Hansen v Pennefather

[2003] NSWSC 1049

CITATION:	Hansen v Pennefather [2003] NSWSC 1049
HEARING DATE(S):	7 November 2003
JUDGMENT DATE:	14 November 2003
JURISDICTION:	Common Law Division Professional Negligence List
JUDGMENT OF:	Studdert J
DECISION:	(1) That the plaintiff provide security for costs to the defendant for costs of and incidental to the proceedings and that proceedings be stayed until the security is given. (2) That such security be in an amount of $30,000. (3) That such security be paid into court and the registrar directed to deposit such security into an interest bearing account with an Australian bank. (4) In the alternative to order (3), that such security be provided by means of an irrevocable bank guarantee in favour of the defendant. (5) Liberty to apply, if need be, as to the manner of provision of security. (6) Order that the costs of the motion be defendant's costs in the cause.
CATCHWORDS:	Practice and procedure - application for security for costs - whether applicant insured of relevance - exercise of discretion.
CASES CITED:	Brookfield & Anor v Davey Products Pty Limited & Ors (unreported, Federal Court of Australia, 7 April 1994) Jeffcott Holdings Limited (In Liq) v Paior & Anor 14 ACSR 239 Quichorn Pty Limited v Broad & Anor (unreported, Supreme Court of Victoria, 24 January 1994) Remm Construction (SA) Pty Limited v Allco Newsteel Pty Limited & Ors (1992) 57 SASR 180 Rickard Constructions Pty Limited v Bonacci Rickard [2000] NSWSC 1124
PARTIES :	Judith Hansen (Plaintiff) Leisa Pennefather (Defendant)
FILE NUMBER(S):	SC 20284/01
COUNSEL:	R. Lovas (Plaintiff) G. Curtin (Defendant)
SOLICITORS:	Carroll & O'Dea (Plaintiff) Sparke Helmore (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
PROFESSIONAL NEGLIGENCE LIST

STUDDERT J

Friday 14 November 2003

20284/01 JUDITH HANSEN v LEISA PENNEFATHER

JUDGMENT

1 HIS HONOUR: In this cause the plaintiff, Judith Hansen, sues the defendant Leisa Pennefather, claiming damages for negligence. It is alleged by the plaintiff that the defendant was negligent in the provision of physiotherapy services to her in 1998 and that in consequence the plaintiff suffered significant injury to her back. Liability is denied.

2 The defendant has applied by motion for an order for security for costs. That application has been opposed by the plaintiff.

3 The relevant rule is Pt 53 r 2(1)(a):

“(1) Where, in any proceedings, it appears to the Court on the application of a defendant:
(a) that a plaintiff is ordinarily resident outside the State…
the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given.”

4 The plaintiff is a resident of New York in the United States of America. It seems to be common ground that the plaintiff underwent treatment by the defendant at a time when the plaintiff and her husband were residing temporarily in Sydney whilst the plaintiff’s husband was posted here on assignment. The plaintiff returned to the United States in June 1999 and that has remained her home since then.

5 The defendant has moved on the affidavit of Deborah Jackson, solicitor formerly with the carriage of the matter on behalf of the defendant. That affidavit was sworn on 17 April 2003, and it addresses the issues in the cause and the estimated costs of the defendant. It emerges from that affidavit that the issue of security of costs was raised with the plaintiff’s solicitor in December 2002. The plaintiff’s solicitor conveyed that it was unlikely that the plaintiff would provide security for costs. The notice of motion was filed in April 2003. Why the hearing of the motion has been adjourned until this month has not been made apparent.

6 In her affidavit Ms Jackson estimated the costs of the defendant in defending the claim as being approximately $50,000. In addition counsel’s fees and disbursements have been estimated and, bringing those items into account, it was submitted that total costs of the litigation from the defendant’s point of view would be approximately $80,000. The defendant seeks security in an amount of $50,000 or such other amount as the Court considers appropriate.

7 In opposing the application, the plaintiff relies upon the affidavit of her solicitor, Janine Smith, sworn on 4 September 2003. In that affidavit, issue was joined with the costs estimate provided by Ms Jackson. Ms Smith also addresses the asserted inability of the plaintiff to provide security. I shall consider this assertion more closely in the course of this judgment.

