Cox v Cox
[2013] VSC 318
•19 June 2013
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2011 00661
| WILLIAM SAMUEL COX | Plaintiff |
| v | |
| PATRICIA JOAN COX, JAMES ARTHUR COX (as Executors of the Defendants Estate of JOAN COX; and personally) | Defendants |
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JUDGE: | DERHAM AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 February 2013 | |
DATE OF JUDGMENT: | 19 June 2013 | |
CASE MAY BE CITED AS: | Cox v Cox and ors | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 318 | |
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PRACTICE and PROCEDURE – Application for leave to withdraw deemed admissions -Notice to admit facts served by defendants – Plaintiff failed to give notice of dispute - Failure to dispute through misunderstanding between plaintiff and his solicitor – Clear explanation for how and why the failure to dispute occurred – Sufficient identification of the issues which the plaintiff wishes to raise at trial – Further particulars required in relation to the issues – Leave granted with order for particulars.
PRACTICE and PROCEDURE– Security for Costs – Threshold question in dispute – Whether plaintiff’s address stated correctly in originating process – Whether plaintiff acted innocently and without intention to deceive – Whether plaintiff changed address to avoid consequences of proceedings – Whether grounds to order security for costs – plaintiff an individual – Whether impecunious – Whether appropriate to require security – No security for costs required in the circumstances - Supreme Court (General Civil Procedure) Rules 2005, rr 62.02(1)(d) & (e).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms CH Sparke SC | Donaldson Trumble Lawyers |
| For the Defendants | Mr SF McNab | Robert Paterson |
HIS HONOUR:
Introduction
There are two applications in this matter:
(a) The plaintiff’s summons filed 31 October 2012, for leave pursuant to Rule 35.03(2) of the Supreme Court (General Civil Procedure) Rules2005 (“the Rules”) to withdraw a deemed admission arising because of a failure to dispute a Notice to Admit;
(b) The defendants’ summons filed 26 November 2012, for security for their costs under r 62.02(1)(d) of the Rules.
The Proceeding
The proceeding was commenced by writ filed on 16 February 2011. It is a claim by the plaintiff against his siblings, who are the executors and trustees of the estate of their mother (“Joan”), for payment of the plaintiff’s share of the residuary estate. The plaintiff is claiming that debts allegedly due to the estates of his mother and father have been wrongly deducted from his share in his mother’s estate. In particular, the plaintiff claims that the defendant executors have made distribution to the plaintiff of his share of the residuary estate, which was not an equal one third share as required by Joan’s Will and that they (the defendants) have asserted that:
(a) Various unproved debts allegedly owed by him to Joan be deducted from the plaintiff’s share;
(b) Various unproved debts allegedly owed by him to the estate of his late father, William Murray Cox (“William”) (whose estate passed to Joan) be deducted from his share.
In the result, it is alleged by the plaintiff that the defendants breached their duties as executors and trustees of Joan’s estate and are liable to pay to him the amount of his share that ought properly to have been paid.
In their Defence,[1] the defendants respond, in substance, that the various debts owed to the estates of Joan and William have been properly allowed against the plaintiff’s one-third share of the residuary estate. In particulars, the defendants identify that loans were allegedly made by Joan to WS Cox, the plaintiff, and to “Cox & Associates”.
[1]Filed 14 March 2012.
In his Reply, the plaintiff denies that any debts purportedly owing by Cox & Associates are debts owed by him or can be deducted from his share of the estate, and denies that any moneys purportedly advanced by either Joan or William ‘to any other company entity’ are debts owed by him or can be deducted from his share of the estate.
Subsequent to the entry of appearances, the defendants filed their defence on 14 March 2012 and directions were made for the usual steps in the proceeding resulting in a Reply and the filing of an affidavit of discovery by the defendants (on 15 June 2012) and by the plaintiff (on 4 July 2012). An unsuccessful mediation was held in October 2012.
