Jacobs v Edwards (No 5)

[2012] SASC 39

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

JACOBS & ANOR  v  EDWARDS & ORS (No 5)

[2012] SASC 39

Reasons of Judge Lunn a Master of the Supreme Court

13 March 2012

PROCEDURE - COSTS - SECURITY FOR COSTS

Application by one of nine defendants against second corporate plaintiff under s 1335(1) of the Corporations Act 2001 - no cause of action pleaded by that plaintiff against that defendant.

Held: As unlikely any order for costs would be made in favour of that defendant against that plaintiff no order for security is to be made.

Application by one of nine defendants for security against co-plaintiff who was a natural person.

Held: order not to be made under 6R 194(1)(a) as not shown that plaintiff was suing in a representative capacity and not to be made under 6R 194(1)(e) as being necessary in the interests of justice - application dismissed.

JACOBS & ANOR  v  EDWARDS & ORS (No 5)
[2012] SASC 39

JUDGE LUNN:

Reasons on application of ninth defendant for security for costs

1. By an application of 21 December 2011 the ninth defendant, Carrington Conveyancers Pty Ltd, seeks an order for security for costs of the action against both plaintiffs.  These reasons are confined to what is necessary to justify my dismissal of this application, but without going into all of the arguments put forward by counsel.

2. There are two plaintiffs, being William Jacobs, a natural person, and Fabrication Technology of Australia Pty Ltd, a corporation which is controlled by the first plaintiff.  Of the nine remaining defendants to the action the ninth defendant, Carrington Conveyancers Pty Ltd, is the only one which has brought an application for security for costs.  The  Second Statement of Claim (FDN76) is a long and complicated document pleading numerous causes of action by the plaintiffs or one of them against various of the defendants.  It has not been suggested that all of the parties and all of the causes of action have not been properly joined into this one action.

3. I deal first with the claim for security against the second plaintiff which was pursued under s 1335(1) of the Corporations Act 2001, which only applies to corporations. Even assuming the prerequisites for the operation of s 1335(1) are satisfied, on which I make no findings, the Court’s discretion is not to be exercised to award security against the second plaintiff.

4. The Second Statement of Claim only pleads causes of action by the first plaintiff against the ninth defendant.  There is no pleading of any dealing between the second plaintiff and the ninth defendant, or of anything, which could give the second plaintiff a cause of action against the ninth defendant.  The first plaintiff’s claim against the ninth defendant, if it was pursued independently of the claims against the other defendants, could be dealt with in a separate action in which it would not be proper for the second plaintiff to be a party.  The only reason that the second plaintiff is a party to the action is because it has causes of action pleaded against other defendants arising out of the same factual matrix which are best determined concurrently with the first plaintiff’s claim against the ninth defendant.

5. Although I cannot find any authority on the point, it is highly unlikely that the Court’s general discretion on costs under s 40 of the Supreme Court Act 1935 would be exercised at the conclusion of the trial to order that there be any costs payable, either way, between the second plaintiff and the ninth defendant.  Except where costs are awarded for misconduct I am not aware of any case where a successful defendant in a multi-party action has been awarded its costs against one of several plaintiffs which did not claim any relief against it.  It is highly unlikely that any costs would be awarded to the ninth defendant against the second plaintiff in the event of the ninth defendant being successful in its defence of the action.  It must follow that likewise no order for security for costs should be made in favour of the ninth defendant on account of those costs.  Hence, the application for security against the second plaintiff must fail.

6. The ninth defendant’s claim for security against the first plaintiff was based on 6R 194(1) and (3) of the Supreme Court Civil Rules 2006.  It fails for the following reasons.

7. Sub-r (1)(a) allows an order for security for costs to be made if:

   (a)the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful.

   It has not been shown that the first plaintiff has brought any claim against the ninth defendant “in a representative capacity”.  There was some reference to a family trust, but insofar as it is relevant, the first plaintiff appeared to be a beneficiary in that trust and not a trustee of it.

8. Sub-r (1)(e) allows an order for security to be made if:

   (e)     the order is necessary in the interests of justice.

   It is unclear precisely what is envisaged by “the interests of justice” in this sub‑rule.  It is the successor to the former 87R 100.01(e) which referred to “special circumstances” and not expressly to the interests of justice.  It is unclear whether there is any significant difference between the two phrases in this context.

9. It has always been the law that, other than in special circumstances, an impecunious natural person suing as a plaintiff in his own right should not be ordered to give security for costs.[1]

   [1]    Melville v Craig Nowlan Pty Ltd (2002) 54 NSW LR 82 at [99]-[101].

10. Counsel for the ninth defendant submitted that the inherent weakness of the first plaintiff’s claim against the ninth defendant constituted a sufficient abuse of process by the first plaintiff to justify an order for security being made against him.  However, any such abuse of process must be “very substantial”.[2]  The strength or weakness of the case here turns to some extent on disputed evidence and I am not in a position to resolve that.  In any event, the Court does not usually enter into assessments of the likelihood of success on security applications.[3]  If there is no reasonable basis for the first plaintiff’s claim against the ninth defendant, the ninth defendant could obtain judgment in its favour on an application for summary judgment under 6R 232(2)(b). 

    [2]    Dwyer v Canning Vale [2005] SASC 80, 11 March 2005.

    [3]    Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634.

11. The defendant’s counsel also contended that a factor in favour of granting security, either on its own or in combination with the alleged weakness of the case against the ninth defendant, was that the ninth defendant would have to incur the expense of a long trial involving the plaintiffs’ many other causes of action against the other defendants where much of it would not be relevant to the case against the ninth defendant.  While accepting that the first plaintiff’s claim against the ninth defendant is only a minor part of the whole action, any prejudice to the ninth defendant from this may well be remedied by directions from the trial Judge excusing counsel for the ninth defendant from attending at parts of the trial which do not affect it.  In any event, no authority was cited that such a consideration could be a factor in granting security for costs against a natural plaintiff.  In the circumstances of this matter it does not justify an order for security “in the interests of justice”. 

12. I have today made the following orders:

    1FDN81 dismissed.

    2Ninth defendant to pay to the plaintiffs their costs of FDN81.

    3FDN81 certified fit for counsel.

    4Liberty to the plaintiffs to apply for any supplementary costs orders.

    5Plaintiffs to notify all other defendants of the next directions hearing.

    6Adjourned to a directions hearing on Thursday 22 March 2012 at 10.00am.