FNH United Pty Ltd v United Petroleum Franchise Pty Ltd (Security for costs) (No 2)

[2025] VSC 232

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST

S ECI 2022 04261

FNH UNITED PTY LTD (ACN 639 802 798) & ORS	Plaintiffs
(according to the attached Schedule)
v
UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989) & ORS	Defendants
(according to the attached Schedule)

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JUDGE:	Attiwill J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 May 2025
DATE OF RULING:	5 May 2025
CASE MAY BE CITED AS:	FNH United Pty Ltd v United Petroleum Franchise Pty Ltd (Security for costs) (No 2)
MEDIUM NEUTRAL CITATION:	[2025] VSC 232

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COSTS – Where defendants applied for security for their costs of the proceeding – Where defendants were successful and security was awarded – Where the Court found it unnecessary to determine certain issues raised by defendants on their applications for security – Where the plaintiffs submitted that the costs should be reduced – Supreme Court Act 1986 (Vic) s 24 – Applicable principles on costs – Costs awarded to defendants with no reduction – Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd [2017] VSCA 293, considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr E Gisonda	T F Grundy Lawyer (as town agents for Levitt Robinson)
For the First and Third Defendants	Ms A Batrouney	King & Wood Mallesons
For the Second Defendant	Mr D F McAloon	Seyfarth Shaw Australia

HIS HONOUR:

1. On 11 April 2025, the Court delivered its ruling on the applications for security for costs of the second defendant (Mr Silver) and of the first and third defendants (United Defendants). On 17 April 2025, the Court made orders for security. The United Defendants now seek orders as follows:

(a)   The plaintiffs pay the costs of the United Defendants of their applications for security for costs, to be taxed on a standard basis, in default of agreement.

(b)  The plaintiffs pay the costs of the United Defendants of their submissions on the issue of costs and their attendance at the hearing on 2 May 2025 to be taxed immediately on an indemnity basis in default of agreement.

1. Mr Silver seeks similar cost orders. But he also seeks an order for the costs concerning the appeal from the order of Honourable Associate Justice Efthim made on 30 October 2023. But the Court has already addressed the costs of the appeal by making an order on 30 August 2024 that the plaintiffs pay the defendants’ costs of and incidental to the appeal. The plaintiffs accept that they should pay some of the costs of the defendants but submit that there should be reductions as follows:

(a)   The plaintiffs pay 62.5% of the costs of the United Defendants of their applications for security (a reduction of 37.5%).

(b)  The plaintiffs pay 72.5% of the costs of Mr Silver of his application for security (a reduction of 27.5%).

1. The applicable law is well established and was not in dispute. It is correctly set out in Mr Silver’s submissions:

2.Pursuant to s 24(1) of the Supreme Court Act 1986 (Vic), the costs of and incidental to the Application are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid. This is a wide discretion. It must be exercised judicially. Amongst the well-established principles that provide guidance for the exercise of the discretion and avoid it being exercised in an arbitrary or inconsistent manner is the principle that costs usually follow the event; that is, that the unsuccessful party is usually ordered to pay the successful party’s costs.

1. In Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd,[1] the Court of Appeal said:

87.As the applicants succeeded in obtaining the relief that they sought, namely an order for further security for costs, they were prima facie entitled to an order for costs pursuant to the principle that costs follow the event.  Although that principle is not applied automatically, there must be sound reasons based on the justice of a particular case to justify departure from the principle.  This is particularly so if the court proposes to go beyond refusing to make any order for costs and make an order that the successful party pay the costs of the unsuccessful party.[2]

[1][2017] VSCA 293.

[2]Ibid [87] (Tate and Kyrou JJA).

1. The defendants succeeded in obtaining the relief they sought and are prima facie entitled to an order that the plaintiffs pay their costs. Costs should follow the event unless there are sound reasons to make a reduction to the defendants’ costs as submitted by the plaintiffs. I am not so satisfied that there are any sound reasons to make a reduction to the defendants’ costs.

1. First, I accept that the defendants spent time in evidence, written submissions and at the hearings addressing the relevance of the group members’ capacity to contribute to security and their willingness or ability to do so. It was a significant issue concerning stultification. Ultimately, the Court did not decide it as it was not necessary to do so. The defendants were not unsuccessful in relation to it. But the issue was properly raised by them. It is not appropriate or just to reduce the defendants’ costs in relation to it.

1. Second, I accept that the United Defendants spent some time in evidence, written submissions and at the hearings addressing the issue of whether the plaintiffs’ solicitors themselves should provide security. The Court did not decide this issue as it was not necessary to do so. The defendants were not unsuccessful in relation to it. But the issue was properly raised by them. In addition, this issue took up a relatively insignificant amount of time and cost. It was not a significant issue. It is not appropriate or just to reduce the costs of the United Defendants in relation to it. The plaintiffs did not seek any reduction to Mr Silver’s costs in relation to this issue.

1. Third, I do not accept that the United Defendants and Mr Silver made unnecessary submissions on the issue of whether security would stultify the proceedings and that their costs should each be reduced. This issue was protracted and the subject of much evidence by the plaintiffs and written submissions and at the hearings by the parties. It was the central issue in the applications. It was appropriate, however, for the United Defendants and Mr Silver to separately address it. The Court was much assisted by each of their submissions. They were not repetitious. Mr Silver did not simply repeat matters already addressed by the United Defendants but made further refined submissions that assisted the Court. This included at the hearings. In addition, Mr Silver was entitled to advance his own application without simply relying upon the submissions of the United Defendants. As a result, it is not appropriate or just to reduce the defendants’ costs in relation to it.

1. In my view, taking into account the matters I have addressed, it is appropriate and just, in the circumstances, to order the plaintiffs to pay the costs of the defendants of their applications for security for costs on a standard basis to be taxed in default of agreement. This includes the costs of the defendants of their submissions on costs and their attendance at the hearing on 2 May 2025. It is not appropriate or just to make an order that the plaintiffs pay the costs of the defendants of their submissions on costs and their attendance at the hearing on 2 May 2025 on an indemnity basis. The Court was assisted by the submissions of the plaintiffs and, although they were unsuccessful, there is nothing in the plaintiffs’ conduct that justifies an order for indemnity costs.

Orders

1. For the reasons I have given, I will order that the plaintiffs pay the costs of the defendants of and incidental to their applications for security for costs (including the hearings before the Honourable Associate Justice Efthim)  on a standard basis to be taxed in default of agreement.

SCHEDULE OF PARTIES

S ECI 2022 04261

FNH UNITED PTY LTD (ACN 639 802 798)	First Plaintiff
FAHIM ISTANIKZAI	Second Plaintiff
JIGARKUMAR BHARATBHAI PATEL	Third Plaintiff
JAYDEEP DEVJIBHAI BHATTI	Fourth Plaintiff
YUG SHARMA PTY LTD (ACN 640 132 190)	Fifth Plaintiff
- and -
UNITED PETROLEUM FRANCHISE PTY LTD (ACN 127 764 989)	First Defendant
AVI SILVER	Second Defendant
UNITED PETROLEUM PTY LTD (ACN 085 779 255)	Third Defendant