In the matter of Australasian Hail Network Pty Limited

[2020] NSWSC 44

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Australasian Hail Network Pty Limited [2020] NSWSC 44

Hearing dates:

13 November 2019

Decision date:

07 February 2020

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

On the first plaintiff’s undertaking to be liable for any costs order made against the second plaintiff, dismiss the Interlocutory Process for security for costs with costs.

 Order that the parties’ costs of the plaintiffs’ Interlocutory Process to amend the pleadings be the parties’ costs in their respective causes.

Catchwords:

PRACTICE AND PROCEDURE – security for costs – residence of plaintiff – New Zealand citizen – itinerant worker – prospects of success – delay in seeking security – enforceability of costs order in New Zealand – undertaking to meet costs orders of corporate plaintiff

Legislation Cited:

Contracts Review Act 1980 (NSW), s 6(2)
Corporations Act 2001 (Cth), ss 181, 182, 183, 232, 1335
Partnership Act 1892 (NSW)
Reciprocal Enforcement of Judgments Act 1934 (NZ)
Trans-Tasman Proceedings Acts 2010 (Cth)
Trans-Tasman Proceedings Acts 2010 (NZ), ss 52(2), 52(3), 54(1)(a), 54(2), 57(1)
Uniform Civil Procedure Rules 2005 (NSW), rr 42.21(1)(a), 42.21(1)(d), 42.21(1A), 42.21(1A)(f), 42.21(1A)(l) 42.21(1A)(n), 42.21(1B)

Cases Cited:

Anderson v Patersons Securities Ltd [2019] NSWSC 852
Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365
Barnes v Addy (1874) LR 9 Ch App 244
Cameron v Qantas Airways Ltd and Anor [2010] NSWSC 899
Connop v Varena Pty Ltd [1984] 1 NSWLR 71
Galati v Deans [2018] NSWSC 1600
Hannaford v Commonwealth Bank of Australia [2013] NSWCA 472
Harpur & Ors v Ariadne Australia Ltd & Ors (1984) 2 ACLC 356 at 362; [1984] 2 Qd R 523
In the matter of Australia Wattle Fund Pty Ltd [2017] NSWSC 1664
Li v State of New South Wales [2013] NSWCA 165
Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302
LK v Director-General, Department of Community Services (2009) 237 CLR 502; [2009] HCA 9
Luo v Windy Hills Australian Game Meats Pty Ltd (No 2) [2018] NSWSC 1139
Newtimber (Operations) Pty Ltd v Tarong Energy Corporation Ltd [2011] FCA 123
Pearson v Naydler [1977] 3 All ER 531; [1977] 1 WLR 899
Re Australian Style Holdings Pty Ltd (as trustee of Australian Style Investments Unit Trust) [2018] NSWSC 1368
Re Taylor; Ex parte Natwest Australia Bank Limited (1992) 37 FCR 194
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165
Trojan Marketing & Consultants Pty Ltd v Kirela Pty Ltd [2018] NSWSC 1786
Worrall v White (1851) 3 Jo & Lat 513 at 515

Category:

Procedural and other rulings

Parties:

Kane Neil Boyd (First Plaintiff)
Automotive Paintless Techniques Pty Limited (ACN 092 638 330) (Second Plaintiff)

  Adam Fry Woodlands (First Defendant)
Stephanie Woodlands (Second Defendant)
Southern Cross Hail Pty Limited (ACN 150 257 113) (Third Defendant)
Australasian Hail Network Pty Limited (ACN 111 808 112) (Fourth Defendant)
Australian Securities and Investments Commission (Fifth Defendant)
Carwook Pty Ltd (ACN 003 475 938) (Sixth Defendant)

Representation:

Counsel:
Mr S Docker with Mr A Gandar (Plaintiffs)
Mr G Curtin SC with Mr J Duncan (First to Fourth Defendants and Sixth Defendant)

 

Solicitors:
Teneo Legal (Plaintiffs)
Watkins Tapsell (First to Fourth Defendants and Sixth Defendant)

  ASIC (Fifth Defendant) filed a submitting appearance

File Number(s):

2019/30653

Judgment

1. HER HONOUR: The defendants seek security for costs of $241,120 from the first plaintiff, Kane Boyd, a panel beater, and the second plaintiff, Australian Paintless Techniques Pty Ltd, a company which has recently been re-registered for the purpose of these proceedings. In short, the basis of the application is that Mr Boyd is said to be ordinarily resident in New Zealand and the plaintiffs’ claims are said to have poor prospects of success. There is also the question of what costs order should be made in respect of the plaintiffs’ application to amend the pleadings, which I determined on 13 November 2019.