8 A consideration of the two affidavits upon which reliance has been placed by the parties does reveal that there is a live issue on liability in this cause. The plaintiff was, on any view of the matter, experiencing back problems before she attended a physiotherapist for treatment. The first physiotherapist seen was a physiotherapist, Ms Mussett. After her treatment, the plaintiff came under the care of the defendant and was given further treatment. It is, of course, the plaintiff’s case that it was the defendant’s treatment which caused her back problems. That is denied.

9 The defendant relies upon reports of Associate Professor Refshauge and of Dr Ditton. The former is a Associate Professor at the School of Physiotherapy at Sydney University and the latter is a specialist consultant in pain management. Professor Refshauge has opined that the plaintiff’s alleged injuries and disabilities are referable to the treatment given by neither of the physiotherapists, and Dr Ditton is of the like opinion. On the other hand, the plaintiff relies upon Mr Schneider, a physiotherapist, who considers the treatment that the defendant gave to the plaintiff “fell short of the standard of care one would reasonably expect of a competent physiotherapist.” Dr Tinning also supports the plaintiff. He wrote on 20 May 1999:

“If there had been vigorous manipulative treatment by [the defendant] on the 9/11/1998, then such treatment fell short of a standard [of] treatment one would reasonably expect of a competent physiotherapist.”

10 The opinions supporting the plaintiff were based upon the plaintiff’s account of the nature of the procedure carried out by the defendant, and the description of that procedure is in issue. Indeed, it would seem that this will be a critical issue, so, plainly, this is a case in which the service of statements by the parties should be required, together with statements by any other witnesses relating to what occurred.

11 The above comprises a very broad outline sufficient to indicate the nature of the contest on liability. There are issues as to what exactly was the nature of the procedure carried out by the defendant, whether the procedure was carried out negligently, and, finally, what harm, if any, was due to the procedure performed by the defendant. Expert evidence will be required both from medical practitioners and from physiotherapists. Ms Jackson’s estimates as to costs are based upon a hearing of approximately four days duration. I do not regard that as being an overstatement of the time likely to be occupied at a hearing and, indeed, the hearing may take longer.

12 Mr Curtin has submitted since the plaintiff does not live here and since the plaintiff has no assets here and since the defendant must inevitably incur significant costs in defending this matter, it is appropriate that the Court should order security for costs.

13 In resisting that application, the plaintiff, through Mr Lovas, has submitted that the following matters are relevant:

(i) the fact that the defendant is insured for her costs;

(ii) the plaintiff’s lack of funds are due to the defendant’s wrongdoing;

(iii) if the order is made, this will prevent the plaintiff from proceeding;

(iv) there has been delay in bringing the application;

(v) there is a real issue to be determined;

(vi) the amount claimed by way of security is, in any event, excessive.

14 It is convenient to address those matters in turn.

15 There is evidence that the defendant has the benefit of an insurance policy of professional malpractice indemnity insurance which is provided to members of the Australian Physiotherapy Association. According to the wording of the policy, the defendant is covered against an award to the limit of indemnity, (“$2,000,000 any one claim and $4,000,000 in the aggregate”), and in addition against “the costs and expenses incurred by or on behalf of the insurer and the costs and expenses incurred by the member…in the defence…of any claim.” Mr Lovas submitted the existence of this policy is a relevant consideration. He drew attention to the decision in Remm Construction (SA) Pty Limited v Allco Newsteel Pty Limited & Ors (1992) 57 SASR 180 and to the dicta of King CJ concerning an application for security for costs. In that case King CJ said (at 186):

“…I can see no reason to treat an action against a defendant who is insured against liability differently from one in which the defendant has no such insurance. In weighing the factors affecting the provision of security for costs, the ability of the defendant to absorb the costs, if he is unable to recover them from the plaintiff, is a relevant consideration. Any insurance cover would be relevant in assessing that factor.”

