Michael Wilson & Partners Ltd v Emmott (No 3)

[2025] NSWCA 74

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Michael Wilson & Partners Ltd v Emmott (No 3) [2025] NSWCA 74

Hearing dates:

31 March 2025; 14 April 2025

Date of orders:

15 April 2025

Decision date:

15 April 2025

Before:

Basten AJA

Decision:

(1)   Set aside the notice to produce served by the applicant on the respondent on 19 March 2025.

(2)   Upon the applicant paying into court the amount of $A221,200, being the gross sum for costs determined by Hammerschlag CJ in Eq on 12 March 2025, stay the order requiring payment of that amount to the respondent pending determination of the applicant’s application for leave to appeal and, if leave be granted, the determination of the appeal.

(3) Pursuant to s 1335 of the Corporations Act2001 (Cth), or pursuant to UCPR, r 42.21, order that the applicant provide security for the respondent’s costs of the application for leave to appeal in an amount of $A15,000, to be paid into court within 28 days.

(4)   The applicant is to pay the respondent’s costs of the motions.

(5)   Stay the proceedings until the security fixed by order (3) has been paid into court.

Catchwords:

CIVIL PROCEDURE – appeal – application for leave to appeal – respondent’s application for security for costs – whether corporate applicant unable to pay costs if unsuccessful – strength of applicant’s case for leave – stay until security paid into court

CIVIL PROCEDURE – appeal – application to stay costs order made by primary judge – stay on basis of payment into court

CIVIL PROCEDURE – application for leave to appeal – respondent’s application for security for costs – applicant issued notice to produce – respondent’s motion to set aside notice – documents sought to resist security for costs application – agreements between respondent and legal representatives – relevance not established – documents sought to show respondent owed money to applicant – relevance not established – to determine balance of account between parties would be to engage in satellite litigation

Legislation Cited:

Civil Procedure Act 2005 (NSW), Pt 6, s 98

Corporations Act 2001 (Cth), s 1335

Supreme Court Act 1970 (NSW), s 75A

Uniform Civil Procedure Rules 2005 (NSW), rr 42.21, 51.1, 51.14

Cases Cited:

Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46

Michael Wilson & Partners Ltd v Emmott [2025] NSWCA 37

Category:

Procedural rulings

Parties:

Michael Wilson & Partners Ltd (Applicant)
John Forster Emmott (Respondent)

Representation:

Counsel:
J Baird (Respondent)

Solicitors:
M Wilson (Applicant)
P Duggan, Duggan Legal (Respondent)

File Number(s):

2024/449432

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Commercial List

Citation:

[2024] NSWSC 1489

Date of Decision:

22 November 2024

Before:

Hammerschlag CJ in Eq

File Number(s):

2016/34380

JUDGMENT

1. BASTEN AJA: On 22 November 2024, Hammerschlag CJ in Eq gave judgment in the matter of Michael Wilson & Partners Ltd v Emmott [2024] NSWSC 1489. On 19 February 2025, Michael Wilson & Partners Ltd (MWP) filed a summons seeking leave to appeal from that judgment, from an interlocutory judgment given on 18 November 2024, and from a later costs order made on 12 March 2025.

2. This judgment concerns three matters. First, the respondent, John Foster Emmott, filed a notice of motion on 17 March 2025, seeking an order that MWP provide security for costs “of the application for leave to appeal” in an amount of $62,800. The respondent’s motion further sought a stay until that amount, or such other security as might be ordered, had been provided.

3. Secondly, MWP sought in its summons a stay of the orders made by the primary judge. In response to that application, the respondent proposed that the stay be granted on a condition that three amounts of unpaid costs be paid into court. MWP’s application was not before the Court when the motion for security was first listed on 31 March 2025, because the summons had been stood over until 14 April 2025, when it was listed for directions. In the course of the hearing on 14 April the parties accepted that the interlocutory stay should be addressed.

4. Thirdly, the applicant filed a notice of motion on 28 March 2025 seeking to vary directions given by the Registrar on 19 March 2025. By order 1 the Registrar vacated the listing of the respondent’s motion seeking security for costs for hearing on 24 March 2025. Order 2 directed the parties to file and serve evidence and submissions on that motion by midday on 28 March 2025. Order 3 directed that “there will be no extension of time beyond that made in order 2 above”. Order 4 listed the respondent’s motion for hearing on 31 March 2025. The gravamen of the applicant’s objection to the orders was that they were made without hearing from the applicant and without consideration of the fact that the applicant sought to serve a notice to produce on the respondent with respect to documents the applicant claimed were relevant to the motion for security.

