Olson v Keefe (No 5)

Case [2023] FCA 127

FEDERAL COURT OF AUSTRALIA

Olson v Keefe (No 5) [2023] FCA 127

File number(s): NSD 1498 of 2016
Judgment of: GOODMAN J
Date of judgment: 24 February 2023
Catchwords: PRACTICE AND PROCEDURE – application for security for costs – applicant not resident within the jurisdiction and with insufficient assets in the jurisdiction to satisfy an adverse costs order – application brought shortly before hearing date – delay and proximity to hearing date not significant in the absence of prejudice – order made for the provision of security of costs   
Legislation:

Federal Court of Australia Act 1976 (Cth), s 56

Federal Court Rules 2011 (Cth), r 19.01
Cases cited:

Axent Holdings Pty Ltd v Compusign Australia Pty Ltd (No 2) [2017] FCA 1102

Brundza v Robbie & Co (No 2) (1952) 88 CLR 171

Commissioner of Taxation v Vasiliades [2016] FCAFC 170; (2016) 344 ALR 558

Kelly v Willmott Forests Ltd (in liquidation) [2012] FCA 1446; (2012) 300 ALR 675

Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1

PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48

PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321

United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VSCA 192
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 45
Date of last submission/s: 21 February 2023
Date of hearing: 20 February 2023
Counsel for the Applicant: Mr R A Jedrzejczyk
Solicitor for the Applicant: Mills Oakley
Counsel for the Respondents: Mr Y Shariff SC with Mr N Condylis
Solicitor for the Respondents: King & Wood Mallesons

ORDERS

NSD 1498 of 2016
BETWEEN:

KEVIN OLSON

Applicant
AND:

MICHAEL THOMAS KEEFE

First Respondent

CORY LIPOFF

Second Respondent

HILCO MERCHANT RESOURCES LLC (and another named in the Schedule)

Third Respondent

ORDER MADE BY:

GOODMAN J

DATE OF ORDER:

24 FEBRUARY 2023

THE COURT ORDERS THAT:

1.The applicant provide security for the respondents’ costs of and incidental to this proceeding in the amount of AUD200,000 (Security Amount).

2.The Security Amount be provided by an irrevocable bank guarantee issued by an Australian bank in favour of the respondents, or by payment into Court, by 4:00pm on 17 March 2023.

3.If the applicant fails to comply with orders 1 and 2, then:

(a)the proceeding be stayed until the security is given;

(b)the parties are to notify the Associate to Goodman J forthwith of such non‑compliance; and

(c)the respondents have liberty to restore the matter before the Court on 24 hours’ notice for the purpose of seeking:

(i)the vacation of the hearing dates commencing 27 March 2023; and

(ii)the dismissal of the proceeding.

4.The applicant pay the respondents’ costs of and incidental to the respondents’ interlocutory application filed on 20 December 2022.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

GOODMAN J

INTRODUCTION

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Olson v Keefe (No 5) [2023] FCA 127
Case
[2023] FCA 127
Decision Date

CaseChat Overview and Summary

In Olson v Keefe (No 5), the applicant, Olson, filed an application for security for costs against the respondents, Keefe and others. The application arose from a broader legal proceeding that commenced in 2016. The respondents sought security for costs due to concerns about Olson's residency status and lack of assets in Australia, which they believed would hinder enforcement of any costs order against him if they were successful in the proceeding. Olson, a U.S. citizen who had recently obtained Australian citizenship, had conceded that he was not ordinarily resident in Australia and that his assets within the country were insufficient to cover any adverse costs order.

The legal issues before the court involved whether Olson should be required to provide security for the respondents' costs. The primary considerations included the applicant's residency status, the availability of his assets in Australia, the potential difficulty of enforcing a costs order against him, and the timing of the application. The court had to exercise its discretion under section 56 of the Federal Court of Australia Act 1976 (Cth) and rule 19.01 of the Federal Court Rules 2011 (Cth).

The court found that Olson's lack of residency in Australia and insufficient assets within the country were significant factors in favour of granting the application for security for costs. These factors aligned with established legal principles that underscore the importance of ensuring a successful respondent has a fund within the jurisdiction to enforce a costs order. Despite the applicant's argument regarding the respondents' delay in bringing the application, the court did not find the delay significant enough to outweigh the substantial risk of enforcement difficulties. The applicant's ability to provide the required security within a specified timeframe also supported the making of the order.

The court concluded that Olson should provide security for the respondents' costs in the amount of AUD200,000, either through an irrevocable bank guarantee or by payment into court, by a specified date. Failure to comply with these orders would result in the stay of the proceeding and potential dismissal of the case. Additionally, Olson was ordered to pay the respondents' costs associated with the interlocutory application.

Orders

Orders of the court

1. The applicant provide security for the respondents’ costs of and incidental to this proceeding in the amount of AUD200,000 (Security Amount).

2. The Security Amount be provided by an irrevocable bank guarantee issued by an Australian bank in favour of the respondents, or by payment into Court, by 4:00pm on 17 March 2023.

