Michael Wilson & Partners Ltd v Nicholls (No 6)
[2022] ACTCA 41
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Michael Wilson & Partners Ltd v Nicholls (No 6) |
Citation: | [2022] ACTCA 41 |
Hearing Date: | 3 May 2022, 21 July 2022 |
DecisionDate: | 21 July 2022 |
ReasonsDate: | 28 July 2022 |
Before: | Loukas-Karlsson J |
Decision: | See [131]-[134] |
Catchwords: | APPEAL – APPEAL FROM SUPREME COURT – CIVIL – application for security for costs – whether Court has power to make an order under r 1900 where applicant for leave to appeal has assets in jurisdiction – where applicant for leave to appeal is a foreign corporation – whether the justice of the case requires an order for security to be made – where prospects of application for leave to appeal weak – appropriate quantum of security for costs |
Legislation Cited: | Corporations Act 2001 (Cth) s 1335(1) |
Cases Cited: | Banki Trading BV v Ausland Export Pty Ltd [2022] FCA 37 |
Parties: | Michael Wilson & Partners Ltd (Applicant) Robert Colin Nicholls (First Respondent) David Ross Slater (Second Respondent) Temujin Services Ltd (Third Respondent) Temujin International Ltd (Fourth Respondent) Temujin International FZE (Fifth Respondent) John Forster Emmott (Sixth Respondent) Effective Funds Management Pty Ltd (Seventh Respondent) |
Representation: | Counsel M Wilson (Applicant) J Baird (Sixth Respondent) B Glare (Seventh Respondent) |
| Solicitors Michael Wilson & Partners (Applicant) Duggan Legal (Sixth Respondent) Rothwell Lawyers (Seventh Respondent) | |
File Number: | ACTCA 36 of 2021 |
Decision under appeal: | Court/Tribunal: ACT Supreme Court Before: McWilliam AsJ Date of Decision: 30 June 2021 Case Title: Michael Wilson & Partners Ltd v Nicholls & Ors Citation: [2021] ACTSC 128 |
LOUKAS-KARLSSON J:
Introduction
The applications before me are the latest steps taken across a number of court cases both in Australia and internationally that relate to a breakdown in a partnership between several lawyers. That partnership ended in what can only be described as acrimonious circumstances. There is no need to outline the lengthy background to the wider set of proceedings, which traverse several jurisdictions.
Suffice to say, a very significant amount of resources have been dedicated to this broader litigation, which appears to have led to several former members of the partnership becoming bankrupt and a number of companies being placed into litigation.
Complicating the kaleidoscope of litigation is the fact that the applicant in this proceeding has been assigned various rights from the individuals it has succeeded against in bankruptcy proceedings (who are themselves respondents to the wider litigation, including in this jurisdiction).
This assignment appears to have included a right to recover money lent to the sixth respondent to this proceeding to help cover the costs of defending action brought by the applicant in the United Kingdom (UK).
The context of the various court decisions said to be relevant, and the tendency for submissions or material to be advanced concerning wider issues in the overarching litigation has led to a not insignificant delay in what is, on its face, a modest application seeking $22,500 in security for costs. That such an application has required a number of judgments and involved numerous hearings before two judges of the Court speaks to these broader complications.
Such issues are not limited to this jurisdiction. Indeed, in Michael Wilson & Partners Ltd v Emmott [2019] EWCA Civ 219, Peter Jackson LJ noted that:
… [this] pathological litigation has already consumed far too great a share of the court’s resources and if it continues judges will doubtless be astute to allow the parties only an appropriate allotment of court time.
Background
Before me are two applications. I heard those applications sitting as the Court of Appeal constituted by a single judge pursuant to s 37J of the Supreme Court Act 1933 (ACT). The first is an application for security for costs filed by the sixth respondent. No other respondents sought to be heard in relation to that application. The second is an application filed by the applicant on 28 April 2022 and dated 19 April 2022, I will discuss that application in more detail later in these reasons.
The applicant also sought compliance from the sixth and seventh respondent in relation to a notice to produce. My reasons for setting aside that notice to produce are dealt with in Michael Wilson & Partners Ltd v Nicholls (No 5) [2022] ACTCA 39 (Wilson (No 5)).
For convenience, despite being the applicant on the primary application before me, I will refer to the sixth respondent (Mr Emmott) as the sixth respondent and the applicant (who is the respondent to that application) as the applicant.
By that application, the sixth respondent seeks $22,500 in security for costs from the applicant who is seeking leave to appeal from the orders of McWilliam AsJ in Michael Wilson & Partners Ltd v Nicholls & Ors [2021] ACTSC 128.
Some of the background to the security for costs application was set out in my reasons in Michael Wilson & Partners Ltd v Nicholls (No 4) [2022] ACTCA 23 (Wilson (No 4)) at [2]-[3] where I outlined my reasons for setting aside the first notice to produce. I adopt that background.
The application for security for costs was listed before me for hearing on 3 May 2022. At that hearing the applicant moved on an application in proceeding dated 19 April 2022. That is the second application before me.
By that application, the applicant sought the following orders (edited for clarity):
(a) That the security for costs application be struck out as it was filed in the wrong court;
(b) That the “first joined party” (the sixth respondent) must cease in purporting to appear conditionally and “correct, amend and re-file all documents so as to accept that he is subject to the jurisdiction [of the Court]”;
(c) That the notice to produce be complied with by 30 April 2022;
(d) That the hearing of the security for costs application listed on 2 May 2022 be vacated;
(e) Costs “in the applications and the appeals”; and
(f) Liberty to apply.
Despite being dated 19 April 2022, the second application was, regrettably, not filed until 28 April 2022. I pause to note that the timetabling orders made by Elkaim J in relation to the security for costs application had required, inter alia, “the appellant [sic] to file and serve any affidavit material and submissions by 5PM on 19 April 2022”.
