidence as to what occurred between the parties to be very important. This is particularly so after I had raised concerns in the injunction judgment. The applicants by their revised claim have attempted to add further causes of action but have not pleaded sufficient detail to support them. Those causes of action are inconsistent with the earlier documents filed in the action. The evidence before the Court, is not complete despite several opportunities given to the applicants to provide further affidavits.
In those circumstances I must consider the position of the respondents and particularly the natural person second respondent. If the action is successfully defended, the first respondent will regain the lease of a property and a café business. However, the value of that business is unknown, and the first respondent will still have paid monies towards the fit out of the café which may not be recovered. While no evidence is before the Court that the applicants are impecunious, I accept that they are likely of modest means.

I have considered and weighed the relevant considerations as set out above regarding the ordering of security for costs. It is difficult to determine where the interests of justice lies where such little detail has been provided by the applicants. However, I am of the opinion that the interest of justice is best served by an order that the applicants provide security for costs.
Quantum of Costs
The only evidence put before the Court as to the likely costs to be incurred by the respondents up until the first day of trial was contained in the affidavit of the respondents’ solicitor.[49] Those costs were assessed at $137,671.90 (incl. GST of $12,515.63). The applicants never responded to that estimate that was also contained in a letter to their solicitor of 24 June 2021.[50]
[49] FDN 25 at [21]-[26].
[50] Exhibit PGC7 to FDN 23.
A discount of 25% was applied to the calculation, resulting in security sought at $103,253.93. The claim at 100% included an amount of $50,556.27 incurred for past costs between 11 December 2020 and 24 June 2021. Those costs include the costs that I determined were costs in the cause of the applicants’ interim injunction proceedings, where the respondents were not successful in obtaining occupation of the premises so that the café business could be sold. In my view the past costs should not be included in any order for security.
In assessing the extent of an order for security I adopt what Doyle J said in Allison v Harmsworth:
… as the authorities acknowledge, I do not consider it necessary or appropriate to order an amount reflecting a complete indemnity against the first defendant’s likely party and party costs through to the commencement of trial. Security is often ordered in a relatively modest or conservative amount, reflecting the fact that it is intended to mitigate the risk associated with enforcement of a costs order and is not necessarily intended to be a complete indemnity in respect of those costs.[51]
[51] [2018] SASC 27.
It is never possible to precisely quantify the costs a party is likely to incur in the future. One factor is often the sums in dispute in the action. Although the applicants have sought damages in the sum of $200,000.00 if they are evicted from the premises, there is no evidence to support that claim. As set out in the injunction judgment sums of $40,000.00 to $70,000.00 are in dispute.[52] Those sums relate to outstanding expenses owed to the respondents, and fit-out costs sought to be recovered by the applicants. It is of some concern that the total costs of the respondents to the first day of trial, including GST, are assessed to be $137,671.90. Those costs appear out of proportion to the matters in dispute.
[52] [2021] SADC 64 at [10]-[16], [33], [39]-[41].
The expenses claimed by the respondents as being unpaid in relation to the premises and the café business are now being paid by the applicants at a monthly rate of $1,500.00. All arrears of rental payments are being paid. There are therefore no ongoing losses being suffered by the respondents. This will continue until trial and judgment.
In the circumstances of the subject matter of this action, I am of the view that the Court should be cautious as to the calculation of an amount for security for costs. I order that the applicants provide security for costs in the sum of $35,000.00.
I further order that this sum is to be paid into the Suitor’s Fund and the action be stayed until such time as the applicants provide the said security.
I will hear the parties on the question of the time within which the security for costs is to be paid, on the question of costs.