2. In the substantive proceedings, Mr Boyd contends that, contrary to various documents said to have been executed by him, he did not transfer his shares in Australasian Hail Network Pty Ltd (the fourth defendant) to Adam Woodlands (the first defendant) or resign as director and secretary of that company. Mr Woodlands and his wife (the second defendant) are said to have excluded Mr Boyd from the company and refused access to its records. The plaintiffs seek relief under section 232 of the Corporations Act 2001 (Cth) for oppression. Mr Woodlands is said to have diverted business opportunities from the company to Southern Cross Hail Pty Ltd (the third defendant) in breach of his fiduciary duties and duties owed under the Partnership Act 1892 (NSW). Mr and Mrs Woodlands are said to have breached their director’s duties under sections 181, 182 and 183 of the Corporations Act 2001 (Cth). Southern Cross Hail Pty Ltd is also said to be liable under the first limb of Barnes v Addy (1874) LR 9 Ch App 244 for knowing receipt of property and the diversion of various business opportunities and for assisting in the statutory breaches. Alternatively, if Mr Boyd did sign the documents in question, then he was under a ‘special disadvantage’ by reason of lack of education, poor literacy and drug use and Mr and Mrs Woodlands are said to have engaged in unconscionable conduct.

Facts

3. The application for security was hard fought: six affidavits were read, a large amount of documentary material was tendered and Mr Boyd was cross-examined. I accept his evidence. Mr Boyd was born in New Zealand and is a citizen of that country. He continues to hold a New Zealand drivers licence obtained in 1984. Mr Boyd has three bank accounts in New Zealand. From 1995 to 2004, Mr Boyd lived and worked in Australia with his then wife. They had three children during that time. Also during this period:

1. From 2000, Mr Boyd specialised in paintless dent repair of hail damaged cars, being a technique that is cheaper and faster than conventional panel beating. In 2000, Automotive Paintless Techniques was incorporated: Mr Boyd was director and he and his wife were shareholders. Mr Boyd obtained work by travelling to the site of a recent hailstorm and setting up a temporary workshop: in this way, the work is inherently itinerant.

2. In 2002, Mr Boyd incorporated a company in New Zealand, KC Boyd Enterprises Limited. The purpose of this company was to hold land and the company continues to exist.

3. From about 2003, Mr Boyd went into business with Mr Woodlands in paintless dent repair of hail damaged cars. In November 2004, Mr Woodlands became a director of Automotive Paintless Techniques.

4. In 2003, Mr Boyd purchased a house in New Zealand.

4. In December 2004, Mr Boyd moved back to New Zealand with his wife and children and did not keep a residence in New South Wales. He continued, however, to travel to Australia to work for Australasian Hail Network. Mr Boyd deposed:

The length of time I stayed in Australia depended on the amount of work to be done. Some of the jobs went for as little as 1–2 months and others for up to about a year. I normally stayed near where I was working in Australia. For most weekends during jobs that were in capital cities and less often when jobs were in regional areas, I used to travel back to New Zealand to see my family. The work was usually for about 12 hours a day, 5 days a week if I went to New Zealand for the weekend or 6 days a week if I did not. In between jobs, I used to go back to New Zealand, rest and be with my family.

… By far the majority of my work since 2006 has been in Australia because there are many more hail storms in Australia than in New Zealand. I have only worked on 3 hail storms in New Zealand: Ashburton in late 2008 to mid-2009 for about 8 months, Papamoa in mid-2009 for about 2 months and Christchurch in 2012–2013 for about 9 months.

The jobs I have worked on in Australia, without being exhaustive, included jobs at Smithfield/Fairfield NSW (2002/2003, about 6 months), Erina NSW (2003, a few months), Lilydale VIC (2003/2004, about 6 months), Taree NSW (2004, about 1 month), Sydney NSW (2004/2005, about 6 months), Gosford NSW (2005, about 2 months), Newcastle NSW (2006/2007, about 7 months), Castle Hill Sydney NSW (2007/2008, 5–7 months), Melbourne VIC (2010, about 7 months), Melbourne VIC (2011/2012, about 12 months), Port Macquarie NSW (2013, about 1 month), Coffs Harbour NSW (2013, about 1–1–2 months), Brisbane QLD (2014/2015, about 9 months) and Maitland NSW (2015/2016, 2–3 months).

After the last-mentioned work in Maitland, Mr Boyd was no longer given any work by Australasian Hail Networks and says he was excluded from the company. During this period, Mr Boyd continued to retain accountants in Australia to lodge tax returns in this country. Indeed, he has a disputed debt to the Australian Taxation Office (ATO) of $496,000, which is consistent with having earnt substantial income in Australia.

5. In 2006, Mr Boyd incorporated Kiwi Dent Company Limited in New Zealand, a company of which he was the sole director and shareholder. Mr Boyd was thus also undertaking work in New Zealand in panel beating. This company continues to exist although no longer trades.

6. Mr Boyd’s then wife attended to the bookkeeping, sending emails and dealing with accountants in respect of Mr Boyd’s businesses. In July 2007, Moray & Agnew solicitors wrote to the accountants for Australasian Hail Network seeking access to documents on behalf of Mr Boyd. The instructions appear to have emanated from his wife, who also communicated with their accountant in respect of obtaining the documents. In August 2007, Moray & Agnew on behalf of Mr and Mrs Boyd sent a proposed Shareholder’s Agreement to the solicitors for Mr and Mrs Woodlands to resolve a recent dispute between their respective clients. On 25 October 2007, Mr and Mrs Woodlands’ solicitors forwarded a proposed amended shareholders agreement. On 8 October 2007, that is, before the amended version submitted by Mr and Mrs Woodlands, Mr Boyd apparently signed the Shareholders Agreement. Whether he in fact signed the agreement and, if so, in what circumstances is the subject of these proceedings. The Shareholders Agreement obligated Mr Boyd to transfer his 100 shares in Australasian Hail Network to the Mr Woodlands in three yearly tranches for $1 per share.

