Bennie v The Public Trustee - [2017] SASC 175

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BENNIE v THE PUBLIC TRUSTEE & ORS
[2017] SASC 175
Reasons of Judge Dart a Master of the Supreme Court
22 November 2017
PROCEDURE - COSTS - SECURITY FOR COSTS - POVERTY
The plaintiff claims that a property is held on a constructive or resulting trust - he asserts payment of the full purchase price - strength of the case is unclear - plaintiff unable to pay costs if unsuccessful in the claim - on balance, the interests of justice require payment of security for costs.
Supreme Court Civil Rules 2006 r 194; Supreme Court Rules 1987 r 100.01(e); Statute 2 Hen. (1495) 7 c 12, referred to.
Calverley v Green (1984) 155 CLR 242; Collins v Emacord Autos Pty Ltd SASC S6418 3 November 1997; Cook v Whellock (1890) Vol 24 Q.B.D. 658; Dwyer Maxted v Canning Vale [2005] SASC 80; Pacific Acceptance Corp Ltd v Forsyth (No 2) [1967] 2 NSWR 402; Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors (1992) 57 SASR 180; Ulowski v Miller [1968] SASR 277; Wagner v Mears (1829) 37 E.R. 947, considered.

BENNIE v THE PUBLIC TRUSTEE & ORS
[2017] SASC 175
JUDGE DART:

The fourth, fifth and sixth defendants are beneficiaries of the Jean Bennie Family Trust (“the Trust”). They have applied for an order that the plaintiff provide security for the costs of the action. The plaintiff alleges that a residential property at Ceduna (“the property”) is held on trust for him. That property is the main asset of the Trust.
For the reasons that follow, the plaintiff should provide security for costs in the amount of $35,000.00
Background factual matters
Mr Clarence Bennie and his wife, Jean Bennie, the second defendant, were farmers at Wirrulla. Their son, Neil Bennie, is plaintiff. He had one brother, Greg Bennie, who passed away some years ago. Greg Bennie left a wife and two children. They are the fourth, fifth and sixth defendants.
From about 1972 the plaintiff and his father conducted the farming business at Wirrulla. The plaintiff had a one quarter interest in the farming property and his father held the other three quarter interest. The land was sold in 1992. The farming enterprise was initially carried on by the plaintiff in partnership with his mother and father. As from 10 July 1979 the farming business was conducted by a company, Bennie Partners Proprietary Limited (“Bennie Partners”) and the partnership ceased to trade. The plaintiff says that his parents were initially directors and shareholders of the company. The ASIC company search does not disclose that, but does show that the plaintiff’s brother was a shareholder. In any event, the company was deregistered in 1997.
The plaintiff deposed to the fact that he offered to buy his parents a house, so that they could retire. He says he offered to do so on the basis that, once they no longer required the property, it would become his. He says that his parents accepted the offer. The plaintiff alleges the circumstances are such as to give rise to the property being held for him by reason of a constructive or resulting trust.
He also deposed to the fact that, in March 1979, his parents selected a property for him to purchase for them for their retirement. Settlement on the property occurred on 10 May 1979. A loan of $15,000 was provided to the parents by the Bank of Adelaide. It is not clear how the balance of settlement funds were paid, but it is clear that the contract settled and the plaintiff’s parents became joint registered proprietors of the property. The plaintiff’s father passed away in 1994 and his mother became the sole proprietor by reason of survivorship.
The next event in respect of the property was the settlement of the Trust, which occurred on 5 February 1995. The second defendant caused the Trust to be created, which is a discretionary family trust. As mentioned, it is called the “Jean Bennie Family Trust”. The trust deed has been exhibited.[1] It was prepared by a well-known firm of solicitors. On 8 February 1995 the property was transferred from the second defendant to her brother and herself, as trustees of the Trust. The capital and income beneficiaries of the Trust are the second, fourth, fifth and sixth defendants.
[1] Affidavit of Neil Clarence Bennie sworn 31 January 2017, FDN2, Exhibit 2L.