16 With the judgment of Chief Justice the other members of the court in Remm agreed, and those dicta were cited by Burley J in Jeffcott Holdings Limited (In Liq) v Paior & Anor 14 ACSR 239. Having cited the passage from Remm, Burley J went on, at 241, to say:

“It is clear from the Chief Justice’s statement of principle that it does not follow that, because a defendant has a right of indemnity against an insurer in relation to costs incurred in defending proceedings, security for costs will not be granted on the application of that defendant. It is merely a factor to be taken into account in the context of the defendant’s ability to absorb the costs should the defendant be successful and the plaintiff impecunious.”

17 Mr Curtin has drawn attention to the decision of Rolfe J in Rickard Constructions Pty Limited v Bonacci Rickard [2000] NSWSC 1124. In that case, Rolfe J was considering an application for security for costs. In defending the application the plaintiff issued a notice to produce to the defendant requiring the production of its professional indemnity policy. Rolfe J determined that the existence of a professional indemnity policy was irrelevant in that case and set aside the relevant paragraphs of the Notice to Produce. His Honour went on to make an order for security for costs. In that case his Honour considered Remm, saying of that decision:

“I do not accept that the Full Court in South Australia in Remm …laid down some general principle that the existence of insurance cover is always relevant. In that case, there was a contractual stipulation that the party seeking security should have insurance against the risk which had come to pass. The court held that it had not been shown that the master or the judge on appeal had acted on an incorrect principle in taking into account the ability of the defendant to absorb the costs which otherwise would fall upon it.
But that, in my view, falls far short of saying, as the plaintiff’s submission would have it, that it is necessary for the defendant not only to disclose the nature or extent of any insurance cover but also that if the defendant has insurance, no security should go because it has looked after its own interests in that regard.”

18 What Rolfe J determined in Rickard is recorded in paras 26-28 of the judgment:

“26 In my respectful opinion, the fact that the applicant is able to absorb a costs’ order, either from its own funds or from the proceeds of an insurance policy, does not preclude its recovering an order for security in appropriate circumstances. The provisions for granting security for costs look to the protection of defendants, whether solvent or insolvent, against insolvent plaintiffs so that, to use the words of Heerey J in Brookfield , the insolvent plaintiff is precluded from “getting the benefit of a proceeding should it succeed, but is protected from the risk of an order for costs should it fail”. His Honour referred to this as an ‘obviously unjust situation’.
27 I do not see that these principles are any different when applied to a wealthy or an impecunious defendant. The whole focus of an application for security for costs commences with the proposition that the plaintiff is unlikely to be able to meet an order for costs. Thereafter, the Court is given a very wide or unfettered discretion to consider whether, in all the circumstances of the case, it will order security. However, one of those circumstances is not, as a general rule, the capacity of the defendant to absorb the costs by reason of its own financial position or of its being insured in relation to them. It would be, in my opinion, surprising if this was a relevant factor for the reasons I have sought to explain. The general rule has not been shown to be inapplicable in this case.
28 As with Hayne and Heerey JJ, I consider that the existence of a professional indemnity policy, whether at present or in the past and on the facts of the present case, is totally irrelevant to the application and, accordingly, I would set aside paragraphs 1 and 2 of the Notice to Produce.”

19 His Honour’s references to Hayne and Heerey JJ in the above passages are references to decisions by those judges in cases referred to in Rickard.

20 In Brookfield & Anor v Davey Products Pty Limited & Ors (unreported, Federal Court of Australia, 7 April 1994), Heerey J, in considering an application for security for costs, said:

“There were some other matters which I do not regard as relevant. It was stated on behalf of the company that the respondents were or might be protected to some extent by insurance. With respect to what was said in Remm, I do not regard that as a relevant factor, and I do not take that into account in support of the company’s case.”

21 Then in Quichorn Pty Limited v Broad & Anor (unreported, Supreme Court of Victoria, 24 January 1994), Hayne J, in referring to cases where an insurer was the defendant, said:

“I consider the better view to be that the fact that an applicant for security is an insurer and that it is resisting a claim by a party on a contract into which it voluntarily entered are matters that may be taken into account in the exercise of the discretion whether to order security, but that there is no general predisposition against the granting of security to insurers. The question will always be one for the exercise of an unfettered discretion …
There is, in my view, no general principle of the kind which the plaintiff’s submission suggests might apply to defendant insurers who seek security for costs. Rather, in each case, the position of the applicant must be considered having regard to all of the circumstances that affect an application in those proceedings without any predisposition one way or the other in favour or against the granting of security.”