At the hearing on 3 May 2022, I heard submissions from the sixth respondent regarding the application for security for costs and I heard from the parties in relation to the first notice to produce.
Ultimately, I made orders on 3 May 2022 dismissing the first notice to produce on the basis that the notice did not comply with r 6748(2) of the Court Procedures Rules 2006 (ACT) (Court Procedures Rules): Wilson (No 4) at [12].
Finally, on 3 May 2022 I also made orders adjourning the security for costs application until a later date.
I adjourned the matter to allow the applicant time to provide the Court with copies of orders and reasons for judgment from a proceeding before Judge Mark Pelling QC sitting as a Judge of the High Court of the United Kingdom. That proceeding was said to be relevant to the security for costs application as, in the applicant’s submission, it related to a freezing order issued in the UK over the assets of the applicant. As such, the applicant submitted that it was said to be relevant to the question of whether the applicant had assets in Australia that could satisfy any order for costs made by this Court.
Ultimately, the proceeding was re-listed for further oral submissions relating to the application for security for costs and the applicant’s related application on 21 July 2022.
On 11 July 2022 the applicant filed a further affidavit which annexed a copy of the reasons for judgment of Judge Pelling QC along with various other documents said to be relevant to the security for costs application. I will discuss that affidavit and the relevance of his Honour’s decision in more detail later in these reasons.
Also annexed to that affidavit was a further notice to produce dated 11 May 2022. At the hearing on 21 July 2022, I made an order setting aside that notice to produce. Reasons for that decision were published on 26 July 2022: Wilson (No 5).
On 21 July 2022 I also made orders granting security for costs and dismissing the applicant’s application. These are the reasons for making those orders.
Background to the security for costs application
The application for security for costs was filed on 15 August 2021 by the sixth respondent. By that application the sixth respondent sought orders in the following terms:
(a) That the applicant provide security for the costs of the sixth respondent for the application for leave to appeal in the sum of $22,500.00, or such other amount as this Honourable Court may determine.
(b) Costs.
(c) Such further or other order as to this Honourable Court may seem fit.
I pause to note that if I am persuaded to make an order for security in this case it would be appropriate to also make an order staying the proceeding pending the provision of that security. Such would be the usual order following a successful security for costs application.
Principles governing the application
As rule 5302 of the Court Procedures Rules provides, security for costs of an appeal is not required unless the Court of Appeal otherwise orders.
Rule 1900 of the Court Procedures Rules relevantly provides that:
(1) On application by a defendant, the court may order the plaintiff to give the security it considers appropriate for the defendant’s costs of the proceeding.
(2) An application must be supported by an affidavit setting out the facts relied on and the grounds on which the order is sought.
Rule 1901 outlines when a Court may make an order for security for costs. The relevant parts of the rule are set out below:
1901 Security for costs—when court may make order
The court may order a plaintiff to give security for costs under rule 1900 only if satisfied—
(a) the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; or
…
(e) the plaintiff is ordinarily resident outside Australia; or
(f) the plaintiff is, or is about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient fixed and permanent property in Australia available for enforcement to pay the defendant’s costs if ordered to pay them; or
…
(h) the justice of the case requires the order to be made.
Also relevant to the application is s 1335(1) of the Corporations Act 2001 (Cth) as the applicant is a corporation. Section 1335(1) relevantly provides:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if 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, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
The sixth respondent submitted that there was no relevant difference between the terms of s 1335(1) and r 1901(a) of the Court Procedures Rules. Accordingly, these reasons for judgment will consider whether security for costs should be ordered pursuant to r 1900 (if the conditions of any of the sub-rules outlined in r 1901 are met).
A non-exhaustive list of factors that may be taken into account in determining whether an order for security should be made are contained in r 1902 of the Court Procedures Rules.
While rules 1900, 1901 and 1902 refer to civil proceedings, the operation of rr 5001(2) and 5001(3) of the Court Procedures Rules is such that those rules also apply to appellate proceedings.
General comments in relation to the evidence tendered by the parties
There were a significant number of objections raised by the sixth respondent in relation to the affidavits and documents tendered at the hearing by the applicant. The applicant also indicated that he had objections regarding the sixth respondent’s evidence, however, the full basis for particular objections was not clear. For example, one of the applicant’s objections appeared to be that the sixth respondent had not complied with some law or rule in the UK before placing copies of court orders or judgments before me. In relation to that objection, I note the sixth respondent’s submission that while foreign judgments are not evidence, they are documents that the Court can have regard to. I note that the documents the sixth respondent relied upon were public judgments of another Court and public orders made in those proceedings.
The sixth respondent advanced a number of objections including that parts of the affidavits of Mr Wilson were in the nature of submissions rather than evidence and that parts of the affidavits were not relevant to the security for costs applications as they traversed other matters relating to the broader litigation between the parties.
Rather than deal at length with the many objections advanced by the parties, I indicated that my preferred approach was to receive all of the evidence subject to weight for the purpose of deciding the two applications before me. In my view, that approach was preferable as it permitted the hearing of the applications to proceed in a timely manner in accordance with the overarching purpose of civil litigation: s 5A Court Procedures Act 2004 (ACT) and, as a general comment, rules of procedure are applied less rigidly at the hearing of interlocutory applications.
Such an approach was in the best interests of court time and court efficiency, noting that these were interlocutory applications. I indicated at the hearing to both parties that submissions could be advanced in relation to the weight to be attributed in relation to relevant material.