On the application of the second defendant orders were made by consent in this Court on 8 April 1998 replacing the trustees. The Public Trustee was appointed at that time, and remains, trustee of the Trust. Shortly thereafter the second defendant moved to the Far West Senior Citizens Village in Ceduna.
Criteria for security for costs
There is no dispute that the plaintiff is impecunious. He deposed to the fact that he has been on a pension since about 1998 and has been unable to work. He deposed further to the fact that he is effectively homeless. The only reason that he is able to pursue these proceedings is that he has obtained the assistance of JusticeNet which has procured solicitors and counsel to act on a pro bono basis. It is not in dispute that if he fails in the action and suffers a cost order he would be unable to satisfy it.
The relevant Rule of Court in respect of security for costs is in Rule 194, which provides as follows:
194—Security for costs
(1)The Court may order a plaintiff to provide security for costs if—
(a)the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful; or
(b)the plaintiff is ordinarily resident outside Australia; or
(c)there are reasonable grounds to suspect that the action may have been brought for an ulterior purpose; or
(d)the order is authorised by statute; or
(e)the order is necessary in the interests of justice.
Note 1—
Section 1335 of the Corporations Act 2001 (Cth), section 19 of the Service and Execution of Process Act 1992 (Cth) and section 15 of the Trans-Tasman Proceedings Act 2010 (Cth) empower the Court to order security for costs in defined circumstances.
Note 2—
If a defendant makes a counterclaim, the defendant is the plaintiff in the cross action—see definition of plaintiff.
(2)Security for costs is to be given in the form and manner directed by the Court.
(3)If the Court orders security for costs, the action may be stayed until the security is given.
(4)The Court may, at any time, vary or revoke an order for security for costs and make consequential directions.
(5)An amount paid into the Court by way of security for costs may be paid out by consent of the interested parties.
(6)If the action has been stayed for 6 months, the action is automatically dismissed for want of prosecution.
(7)A dismissal effected by subrule (6) takes effect at 4.30 pm on the last day of the period.
(8)Despite the dismissal of an action under this rule, the Court may, for special reasons, reinstate the action.
It is accepted by all parties that we are dealing with the provision of Rule 194(1)(e), ie. should the Court make an award of security for costs in favour of the defendants in the interests of justice? The first defendant, the Public Trustee, does not wish to be involved in the dispute. The second defendant is now 90 years of age and not in a position to participate. It is the fourth, fifth and sixth defendants, as beneficiaries of the Trust, who are acting as contradictors to protect the principal asset of the Trust. They reside in the property and have done so for more than 20 years.
The current Rule came into operation in 2014. Prior to that the Rules provided that security for costs could be ordered in special circumstances. That was also the position in the 1987 Rules.[2] Impecuniosity was not of itself a special circumstance.[3] The jurisdiction to award security for costs is limited to the circumstances set out in the Rules.[4]
[2]    Supreme Court Rules 1987 r 100.01(e).
[3]    Collins v Emacord Autos Pty Ltd SASC S6418 3 November 1997.
[4]    Dwyer & Maxted v Canning Vale [2005] SASC 80.
Historically, the starting point in respect of an impecunious individual was that, if suing as a pauper, no costs order would be made in the event of a claim being dismissed.[5] If such a person conducted litigation in a vexatious manner, costs could be ordered.[6] Rules then developed in respect of security for costs, but were quite limited. In Cook v Whellock[7] it was held that an undischarged bankrupt, suing in respect of a post-bankruptcy cause of action, could not be treated as a nominal plaintiff and no order for security for costs should be made simply because he is a bankrupt. Such an approach recognises the importance of a plaintiff having a day in court.
[5] Statute 2 Hen. 7 c 12 (1495).
[6] Wagner v Mears (1829) 37 E.R. 947.
[7] (1890) Vol 24 Q.B.D. 658.
The cases in respect of special circumstances no longer have much relevance. The test is now simply the interests of justice. That, in its terms, is a less rigorous test than that of special circumstances. It is appropriate to proceed on the basis that the change to the Rule was intended to effect a change in approach to applications for security for costs. Logically, applying a less rigorous test means more applications should succeed.