7. In January 2009, the solicitor for Mr and Mrs Woodlands received a call from Mrs Boyd in which she apparently provided a date for the resignation of Mr Boyd from the company, required a full transfer of all shares to Mr Woodlands and that the company pay costs, although the solicitor’s file note is not entirely clear. On 14 January 2009, Mr and Mrs Woodlands’ solicitors sent the Boyds an email attaching a proposed Deed of Agreement, transfer form and letter of resignation. The documents provided that the Shareholders Agreement was terminated, Mr Boyd resigned as a director and secretary of Australasian Hail Network, and Mr Boyd transferred his shares in the company to Mr Woodlands. The solicitor asked that the documents be signed and returned for Mr Woodlands to sign as soon as possible. Later that day, Mrs Boyd sent an email to George Papas of CBD Newington, whose role is unclear, providing her authority for Mr Papas to speak to their accountant saying, “Our situation at this stage is that Kane is giving his share of Australasian Hail Network to Adam”. The documents were apparently signed by Mr Boyd. Whether Mr Boyd in fact signed the documents and, if so, the circumstances in which he signed the documents is the subject of these proceedings. A forensic document examiner’s report has been obtained by Mr Boyd which is inconclusive. Either way, Mr Boyd continued to work for Australasian Hail Network until 2015 when he says he was excluded from the company.

8. In 2011, Mr Woodlands ceased to be a director of Automotive Paintless Techniques. In 2012, Kiwi Dent Company ceased to trade. Mr Boyd thereafter worked as a sole trader on the advice of his accountants. Since that time, all of Mr Boyd’s income has been derived from work in Australia. It was suggested that Mr Boyd transferred income earned in Australia to his New Zealand bank accounts and he denied doing so.

9. In early 2014, Mr Boyd separated from his wife. In late 2015, Mr Boyd says he was excluded from the business of Australasian Hail Network. In 2016, Mr Boyd says that he didn’t work much: his divorce was finalised in late 2016 and he retained the home in New Zealand. He is no longer on speaking terms with his former wife. From February to June 2017, Mr Boyd worked in Australia and then returned to New Zealand. In July 2017, Mr Boyd sold his home in New Zealand. He rented a storage shed in New Zealand where he lived with his eldest daughter and also saw his younger children on weekends and holidays.

10. In November 2017, Mr Boyd flew to Australia to do work following a hail storm. He collected his van from a storage facility in Pennant Hills and rented a room in a colleague’s home in Wyoming for $100 a week. He returned to New Zealand for Christmas, leaving everything in Wyoming and continued to pay rent to his colleague whilst he was away. In January 2018, Mr Boyd returned to Australia and continued to work there and stay in the rented room in Wyoming. By February 2018, the hail storm work had finished and Mr Boyd returned to New Zealand but agreed with his colleague to use the room in Wyoming as his Australian base and to pay $100 a week when Mr Boyd was living there and $50 a month for storage when he was not. Mr Boyd lodged a tax return in Australia for the year ended 30 June 2018 advising that he was not an Australian resident, gave a home address in New Zealand, declared Australian earned income and provided an Australian business address and postal address.

11. In late December 2018, a hail storm caused damage to motor vehicles over an area from Wollongong to the Central Coast. On 1 January 2019, Mr Boyd and his partner flew to Sydney to work. Initially, they lived in the room at Wyoming. In January 2019, after discussions with his partner, Mr Boyd decided to stay in Australia because most of his work is here; he decided he wanted to make work the focus of his life and there was a lot more work for him in Australia than in New Zealand. He and his partner rented a unit in Terrigal and moved there to live. Mr Boyd continued to pay rent to his colleague in Wyoming as he stored his possessions there and used it as his base. Consistently with this, on 29 January 2019, Mr Boyd sent an email to his accountant providing his new address in Terrigal,

I have moved back to Australia. My kids have grown up and flown the coup … I have taken out a 12 mth lease at this stage. I won’t be able to buy a property as I’ve sold my house to pay my tax bill.

12. On 29 January 2019, these proceedings commenced. Mr Boyd’s solicitors have since sent monthly invoices to Mr Boyd at the Wyoming address. On 17 February 2019, the defendants briefed counsel and sought advice in relation to security for costs. On 5 June 2019, the defendants gave instructions not to seek security for costs. These proceedings have a dense procedural history with numerous directions hearings and a series of amended pleadings. On 29 August 2019, Mr Boyd served a forensic handwriting report and, on 1 September 2019, a lengthy affidavit in respect of the substantive claim. His evidence in chief is complete.