I also note that, at least regarding the aspects of the affidavits of Mr Wilson that were purportedly in the form of submissions rather than evidence, the Court would have had regard to the matters raised in those parts of the affidavits in any event. Similarly, to the extent that some of the matters in affidavits are not relevant as they relate to the broader litigation between the parties, submissions were made covering those wider issues in any event.
Submissions and evidence of the sixth respondent
The grounds of the application include, in summarised form, that:
(a) The applicant is a corporation incorporated in the British Virgin Islands;
(b) The applicant does not carry on business in the Australian Capital Territory or elsewhere in Australia;
(c) The applicant has no assets within the jurisdiction of the Australian Capital Territory which would be available to meet an order for costs in favour of the sixth respondent;
(d) The prospects of success of the appeal (if leave to appeal is granted) are poor; and
(e) It is just and equitable that the applicant should be ordered to provide security for costs.
In support of the application for security for costs, the sixth respondent relied on two affidavits of Mr Peter Joseph Duggan sworn on 12 August 2021 and 21 March 2022 respectively. Mr Duggan is the solicitor with carriage of the matter for the sixth respondent. The sixth respondent also tendered two documents at the hearing on 21 July 2022, namely, a “Costs Disclosure and Costs Agreement” signed by the sixth respondent on 20 August 2021 and a letter from the sixth respondent’s counsel to the sixth respondent’s solicitor annexing a signed “Conditional Costs Agreement between Barrister and Solicitors”.
The first affidavit of Mr Duggan addresses several matters, including the basis on which the quantum of fees sought by the security for costs application were calculated. The first affidavit also discussed the freezing orders made in the UK that apply to the applicant’s worldwide assets. I will turn to consider the freezing order in more detail later in these reasons.
In relation to the estimated costs of the application for leave to appeal I make the following observations. Mr Duggan’s calculation is based on counsel’s fees calculated for an estimated one-day hearing (with an additional one and a half days of preparation) at a daily rate of $5,000 and 25 hours of work by the instructing solicitor at his hourly rate.
To this calculation, Mr Duggan has reduced the costs sought for solicitors’ fees by 27% to account for the amount of costs that would be recoverable on a party-party basis. I discussed the issue of reducing the amount of security for costs sought for solicitors’ fees in accordance with the amount that would be recoverable were costs to be taxed in Hurst-Meyers v Hoy (No 2) [2022] ACTCA 38 (Hurst-Meyers) at [53].
As outlined in his first affidavit, Mr Duggan’s proposed reduction of 27% to his fees is, according to his evidence, within the usual and appropriate range. No reduction has been made for counsel’s fees as, in Mr Duggan’s experience, “counsel’s fees are usually allowed in full if they are within … the range set out in the CARC Guidelines”.
By his second affidavit, Mr Duggan provided the Court with a copy of the judgment in Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315, and documents relating to the litigation between the parties in NSW including orders made by the Court. In the second affidavit, Mr Duggan also provided the Court with a copy of an order made by Judge Pelling QC in the UK proceedings on 17 February 2022.
The sixth respondent also provided the court with two sets of written submissions and advanced oral submissions regarding why orders for security for costs ought to be made.
In essence, the sixth respondent submitted that the evidence establishes that the applicant does not have assets within the jurisdiction to satisfy any costs order made on the appeal or that, alternatively, the applicant has not provided the Court with any evidence that any such assets would be available.
In particular, while noting that the applicant’s evidence was that the applicant had a bank account with a balance of approximately $1.7 million in Australia, the sixth respondent submitted that there was (at the time of the hearing) an extant freezing order that the applicant had not discharged and that those assets were therefore not necessarily available to the applicant to satisfy any future order for costs.
The sixth respondent further submitted that the applicant’s prospects of either obtaining leave to appeal, or, were leave granted, of succeeding on the substantive appeal are poor.
In particular, the sixth respondent submitted that the application for leave to appeal is “in relation to a matter of practice or procedure” and, as such, is an order that the Court of Appeal is unlikely to interfere with. The sixth respondent further submitted that none of the applicant’s proposed grounds of appeal indicate how McWilliam AsJ erred in principle or approach in construing the relevant rules.
Additionally, the sixth respondent submitted that the applicant had previously been made the subject of an order to provide security by an Australian court. As to this matter, I do not regard that as relevant to the question of my discretion. Each security for costs application turns on the facts of the case and I do not propose to give weight to a discretionary decision of a different court in relation to a different appeal, where, even assuming similar information concerning the applicant’s assets was before the Court, the prospects of success of the appeal would be different.
Finally, the sixth respondent submitted in supplementary written submissions that the purpose underpinning the applicant’s application to have the proceeding reinstated was to seek an order beyond that contemplated in the original proceeding, namely, that: the sixth respondent “is jointly and severally liable … for all of the US$14m judgment debts owed … as a Temujin partner”.
That claim, the sixth respondent submitted, has, subsequent to the orders of McWilliam AsJ, been determined adversely to the applicant (in Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315). As such, the sixth respondent submitted that the application for leave to appeal either has no prosects of success, is not genuine, or is an abuse of process. In particular, the sixth respondent submitted that the res judicata principles will apply and that the sixth respondent should not be required to defend an identical claim in the ACT and in NSW and incur the costs of having to do so.
Ultimately, the sixth respondent submitted that the Court would be satisfied that one of the conditions outlined in r 1901 would be satisfied. In particular, the sixth respondent advanced the following submissions:
(a) the applicant is a corporation and the Court should be satisfied that there is reason to believe the applicant would not be able to pay the sixth respondent’s costs if ordered to pay them and as such (a) applies.
(b) the applicant has conceded that it is ordinarily resident outside of Australia and the addresses for service provided in Australia are not proper addresses and as such (e) applies.
