Clifford v Rumsley - [2019] WADC 128

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   CLIFFORD -v- RUMSLEY [2019] WADC 128
CORAM:   DEPUTY REGISTRAR HEWITT
HEARD:   22 AUGUST 2019
DELIVERED          :   16 SEPTEMBER 2019
FILE NO/S:   CIV BUN 4 of 2017
BETWEEN:   PHILIP GEORGE CLIFFORD
First Plaintiff
SHERAZ PTY LTD
Second Plaintiff
AND
ALAN PHILLIP RUMSLEY
Defendant

Catchwords:

Practice and procedure - Application for security for costs - Basis upon which security can be ordered - Consideration of the strength of the case advanced - Turns on its own facts

Legislation:

Corporations Act 2001 (Cth), s 1335
Legal Profession Act 2008 (WA), s 289, s 291
Supreme Court Rules 1971 (WA), O 25 r 2, r 3

Result:

Application dismissed

Representation:

Counsel:

First Plaintiff	:	In person
Second Plaintiff	:	Mr P Lafferty
Defendant	:	In person

Solicitors:

First Plaintiff	:	Not applicable
Second Plaintiff	:	Armeli & Molony Lawyers
Defendant	:	Not applicable

Case(s) referred to in decision(s):

Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584

DEPUTY REGISTRAR HEWITT:

This action was commenced by a writ filed on 16 March 2017 by which the plaintiff, who is a barrister, and a company Sheraz Pty Ltd, sought payment of various monies for the provision of legal services said to have been provided by the first plaintiff at the request of the defendant.
On 25 May 2017 the defendant filed an application for security for costs seeking security in the sum of $40,000 or such sum as the court might think fit. That matter came before me for argument on 5 October 2017 and I delivered my decision on 12 October 2017 ordering the second plaintiff to provide security in the amount of $20,000. That order was appealed and on 20 July 2018 his Honour Judge Birmingham set aside the relevant portion of my decision, that being the order for security, and ordered that the application for security be adjourned sine die. His Honour was also dissatisfied with the quality of the pleading of the case and directed that to be corrected.
Various other applications and activities have since followed and the application for security for costs was relisted before me on 22 August 2019.
The actual order, which was sought by the defendant in regard to security for costs was:
within 14 days of the date of this order the plaintiff's give security for the Defendant's costs of the action in the sum of $40,000 or such other sum as this honourable court sees fit.
Documents later filed indicated that the defendant sought a far greater sum, perhaps as much as $250,000.00.
No authority for the proposed orders was referred to in the application but the matter proceeded before me on the basis that the case advanced by the plaintiffs was palpably weak, such that it would be fair for security to be given to protect the defendant against the likelihood of the action being dismissed and in light of the recent bankruptcy of the first plaintiff, the likelihood that attempts to recover any amount awarded by way of costs would not be successful. Additionally, the second plaintiff is a trustee company and the decision of the Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584 was relied upon.
Essentially that case is a recognition by the Federal Court of the difficulties in executing against a trustee company. In the present case, the second named plaintiff is such a company.
To the extent that the application relies on the Supreme Court Rules1971 (WA) (RSC) O 25 r 1, r 2 and r 3 are relevant. Those rules provide as follows:
1.Factors that are not grounds for ordering security of costs
The Court may order security for costs to be given by the plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.
2.Grounds for ordering security for costs
Without limiting the generality of rule 1 the Court may order security for costs to be furnished where the plaintiff ‑
(a)is ordinarily resident out of the jurisdiction, notwithstanding that he may be temporarily within the jurisdiction;
(b)is about to depart from the jurisdiction;
(c)enjoys within the jurisdiction some privilege which renders him immune, wholly or partially, from the normal processes of execution;
(d)is an undischarged bankrupt or a person who has suspended, or given notice of suspension of, his debts;
(e)is a company in liquidation or under official management, or a company in respect of which a receiver of its property has been appointed;
(f)is a relator suing for the enforcement or declaration of some public right or to have some public trust carried out or some charitable scheme settled;
(g)is in default in respect of any costs ordered to be paid by him in any proceedings previously brought by him against the same defendant or another defendant for substantially the same cause of action or in relation to substantially the same subject matter;
(h)is a person who has in the past vexatiously brought litigation against the same defendant or against any other defendant;
(i)is suing the sheriff in respect of anything done or omitted to be done by the sheriff or his officers in execution of any judgement of the Court.
3.Court has discretion
The granting of security shall be in the discretion of the Court, and in determining whether an order should be made the Court shall take into consideration ‑
(a)the prima facie merits of the claim;
(b)what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff;
(c)whether the normal processes of the Court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff.
Insofar as the first named plaintiff is concerned, RSC O 25 is the only basis upon which security could be ordered and insofar as the second named plaintiff is concerned, s 1335 of the Corporations Act 2001 (Cth) also provides a possibility and I shall deal with that aspect of the matter later. None of the grounds which are outlined in RSC r 2 are applicable in the present circumstances and it must therefore be the general discretion, which is contained in RSC r 3, upon which the applicant defendant relies. Of the various aspects to that rule, the prima facie merits of the claim appear to be the deciding factor and the argument before me presented by the defendant largely revolved around the perceived deficiencies in the case advanced by the plaintiff.
In essence, the defendant relies on arguments which are based on s 289 ‑ s 291 of the Legal Profession Act 2008 (WA) (the Act). Those provisions are as follows:
289.Legal costs cannot be recovered unless bill has been given
(1)A law practice must not commence legal proceedings to recover legal costs from a person until at least 30 days after the law practice has given a bill to the person in accordance with sections 290 and 291.
(2)A court of competent jurisdiction may make an order authorising a law practice to commence legal proceedings against a person sooner if satisfied that ‑
(a)the law practice has given a bill to the person in accordance with sections 290 and 291; and
(b)the person is about to leave this jurisdiction.
(3)A court or tribunal before which any proceedings are brought in contravention of subsection (1) must stay those proceedings on the application of a party, or on its own initiative.
(4)This section applies whether or not the legal costs are the subject of a costs agreement.
290.Bills
(1)In this section ‑
agent of a person means an agent, law practice or Australian legal practitioner who has authority to accept service of legal process on behalf of the person.
(2)A bill may be in the form of a lump sum bill or an itemised bill.
(3)A bill must be signed on behalf of the law practice by an Australian legal practitioner or an employee of the law practice.
(4)It is sufficient compliance with subsection (3) if a letter signed on behalf of a law practice by an Australian legal practitioner or an employee of the law practice is attached to, or enclosed with, the bill.
(5)A bill or letter is taken to have been signed by a law practice that is an incorporated legal practice if it has the practice's seal affixed to it or is signed by a legal practitioner director of the practice or an officer or employee of the practice who is an Australian legal practitioner.
(6)A bill is to be given to a person ‑
(a)by delivering it personally to the person or to an agent of the person; or
(b)by sending it by post to the person or an agent of the person at –
(i)the usual or last known business or residential address of the person or agent; or
(ii)an address nominated for the purpose by the person or agent;
or
(c)by leaving it for the person or agent at ‑
(i)the usual or last known business or residential address of the person or agent; or
(ii)an address nominated for the purpose by the person or agent,
with a person on the premises who is apparently at least 16 years old and apparently employed or residing there; or
(d)subject to the Electronic Transactions Act 2011 section 10, by transmitting it electronically to a facsimile number or email address provided by the person or agent; or
(e)by sending or delivering it to the person or agent in a manner prescribed by regulation.
(7)A reference in subsection (6) to any method of giving a bill to a person includes a reference to arranging for the bill to be given to that person by that method (for example, by delivery by courier).
The essence of the argument advanced by the defendant is that the Act has not been complied with because the accounts were rendered in the name of the company, Sheraz, which would amount to an infringement of the requirements of the Act and would provide a defence to the defendant. Whether or not that is so is a matter of some controversy, the plaintiff having produced various accounts in the name of the first plaintiff, which apparently satisfy the requirements of the Act. The defendant in oral submissions suggested that those bills were in some way not genuine. That is an extremely serious allegation amounting to an accusation of criminal behaviour and I merely note that it has been made but intend to give it no weight in the determination that I am going to reach in this matter.
As matters stand, it appears to me that the contentions of the defendant are founded on the basis upon which I ordered a modest amount of security be given on the last occasion. That basis now appears to me to be flawed and there is therefore no basis upon which I can see upon which I could characterise the case advanced by the plaintiffs as inherently weak and unlikely to succeed.
As to the involvement of Sheraz as a litigant in its own right, documents produced to me indicate that in rendering accounts for payment, the first defendant gave a direction that the payment to be made should be directed to the company Sheraz conferring on that company, arguably, a basis for its involvement in the present litigation. To complicate matters, the statement of claim has recently been amended to refer to an assignment by Sheraz to the first plaintiff of its rights being pursued under the writ. Whether that assignment was effective is a matter which is in dispute but it nonetheless appears to me that since the issue is still at large, the company has a legitimate involvement in the action to protect the plaintiffs against the possibility that the assignment might be found to be invalid and Sheraz to nonetheless have a valid cause of action to pursue.
By an affidavit sworn 17 July 2019, the first named plaintiff deposed to the fact that the company, Sheraz, has cash in the bank of $812,592.22, with prospect of receipt of a further $30,000 within the next two months and an unencumbered real property asset valued at approximately $830,000 in New South Wales. A bank statement has been produced to verify the amount held in the bank to be accurate. The first plaintiff also testifies that he has cash in the bank of $240,000 and motor vehicles which he estimates to be in value of approximately $70,000. Whilst these assets are largely irrelevant in an application brought pursuant to RSC O 25, they do underscore the proposition and that both the plaintiffs are well able to meet any likely order for costs in the event that their action fails.
One of the issues which was canvassed in the previous hearing before me was the possibility, even the likelihood, that the provisions of the trust deed under which the company operates may limit or eliminate the right of the trustee company to an indemnity from the trust funds in the event that it is called upon to pay costs. The trust document has been produced and it appears that there is no such provision within it. Whilst recovery from the trust company might be somewhat more cumbersome than other execution, nonetheless it would appear that the company is in a very healthy financial position and the same might be said of Mr Clifford.
I now turn to consider the provisions of s 1335 of the Corporations Law. That provision provides that if shown by credible evidence that the company is likely to be unable to pay the costs which might be awarded against it in the event that its action is unsuccessful, I may, but am not required to, order the company to give security for costs. The financial position of the company appears to be extremely buoyant. I do not see any evidence to suggest that the company will be unable to pay the defendant's costs in the event that its action against the defendant fails. Accordingly, it appears to me that there is no basis upon which I can conclude that the company may be unable to pay the costs of a successful defence of its action, if it is ordered to do so.
For these reasons I take the view that the application for security of costs should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
KT
Court Person
16 SEPTEMBER 2019