13. In October 2019, Mr Boyd began doing work on hail damaged vehicles following a hail storm in Taree. He and his partner rented a room at a local motel and planned to stay there until the work was done, thought to be at the end of November 2019. Once that work finished, Mr Boyd intended to return to Wyoming and stay at his colleague’s house. Mr Boyd deposed:

My plan is to pay off my tax debt and save enough money to buy a place on the Gold Coast in Queensland for [my partner] … and I to live in. Until we can afford to do that I intend to stay at [Wyoming] … or nearby to where I am working.

14. Mr Boyd has a New South Wales driver’s licence and a New South Wales fishing licence. Mr Boyd has had an Australian bank account for 24 years; a bank statement in evidence is addressed to Mr Boyd at the Terrigal unit. In evidence is an electricity bill addressed to Mr Boyd at the Terrigal address, correspondence with the managing agent for return of the bond for the premises, and a letter from the Australian Securities and Investments Commission (ASIC) to Mr Boyd at the Wyoming address.

15. Mr Boyd’s children have all now completed their high school studies and embarked on tertiary education and careers. Mr Boyd’s eldest daughter continues to live in the storage shed in New Zealand together with her partner. Mr Boyd and his partner now return to New Zealand for children’s birthdays and Easter and Christmas holidays. While in New Zealand, they either stay in the storage shed or on Mr Boyd’s boat which is berthed in a marina. Mr Boyd continues to retain accountants in New Zealand to lodge his tax returns there. His parents live in New Zealand and he visits them from time to time. He has cousins in New Zealand. His partner is a New Zealand citizen whose parents and brother live in New Zealand. His partner has two children aged 8 and 3 who live with their father in New Zealand.

16. On 11 October 2019, Mr Boyd’s solicitors served a proposed further amended pleading advising that their client was then overseas and asked whether the defendants consented to the proposed amendments. It would appear that it was proposed to join Automotive Paintless Techniques. On 17 October 2019, the defendants advised that they did not consent but would reconsider the position if Automotive Paintless Techniques was re-registered and evidence was provided that the company had sufficient assets to satisfy an adverse costs order. In addition, the defendants sent a separate letter asserting that the defendants were entitled to security for costs from Mr Boyd and Automotive Paintless Techniques and sought information that may satisfy them that Mr Boyd and the company was able to pay the defendants’ costs if ordered to do so. A range of financial information was sought within seven days. I note that by this time the proceedings had been the subject of eight directions hearing and Mr Boyd had filed his lay and expert evidence in chief.

17. On 21 October 2019, Mr Boyd’s solicitors sought to ascertain the defendants’ attitude to the amendments which did not concern Automotive Paintless Techniques before responding to the defendants’ letter in full. The defendants did not reply. Rather, on 27 October 2019, the defendants’ senior counsel gave advice in respect of security for costs and, on 28 October 2019, the defendants gave instructions to seek same. On 29 October 2019, Mr Boyd filed an Interlocutory Process seeking to further amend the pleadings:

1. to add, as second plaintiff, the recently re-registered Automotive Paintless Techniques;

2. to add, as sixth defendant, Carwook Pty Ltd, a company controlled by Mr Woodlands; and

3. to add various causes of action, including seeking relief in respect of non est factum, resulting trust, undue influence or illegitimate pressure (paragraph 13D), misleading or deceptive conduct (paragraph 13E), the Contracts Review Act (paragraph 13F), and partnership claims.

18. Also on 29 October 2019, the defendants filed an Interlocutory Process seeking security for costs. In support of the defendants’ application for security, reliance was placed on title searches conducted in the names of Mr Boyd and Automove (sic) Paintless Techniques which reveal that neither Mr Boyd nor the mis-spelt company own any property or have registered any leases in Australia. A printout of Mr Boyd’s Facebook page was relied upon but was not legible. Several printouts from LinkedIn were relied upon: one reported Mr Boyd’s location as being in New Zealand with five connections, whilst another reported that Mr Boyd was located in New South Wales with over 500 connections: this tends to suggest that Mr Boyd’s connections are overwhelmingly in this country. The LinkedIn pages also reported that Mr Boyd had been a director of Kiwi Dent from 2002 in New Zealand and “self-employed in Australia from March 2003 to March 2017”. Again, this tends to suggest that Mr Boyd’s place of work over the period for which a description was given was overwhelmingly in Australia. The defendants’ solicitor also deposed that the defendants’ costs to date are $178,000 including GST with estimated future costs of $274,000 plus GST of which 80% are estimated to be recoverable on an assessment, that is, $241,120.

18. On 8 November 2019, the defendants’ solicitors finally replied to the plaintiff’s letter of 21 October 2019, raising a number of concerns in respect of proposed paragraphs 13D, 13E and 13F of the amended statement of claim. In short, it was suggested that the paragraphs failed to plead material facts to support the suggestion of undue influence, illegitimate pressure, misleading or deceptive conduct and was doomed to fail by reason of section 6(2) of the Contracts Review Act. On 11 November 2019, the plaintiffs served an amended pleading seeking to address the defendants’ concerns.