(c) the assets that the applicant claims that it possesses in Australia are not “fixed and permanent” within the meaning of r 1901(f) and as such (f) applies. In particular, the sixth respondent submitted that the applicant has no real property within the jurisdiction and the cash that it holds in Australia can be readily moved outside of the jurisdiction.
(d) given that the application for leave to appeal is not genuine or is an abuse of process as the proposed proceeding is different to the original proceeding the applicant seeks to reinstate and is (in the sixth respondent’s submission) estopped from re-agitating in the ACT given the NSW proceeding, the justice of the case requires the order to be made and as such (h) applies.
In relation to the factors to consider, the respondent noted that the amount of security sought was reasonable, the prospects of success can only be described as low and, accepting the applicant’s evidence regarding the money purportedly held in Australian and New Zealand bank accounts there could be no suggestion that the order for security would be oppressive, would stifle the proceedings or would prevent the applicant from prosecuting the appeal.
Submissions and evidence of the applicant
The applicant filed a significant volume of material said to be relevant to the application. This included five affidavits sworn by Mr Michael Earl Wilson dated as follows:
(a) 7 July 2021;
(b) 29 September 2021;
(c) 19 April 2022;
(d) 19 April 2022; and
(e) 10 July 2022.
There is a significant volume of material in the affidavits and annexed to the affidavits and I indicated to Mr Wilson that he ought to draw my attention to the most important aspects of that evidence that he submitted supported the arguments he advanced in relation to the two applications before me.
As a general summary, the first affidavit was filed with the application for leave to appeal and is said to be relevant to the question of the prospects of the appeal. The second affidavit dealt with various matters, including the applicant’s evidence in relation to an adjournment that was sought. The third and fourth affidavits outline the assets the applicant claims it possesses in order to satisfy any costs order(s) and the fifth affidavit provides detail in relation to the UK proceeding and the freezing order as well as dealing with the notice to produce.
I note that this material could only be described as voluminous. For example, the fourth affidavit of Mr Wilson including annexures was over 900 pages in length.
In addition to the five affidavits, the applicant tendered three documents at the hearing on 21 July 2022 which, as I outlined above, I received for the purpose of deciding the applications before me only. Those documents were: a deed between the sixth respondent and Mr Sinclair signed by the sixth respondent and dated March 2021, a second deed between the sixth respondent and Mr Sinclair dated 8 November 2020 and an amended particulars of claim filed by the applicant in the UK proceedings before Judge Pelling QC.
The applicant also relied upon a set of written submissions dated 2 May 2022 which addressed both the applicant’s application and the issues relevant to the security for costs.
The applicant also advanced oral submissions directed at why the security for costs application should be dismissed and why the orders sought in the applicant’s application should be granted.
Many of the applicant’s submissions traversed wider issues and sought to advance arguments as to why the sixth respondent owed or would owe the applicant money after court proceedings in the UK and NSW were finalised. It is neither appropriate nor necessary for this Court to comment on matters before other judges in other Courts.
Nothing in the summary of the applicant’s submissions should be taken as a comment on the likelihood of any particular order being made by any other Court.
First, the applicant submitted that there is no “valid and proper” security for costs application before the Court as the document is in a form that indicates it was drafted and filed in the Supreme Court rather than in the Court of Appeal. Accordingly, the applicant submitted the application should be struck out or dismissed.
In response to this submission, the sixth respondent submitted that first, the document had been accepted for filing by registry and once accepted for filing the application had been filed in the Court of Appeal and the Court accordingly had jurisdiction to hear it. Second, the sixth respondent submitted that, to the extent required, the Court should grant leave for the document to be amended to record that it was filed in the Court of Appeal proceeding.
Second, the applicant submitted that the sixth respondent should be ordered to “cease and desist in and from purporting to appear “conditionally”” as he was joined to the proceeding by an order of Mossop AsJ (as his Honour then was) on 21 August 2015. The applicant also submitted that the sixth respondent should be required to “correct, amend and re-file all documents”.
In response to this submission, the sixth respondent submitted that the current status of the matter is such that the proceedings in the Supreme Court have been deemed to be dismissed by the orders of McWilliam AsJ and the sixth respondent has not taken an active part in the proceedings since 2015. In the result, the sixth respondent submits that it was open to the sixth respondent to file a notice of conditional appearance in the matter.
In relation to the security for costs application, the applicant further submitted that while the applicant is incorporated outside Australia and does not have a corporate presence in Australia it “owns 67% of the Temujin partnership which has very considerable assets … in Australia”. These assets include, in the applicant’s submissions, over US$69 million of which over US$8.73 million are held in cash. The applicant also submitted that through various judgment debts it was purportedly owed in Australia and the assets held by the Temujin partnership, it controlled substantial assets in Australia. These assets were said to include real property controlled by various caveats that had been granted over those properties.
The applicant further submitted that it “has final and binding judgment debts in its favour in Australia” totalling over $20 million. The precise basis for these judgments or orders was not apparent from the document summarising the amounts which is annexed to the fifth affidavit of Mr Wilson. Without deciding the point, I note that the amounts claimed to be owed to the applicant vastly exceed the sums discussed in the recent NSW Court of Appeal judgment: Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315.
In relation to this submission, the sixth respondent submitted that the litigation in NSW was ongoing and none of the rights had yet been conclusively determined in Australia and that, in any event, none of these amounted to interests in real property (or fixed and permanent property) owned by the applicant. I will consider the relevance of the amounts the applicant claims to be owed by the respondent later in these reasons.
The applicant further submitted that it possesses over $1.7 million in cash in a bank account in Australia and further cash of approximately NZ$770,000 in a New Zealand bank account.
In relation to the worldwide freezing order, the applicant submitted that the recent judgment of Judge Pelling QC in the UK was to the effect that the worldwide freezing order had been significantly reduced, with a further hearing relating to the total amount remaining occurring shortly.