The Notice to Admit
The Notice to Admit is dated and filed 23 August 2012. It was a combined Notice to admit facts and documents. Relevantly for present purposes, it specifies in paragraphs 1, 2 and 3 the following supposed facts:
(a) At 5 May 1997 the plaintiff was indebted to William (the plaintiff’s father) to the extent of $500,000 for moneys lent to the plaintiff and paid to him, his bank accounts and to others at his request or direction;
(b) The sum of $500,000 referred to in paragraph (1) does not include MasterCard debts, being moneys charged by the plaintiff to the MasterCard account of William Murray Cox;
(c) That between 16 May 1997 and 22 September 2001 William Murray Cox lent further moneys to the plaintiff as set out in the table below (which identified payments amounting to $115,250).
It was served on 23 August 2013 and was a 21-day Notice. The documents referred to in it were inspected by the plaintiff, and his solicitor, promptly. No notice of dispute was given within the time stipulated. The application for leave to withdraw the admissions was filed over a month after the expiry of the 21 days specified in the Notice.
Leave to Withdraw Admission
Rule 35.03 provides:
(1) A party may serve on another party a notice stating that unless that party, within a time to be expressed in the notice (which shall not be less than 14 days after service), disputes the facts specified in the notice, that party shall, for the purpose of the proceeding only, be taken to admit those facts.
(2) If the party served with the notice does not dispute any fact specified by serving notice that that party disputes the fact within the time allowed for that purpose, that party shall, for the purpose of the proceeding only, be taken to admit that fact.
(3) By leave of the Court, a party may withdraw an admission that is taken to have been made under paragraph (2).
(4) A notice under paragraph (1) shall be in Form 35A and a notice under paragraph (2) shall be in Form 35B.
The plaintiff failed to dispute the facts in the Notice to Admit due to a misunderstanding between the plaintiff and his solicitor.[2] It was not intentional. He has explained the misunderstanding as arising from a decision made not to dispute other parts of the Notice, in particular the indebtedness allegedly owed by him to his late mother, Joan. In the result, he and his solicitor simply overlooked the need to deal with paragraphs 1 to 3 of the Notice to Admit, which relate to the debts allegedly owed by the plaintiff to his father William.
[2]Affidavit of John Robert Evans sworn 2 November 2012 at [7-9]. Affidavit of William Samuel Cox sworn 26 October 2012 at [5-8].
The plaintiff submitted that the admissions resulting from the failure to dispute the Notice that are sought to be withdrawn are central to the defendants’ case. They relate to the debts alleged to be owed by the plaintiff to his late father, William. Having regard to the defences raised in the defence, it is unlikely that the plaintiff would intentionally admit those matters and, effectively, determine against himself an important plank in the proceeding.
The plaintiff submitted that to deny the plaintiff leave to withdraw the admissions would be a denial to the plaintiff of a proper hearing on what is self-evidently a central issue in the proceeding. The question whether the plaintiff owed his father money is at the heart of the defendants’ defence, in that it depends on the defendants’ right to deduct those monies from the plaintiff’s share of his mother’s estate.
The defendants submitted that the admission of paragraphs 1, 2 and 3 of the Notice are not inconsistent with the admission made in respect of the documents specified in the Notice, in particular, documents authored by the plaintiff showing various payments William made and which go to prove the indebtedness. They complain that the plaintiff has not descended to specifics as to why the alleged payments do not give rise to debts due to William’s estate. In submissions their Counsel said that they understand that there are various answers, such as some payments were gifts, some loans, some made to other entities, but no detail is given either in the pleadings or in the material in support of the application, and that if leave was given to the plaintiff to withdraw the admissions, he should be required to give proper particulars of the grounds on which he says the payments were not loans.
One of the difficulties arising from the deemed admissions is what to make of them. Paragraph 1 of the Notice is a rolled up conclusion from facts that are neither stated nor identified. Much the same can be said of paragraph 3 of the Notice, where, with the exception of two payments identified as having been paid to Geelong Grammar School, the payments are all said to have been paid to “the plaintiff or his bank account or a bank account nominated by him”.
In the end, what is clear is that the issues in dispute gain little definition as a result of the defendants’ Notice to Admit. What is needed is proper particulars from the defendants of the basis for the allegation that the payments give rise to loans to the plaintiff and proper particulars from the plaintiff as to which payments made by his father are not debts and why. At this stage I am not addressing who has the onus of proof as to whether the payments are loans or not.
