Brown v De Saram

[2014] VCC 47

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST

GENERAL CASES DIVISION

Case No. CI-13-01735

DAVID BROWN	Plaintiff
v.
JOSEPH DE SARAM	Defendant
and
JOSEPH DE SARAM & ANOR	Plaintiffs to Counterclaim
v.
DAVID BROWN & ANOR	Defendants to Counterclaim

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	3 February 2014
DATE OF JUDGMENT:	3 February 2014 (revised 5 February 2014)
CASE MAY BE CITED AS:	Brown v. De Saram
MEDIUM NEUTRAL CITATION:	[2014] VCC 47

REASONS FOR JUDGMENT

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Catchwords:              Practice and procedure – Security for costs of counterclaim – Application for adjournment refused – Security ordered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff and Defendants to Counterclaim	Mr J. Werner	McDonald Slater Lay
For the Defendant and Plaintiffs to Counterclaim	Mr L.P. Wirth	Defteros Lawyers

HIS HONOUR:

1The defendants to counterclaim make application that the plaintiffs to counterclaim provide security for their costs in respect of the counterclaim. During the course of argument, the plaintiffs to counterclaim, by their counsel Mr Wirth, disputed whether the applicants had satisfied the jurisdictional requirements for the Court to make an order. Mr Wirth submitted that there was no “credible testimony that there is a reason to believe that the corporation [the second plaintiff to counterclaim] will be unable to pay the costs of the defendant if successful” in the defence of the counterclaim.

2Mr Werner, counsel for the defendants to counterclaim, relied upon a number of matters to support his submission that the requirements of section 1335 of the Corporations Act 2001 (Cth) had been satisfied, including:

a.the corporate plaintiff to counterclaim appears to own no property in Australia;

b.the evidence of its business operations are unclear;

c.there is a floating charge over the assets and undertaking in favour of the first plaintiff to counterclaim;

d.the first plaintiff to counterclaim, Mr De Saram’s financial position is also uncertain;

e.he is not a person ordinarily resident in Australia;

f.it was asserted in correspondence between solicitors that he owned five properties. That statement was incorrect.

3In respect of two properties in Victoria, Mr De Saram was the named beneficiary, but not the sole beneficiary, of a trust. One property is owned by a company which is the trustee of the trust. The second property in Victoria is owned by a company whose shares are owned by the company which is the trustee of the trust. It was asserted that, in respect of both those properties, the first plaintiff to counterclaim, although only one of the potential beneficiaries, was entitled to an interest in the properties, through which the defendants to counterclaim could enforce a costs order. 

4There are three Western Australian properties, two owned jointly by Mr De Saram with other persons and one owned solely in his own name. Those properties are subject to substantial mortgages. It is asserted that the value of the properties exceeds the amount owing under the mortgages. This assertion is made upon the basis of what is described as “market appraisals” of properties. Examination of those documents provides little support for the conclusions stated.

5Mr Wirth, at the stage at which I anticipated his submissions were coming to a close, sought an adjournment of the application so that the plaintiffs by counterclaim might supplement their material by filing reports from independent valuers as to the value of the properties owned by Mr De Saram in Western Australia and to show that, in fact, he has some assets from which an order for costs in favour of the defendants to counterclaim might be recovered.

6In an affidavit sworn by his solicitor on 31 January 2014, it is stated that the first plaintiff by counterclaim, Mr De Saram “is prepared to undertake, in writing, to be personally liable for any costs order made against Rhodium [the second plaintiff by counterclaim] in respect of the counterclaim”.

7Mr Wirth informed me today that he had further instructions to offer an alternatively formulated undertaking by Mr De Saram, “to personally pay any costs ordered to be paid by the second plaintiff to counterclaim that it was ordered to pay in the proceeding”. Mr Wirth suggested that there was some difference between an undertaking to be personally liable for costs and an undertaking to personally pay the costs.

8It was submitted that the plaintiffs by counterclaim had had insufficient time to file adequate material and that this was the reason it was necessary to rely upon the market appraisals. The application was commenced by summons filed 18 December 2013 and served, apparently, on 20 December. On that day, the plaintiffs by counterclaim’s solicitors office closed until 6 January 2014.

9The material in opposition was filed on 31 January 2014. Mr Wirth submitted that this has not been an adequate time to obtain proper or full instructions, particularly as, in the meantime, Ms McCall, who swore the affidavit on behalf of the plaintiffs by counterclaim, had moved house from Western Australia to Melbourne.

10I raised with Mr Wirth the utility of seeking evidence from an independent valuer without also addressing the general financial position of the plaintiffs by counterclaim. He said that consideration would also be given to that matter if the application were adjourned.