The applicant accepted, however, that there was still a freezing order in effect as at the time of the hearing just that the amount that order was over was still yet to be determined. The applicant submitted, that while the precise amount was to be determined, the final amount would be one that accorded with the reasons for judgment of Judge Pelling QC annexed to the fifth affidavit of Mr Wilson. The applicant submitted, that those reasons indicate that Judge Pelling QC had accepted the applicant’s submissions that a debt owed by the sixth respondent to Mr Sinclair pursuant to deeds relating to a loan advanced by Mr Sinclair to fund the sixth respondent’s defence to proceedings in the UK had been, in-turn, assigned to the applicant.
The effect of that assignment was said by the applicant to be that some amounts of money that the applicant had paid to the sixth respondent pursuant to court orders in the UK was now owed back to the applicant, and, accordingly, the freezing order over the applicant’s assets was to be reduced by that amount.
The applicant submitted that the further hearing only related to the question of what the ultimate quantum of the freezing order would be, but that it was plain, that it had been significantly reduced.
The applicant alleged that it was “very likely” or “almost certain” that the freezing order would soon be reduced to zero and discharged. I do not accept that submission which does not accord with my own review of the reasons of Judge Pelling QC in the judgment annexed to the fifth affidavit of Mr Wilson. While from those reasons it is clear that the order has been significantly reduced, it is apparent that there will (at least for now) still be a freezing order of some amount in place.
The applicant submitted that the entire basis for the application for security for costs was that a worldwide freezing order applied (by operation of Court orders in the UK) and that, as those freezing orders were significantly reduced, the application for security no longer had any basis.
In any event, the applicant submitted that the evidence provided by the applicant demonstrated that it had assets capable of satisfying any costs order made in this jurisdiction.
In relation to the application for security for costs, the applicant further submitted that the sixth respondent was bringing the application as he could no longer afford his lawyers. I do not accept this submission which does not accord with the principles underpinning an award for security for costs. Any award of security made is made either to the Court or made by way of a bank guarantee (or similar). The money is not given to the sixth respondent directly or to any solicitors or barristers acting for the sixth respondent unless and until some further order in relation to costs is made by the Court of Appeal following the hearing of the application for leave to appeal.
Finally, in relation to prospects of success the applicant submitted that the primary judge erred in interpreting the relevant court rules and, in particular, erred in finding that a rule deeming discontinuance can apply where judgment has been reserved.
This matter, the applicant submitted was a matter of “public importance”, a factor relevant to the question of whether security could be ordered.
Consideration
Although there are two applications before the Court, the applications can, in effect, be reduced to one question, namely whether security for costs should be ordered.
In turn there are three issues for me to decide:
(a) Whether the application for security should be dismissed as it was filed in the wrong jurisdiction or because the sixth respondent is appearing conditionally;
(b) Whether any of the sub-rules in r 1901 are met, such that the Court may make an order for security for costs; and, if so,
(c) Whether after considering the relevant factors, in the exercise of my discretion I consider that an order for security should be made.
It is convenient to address each of the three issues in turn.
Preliminary Matters
I do not accept the applicant’s submission that the security for costs application should be dismissed as it was filed in the wrong jurisdiction or because the sixth respondent purports to appear conditionally for the following reasons.
First, I accept the sixth respondent’s submission that the relevant question is whether the application was accepted for filing by Registry. Having accepted the application for filing, the application has been listed before me sitting as the Court of Appeal constituted by a single Judge. There is no question that the Court has jurisdiction to hear the matter.
In the event that I am wrong in that conclusion, I am further satisfied that, to any extent that leave were required for the sixth respondent to amend the application, leave would be granted.
This is so for the following reasons. First, the matter is one of a typographical error in relation to the matter number recorded on the application. Second, there can be no relevant prejudice to the applicant. The applicant has been on notice as to the substance of the application since it was filed. He has appeared at multiple hearings before judges of the Court in relation to the application and has had the opportunity to file extensive evidence and submissions in relation to the application.
In relation to the second matter, I accept that there appears prima facie to be a sound basis for the sixth respondent appearing conditionally in relation to the appeal. In any event, the question of whether the sixth respondent has submitted to the jurisdiction of the Court is an issue that can be raised on the appeal. It is not an issue that would prevent the hearing of an application for security for costs. Nor is it a matter that would require the sixth respondent to re-file all documents in the proceeding to date.
If the Court of Appeal at the hearing of the leave to appeal application finds it necessary to resolve the question, that is a matter for that Court at that time. However, any such determination in my view could not have the effect advanced by the applicant, namely that it would require all documents filed by the sixth respondent to be of no legal effect and need to be refiled.
It follows that the application for security for costs should not be dismissed on either basis.
Are any of the sub-rules contained in r 1901 met?
It is convenient to set out again the relevant aspects of r 1901:
1901 Security for costs—when court may make order
The court may order a plaintiff to give security for costs under rule 1900 only if satisfied—
(a) the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant’s costs if ordered to pay them; or
…
(e) the plaintiff is ordinarily resident outside Australia; or
(f) the plaintiff is, or is about to depart Australia to become, ordinarily resident outside Australia and there is reason to believe the plaintiff has insufficient fixed and permanent property in Australia available for enforcement to pay the defendant’s costs if ordered to pay them; or
…
(h) the justice of the case requires the order to be made.
In my view, the condition in r 1901(h) is met in this case. Accordingly, I am satisfied that I may make an order for security for costs pursuant to r 1900 for the reasons that follow.