5. At the hearing on 31 March 2025 the substance of the challenge to the Registrar’s orders was treated as being an application to vacate the hearing of the motion for security listed for that day. The direction in order 3 may be disregarded. The applicant’s objection was accepted and the notice of motion for security was stood over to 2.30pm on 14 April 2025, with the applicant having until 5.00pm Sydney time on 10 April 2025 to file and serve evidence in relation to its assets in Australia and any explanation as to the relevance of the notice to produce. Further, the respondent was given leave to file a notice of motion to set aside the applicant’s notice to produce. The Registrar’s orders of 19 March 2025 have thus been superseded.

6. The applicant’s notice of motion filed on 28 March 2025 was not in an appropriate form. Much of the contents (the substance of the document went for little over 4 pages) was a mixture of factual material (which should have been in an affidavit) and submissions. The order to set aside the Registrar’s orders of 19 March 2025 could have been stated in a single line, but took ten lines. Annexed to the notice of motion was a notice to produce dated 19 March 2025 and addressed to the respondent’s solicitor. As it was necessary for the document to be in evidence in order to deal with the motion to set it aside (which was also not supported by an affidavit) it was tendered and marked as Ex B on the respondent’s motion for security for costs.

7. The result of this convoluted process was that the third issue before the Court concerned the status of the notice to produce. If required to be complied with, it would be necessary to stand over the motion for security for costs again on the basis that the applicant might seek to tender any documents produced. Accordingly, it is convenient to deal with that matter first.

Notice to produce

8. The notice to produce listed nine sets of documents. They can conveniently be grouped into two categories. The first may be identified as costs disclosure statements, costs agreements, invoices and records of payments between the respondent and his legal representatives in relation to the appeal and related proceedings. The supposed purpose underlying the first category of documents was in part to demonstrate that any costs recovered would be payable to a litigation funder, which was in liquidation and whose assets MWP had bought. The assumption was both implausible and irrelevant. Reference was also made to the assumption that, the respondent being impecunious, the respondent’s lawyers were acting on contingency fee basis, their fees being met only if the respondent were successful in resisting the application for leave to appeal, or, if leave were granted, the appeal. That may be accepted; it did not, as was suggested, undermine the indemnity nature of any costs order.

9. Accordingly, the category one documents cannot be relevant and, to that extent, the notice to produce should be set aside.

10. The second category included documents “of the Respondent … as to all and any of the judgment debts that he asserts, claims and alleges are owed by MWP, … and all payments, credits and monies received, and as to all set-offs, cross claims and counterclaims asserted and made”. The purpose underlying the second category was, the applicant submitted, to demonstrate that, even if the respondent were successful, no costs would in fact be payable because the applicant would be entitled to set off any liability for costs against amounts otherwise owed by the respondent to the applicant, which far outweighed any likely costs liability.

11. There are two difficulties in permitting the notice with respect to category two documents. First, in its present form, it is not possible to identify which documents, if any, might be relevant: the notice is far too wide. It is not for the Court to attempt to undertake surgery beyond that which might be appropriate as to broad categories, if one category were deemed relevant. As only category two is left, and the category is undoubtedly unacceptable in its present form, the notice should be set aside on that basis.

12. Secondly, the proposition sought to be supported by category two documents is not one which the Court should address in determining whether to order security for costs. To determine the truth of the applicant’s assertions as to the credit balance in its favour resulting from extensive litigation extending over the better part of a decade would be to embark on satellite litigation of a greater magnitude than that decried by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46. Such an exercise would contravene the obligations imposed on the Court and the parties under Pt 6 of the Civil Procedure Act 2005 (NSW) to focus on the just, quick and cheap resolution of the real issues in dispute. It will not be entertained on an application for the small amount of security likely to be required for an application for leave to appeal, or indeed, an appeal.

13. For these reasons, the applicant’s notice to produce dated 19 March 2025 should be set aside. That order removes any obstacle to consideration of the respondent’s motion for security for costs. However, before addressing that matter, it is convenient to deal with the applicant’s application for a stay of the orders made by the trial judge in the proceedings below.

Stay of orders made by primary judge

14. As noted above, the stay was sought in the summons seeking leave to appeal. It was in the following terms:

“4    Stay of the orders of the primary judge made on 18.11.24, and the judgment and orders of 22.11.24, as well as a stay of the judgment and orders made on 07.02.25 (and also a stay of the resulting costs judgment and orders when issued).”