The purpose of the notice to admit procedure is to ensure that the Court is called upon to determine only questions bona fide in dispute: Rigato Farms Pty Ltd v Ridolfi,[3] Coopers Brewery Ltd v Panfida Foods Ltd;[4] Cormie v Orchard.[5]
[3][2001] 2 Qd R 455 at 461; [2000] QCA 292
[4][4] (1992) 26 NSWLR 738.
[5][2001] QSC 021.
There are two preconditions that must be satisfied before the Court grants leave to withdraw deemed admissions consequent upon the failure to serve a notice of dispute. First, there should be a clear explanation for both how and why the admission came to be made. Secondly, there should be detailed particulars given of the issue or issues which the parties would raise at trial if the admission was withdrawn. These two requirements are not an exhaustive statement of what is required. Each case must be considered in the light of its own facts: Ridolfi v Rigato Farms Pty Ltd (“Ridolfi”)[6] and Permanent Trustee Company Ltd v Gulf Import and Export Company (“Permanent Trustee Company”).[7]
[6](2001) 2 Qd R 455 at [32], Per McPherson JA. See also de Jersey CJ at [19].
[7][2006] VSC 110 at [10].
The discretion to grant leave to withdraw deemed admissions is a broad and unfettered discretion as exemplified by Cooper’s Brewery Ltd v Panfida Foods Ltd,[8] and Equuscorp Pty Ltd v Orazio:[9] see also Ridolfi. [10]
[8](1992) 26 NSWLR 738.
[9][1999] QSC 354.
[10](2001) 2 Qd R 455 at [20].
Leave to withdraw admissions will more readily be given where the failure arises from an inadvertent lack of response to a Notice: International Property Development Pty Ltd v Mevco International Pty Ltd.[11] There is no suggestion that the defendants will suffer any prejudice in consequence of the grant of leave to withdraw the submissions.
[11][2003] VSC 287.
The Rule requires that the facts to be admitted be “specified in the notice”. This requires the stating of the facts definitely, or to state them in detail.[12] In my view, it also requires the distinct identification of the facts to be admitted or disputed. The rolling together of a variety of facts, ultimate facts and matters of mixed fact and law does not satisfy this requirement.
[12]The Macquarie Dictionary, 3rd Ed, definition of ‘specify’.
Such facts, as distinct from conclusions from fact, as are contained in paragraph 1 of the Notice are not distinctly specified in a way that would enable an appropriate notice of dispute. That is because paragraph 1 of the Notice refers to a total sum of $500,000 arising from several payments apparently made either to the plaintiff, directly to some unidentified bank accounts of the plaintiff’s, or to others by some unidentified request or direction.
Paragraph 2 of the Notice is a negative fact. That is, ”[t]he sum of $500,000 referred to in paragraph (1) does not include MasterCard debts, being moneys charged by the plaintiff to the MasterCard account of William Murray Cox”. It is dependant on the “facts” in paragraph (1) being sufficiently specified and in my view they are not.
It was not submitted, however, that the facts purporting to be specified in any of the three relevant paragraphs of the Notice were not sufficiently clearly specified. Although it seems to me to be a matter that may be taken into account in the exercise of the broad discretion to grant leave to withdraw the admissions,[13] I do not do so in the absence of the parties having an opportunity to make submissions on the point.
[13]because in not responding to the notice, the plaintiff will not be taken to admit conclusions from unspecified facts: Aslor Pty Ltd (in liq) v Springmount Pty Ltd; Crema (Vic) Pty Ltd (in liq) v Aslor Pty Ltd (In liq), Chernov J, 15 October 1998, No. 2259/96 unreported BC 9805949; Cormie v Orchard [2001] QSC 021.
It seems to me that grounds for the grant of leave to withdraw the deemed admissions are made out by the plaintiff. There is a clear explanation for both how and why the admission came to be made and there is a sufficient identification of the issue or issues which the plaintiff wishes to raise at trial if the admissions are withdrawn; although not sufficient particularity of the reasons why the particular payments made to the plaintiff by William did not give rise to debts.