I am satisfied that the justice of this case requires the order for security for costs to be made. This is because, as I will explain when discussing the discretionary factors that bear on whether an order for security should be made (rather than whether the order could be made), I am satisfied that the prospects of success of the leave to appeal application are very low and the appeal itself (if leave is granted) has very low prospects of success. I am further satisfied that the order for security is not oppressive. In making my assessment of r 1901(h), it is also relevant in my view, that there is at least a strong argument that the relief the applicant is ultimately seeking is different to the proceedings originally commenced and as such there is an open question as to whether the relief now sought can properly be described as the same proceeding that was originally filed in 2015.
In the result, I am satisfied that the condition in r 1901(h) is satisfied and therefore I may make an order for security for costs pursuant to r 1900 if I am satisfied that such an order should be made.
I will also address the submissions advanced by the sixth respondent in relation to the other sub-rules advanced as additional bases on which an order for security for costs may be made.
As to sub-rule r 1901(e), the applicant has accepted in both its affidavit evidence and in submissions that it is a corporation not resident in Australia. While the applicant has submitted that it does business in Australia and has customers and bank accounts here, those matters are not relevant to the tests outlined above.
There was no submission advanced by the applicant that the sub-rule only applied to individuals and did not apply to companies or partnerships. While the point was not argued, I note that there is authority in other Australian jurisdictions indicating that the phrase “ordinarily resident outside of Australia” extends to corporate entities: see, for example, Energy Drilling Inc v Petroz NL (1989) ATPR 40-954; GAIN Capital UK Limited v Citigroup Inc [2015] FCA 1009; Banki Trading BV v Ausland Export Pty Ltd [2022] FCA 373.
One matter that may differentiate the ACT Court Procedures Rules as opposed to the approach taken in the Federal Court is that sub-rule 1901(a) expressly refers to corporations, while 1901(e) does not. There is no similar express reference to corporations in the Federal Court Rules 2011 (Cth). Rather, r 19.01 of the Federal Court Rules merely outlines the information that “should” be included in an affidavit stating the facts on which the order for security is sought as including “whether the applicant is ordinarily resident outside Australia”.
I do not think much turns on any difference between the Court Procedures Rules and the Federal Court Rules. The phrase “ordinarily resident outside of Australia” does not impose any clear limit in relation to the type of entity an order for security for costs is sought against.
The rationale underpinning why the fact that a party is ordinarily resident outside Australia is relevant to whether security for costs should be ordered was outlined in Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558 at [72]:
The purpose to be served by making an order for security for costs is to ensure that a successful respondent to a claim will have a fund available within the jurisdiction of the Court against which the respondent, if successful in defence, can enforce a judgment for costs in the respondent's favour. This purpose is, of course, relevant to an exercise of discretion. The factors that the courts have over time recognised as relevant to an exercise of discretion are relevant because they bear on the purpose for which an order for security for costs is made. Thus, if an applicant in a proceeding is ordinarily resident outside the jurisdiction, an award of security for costs means that a respondent “does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement”: Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,422 (Gummow J). See also: Logue v Hansen Technologies Ltd 125 FCR 590 at [18] (Weinberg J); GAIN Capital UK Limited v Citigroup Inc [2015] FCA 1009 at [18] (Yates J); and Oswal [2015] FCA 1143 at [57] (Nicholas J).
(emphasis added)
While, of course, the applicant’s claim that it has assets in Australia that are capable of satisfying any costs order is a factor relevant to the discretion as to whether an order should be made, it is not relevant to the question of whether the Court may make an order pursuant to the condition contained in r 1901(e).
Accordingly, I accept the sixth respondent’s submission that the applicant is ordinarily resident outside of Australia. As such, I am satisfied that the condition contained in r 1901(e) is met.
As to sub-rule r 1901(f), I am satisfied that, taking the applicant’s evidence at its highest, there is reason to believe that the applicant does not have sufficient fixed and permanent property in Australia that would be available for enforcement were a costs order made after the hearing of the application for leave to appeal. I have already indicated that I am satisfied that the applicant is ordinarily resident outside of Australia.
This is the case for the following reasons.
First, in relation to the applicant’s claim that it has approximately $1.7 million in an Australian bank account (the evidence for which is set out at Annexure A to this judgment), those assets cannot be said to be fixed and permanent. There is no evidence before me suggesting that there is any requirement that those assets remain in Australia. Cash is, by its nature, not fixed or permanent for the purpose of r 1901(f). In relation to the evidence I also note the following:
(a) There is no affidavit evidence supplied by representatives of the bank;
(b) The full names of the bank employees who have signed the letter are not provided;
(c) The letter outlines what assets the applicant held in Australia in March 2022, prior to the worldwide freezing order being reduced;
Second, in relation to the applicant’s claim regarding the New Zealand bank account, that is plainly not an asset in Australia.
In relation to the applicant’s claim that it holds various assets of the Temujin partnership or is otherwise owed various debts in Australia by the sixth respondent or other persons the following points can be made.
(a) The evidence before me is not sufficient to establish what assets (if any) the Temujin partnership has in Australia and whether those particular assets are fixed and permanent property within the meaning of r 1901(f);
(b) There is no cogent evidence (beyond statements made by Mr Wilson in his affidavits) outlining how the claim for the Temujin property is advanced;
(c) The claim that the applicant is entitled to some assets of the Temujin partnership is not a matter that this Court can determine. Indeed, it appears to be the subject of an ongoing dispute in New South Wales;
(d) While the fourth affidavit of Mr Wilson annexed a table outlining the basis on which the various judgment debts were purported to be calculated by Mr Wilson, that evidence does not rise to a level to support a finding that those are actual debts present and owing to the applicant and, if so, which party actually owes those debts;
(e) Further, I am not satisfied that a judgment debt is an asset that is fixed and permanent for the purpose of r 1901(f), nor that if it is, that it would be an asset available in Australia to the applicant in order to meet any order for costs in this jurisdiction. In particular, I note counsel for the sixth respondent’s submission that the sixth respondent “is a person outside the jurisdiction” (T60.14-15). If the judgment debts are claimed to be owed to the applicant by the other respondents, those respondents are variously bankrupt or in liquidation. Accordingly, any claim that debts are owed by those parties would not in my view rise to a level of a “fixed and permanent” asset.