22 Heerey J then went on to consider the relevance of the defendant’s ability to absorb costs:

“What then of the other matters mentioned by the plaintiff? It submitted that the second defendant had not disclosed whether it was able to absorb costs that it might have to bear having regard to the benefit of any insurance that it may have. I do not consider that it is right to say that there has been some relevant failure on the part of the second defendant to disclose whether it is able to absorb costs having regard to any insurance it may have.
The plaintiff sought to have me require the second defendant disclose whether or not it was insured. I declined to require the second defendant to do so. In my view, it was not appropriate to make such a requirement of the second defendant. It is for the party seeking security to make out its case, it is for the plaintiff then to set about challenging that case as made.
Even if I were to accept that there is, or at least may be, some such insurance cover of the kind that the plaintiff was enquiring about, numerous other questions would then arise e.g. about the extent of that cover, both as to amount and to the basis on which that cover would extend.
I do not accept that the Full Court in South Australia in Remm .. laid down some general principle that the existence of insurance cover is always relevant. In that case, there was a contractual stipulation that the party seeking security should have insurance against the risk which had come to pass. The Court held that it had not been shown that the Master or the Judge on appeal had acted on an incorrect principle in taking into account the ability of the defendant to absorb the costs which otherwise would fall upon it.
But that, in my view, falls far short of saying, as the plaintiff’s submission would have it, that it is necessary for the defendant not only to disclose the nature or extent of any insurance cover but also that if the defendant has insurance, no security should go because it has looked after its own interests in that regard.”

23 Mr Lovas submitted that I should not follow Rickard, but, on the contrary, that I should follow Remm. I do not read Remm as authority for the proposition that the existence of insurance cover necessarily defeats an application for security for costs, but rather that the court may take into account the applicant’s ability to absorb the cost of the litigation as a relevant consideration. With respect, I consider what Burley J said in Jeffcott (supra) as being a correct analysis of what was relevantly to be drawn from Remm. However, having carefully considered what Rolfe J wrote in Rickard, consistent as it is with the approach of Heerey J in Brookfield and of Hayne J in Quichorn, I consider I should follow Rickard. As a consequence, in recognition of the general rule as stated by Rolfe J in para 27 of his judgment, I consider I should treat the existence of the policy of indemnity in favour of the defendant as irrelevant to this application. I should add that even if it was relevant to bring into account the existence of the policy as one matter to be weighed, such existence would not alter the outcome that I conclude should be reached on the view that I take of this application overall.

24 The next matter raised by Mr Lovas concerned the plaintiff’s asserted lack of funds. As I indicated during the hearing of this application, I consider the evidence about this to be unsatisfactory. There is no evidence before the Court from the plaintiff and the only evidence in point is to be found in paras 28, 29 and 30 of the affidavit of Janine Smith:

“28. I am instructed by the Plaintiff and verily believe that the Plaintiff does not have, and cannot afford to pay into Court, the sum of $50,000.00 which the Defendant seeks as security for costs.
29. It is the Plaintiff’s evidence that she has suffered significant loss of income to date and loss of earning capacity in the future due to the Defendant’s negligence. The Plaintiff’s loss of earnings is particularised in the further and better particulars provided to the Defendant’s Solicitors on 13 August 2002 and is set out in the Part 33 Rule 8A Statement of Particulars filed on 2 May 2003. The Defendant’s negligence has placed the Plaintiff in a position of financial disadvantage relative to her pre-injury position and means that she cannot afford to pay into Court the sum sought by the Defendant.
30. I am instructed by the Plaintiff and verily believe that if the Court orders the payment of security for costs by the Defendant, the Plaintiff will be unable to pursue her claim.”

25 This evidence does not permit me to make an assessment of the plaintiff’s ability to comply with an order for security for costs be it in the amount of $50,000 or in some lesser amount. There is no evidence as to the plaintiff’s resources and the particulars filed under Pt 33 r 8A are an unsatisfactory and inadequate source of information. Still less do those particulars constitute evidence.