11In my view, the time that the plaintiffs by counterclaim have had to respond to the application has been adequate The application for an adjournment was not made until, during the discussion between counsel and the Bench, it became obvious that the appraisal material was of little use and the specific financial information about the position of both plaintiffs by counterclaim might have been more fully addressed by the plaintiffs by counterclaim themselves, and not simply by asserting that the answer to that issue was the fact that the applicants bore the onus of proof in respect of the application.

12Mr Wirth did not suggest that he had instructions as to what “independent” valuers might say as to value of the three Western Australian properties, or whether investigation of the issue would affect the capacity of the plaintiffs by counterclaim to pay the costs of the defendants to counterclaim. I consider that in these circumstances, it is inappropriate to allow an adjournment. I will proceed with the application and hear Mr Wirth’s submissions to completion.

13Mr Wirth has now indicated that he has no further submissions in respect of the application. I am satisfied in the present case that in relation to both plaintiffs to counterclaim there is jurisdiction for the Court to make orders for security. In respect of Mr De Saram, he is not ordinarily resident in Victoria. This matter was conceded by Mr Wirth. In respect of the second plaintiff by counterclaim, I consider that there is credible evidence that the second plaintiff by counterclaim will be unable to pay the defendants’ costs if they were successful on the counterclaim.

14I have listed the matters relied upon by Mr Werner. Other matters which I consider make it appropriate to exercise my discretion to make an order are:

a.the second plaintiff by counterclaim has previously made many of the same claims included in the counterclaim by a proceeding issued in the Magistrates Court of Western Australia;

b.it is unclear what is the present state of that proceeding. An application by the defendants to the proceeding in Western Australia (which include the present defendants to counterclaim), was successful in having judgment set aside and the proceeding stayed. There was a later application for leave to appeal filed by the second plaintiff by counterclaim;

c.although it may not be sufficient to satisfy the ground in Rule 62.02(1)(c), that the present counterclaim is for the same claim that is pending in another Court, it is, in my view, an appropriate matter for me to consider;

d.I also take into account the assertions made in correspondence from the plaintiffs by counterclaim’s solicitors that properties were owned by Mr De Saram. Mr Wirth has conceded that, at best, he would submit that Mr De Saram has an interest in those properties. In respect of the Victorian properties, the submission cannot be sustained;

e.I am also concerned that the form of the undertaking offered by counsel today suggests that the undertaking offered in the affidavit of the plaintiffs by counterclaim’s solicitor was itself of little value because it simply was an undertaking to be “personally liable for any costs” rather than an undertaking to pay any costs ordered.

15The parties have agreed that if security were ordered it should be in the sum of $40,000, subject to the present applicants having the right to make a further application if they can establish that the costs they are likely to incur in defending the counterclaim will be greater than presently anticipated.

16One can understand such a qualification in the circumstances of the present case where the counterclaim as presently drafted contains no quantification and very little particularisation of any of the six claims made. However, the parties having taken the issue of quantification away from the Court, it seems to me that the applicants would, in the future, be constrained by the matters included in the quantification of costs by the applicants’ solicitors, which for the items claimed totalled in excess of $80,000. Therefore, the items and quantification applied to those items by the applicants’ solicitors will be the matters which determine whether $40,000 security is sufficient to cover the costs they might incur or whether further security would be appropriate.

17In the circumstances, I propose to order as follows:

1.By 3 March 2014, the plaintiffs by counterclaim must provide security for the defendants by counterclaim’s costs of the proceeding, up to and including the trial of both the claim and counterclaim which, subject to the qualification in paragraph 2, shall be made by payment of the total sum of $40,000 to the Registrar of the County Court or by the provision of alternative security which is agreed in writing by the defendants to counterclaim and which is put in place by 3 March 2014.

2.The defendants by counterclaim have leave to make a further application for security for costs but only in circumstances where the items included and the quantification of costs contained in exhibit MSL6 to the affidavit of Ian Charles Slater sworn 18 December 2013 have materially changed. 

3.Until the provision of the security set out in paragraph 1, or further order, the counterclaim is stayed.

4.The trial date for the proceeding of 19 May 2014 is confirmed.

5.The plaintiffs by counterclaim must pay the defendants by counterclaim’s costs of the summons filed 18 December 2013 to be assessed by the Costs Court in default of agreement. Provided the plaintiffs by counterclaim provide the security set out in paragraph 1, payment of those costs is stayed until the hearing and determination of the counterclaim, or further order if the counterclaim does not proceed to trial on 19 May 2014.

6.Reserve liberty to apply.

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Certificate

I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 3 February 2014 and revised on 5 February 2014.

Dated: 5 February 2014

Catherine Kusiak

Associate to His Honour Judge Anderson