The identified judgments and orders should be dealt with seriatim.

15. The orders of 18 November 2024 refused an application to vacate the hearing date and to adjourn the hearing fixed for 20 November 2024. As the hearing proceeded on that date, the orders of 18 November 2024 are spent: there is nothing to stay. One ground of the appeal, and possibly the primary ground, is that the judge erred in failing to grant the adjournment and vacate the hearing date. However, that is an available ground of challenge to the final orders.

16. The orders made on 22 November 2024 were, relevantly, as follows:

“1   Judgment for the defendant.

2   The Court declares that the Temujin partnership as defined in the Further Restated and Further Amended Commercial List Statement was not established.

3   The plaintiff is to pay the defendant’s costs of the application brought by motion dated 13 November 2024 and referred to in my judgment at paragraphs 61 and 62, on the indemnity basis. Otherwise, the costs payable by the plaintiff to the defendant are on the ordinary basis.

4 Pursuant to s 98(4)(c) of the Civil Procedure Act 2005, I order that the defendant is entitled to a specified gross sum instead of assessed costs.”

17. There were three further orders in the form of directions with respect to the determination of the gross sum and, finally, an order that the orders were to be entered forthwith. It is only orders 1 – 4 which are potentially available as the subject matter of a stay.

18. As to orders 1 and 2, the judgment and declaration have taken effect: the effect was to dismiss the proceedings. That is not to say that a declaration may not in some circumstances be stayed, but merely that no purpose is served by a stay in the present case. Orders 3 and 4 envisage a further step to be taken in the proceedings, that is the determination of a gross sum, which has already taken place. Given the intention that a gross sum be identified, the liability to pay costs pursuant to order 3 has now been superseded by the orders made upon specification of the gross sum.

19. Accordingly, it is not appropriate to order a stay of the orders made on 22 November 2024.

20. On 7 February 2025 the Court made a separate order required by the failure of the plaintiff (MWP) to file and serve affidavits and submissions in time. MWP was ordered to pay the respondent’s costs of the motion filed on 16 January 2025 to extend time, which the judge assessed at the figure of $4,000. Order 4 continued:

“Those costs are to be paid by electronic transfer to the defendant’s solicitors trust account within 7 days of today’s date. I note and accept the undertaking from Mr Wilson that the amount will be paid.”

There is no basis for a stay of that order, whether or not the amount has been paid in accordance with the undertaking.

21. Finally, on 12 March 2025, the primary judge made an order in the following terms:

“1   The plaintiff pay the defendant the sum of $221,200, as a gross sum instead of assessed costs.”

22. In effect, the applicant’s request for a stay resolved into a question as to whether there should be a stay of this order for payment of costs; the applicant accepted that conclusion. The respondent contended that such an order should only be made if the applicant pays into court the amount of the gross sum costs order made below and two other amounts of costs ordered in other proceedings, which he says have not been satisfied. One was an amount resulting from a judgment of this Court on 20 December 2024; the other was an amount arising from a judgment in the ACT Court of Appeal on 23 January 2025.

23. These are not debt collection proceedings; the only appropriate condition is payment into court of the amount with respect to which the stay is sought.

24. MWP accuses the respondent of being impecunious, which may be true. If impecunious, he should not be allowed to recover a costs order in circumstances where the basis of the order is under challenge. On the other hand, given that, for reasons noted below, the applicant has not satisfied the Court that it has available assets in Australia, it is unlikely that the respondent will seek to enforce the costs order immediately. However, if the applicant wishes to have the protection of a stay, it should pay the money into court; if not able or willing to do that, the stay should be refused. Accordingly, the stay will be granted subject to the limited condition noted above.

Security for costs

25. The respondent’s application for security for costs in an amount of $62,800 assumed that leave to appeal would be granted and extended to the anticipated costs of the appeal. Indeed, it assumed that leave was required, a matter which was raised as an issue in MWP’s submissions. One possibility is that there will be a direction for a concurrent hearing under Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.14(1)(b), in which case the amount of security may need to be assessed on the basis of the final hearing of both the leave application and the appeal. However, that decision has not yet been made.

26. On the other hand, if leave to appeal is to be addressed separately, the amount by way of security should be limited to the cost of a leave-only hearing, subject to 20-minute limits on oral submissions by both parties. The amount of security which should be allowed in that regard would be significantly less. If leave were to be refused no further issue as to security would arise. If leave were to be granted, any further application for security could be addressed by a court having a more complete appreciation of the issues to be addressed on the appeal, and any conditions attached to the grant of leave. As counsel for the respondent accepted, it is not uncommon to order security in tranches. Accordingly, it is appropriate to take the course taken by McHugh JA in the related matter of Michael Wilson & Partners Ltd v Emmott [2025] NSWCA 37 (14 March 2025) and deal with the question of security for costs on the basis of a leave-only hearing.