The interests of justice provides the Court with a broad discretion to be exercised judicially. In Ulowski v Miller[8] Bray CJ was considering the exercise of the discretion involved in dismissing an action for want of prosecution. His approach to how the discretion is to be approached provides guidance for present purposes:[9]
It must be remembered that we are dealing here with a discretion and in my view it ought not to be fettered by any absolute or inflexible rules. It clearly appears from these cases that five paramount matters to be considered are the length of the delay, the explanation for the delay, the hardship to the plaintiff if the action is dismissed and the cause of action left statute-barred, the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay, and the conduct of the defendant in the litigation.
Speaking for myself I would deprecate any attempt to lay down any rules which would bind Courts dealing with future applications of this kind to hold that any particular onus was laid on either party to prove any particular matter, or that once a particular matter had been proved by either party a certain result would automatically follow unless the other party proved something else, though I do not by any means intend to exclude the application of Lord Mansfield’s famous dictum in Blatch v. Archer[10] that all evidence is to be weighed according to the proof which it was in the power of one side to have produced and in the power of the other to have contradicted.
[8] [1968] SASR 277.
[9] Ulowski v Miller [1968] SASR 277 at 280-281.
[10] (1774) 1 Cowp. 63, at p. 65 (98 E.R. 969, at p. 970).
The starting point then is that there are no fixed rules fettering the exercise of 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 in 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 interests of justice, it is also necessary to consider the position of the defendants. In Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors King CJ said as follows: [11]
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 inability to recover costs by reason of the impecuniosity of the plaintiff but should not go further than is reasonably necessary for that purpose.
[11] Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors (1992) 57 SASR 180 at 189.
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 significant factor in weighing what is in the interests of justice.
Consideration of the issues
The first issue to be considered is the strength of the claim being advanced by the plaintiff. The plaintiff says the property is held on a constructive or resulting trust for him. In a letter before action sent to the Public Trustee, it was asserted by the plaintiff that he paid the full purchase price for the property when it was acquired. That letter was dated 12 June 2014. Clearly enough, a person who contributes the full purchase price for a property would often be in a position to make a claim that that property is held on trust for him or her, even if the legal title was held by another.[12]
[12] Calverley v Green (1984) 155 CLR 242 at 255.
There is a practical difficulty with the plaintiff’s claim, which to my mind creates a doubt as to its strength or genuineness. What the contemporaneous records disclose is that the plaintiff’s parents’ settled on the property and obtained a loan from the Bank of Adelaide to permit them to do so. The purchase price was $40,000.00. The loan amount was $15,000.00. No doubt there were other fees involved in settling on the property.
The plaintiff deposed in his affidavit that he does not know the source of the balance of the purchase price paid at settlement. That is a critical issue. If his parents paid the money from their own funds, the plaintiff contributed nothing to the purchase price at settlement. That serves to undermine the main building block of the plaintiff’s claim.
The plaintiff deposed to the fact that he financed the acquisition of the property by way of a transaction in March 1980. That is ten months after settlement on the property. In his affidavit, the plaintiff asserts that a particular transaction in March 1980 was in effect payment of the purchase price of $25,000 plus other amounts. There is no explanation for the delay of ten months. Nor does the affidavit say the $25,000 was paid to his parents.
The defendants have produced evidence from the plaintiff’s former wife who says that the transaction entered into in March 1980 related to the purchase of a house at Paralowie in Adelaide. It appears to have been the matrimonial home, or at least a home for the plaintiff’s wife. The relevant bank statement of the plaintiff and his wife, dated 7 July 1980, shows the loan amount as being for a settlement. It also shows a debit for stamp duty and registration. This seems consistent with the defendants’ allegation. On the material before the Court there appears to be considerable doubt as to whether the plaintiff contributed to the initial acquisition of the property in any way at all.