26 Having regard to the same shortcomings in the evidence, the submission that the making of an order for security would frustrate the pursuit of the proceedings has not been established.

27 Mr Lovas has submitted that this application should be dismissed because of the delay in making it. Any delay is, of course, a relevant consideration to be carefully weighed. The statement of claim was filed in April 2001 but it was not served until 19 September 2001. The defendant is not to be blamed for that delay. An appearance was filed promptly after service of the originating process and then the defendant requested further and better particulars, and these were requested promptly enough. There was then, however, delay on the plaintiff’s part because the particulars were not supplied until 13 August 2002. I do not consider it was unreasonable for the defendant to seek particulars in the matter before pursuing an application for security. There was delay from the provision of the particulars until December before the defendant’s solicitors first raised the question of security for costs. The plaintiff’s solicitors responded by telephone on 17 December 2002 that the plaintiff was unlikely to consent to the provision of security but the notice of motion was not filed until the following April.

28 A consideration of the history of this matter does not lead me to conclude that I should refuse to order security although there was delay between the provision of particulars and the filing of the notice of motion. In assessing the significance of delay, I do not overlook the evidence to be found in para 22 of the affidavit of Janine Smith that the plaintiff has incurred costs by way of professional costs and disbursements in preparing this matter in excess of $21,000. However, whilst I do not know what proportion of those costs were incurred before an application for security for costs could have been made had all due expedition been exercised, I consider it likely that, costs of the present application aside, most of the plaintiff’s costs thus far incurred would have been incurred by the time the request for particulars was answered in August 2002.

29 Part 53 rule 2 affords a wide discretion in the exercise of which I must have due regard to all the circumstances of this case and the overriding consideration of doing justice between the parties. I conclude that in this case a consideration of all the circumstances requires that I should make an order for security for costs

30 For what sum should security be given? Mr Lovas has submitted that the amount sought, that is $50,000, is excessive. He has drawn attention to one of the estimated costings in annexure B to the affidavit of Deborah Jackson, namely the costings in the preparation of documents for the application for security for costs. According to the estimate, twenty-five hours were required for the preparation of these documents and, presumably, the documents mentioned in that annexure are the affidavit of Deborah Jackson and the notice of motion itself. It does seem to me that twenty-five hours is a very long period indeed to be provided for in the preparation of those documents, and hence I have reservations about the calculation of costs for this item in excess of $5750.

31 Annexed to the affidavit of Janine Smith is a memorandum prepared by an in-house legal costs consultant employed by the plaintiff’s solicitors. In that memorandum, the author joins issue with the number of hours calculated in annexure B to Ms Jackson’s affidavit. It is pointed out that the defendant is claiming to date some $6000 more than the cost of the work in progress for the plaintiff, including as the latter’s costs do, solicitor and client attendances. It is contended that it would be reasonable to provide for less hours to date for the defendant’s professional costs than for the plaintiff’s professional costs. In the defendant’s estimates, the total number of hours claimed for work already undertaken is 129 hours as opposed to the hours undertaken by the plaintiff’s solicitors of seventy-four hours, and it is put that a more reasonable claim for hours by the defendant to date would be between fifty-five and sixty hours.

32 It is not possible for me to be precise in the provision I now intend to make but, as indicated earlier, the estimated hearing time for the cause I regard as conservative.

33 Assessing all the material before me at present, I am not persuaded that I should order security in the amount sought but rather for three-fifths of such amount, namely the sum of $30,000.

34 The formal orders of the Court then are as follows:

1. That the plaintiff provide security for costs to the defendant for costs of and incidental to the proceedings and that proceedings be stayed until the security is given.

2. That such security be in an amount of $30,000.

3. That such security be paid into court and the registrar directed to deposit such security into an interest bearing account with an Australian bank.

4. In the alternative to order (3), that such security be provided by means of an irrevocable bank guarantee in favour of the defendant.

5. Liberty to apply, if need be, as to the manner of provision of security.

6. Order that the costs of the motion be defendant’s costs in the cause.

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Last Modified: 11/17/2003