27. As to the question of power, the parties did not suggest that any difference in approach is required depending on whether the application is dealt with pursuant to UCPR, r 42.21(1)(a), as applied to proceedings in this Court by r 51.1(3) and (4), or s 1335 of the Corporations Act 2001 (Cth). The sole criterion of engagement in s 1335(1) is that “it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his … defence”. For the purpose of determining that criterion, account may be taken of the unwillingness of the controller of the corporation to permit payment, the likely inability of the defendant to enforce a judgment in Australia, and likely inability to locate assets and enforce a judgment in another jurisdiction. If those factors are not available under s 1335, the order may be made under UCPR r 42.21(1)(a). Under the latter rule, the power is engaged in relation to an applicant “ordinarily resident outside Australia”; relevant criteria include:

(m)   whether an order for costs made against the plaintiff would be enforceable within Australia,

(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.

28. The requirements of the UCPR in respect of appeals include “special circumstances”: UCPR, r 51.50(1). That will readily be satisfied in the case of an apparently impecunious foreign corporation. The power under either provision is discretionary, both as to whether any order should be made and, if so, as to the amount.

29. As to the financial circumstances of MWP, the evidence before the Court on the present application was similar to that before McHugh JA in the earlier matter. As explained below, there is evidence that MWP has no significant assets in Australia from which an order for costs could be met. The fact that no security has been offered tends to confirm that conclusion. Further, there are outstanding costs orders against MWP which have not been met. Although there are statements in MWP’s submissions that a large sum is at stake, evidence to support them was not identified.

30. The motion was stood over on 31 March 2025 until 14 April 2025 to allow MWP to put on evidence in support of its claim that it had assets in Australia. An affidavit sworn by Michael Earl Wilson on behalf of MWP was filed at 1.28am on the morning of the hearing. (The direction required that it be filed the previous Friday by 5pm Sydney time.) Although the affidavit extended to 111 pages, it did not include evidence identifying MWP as the owner of physical assets in Australia. The thrust of the affidavit was to recount the history of litigation between the parties and to assert that there are a number of properties in Australia, “which MWP owns and controls and which fall within the scope of and are caught by MWP’s ongoing NSW, BVI, UK and other freezing and disclosure orders in order to secure its unpaid judgment debts of many millions of dollars”: affidavit, par 13. However, listing the addresses of properties is not evidence of ownership. Further, the suggestion that they were all subject to freezing orders to cover MWP’s unpaid debts indicates that they were not available as security for costs in the present matter, nor were they offered as security.

28. In addition, MWP relied upon the proposition that it had “cash and cash on deposit of USD $640,847 (including A$) as of 31 December 2021”. At the end of 2023 financial year, it had “cash and cash on deposit of circa US $1,329,122”.

29. The respondent tendered a copy of MWP’s “consolidated financial statements with independent auditor’s report” for the year ended 31 December 2022 (these were documents MWP had relied upon in other proceedings in this Court). The documents included “a consolidated statement of financial position” dated 6 August 2024, which appeared to be a statement of MWP Corporate Finance Ltd. It was signed, as was the “consolidated statement of comprehensive income”, bearing the same date but for year ended 31 December 2023. The consolidated financial statements for 2022 included notes; the 2023 statements did not.

30. Apart from being out of date, unaudited and otherwise unsigned on behalf of MWP, the financial statements did not support the applicant’s claim that it had assets available in Australia against which a costs order might be enforced. The accounts were prepared on the basis that the Group operates as a “going concern”, but acknowledged that in 2022 its current liabilities exceeded its current assets by an excess of $US66 million. Under current assets, there was an item for “trade receivables” of some $US3.8 million, but the current liabilities included “trade payables” of $US10.7 million. Under non-current assets, there was an item for “restricted cash” in an amount of $535,523, which was identified in the Notes as cash deposited in the UK as security for costs in relation to various ongoing court cases. Moreover, the separate item of “short-term bank deposits, in an amount of $118,300” were said to “primarily represent the bank deposits, with a maturity of less than a year, that were opened and placed in order to support the issue of guarantees for security for costs, as required by [this Court] in relation to the litigation in which the Group was involved from October 2006, and 2 February 2016 respectively.” The accounts did not support the proposition that such amounts are currently available, but, rather, are amounts already held as security for guarantees and are “restricted cash”.