The plaintiff says that he at some stage undertook payment of the monthly mortgage payments on his parents’ behalf. He says he paid those himself. However the evidence suggests it was Bennie Partners that made payment of the mortgage payments. The plaintiff also says he paid an amount of $6266.43 in 1989 to finalise his parents’ loan. At all times, Bennie Partners appears to have had two directors and three shareholders. How the fact that Bennie Partners made the payment fits with the proposition of the plaintiff that he personally made the payments is not clear.
The plaintiff lodged a caveat in respect of his claim in 2004. He thereafter took no action to enforce the claim until these proceedings were recently commenced.
It is to be noted that, since the creation of the trust in 1995, the plaintiff has commenced several Magistrate Court proceedings against parties to this action in relation to, inter alia, tools and equipment and other property said to have been located on the farm. None of those proceedings mentioned any interest in the property. The defendants have produced a court search which shows that the plaintiff has been involved in a considerable amount of litigation over the last 20 years. The plaintiff is now divorced from his wife. It appears that in the Family Court property proceedings no mention was made of the plaintiff’s claim to ownership of the property.
This is not a case where impecuniosity was caused by any action of the defendants.
The fact that proceedings may be stultified if an order for security for costs is made is another consideration. The fact that the financial position of a plaintiff is such that an order for security for costs might prevent a plaintiff litigating a matter is not of itself sufficient to prevent the making of an order.[13] It is, however, an important consideration to be weighed in the balance. I accept that there is a strong possibility that an order of security for costs could prevent the proceedings being further prosecuted.
[13] Pacific Acceptance Corp Ltd v Forsyth (No 2) [1967] 2 NSWR 402.
In determining what is in the interests of justice it is necessary to have regard to the possible prejudice to the defendants in permitting the plaintiff to proceed in circumstances where, if he is unsuccessful, the defendants will have no prospect of recovering the costs of the action. The only asset of any note of the Trust is the property at Ceduna. It is a modest property and has a value of approximately $150,000. Pursuing this litigation to the end may well mean that the legal costs incurred in defence of the asset will equal or exceed the value of the asset.
In summary then, there appear to be two factors which are the most important. The first is that the plaintiff has not cogently set out the basis of the cause of action. The evidence before the Court is incomplete and leads to a concern that the plaintiff’s claim may not be a strong one. It may be that he caused Bennie Partners to make some payments after the initial purchase, but that is a different matter and a lesser claim than that of having paid the full purchase price at acquisition.
The other factor is the potential prejudice of the fourth, fifth and sixth defendants. They have lived in the property since 1994. They appear to have modest means. It seems likely that they are facing the loss of the property regardless of whether they succeed in litigation or not. If the plaintiff is successful, of course the plaintiff will ultimately become the proprietor of the property. However, even if the defendants are successful in the proceedings, absent an order for security for costs, it is difficult to see how they will not be at significant risk of losing the property. The Court should, if it can, avoid a position where any victory is pyrrhic.
This is a matter where the interests of justice will not be perfectly served whatever order the Court makes. In my opinion, after a weighing of the relevant considerations, the least imperfect solution is to order that the plaintiff provide security for costs.
Quantum of the costs

The only evidence put before the Court in respect of costs to be incurred by the defendants up until the first day of trial is contained in a solicitor’s letter dated 1 August 2017 which was exhibited to an affidavit. [14]
[14] Affidavit of Linda Carolanne Bennie sworn 8 August 2017, FDN13, Exhibit 13H.
The letter asserts that the amount of costs likely to be incurred up until the first day of trial is $60,000. An indication is then given that the defendants would be satisfied with the payment of $45,000 by way of security for costs. The amount of $60,000 is arrived at by a number of lump sums for various preparatory steps. In a perfect world a solicitor would swear an affidavit setting out the tasks to be undertaken in respect of trial preparation, the amount of time such a task was expected to take and an hourly rate for that task based on the Supreme Court scale. That would lead to an approximate party/party estimation of costs.
In circumstances where the estimates of costs are more general, the Court must simply do the best it can. That will likely lead to the Court being cautious in its calculation of an amount.
In my opinion the plaintiff should provide security for costs in the sum of $35,000. I will hear the parties on the form of the orders and any other relevant matters.