In the result, I am satisfied that the conditions in r 1901(f) are satisfied.
In relation to r 1901(a) I make the following observations. First, the issue for the Court to consider in relation to that sub-rule is whether “there is reason to believe the [applicant] will not be able to pay the [sixth respondent’s costs] if ordered to pay them”.
The applicant submitted in relation to that issue that it had significant assets in this jurisdiction and internationally. Some of these assets are discussed above. Significant court time was also directed to the issue of the current status of the worldwide freezing order made in the UK and whether, the effect of that order, should be such that the Court would be satisfied that the applicant will not be able to pay any costs orders made following the leave to appeal application.
Given my findings above, there is no need to consider these submissions in detail or decide whether the conditions in r 1901(a) are met by virtue of the existence of a worldwide freezing order that has not been discharged. I note that it appears that the applicant could discharge any remaining freezing order by paying into the UK High Court an amount equal to the amount of the freezing order. I further note that, accepting the applicant’s evidence as to the amounts held in various bank accounts and the value of assets held in Kazakhstan, there is no explanation advanced by the applicant as to why the applicant has not sought to do so.
I therefore make no finding under r 1901(a) as it is unnecessary to do so for the resolution of the applications before me.
In summary, I am satisfied that in the circumstances of this particular case the conditions under r 1901(h) are satisfied and I may make an order for security for costs. I am also satisfied that the conditions in rr 1901(e) and (f) are satisfied.
Should an order for security for costs be made?
I have previously dealt with the principles that apply in relation to whether the Court should exercise its discretion to order security for costs in Hurst-Meyers and University of Canberra v Zierholz@UC Pty Ltd [2020] ACTA 45 (Zierholz). There was no disagreement between the parties as to the principles the Court should apply. The question was one of application.
A non-exhaustive list of factors that the Court may consider when assessing whether an order for security for costs should be made is set out in r 1902 of the Court Procedures Rules. That rule relevantly provides:
1902 Security for costs—discretionary factors
(1) In deciding whether to make an order for security for costs under rule 1900, the court may have regard to any of the following matters:
(a) the means of the people standing behind the proceeding;
(b) the prospects of success or merits of the proceeding;
(c) the genuineness of the proceeding;
(d) for rule 1901 (a)—the corporation’s lack of financial resources;
(e) whether the plaintiff’s lack of financial resources is attributable to the defendant’s conduct;
(f) whether the plaintiff is effectively in the position of a defendant;
(g) whether an order for security for costs would be oppressive;
(h) whether an order for security for costs would stop or limit the progress of the proceeding;
(i) whether the proceeding involves a matter of public importance;
(j) whether there has been an admission or payment into court;
(k) whether delay by the plaintiff in starting the proceeding has unfairly prejudiced the defendant;
(l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction;
(m) the estimated costs of the proceeding.
(2) This rule does not limit the matters to which the court may have regard
As I have noted previously, this rule (as is apparent from the text of the rule) does not limit the matters the Court may have regard to: Zierholz at [11]-[12] and the authorities cited in those paragraphs.
In relation to the factors, I make the following findings.
Accepting the applicant’s evidence that it has an Australian bank account with an approximate balance of $1.7 million (or at least it did so as at March 2022), it is apparent that an order for security in the amount sought, namely $22,500, is not oppressive and would not stop or limit the progress of the proceeding. All the order will require is that some amount of money from this Australian bank account (or some other asset the applicant controls) will be paid into Court, or some form of bank guarantee given in relation to that fixed sum. Again, I note that this will not permit the money to be applied by the sixth respondent to pay the costs of engaging solicitors or barristers unless and until a further order is made by the Court of Appeal.
While the fact that the applicant has significant assets is a factor that tends against an order for security being made (as it makes it less likely that the sixth respondent would not be able to recover its costs) it does not mean, as I have outlined above, that an order cannot or should not be made. No single factor is determinative.
In relation to the prospects of success of the application for leave to appeal, I accept the sixth respondent’s submission that a Court of Appeal will only rarely intervene in relation to a matter of practice or procedure. I also make the following observations:
(a) First, the draft notice of appeal primarily recites a list of disagreements that the applicant has with the primary judge’s findings. There is no clear suggestion in the draft notice that the primary judge has misapplied any principle of law or has made any legal error in how her Honour approached the question before her.
(b) Second, as developed in oral submissions before me the applicant indicated that the prospects of success were strong primarily on the basis that her Honour erred in finding that the proceeding would be deemed to be dismissed while judgment was reserved by Mossop AsJ. It is however apparent from the primary judge’s careful reasons, that her Honour did not make any such finding. Rather, her Honour found that judgment had not been reserved by Mossop AsJ. This was due to bankruptcy proceedings filed in the Federal Court meaning there was no longer any issue before Mossop AsJ to be determined (apart for the issue of costs). This is clearly outlined in the primary judgment at [47].
(c) Third, even were there sound reason to suggest that the primary judge erred in determining whether the proceeding had been deemed to be dismissed, there is at least a strong argument that the proceeding the applicant is now seeking to be reinstated is fundamentally different to the original proceeding filed in the Court below. In the original proceedings, the applicant sought orders in relation to recognition of a judgment debt in NSW against the first to fifth respondents and then sought orders in relation to possession of a particular property in the ACT and some related orders in respect of companies who had registered caveats and interests over that property. The applicant now seeks orders extending the sixth respondent’s liability to a purported US$14 million judgment debt: primary judgment at [68]. For the reasons advanced by the primary judge at [69] and [70] the proper way for the applicant to bring such a claim is to file a new originating claim.