By the same token, there is no great detail of the circumstances giving rise to the allegation that the payments were loans and not gifts or investments. In this context, it should not be forgotten that the fact of a payment by William to the plaintiff may not bring with it an assumption that a loan was made.
Security for Costs
The application by the defendants for security for their costs was based upon Rule 62.02(1)(d) and (e) and upon the inherent jurisdiction of the Court.
Order 62
Rule 62.02(1)(e) provides, so far are relevant:
Where –
…
(d)subject to paragraph (2), the address of the plaintiff is not stated or is noted stated correctly in the plaintiff’s originating process;
(e)the plaintiff has changed his, her or its address after the commencement of a proceeding in order to avoid the consequences of the proceeding;
…
the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against the defendant be stayed until the security is given.
Sub-rule (2) of r 62.02 provides:
The Court shall not require a plaintiff to give security by reason only of paragraph 1(d) if in failing to state the plaintiff’s address or to state the plaintiff’s correct address the plaintiff acted innocently and without intention to deceive.
The application for security is supported by the affidavits of the second defendant, James Arthur Cox,[14] one Michael Tyrrell,[15] and Robert Paterson, the defendants’ solicitor.[16] The affidavits establish, prima facie, that the plaintiff was not, as at February 2012, resident at the address specified in the writ as his place of abode.
[14]Sworn 26 November 2012
[15]Sworn 21 November 2012.
[16]Sworn 15 February 2013.
The address of the plaintiff given in the Writ is Unit 2, 22 Pomara Avenue, Torquay, Victoria, 3228. The writ was issued in February 2011. It was not served for almost a year. The defendants entered their appearances in February 2012. Shortly after the Writ was served, the plaintiff could not be found at that address stated in the Writ. He says he moved in August 2011. The change of address is explained by that move. He has provided an address in his subsequent affidavits. He has always had an address for service through his solicitor.
There is thus no evidence that in stating his address as it was in the writ that the address was stated incorrectly. Further, there is also no evidence, if it is relevant, that any misstatement of the address was anything other than innocent.
The defendants have not established that the plaintiff changed his address in order to avoid the consequences of the proceeding, as required in order to attract the jurisdiction given by Rule 62.02(1)(e). A mere change in address does not provide grounds for security for costs to be ordered: Knight v Ponsonby.[17]
[17][1925] 1 KB 545.
The inherent jurisdiction
There was no dispute that the Court retains an inherent jurisdiction to order security for costs as an adjunct to the Court’s power to regulate its own procedure: Lines v Tana Pty Ltd,[18] Rajski v Computer Manufacture & Design Pty Ltd.[19] It is also true that the inherent jurisdiction is not restricted to the examples in the decided cases, in the sense of denying the existence of the power for any other case. The fact that the power has been regularly exercised in a limited number of cases and refused in others proves the existence of, but does not restrict, the jurisdiction: per Holland J in Rajski at 449.
[18][1987] VR 641.
[19][1982] 2 NSWLR 443 at 447.
It was also not in dispute between the parties that the basic rule is that a natural person who sues will not be ordered to give security for costs however poor he is: Pearson v Naydler.[20] The rule does not mean that there are no circumstances in which a natural person without assets will be required to provide security for costs, or subjected to a stay of proceedings until security is provided: per Hodgson JA in Philips Electronics Australia Pty Ltd v Matthews.[21] In that case Hodgson JA instanced a case that might possibly justify an order for security as where a plaintiff with substantial assets transferred them all overseas into the name of another person shortly before commencing expensive proceedings.
[20][1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533 per Megarry VC.
[21][2002] 54 NSWLR 598 at 610 [48]; [2002] NSWCA 157.