31. Beyond the financial statements, assertions in Mr Wilson’s affidavit that MWP has physical assets available in Australia sufficient to meet an adverse costs order are not supported by independent evidence. I do not accept his unsupported assertions.

32. I am satisfied that there is reason to believe that, if unsuccessful in obtaining leave, MWP will be unable to pay the costs of the respondent. That is not to say it has no available assets anywhere in the world, but that it has no assets in Australia against which an order could be enforced. There is also reason to believe that the respondent would be unable to enforce a judgment against MWP outside Australia. Its large liability to its funder suggests that its assets will all be subject to competing security interests.

33. The discretion is to be exercised having regard to the applicant’s prospects of success on its application for leave to appeal. The Court has a copy of the judgment of Hammerschlag CJ in Eq from which MWP seeks to appeal, a draft notice of appeal and written submissions in support of the appeal. The Court has obtained a copy of the orders made and entered on 22 November 2024, and the order entered on 12 March 2025 for payment by MWP of costs in an amount of $221, 200.

34. The first part of the judgment under appeal concerned a refusal by the primary judge to vacate the final hearing on the application of MWP. The application was rejected and reasons given in the judgment of 22 November 2024. That was a procedural matter, turning on the history of compliance and non-compliance with directions, for which this Court would usually be reluctant to grant leave, if leave were required. While there was no interlocutory appeal, it remains open to MWP to challenge the final orders on the basis of procedural unfairness in refusing to vacate the hearing date. However, the material before the Court suggesting that there was unfairness on the part of the Chief Judge in refusing to vacate the hearing date is repetitive, unfocused and hard to assess on a preliminary basis. It depends in part on what appears to be further medical evidence, which can only be relied on if there are “special grounds” pursuant to s 75A(8) of the Supreme Court Act 1970 (NSW).

35. So far as the final orders are concerned, the Court is not in a position to make any assessment of the prospects of success. The trial focused on whether the respondent had been engaged in a partnership with two other persons against whom MWP had obtained financial relief. The Chief Judge was satisfied that no such relationship existed. The basis for seeking leave to challenge that conclusion was not addressed by the parties and, again, is difficult, if not impossible, to assess on a preliminary basis. I assume that the proposed grounds are reasonably arguable. Nevertheless, in the absence of clear error on the part of the primary judge, it is not likely that leave to appeal will be granted, other criteria for a grant of leave not being satisfied.

36. Taking into account the financial considerations addressed above, there should be an order that the applicant provide security in an amount sufficient to cover the costs of the proceedings in this Court up to and including resolution of the application for leave to appeal. There is no evidence that such an amount would be likely to stultify the proposed application. Given that the dispute is said to “relate to” an amount in excess of $67m, it is unlikely that MWP would abandon its application for a tiny fraction of that sum.

37. On one view, an appropriate course would be to follow that taken by McHugh JA and order that security be provided in the amount of $20,000. However, it is likely that the application for leave to appeal in that matter and the present matter will be listed together. That should reduce the amount of costs in issue. I propose to make an order that security be provided in an amount of $15,000. If the matter is listed for a concurrent hearing, a further application for security may arise. However, until the present order is satisfied the matter will be stayed and no direction as to a concurrent hearing or otherwise will be made. The matter should not, however, be allowed to lie in limbo; there will be a direction that the amount be paid within 28 days.

Orders

41. The Court makes the following orders:

1. Set aside the notice to produce served by the applicant on the respondent on 19 March 2025.

2. Upon the applicant paying into court the amount of $A221,200, being the gross sum for costs determined by Hammerschlag CJ in Eq on 12 March 2025, stay the order requiring payment of that amount to the respondent pending determination of the applicant’s application for leave to appeal and, if leave be granted, the determination of the appeal.

3. Pursuant to s 1335 of the Corporations Act 2001 (Cth), or pursuant to UCPR, r 42.21, order that the applicant provide security for the respondent’s costs of the application for leave to appeal in an amount of $A15,000, to be paid into court within 28 days.

4. The applicant is to pay the respondent’s costs of the motions.

5. Stay the proceedings until the security fixed by order (3) has been paid into court.

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Amendments

15 April 2025 - 15 April 2025 – case name – “(No 3)” added

15 April 2025 - The date of orders and date of decision changed from 15 March 2025 to 15 April 2025.

15 April 2025 - case name - the respondent’s first and middle name removed

Decision last updated: 15 April 2025