In the Matter of Elsmore Resources Ltd

[2014] NSWSC 1390

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Elsmore Resources Ltd [2014] NSWSC 1390
Hearing dates:	1 September 2014
Decision date:	10 October 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Order made for plaintiff to pay costs of and incidental to security for costs application, as agreed or as assessed.
Catchwords:	PROCEDURE - costs - interlocutory application - whether costs should be payable forthwith - relevant considerations - whether any unreasonable conduct on behalf of plaintiff in resisting interlocutory application.
Legislation Cited:	- Uniform Civil Procedure Rules 2005 (NSW) r 42.7(2)
Cases Cited:	- Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 - Hamod v New South Wales [2007] NSWSC 707 - Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2) [2010] FCA 1347 - Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503
Category:	Costs
Parties:	Elsmore Resources Ltd (Plaintiff) Ashley Grant Howard (First Defendant) Periwinkle Investments Pty Ltd (Second Defendant) Harry Fung (Third Defendant) HF Global Financial Solutions Pty Ltd (Fourth Defendant)
Representation:	Counsel: E Cox (Plaintiff/Respondent) P Caillard (Third Defendant/Applicant) Solicitors: Norton White (Plaintiff/Respondent) Rockwell Olivier (Third Defendant/Applicant)
File Number(s):	2014/57738

Judgment

1. On 8 September 2014, I delivered judgment ([2014] NSWSC 1247) in respect of an application by the Third Defendant, Mr Harry Fung, for security for costs in the amount of $95,000 in respect of these proceedings. I ordered that the Plaintiff ("Elsmore Resources") provide security in the amount of $80,000, in two tranches, and that the proceedings be stayed if such security was not provided. I expressed a preliminary view that Elsmore Resources should pay the costs of the application as agreed or as assessed, on the usual basis that costs follow the event. I indicated that I would allow the parties 14 days in which to make any further short written submissions as to that matter. Elsmore Resources made no further submissions as to that matter. Mr Fung made such submissions, seeking an order that Elsmore Resources should pay Mr Fung's costs of the security for costs application forthwith.

1. Mr Fung recognised that, under r 42.7(2) of the Uniform Civil Procedure Rules 2005 (NSW), unless the Court otherwise orders, an interlocutory costs order does not become payable until the conclusion of the proceedings. He submitted that the circumstances of these proceedings justified the Court exercising its discretionary power to make an order that costs are to be paid forthwith and not at the conclusion of the proceedings. He noted that Court had previously made an order that Elsmore Resources pay the costs of an unsuccessful application for summary judgment against Mr Fung, which had not been paid by it. It does not seem to me that that that is a matter for criticism of Elsmore, where the Court had not made an order that those costs be paid forthwith, although it is a background fact relevant to this application.

1. Mr Fung also pointed out that Elsmore Resources had not yet filed a Statement of Claim, although the Court had made orders on 28 July 2014 requiring that it do so by 15 August 2014, and expressed concern that the proceedings were unlikely to be disposed of for a considerable time. He also submitted that the costs of the security for costs application are relevant to a discrete and separately identifiable aspect of the proceedings that would be unaffected by the final outcome of the proceedings.

1. In Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1, Barrett J noted that the cases have identified a number of categories where the Court may make an order that costs be payable forthwith and that whether such an order should be made should be determined according to the demands of justice. In Hamod v New South Wales [2007] NSWSC 707 at [5], Simpson J observed that the relevant factors included whether the costs orders were relevant to a discrete, separately identifiable aspect of the proceedings; whether there had been some unreasonable conduct on the part of the party against whom the costs have been ordered; and whether the proceedings had some distance and time to run, and it may be some time. In Rafferty v Time 2000 West Pty Ltd (No 3) [2009] FCA 727; (2009) 257 ALR 503, Besanko J observed that the usual approach that costs are not resolved until the end of a proceeding generally serves the interests of justice because it avoids multiple assessments and a possible unfairness where a party which is initially successful is ultimately unsuccessful or vice versa and limits the risk that interlocutory proceedings could be used to exhaust the financial resources of one of the parties. The relevant principles were also reviewed by Katzman J in Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 2) [2010] FCA 1347 and I gratefully adopt her Honour's summary of those principles.

1. In summary, an order that costs be paid forthwith is an exception, which will only be made in a case that is out of the ordinary; such an order has the capacity to stultify proceedings, particularly brought by persons with limited resources, and also has the risk of operating unfairly where, over the course of proceedings, there may be orders which are made that one or other party should pay the costs of the other from time to time. Nonetheless, the Court may order that costs be paid forthwith, at least if there is an element of unreasonableness in the conduct of the unsuccessful party, and it is likely there will be a long delay between the interlocutory proceedings and the conclusion of the principal proceeding.

1. In this case, it does not seem to me that there was unreasonable conduct on the part of Elsmore Resources in resisting an order for security for costs and the application was handled efficiently. The decision in Fiduciary Ltd v Morningstar Research Pty Ltd above indicates that the fact that the proceedings have some time to run may itself be sufficient, in an appropriate case, to warrant an order that costs be payable forthwith, but that discretion must be exercised having regard to all the circumstances. In the present case, there seems to me to be a real risk that an order for costs to be paid forthwith could operate unfairly, if Elsmore Resources was ultimately successful in the proceedings but unable to recover its costs against Mr Fung, or if that order or an accumulation of such orders frustrated its ability to continue the proceedings. Having regard to the principles set out above, it does not seem to me that this is a case in which an order that costs should be paid forthwith should be made, since the conduct of the proceedings has not been so unreasonable as to warrant the risk that such an order might ultimately stultify the proceedings.

1. Accordingly, the only order that I make in respect of costs is that the Plaintiff pay the costs of and incidental to the security for costs application heard before me on 1 September 2014, as agreed or as assessed.

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Decision last updated: 21 October 2014