Usually some other or additional factor to the plaintiff’s impecuniosity must be present in order that an individual plaintiff provides security for costs: Knight v Beyond Properties Pty Ltd.[22] In that case, Lindgren J noted the following (at [33]):
In the cases in which natural persons have been ordered to provide security, some factor in addition to impecuniosity has been present; cf Barton v Minister for Foreign Affairs (1984) 2 FCR 463 (Morling J) at 594 (impecuniosity and residence outside Australia); Cunningham v Olliver (unreported, Burchett J, 21 November 1994) (but for delay, security would have been ordered on ground of impecuniosity and bringing of claim to a significant extent for benefit of others); Chang v Comcare Australia [1999] FCA 1677 (Moore J) at [32] (impecuniosity and lack of prospects of success); Loque v Hansen Technologies Ltd [2003] FCA 81 (Weinberg J) (impecuniosity and residence outside Australia); Morris v Hanley [2000] NSWSC 957 (Young J) at [21], [38] and [39] (but for delay, Young J would have ordered security on grounds of impecuniosity and lack of prospects of success and large costs involved to defendants. Young J's decision was reversed on appeal on the ground that defendants had not adequately explained their delay in moving for security, but the Court of Appeal did not consider other aspects of his Honour's reasons: see Morris v Hanley & Ors [2001] NSWCA 374 at [30]-[31]); Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82 (CA) at [132] (per Heydon JA) (impecuniosity and applicant's failure to show that order would stultify proceeding and sum ordered by primary Judge not oppressive).The defendants contended that the plaintiff is a man of straw and, what is more, is a man who generally avoids his creditors and his financial responsibilities.
[22][2005] FCA 764; see also Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247.
In this regard, the defendants point to the fact that the plaintiff has been bankrupt on two occasions in the past. In addition, he has been subjected to bankruptcy proceedings on three other occasions. The plaintiff contends, with considerable force,[23] that the plaintiff’s former bankruptcies are irrelevant. The plaintiff is not presently bankrupt. What relevance his past bankruptcies have is not properly explained, except as a foundation for the proposition that he is a man who generally avoids his creditors and financial responsibilities. I do not consider that his prior bankruptcies, either alone or in conjunction with the other evidence, establish such a broad proposition.
[23]As the learned editors of Williams Civil Procedure Victoria note at paragraph 62.01.55, the bankruptcy of the plaintiff is not a sufficient ground for requiring security to be given. See Rhodes v Dawson (1886) 16 QBD 548; 55 LJQB 134; Buchan v Hill [1888] WN 233; Cook v Whellock (1890) 24 QBD 658; Affleck v Hammond [1912] 3 KB 162; (1911) LJKB 565; McSharry v Railway Cmrs (1897) 18 LR (NSW) L 33; Caraher v Gillespie (1906) 23 WN (NSW) 161.
The defendants also assert that the plaintiff is a “serial borrower” and has a pattern of not paying his debts; and that he is a failed businessman. They contend that the plaintiff habitually avoids his creditors and delays payment; that he relies on corporate structures and loan accounts to avoid responsibility for his debts. They submitted that in the event that the plaintiff is unsuccessful in these proceedings there were grounds for concern that he will take steps to evade the effect of any costs order against him, either by ordering his affairs to avoid personal responsibility or by simply evading payment. In this regard the defendants advance the following evidence:
(a) The affidavit of Michael Tyrrell in which Mr Tyrrell deposed to having lent the plaintiff $10,100 in 2009 for a short period of a couple of months but which has not been repaid. He deposes to being met with excuses, including absences in China, New Zealand and the United States of America when he has sought to pursue the plaintiff for repayment. This is, to my mind, decidedly thin material upon which to establish a pattern of the plaintiff not paying his debts, and in consequence an application for security pursuant to the inherent jurisdiction;
(b) The affidavit of James Arthur Cox sworn 26 November 2012, points to hearsay material in support of an assertion that the plaintiff has avoided paying debts in the past. He refers to the fact that there are unpaid debts of a restaurant business conducted in Torquay by a company called Food Speaks Australia Pty Ltd (the second defendant asserts that the plaintiff and his wife conducted the business through the company, whilst the plaintiff says he was not a shareholder of that company, his wife and another person were the shareholders). In my view this does not assist the application. Indeed, it is not admissible to establish that the plaintiff has a history of not paying his debts.