In my view, given the above, the likelihood of leave being granted to the applicant is itself an extremely doubtful prospect.
I further note that the sixth respondent submitted that the proceeding was not genuine as, in effect, the applicant was seeking to litigate a new claim (which the sixth respondent submitted it should not have to defend in the ACT and in NSW). While there is some force to this submission, I do not make a finding that the leave to appeal application itself was not genuinely brought. In my view it is not necessary to make such a finding to determine the applications before me.
In relation to the applicant’s submission that there is some matter of public importance, I do not accept that submission. There is no apparent error in the primary judge’s approach to the interpretation of rule 75 of the Court Procedures Rules and the re-instatement application would be, in effect, limited to determining some question of costs that was never pursued by the parties in the original proceedings.
There is no significant matter of public importance raised in the case.
I note in relation to the estimated costs of the proceeding and the amount sought in the security for costs application, the amount sought is modest.
In addition to the above matters, I consider it relevant that the applicant has no Australian office and is wholly outside the jurisdiction. While the applicant, on its evidence, has some assets in Australia none of those assets are fixed or permanent. Absent an order for security, there is nothing that appears to prevent the applicant from removing its Australian assets from this jurisdiction which would lead to costs being incurred by the sixth respondent if it had to seek to enforce any future costs order made against the applicant overseas.
Balancing the various factors discussed above and while noting that it is significant that the applicant has assets in Australia, in my view, the prospects of success of the case are so low that security for costs should be ordered. I also regard it as significant that the order is not oppressive and will not prevent the application from being prosecuted. Rather, the order will simply ensure that the applicant provides to the Court a suitable form of security ensuring that any future order for costs will be met.
In relation to quantum, although the applicant advanced some general submissions arguing that the amount sought was excessive or that the proposed daily counsel fee was excessive, on my own review of the evidence of the sixth respondent I do not accept those submissions. It is apparent that the fees relied upon in the estimation of costs fall within the CALC bands and are within the appropriate range for counsel of the experience of Mr Baird.
As I noted above, the amount sought has appropriately been reduced to account for what would likely be recoverable on a party-party basis. There is no reason for this Court to reduce the amount of security sought by the application.
Given my conclusion in relation to security for costs it is also appropriate for the applicant’s application to be dismissed.
I confirm the orders I made on 21 July 2022 as follows:
(a) The application filed by the applicant on 28 April 2022 and dated 19 April 2022 is dismissed.
(b) Pursuant to r 1900 of the Court Procedures Rules 2006 (ACT) the applicant is to provide security for the sixth respondent's costs of the application for leave to appeal within 28 days of the date of these orders fixed in the sum of $22,500.
(c) The security may be provided, at the option of the applicant, either by a deposit into court or a guarantee in favour of the sixth respondent from an Australian bank or an Australian authorised deposit-taking institution.
(d) The application for leave to appeal is stayed pending the provision of security as outlined above.
(e) If the applicant fails to provide the security within 28 days of the date of these orders, the application for leave to appeal will be deemed to have been dismissed and the applicant is to pay the sixth and seventh respondent's costs of the leave to appeal application to that date as agreed or assessed.
On 21 July 2022 I also made an order reserving costs of the applications pending the provision of reasons to the parties. That order was in the terms sought by the applicant.
In relation to costs, orders will be made in-chambers in the following terms:
(a) The applicant, sixth respondent and seventh respondent have leave to provide submissions limited to two pages in length in respect of costs incurred in relation to the hearing of the security for costs application, the application dated 19 April 2022 and the notices to produce dated 11 May 2022 and 19 April 2022.
(b) Any such submissions are to be provided to my chambers by email by 4.00pm AEST on 4 August 2022.
(c) The parties have leave to provide submissions in reply, limited to two pages in length. Any such submissions are to be provided to my chambers by email by 4.00pm on 9 August 2022.
(d) Subject to further order or direction, the question of costs will be determined on the papers.
In relation to the determination of costs orders, the applicant indicated at the hearing on 21 July 2022 that Mr Wilson wished to advance oral submissions in relation to costs. In my preliminary view, oral submissions are not necessary in the particular facts of the case for the following reasons. First, in the usual course costs follow the event and the question of costs in this case does not appear to be one that is complicated by any relevant wider matters. Second, the general course for applications of this type is for written submissions on costs to be provided and for costs to be determined on the papers. Such a course prevents unnecessary further costs being incurred by the parties who have succeeded in relation to the interlocutory application. Third, the parties are all represented by experienced counsel and practitioners and no party will suffer any prejudice where costs are determined on the papers. However, I will also make orders in the following terms in-chambers:
(e) The applicant has leave to provide separate written submissions limited to two pages in length addressing the question of why the applicant submits leave should be granted for the applicant to provide oral submissions in relation to costs.
(f) Any such submissions should be provided to my chambers by email by 4.00pm AEST on 4 August 2022.
(g) The sixth and seventh respondents have leave to provide written submissions in reply, limited to two pages in length, by 4.00pm on 9 August 2022.
(h) The question of whether the Court will hear further oral submissions in relation to costs will be determined on the papers.
| I certify that the preceding one-hundred and thirty-four [134] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Loukas-Karlsson Associate: Andrew Ray Date: 28 July 2022 |
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Amendments
28 July 2022 Replace “I note that the sixth respondent is not an Australian citizen” with “I note counsel for the sixth respondent’s submission that the sixth respondent “is a person outside the jurisdiction” (T60.14-15).” Paragraphs: [107](e)
Annexure A
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