19. Mr Boyd has provided details of his current assets and liabilities. His liabilities exceed his assets, in particular, he owes the ATO some $496,000, being a debt which he disputes. In Australia, Mr Boyd has a superannuation fund and a van. In New Zealand, Mr Boyd owns a boat, has the lease of a boat berth, a much smaller superannuation fund, a rather old car and an even older horse trailer. He also has cash at bank, although whether these monies are held in Australian or New Zealand bank accounts is not known. Mr Boyd earns $9,000 a week net when the work is “on”. Mr Boyd’s costs of the proceedings as at 11 November 2019 were some $300,000.

Submissions

21. In relation to Mr Boyd, the defendants relied upon rule 42.21(1)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), namely that Mr Boyd is ordinarily resident outside Australia, and the Court’s inherent jurisdiction. In relation to the second plaintiff, the defendants relied upon rule 42.21(1)(d) and section 1335 of the Corporations Act 2001 (Cth), that is, there is reason to believe the second plaintiff will be unable to meet the defendants’ costs, and the Court’s inherent jurisdiction. The defendants submitted that the evidence established that Mr Boyd is ordinarily resident outside Australia, noting that the assessment of the plaintiff’s ordinary residence is to be made at the time the application for security is brought, not the plaintiff’s circumstances at the beginning of the proceedings or at some indeterminate future time: Hannaford v Commonwealth Bank of Australia [2013] NSWCA 472 at [57]; Anderson v Patersons Securities Ltd [2019] NSWSC 852 per Ward CJ in Eq at [37]-[40], [43]. The defendants submitted that there was no element of permanence to Mr Boyd’s present presence in Australia. Rather, he was here intermittently for work and was not “settled” in Australia. Mr Boyd has no assets in Australia. Mr Boyd has no established home, place or work or assets within Australia. His Australian accommodation is always temporary; he moves to where the work is.

22. The address Mr Boyd has given to ASIC as director of the now re-registered second plaintiff is in Woronora. Mr Boyd gives no explanation for this address, and does not assert that he resides there. I do not think anything turns on this. From the various company searches for Australian Paintless Techniques in evidence, the Woronora address has been the address of the company since it was incorporated in 2000. Presumably, that is where Mr Boyd and his then wife had some association at the time. On re-registration, the previous details of the company have simply been placed back on the record and it is unsurprising given the nature of Mr Boyd’s work and his other evidence that he is no longer at this address.

23. Even if Mr Boyd is ordinarily resident in Australia, security may still be ordered – Anderson at [42] – and the defendants submitted that it should be ordered in this case. As Gleeson JA said in Hannaford at [55], ordinarily, and in the absence of countervailing considerations, the fact that the appellant is resident out of and has no assets in Australia is to be given significant weight. The purpose of the order is to create a fund within Australia against which the defendants may enforce a judgment for costs without having to bear the risk as to the uncertainty of enforcement in New Zealand and as to the time and complexity of action which might be necessary to effect enforcement. Where a party is not ordinarily resident in Australia, and has no assets within the jurisdiction, security for costs is normally ordered: Anderson at [45].

24. Having established a basis for an order for security, the defendants submitted that the evidentiary onus shifted to the plaintiffs to establish why security should not be granted: Re Australian Style Holdings Pty Ltd (as trustee of Australian Style Investments Unit Trust) [2018] NSWSC 1368 per Black J at [30]. In relation to the matters set out in rule 42.21(1A) of the UCPR, the defendants pointed to the prospects of the plaintiffs’ claim: Trojan Marketing & Consultants Pty Ltd v Kirela Pty Ltd [2018] NSWSC 1786. Mr Boyd does not admit or denies signing the Shareholders Agreement, Deed of Agreement, letter of resignation and Share Transfer Form. His forensic document examiner is equivocal about whether or not the signature on the Shareholders Agreement is his, but opines that it is more probable than not that he signed the other three documents. Contemporaneous documents reveal that Mr Boyd retained solicitors in relation to the Shareholders Agreement in 2007 yet he deposes that he had never heard of Moray & Agnew nor seen the Shareholders Agreement before. The defendants submitted that the contemporaneous documents are clearly contrary to statements made in Mr Boyd’s affidavit, suggesting Mr Boyd had seen and received legal advice about the terms of the agreement before signing it. Contemporaneous documents reveal that Mr Boyd’s wife was emailed the remaining three documents to sign in 2009. His then wife represented to two different people in January 2009 that Mr Boyd was “giving” his shares in Australasian Hail Network to Mr Woodlands, which was the effect of the three documents. But Mr Boyd says he does not recall ever seeing the documents other than in preparation for these proceedings. It was submitted that the contemporaneous documents severely undermined the plaintiffs’ case which, in relation to the four critical signed documents, was solely based on Mr Boyd’s uncorroborated recollection of events occurring ten or more years ago. It was submitted that the plaintiffs’ case is exceedingly weak and is highly questionable in relation to its genuineness, as Mr Boyd simply says that he does not remember signing the documents and gives no evidence of the circumstances in which he did so: cf Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [57].