It was submitted on behalf of the plaintiff:
(a) The plaintiff’s former bankruptcy and the existence of an unpaid alleged creditor are irrelevant. The bankruptcies have been annulled or finalised. They do not go to any head of jurisdiction in the Rules and do not support the invocation of the inherent jurisdiction;
(b) Even if it is relevant that the plaintiff is impecunious, the evidence regarding the debts of the restaurant business is not relevant; the debts are not his debts;
(c) In any event, the plaintiff’s present financial position has been contributed to by the defendants. He has on the face of his mother’s will an entitlement to a one‑third share in the residuary estate which has been denied him by the defendants. He points to the fact that the debts allegedly owed by the plaintiff to his father in some cases are over six years old and arose at a time which enabled his father to prove, if they were debts, in an earlier bankruptcy, which did not occur;
(d) The plaintiff has a one-third shareholding in a company called Abergowrie Pty Ltd (“the Company”). The other two shareholders are the defendants. The Company owns a rural property and the plaintiff gives some evidence that his shares are worth $690,000. That evidence is disputed by the defendants who submit that his share is worth only $270,000. The Company is entirely controlled by the defendants. The first defendant lives at the property and pays no rent. The defendants ought not, the plaintiff submitted, to be entitled to argue that the plaintiff has no ability to meet the costs of the proceeding in the event that the defendants are successful in their defences whilst at the same time controlling his major asset, his one-third share in the Company, which the defendants could chose to make available to the plaintiff either by purchasing his shares or by selling the major asset of the company, being the rural property.
There is also evidence (given by the plaintiff) that he has mortgaged his shares in the Company to JRE Legal Pty Ltd to secure payment of his costs in this proceeding. The amount secured is $200,000. The plaintiff has offered as security for the defendants costs a further mortgage, ranking behind the mortgage to JRE Legal Pty Ltd. The implication is that absent that property and its availability as security, an order for the plaintiff to provide security would stultify the prosecution of the proceeding. The defendants do not accept the values ascribed to the property owned by the Company as put forward by the plaintiff, and fear that the security given to the plaintiff’s solicitor will substantially consume the value of the shares. They will not accept security over the shares and require, if security is ordered, that it be by way of payment into Court of the requisite sum.
Having regard to the fact that, so far as the defendants are concerned the proceeding commenced in February 2012 when they were served, there has been considerable delay in the application for security. The pleadings are, subject to the provision of proper particulars, closed. Discovery has been given on each side. A mediation has been held. As a rule, an application for security should be made promptly once the defendants have knowledge of the facts that would justify the making of an order. Delay in applying brings with it the inevitable consequence that an order for security might unfairly prejudice the plaintiff, which has no doubt incurred a considerable liability for costs so far.
There was no submission made that the plaintiff's claim is not made made bona fide and has reasonable prospects of success. In any event, the claim is prima facie regular on its face and discloses a cause of action. In the absence of evidence to the contrary, the Court should proceed on the basis that the claim is bona fide with reasonable prospects of success.[24]
[24]See Bryan E Fencott and Assocs Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497; KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189; 13 ACLC 437 at 439;
Conclusion
In my view, the defendants have not established a basis for an order against the plaintiff that he provide security for their costs. The circumstances do not come within any of the exceptions to the basic rule that a natural person who sues will not be ordered to give security for costs however poor he is. The bankruptcies do not, for reasons I have given, provide a sound basis. The evidence advanced to support the submission that the plaintiff habitually avoids his creditors and delays payment was thin or inadmissible for that purpose, as was the evidence that there were grounds for concern that he will take steps to evade the effect of any costs order against him. The defendants have delayed in making their application so that it is inevitable that the plaintiff will have suffered prejudice if he is ordered to give security and the proceeding is stayed. Such security as he is able to give, his shares in the Company, are not acceptable to the defendants and, in consequence, there is reason to think that the action may now be stultified if an order is made.
Overall, in my view the interests of justice tell against an order for security being appropriate in these circumstances.
I will hear the parties as to the appropriate orders to be made for costs and particulars, and any other orders necessary to advance the proceeding to trial.
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