25. As to other factors, the defendants submitted that there was prejudice to the defendants by reason of the delay in commencing these proceedings at all and in prosecuting the proceedings. It was submitted that there was no evidence that Mr Boyd is impecunious, nor does he assert that he would be unable to provide security: cf Anderson at [127]. There is no evidence that any impecuniosity was caused by the defendants: Australian Style Holdings at [34]. There is no matter of public importance. The defendants submitted that the application for security had been brought relatively early in the proceedings. Alternatively, the weight of delay was said to be lessened when the plaintiff is ordinarily resident outside Australia: Anderson at [178]. It was said that Mr Boyd had been less than forthright about his ordinary residence. Should the defendants succeed, it was submitted that it would not be easy, convenient nor cost-effective to pursue that judgment, although I note that there was no evidence of the cost of enforcing a judgment in New Zealand.

26. The plaintiffs submitted that Mr Boyd is not ordinarily resident outside Australia within the terms of rule 42.21(1)(a) of the UCPR. The test for ordinary residence depends to a significant degree upon the state of mind of the person whose residence is in question. Mr Boyd moved to Australia shortly before the proceedings commenced and he has decided to make it his permanent home. Mr Boyd’s work is a settled purpose for which he has decided to ordinarily reside in Australia. The defendants therefore do not meet the threshold question for the exercise of the power to grant security for costs under the UCPR: Li v State of New South Wales [2013] NSWCA 165 at [12].

27. Alternatively, the plaintiffs submitted that the delay in bringing the application for security hold against it being granted: Li at [37]. A plaintiff is entitled to know its position in relation to the security before it embarks to any real extent on its litigation and before it is allowed to commit substantial sums of money towards litigating its claim: Li at [38]. The application was filed on 29 October 2019. In the meantime, Mr Boyd has incurred over $300,000 in costs: that money would be squandered if an order for security for costs is made and the plaintiff is unable to provide the security. Although Mr Boyd earns a reasonable income, his work is seasonal and his current job was expected to finish by the end of November 2019. The evidence suggested that an order for security for costs in the amount sought by the defendants would be likely to stultify the proceedings and effectively shut the plaintiff out from his case. It would be unfair and oppressive to require the plaintiff to now provide security at this late stage, after most of his costs in preparation for trial have been incurred.

28. In respect of prospects, the plaintiffs submitted that none of the correspondence relied on by the defendants included a signed copy of any of these documents or recorded receipt of a signed copy of any of the documents. Ordinarily, it may be very difficult to express a meaningful view as to the strength of a case, which is why courts often proceed on the assumption that the plaintiffs’ case is bona fide and is arguable: Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [97]-[102]. The documents relied on by the defendants alone would not enable the Court to make an assessment that the plaintiffs have a weak case where the facts and documents have not been investigated, nor are they the subject of evidence by the defendants in the substantive proceedings.

29. In respect of enforcement of costs orders in New Zealand, in Connop v Varena Pty Ltd [1984] 1 NSWLR 71 at 74-75, the plaintiff’s only substantial assets were in New Zealand and the only security granted was the additional cost of enforcing a costs order in New Zealand. The ease and convenience of enforcement procedures in the plaintiff’s country of residence will ordinarily be a primary consideration: Li at [20]-[24]; rule 42.21(1A)(n) of the UCPR. The enforcement of Australian civil judgments is no longer governed in New Zealand by the Reciprocal Enforcement of Judgments Act 1934 (NZ) as it was at the time of Connop v Varena Pty Ltd. A new Trans-Tasman regime for the enforcement of civil judgments was established by the enactment in Australia and New Zealand of the Trans-Tasman Proceedings Acts 2010 (NZ and Cth). To be enforceable in New Zealand, an Australian judgment must be a registered in a New Zealand court.  To be registered, the judgment must be a registrable Australian judgment and an application must be made: sections 52(2) and 57(1) of the NZ Act.  A costs order made by the Supreme Court of New South Wales would be a registrable Australian judgment within the definition in section 54(1)(a) of the NZ Act because it would be a judgment that is a final and conclusive judgment that is given in a civil proceeding by an Australian court.  None of the exclusions in section 54(2) of the NZ Act apply.  Once registered in a New Zealand court, the judgment has the same force and may be enforced in the New Zealand court as if the judgment has been given by the New Zealand, with certain exceptions that are not presently relevant: section 52(3) of the NZ Act.

Consideration

30. It is an ancient and well-established rule that a natural person who sues will not be ordered to provide security for costs even if they are impecunious: Worrall v White (1851) 3 Jo & Lat 513 at 515; Pearson v Naydler [1977] 3 All ER 531; [1977] 1 WLR 899 at 902 per Megarry V-C; rule 42.21(1B), UCPR. Rule 42.21(1) is an exception: the Court may order a plaintiff “ordinarily resident outside Australia” to provide security. Both parties relied on the comprehensive review of authorities by Ward CJ in Eq in Anderson at [35]-[47], which review I gratefully adopt. In short, residence is a question of fact; it depends to a significant degree upon the state of mind of the person whose residence is in question; the issue is whether the person habitually and normally resides in the jurisdiction and does so for a settled purpose. Residence connotes a place where, in the ordinary course of a person’s life, they regularly or customarily live with some element of permanence rather than casually or intermittently: Re Taylor; Ex parte Natwest Australia Bank Limited (1992) 37 FCR 194 at 198 per Lockhart J. One searches for the centre of the person’s personal and family life as disclosed by the facts of the person’s activities: LK v Director-General, Department of Community Services (2009) 237 CLR 502; [2009] HCA 9 at [22]-[25].

31. Mr Boyd has spent the last 25 years of his life living variously in Australia and New Zealand and, over that time, has accumulated bank accounts and corporate entities in both jurisdictions to facilitate his business activities. More recently, however, Mr Boyd’s time is spent in Australia, both to live and work. True it is, his children live in New Zealand but they are now adults who have finished their secondary schooling and are embarked on tertiary studies and careers. Mr Boyd appears to have embarked upon the next stage of his adult life – post-divorce and after his children have finished their schooling – to live and work in Australia with his new partner. Mr Boyd’s email of 29 January 2019 to his accountant confirms that Mr Boyd had decided to move back to Australia given that his children had grown up and left home. It would appear from Mr Boyd’s affidavit evidence, cross-examination, bank statement, electricity bill, correspondence with ASIC, correspondence with the managing agent of the Terrigal unit, his Linkedin connections and his substantial debt to the ATO that his life and living is centred in Australia. His largest asset, in the form of a superannuation fund account, is in Australia; his earnings appear to be largely derived in Australia, and his time appears to be very largely spent here. Mr Boyd gave evidence, which was not challenged in cross-examination, that his plan was to pay off his tax debt and save money to buy a place in Australia to live.

32. Much of the evidence relied upon by the defendants arose from Mr Boyd’s earlier business activities before the centre of his personal life recalibrated to Australia. I do not doubt that Mr Boyd will regularly return to New Zealand to attend to family responsibilities. He may well work there in the future if there is work to be done there. But on the evidence before the Court he is not ordinarily resident outside Australia. The jurisdiction of the Court to order security for costs against a natural person under rule 42.21(1)(a) is thus not enlivened. This is a threshold question that must be satisfied before the discretionary considerations set out in rule 42.21(1A) arise and thus it is not necessary for me to turn to those considerations pressed by the defendants being, mainly, “the prospects of success or merits of the proceedings” referred to in rule 42.21(1A)(a).

33. Were it necessary to consider the merits of the plaintiffs’ case, in Live Board Holdings Ltd v Cody Live Pty Ltd, the Court of Appeal noted that the express terms of rule 42.21(1A)(a) entitle the Court to have regard to the merits of the claim in respect of which security for costs is sought and, if able to form a meaningful view on the merits of the claim, to take the merits into account.  When asked to so do, in Galati v Deans [2018] NSWSC 1600 (per Ward CJ in Eq) and Australian Style Holdings (per Black J), their Honours considered that the evidence was insufficient for the prospects of success to be anything other than a neutral factor. In the matter of Australia Wattle Fund Pty Ltd [2017] NSWSC 1664, Black J considered that the matter was too complex and involved issues about which there would be significant factual contest at the hearing and no further assessment of its merits could reasonably be undertaken at such an early stage of the proceedings: at [23]. In Luo v Windy Hills Australian Game Meats Pty Ltd (No 2) [2018] NSWSC 1139, Stevenson J was able to, and did, assess the strength of the plaintiff’s claims and concluded that the plaintiff had prima facie a very strong case against the defendants and this was a factor that militated against providing security: at [45]. I did likewise in Trojan Marketing & Consultants, although it was no easy matter where the defendant had yet to file its defence or put on any evidence but rather ‘picked holes’ in the plaintiff’s case as it then stood: at [68].

34. Here, the defendants have filed a defence but no evidence. The defendants rely on contemporaneous documents and Mr Boyd’s substantive affidavit. It seems to me overall that the contemporaneous documents tend to suggest that the plaintiffs’ case may have some problems, but that critically depends upon whether Mr Boyd signed the documents and there are enough gaps in the documentation, and some questions raised by the documentation, to have the result that the prospects of success would be a relevant factor but not a weighty one.

35. Of more interest to me in discretionary factors under rule 42.21(1A), were it necessary for me to consider such matters, is sub-rule (l) being “the timing of the application for security for costs”. The application for security for costs was filed nine months after the proceedings had commenced but, more importantly, after Mr Boyd had already expended some $300,000 in endeavouring to put his pleadings in proper order and file his lay and expert evidence in chief. It requires no great stretch of the imagination to consider that such an investment by Mr Boyd was a substantial one given his financial position disclosed to the Court in his affidavit. It was only then that the application for security for costs was made. I do not mean to suggest that the defendants deliberately chose that point in time to make the application in order to potentially render Mr Boyd’s investment redundant but the fact that, as a practical matter, it may have that consequence would be a relevant consideration to which I would give considerable weight.

36. Also relevant would be rule 42.21(1A)(f), “whether an order for security for costs would stifle the proceedings”. Mr Boyd did not say in as many words that an order for security for costs for some $240,000 would stifle the proceedings but, as his counsel correctly submitted, such evidence would effectively amount to a submission and either be inadmissible or evidence to which little weight would be given. Rather, Mr Boyd has laid bare his financial position for the Court to assess, based on that evidence, whether an order for security would have that result. I readily conclude that an order for security for costs would stifle the proceedings in circumstances where Mr Boyd’s liabilities exceed his assets, where he presently owes the ATO some $496,000, and where the hail repair work which he has been attending to in recent times was expected to be completed in November 2019.

37. Finally, rule 42.21(1A)(n), “the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff”, would also be relevant. The Trans-Tasman Proceedings Acts 2010 (NZ and Cth) provide a straightforward process to enforce any costs order made against Mr Boyd in these proceedings in New Zealand should it be necessary to do so. There was no evidence that the cost of enforcing such an order in New Zealand would be materially different to enforcing such an order in Australia, or what any additional cost would be. This tends against ordering security. Accordingly, even if I had concluded that Mr Boyd was ordinarily resident outside Australia, I would not have been minded to order that he provide security for costs given the discretionary considerations to which I have referred. For the same reasons, I am not minded to order security in the inherent jurisdiction of the Court.

30. Rule 42.21(1)(d) clearly applies to the second plaintiff as “there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so”. The plaintiffs readily accept that the second plaintiff is without assets and Mr Boyd has offered an undertaking to be liable for any costs order made against it. Australian Paintless Techniques is a company of which Mr Boyd is the director and a shareholder together with his former wife. For relevant purposes, Mr Boyd is the man standing behind the second plaintiff and, by the undertaking offered to the Court, has offered to expose his assets to meet any costs order made against the company. In Harpur & Ors v Ariadne Australia Ltd & Ors (1984) 2 ACLC 356 at 362; [1984] 2 Qd R 523 at 532, Connolly J (with whom Campbell CJ and Demack J agreed) noted that the purpose of an order for security in respect of a corporation without assets is to require the individual who conducts their business affairs through that company “if not to come out from behind the skirts of the company, at least to bring his own assets into play. If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied”. More recently, Greenwood J explained in Newtimber (Operations) Pty Ltd v Tarong Energy Corporation Ltd [2011] FCA 123 at [31], that it is clear that the unconditional willingness of a person substantially interested in the corporation bringing the proceedings to expose themselves to personal liability for a costs order against the corporation “is a factor which must necessarily weigh heavily in the exercise of the discretion”: at [31] (emphasis that of his Honour). I do not consider that it is necessary for the second plaintiff to provide any additional security beyond Mr Boyd’s undertaking, including by reason of the discretionary considerations canvassed at [38] to [42]. The defendants’ senior counsel agreed that the defendants should pay the costs of the Interlocutory Process in that event.

Costs of application to amend pleadings

39. As to the question of what costs order should be made in respect of the plaintiffs’ application to amend the pleadings, the relevant facts are at [21]-[24]. The defendants maintained their opposition to the proposed paragraphs 13D, 13E and 13F at the hearing on the basis that the paragraphs did not disclose a cause of action and were said to be inadequately pleaded, relying on Schmidt J in Cameron v Qantas Airways Ltd and Anor [2010] NSWSC 899 at [18]. I determined that application, save as to costs, and gave ex tempore reasons on 13 November 2019. I granted leave to the plaintiffs to amend their pleading save for proposed paragraphs 13D, 13E and 13F, essentially for the reasons identified by the defendants’ solicitors.

40. The costs of interlocutory applications are dealt with by rule 42.7(1) of the UCPR, which provides:

Unless the court orders otherwise, the costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.

As explained by the Court of Appeal in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365, albeit in the context of a different costs rule in the UCPR, such rules create a starting point as to what the costs order is to be unless that outcome is displaced by a discretionary decision: at [48]. In this case, the starting point is that the costs of the Interlocutory Process are the parties’ costs in the cause.

41. The defendants ask the Court to exercise its discretion and order that the plaintiffs pay the defendants’ costs of the Interlocutory Process because, as I understand it, leave to amend was not granted in respect of the portions of the proposed amended pleading to which the defendants did not consent, essentially for the reasons articulated by the defendants. The difficulty I have, however, is that the defendants did not raise these matters with the plaintiffs until after the Interlocutory Process had been filed, in circumstances where the plaintiffs sought the defendants’ attitude in advance of filing the Interlocutory Process but received no response. It does seem doubtful whether, even if the defendants had articulated their position promptly, the plaintiffs would have taken a different course but, overall, the defendants already have the benefit of the usual costs order for any costs thrown away by reason of the amendment and otherwise the costs order suggested by rule 42.7 seems to me to be appropriate here.

Orders

42. For these reasons, I make the following orders:

1. NOTE the first plaintiff’s undertaking to the Court to be liable for any costs order made against the second plaintiff in these proceedings.

2. On the undertaking noted in (1), dismiss the Interlocutory Process filed by the defendants on 29 October 2019.

3. Order the defendants to pay the plaintiffs’ costs of the Interlocutory Process filed by the defendants on 29 October 2019.

4. Order that the parties’ costs of the Interlocutory Process filed by the plaintiffs on 29 October 2019 are to be the parties’ costs in their respective causes.

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Decision last updated: 07 February 2020