3. If the applicant fails to comply with orders 1 and 2, then:

(a) the proceeding be stayed until the security is given;

(b) the parties are to notify the Associate to Goodman J forthwith of such non‑compliance; and

(c) the respondents have liberty to restore the matter before the Court on 24 hours’ notice for the purpose of seeking:

(i) the vacation of the hearing dates commencing 27 March 2023; and

(ii) the dismissal of the proceeding.

4. The applicant pay the respondents’ costs of and incidental to the respondents’ interlocutory application filed on 20 December 2022.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The applicant resists the application. He concedes for the purposes of the application that he is not presently ordinarily resident in Australia and that his assets in this country are insufficient to satisfy any costs order that may be made against him if he were to be unsuccessful in the proceeding. He contends that the application should be refused principally because of the respondents’ delay in bringing the application.BACKGROUND Events leading up to the filing of the application for security for costs The proceeding was commenced in 2016. On 27 March 2017, the respondents’ solicitors wrote to the applicant’s solicitors stating, in so far as is presently relevant:We have conducted real property searches in respect of Mr Olson. These have revealed that Mr Olson does not own any property in Australia.In circumstances where:(a)we understand that Mr Olson is a citizen of the United States of America, and is not a citizen of Australia;(b)Mr Olson appears to have no real assets in Australia; and(c)there is no treaty between Australia and the United States for the reciprocal enforcement of judgments, making any costs order that our clients obtain in their favour against Mr Olson in the Proceedings difficult to ultimately enforce,our clients are deeply concerned about whether they will recover the costs that they have incurred in defending the Proceedings if they are ultimately successful and have costs orders made in their favour. This is particularly so when your client's contractual claims and his misleading and deceptive conduct claims are made against the Third and Fourth Respondents in the alternative, meaning that at least one of them will be entirely successful in the Proceeding and entitled to a costs order against your client.In these circumstances, our clients are seriously considering making an application to the Court for security for costs. In order to determine whether an application for security for costs should be made, we request that Mr Olson confirm:(a)whether he is an Australian citizen or permanent resident and, if he is, provide us with documentary evidence of the same; and(b)whether he has any assets within Australia, and if so, the nature and value of these assets and any encumbrances over them.We request that this information is provided by 5pm on 31 March 2017. On 3 May 2017, the applicant’s solicitors wrote to the respondents’ solicitors:We refer to your letter dated 14 March 2017 (sic) requesting information in relation to the Applicant’s citizenship and assets.We advise as follows:1.The Applicant has recently become an Australian citizen. We will provide a copy of evidence of citizenship shortly.2.The Applicant currently has sufficient unencumbered assets in Australia to satisfy any costs order against him which include:a. Approximately $160,000AUD in an Australian bank account;b. Bonuses in the amount of approximately $650,000AUD which will be paid in the next month. On or about 26 July 2021, the applicant travelled from Australia to the United States of America, together with his wife and teenage daughter. He did so to provide care, support and assistance to his elderly parents, one of whom was struggling with a long-term illness. The applicant expected to spend several months in California but did not intend to stay there permanently.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

No challenge was made to Ms Tatasciore’s estimate of the respondents’ likely future costs or to her estimate that 70 per cent of those costs would be recoverable. Similarly, the applicant did not suggest that the quantum of security sought, namely $200,000, was unreasonable.The enforcement of a judgment in California The evidence of Mr Lubic, a partner of K & L Gates practising in Los Angeles and San Francisco with more than 36 years of experience in commercial law, is that a costs order obtained by the respondents in this Court would be registerable and enforceable in California at an estimated cost of USD17,500 to 25,000 if undertaken by K & L Gates and at a lower cost if undertaken by a smaller firm specialising in debt collection.The ability of the applicant to provide security The evidence of the applicant was that he would be able to provide security of $200,000 within 21 days if ordered to do so.CONSIDERATION The application is brought pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth). The relevant principles are well settled. In Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1, Allsop CJ and Middleton J at 4 [6] quoted with approval the following statement by the primary judge (Murphy J) in Kelly v Willmott Forests Ltd (in liquidation) [2012] FCA 1446; (2012) 300 ALR 675:It is established that the discretion conferred by s 56 is broad and unfettered. Many attempts to set limitations upon the discretion have been rejected by the Courts, and the only limitation is that it must be exercised judicially: Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1…at 3 per Sheppard, Morling and Neaves JJ. It is a discretion to be exercised according to the merits of each case and without any particular predisposition: Bryan E Fencott Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497…at 511 per French J. The discretion is to be exercised by reference to the particular circumstances arising in each case: Woodhouse v McPhee (1997) 80 FCR 529…at 533 per Merkel J. I turn now to the particular matters which inform the exercise of the discretion in the present case.(1) The applicant is not presently ordinarily resident in Australia and his assets in Australia are insufficient to satisfy any adverse costs order As noted at [2] above, the appellant conceded for the purposes of this application that he is not presently ordinarily resident in Australia and that his assets in this country are insufficient to satisfy any costs order that may be made against him if he were to be unsuccessful in the proceeding. These factors constitute a significant circumstance militating in favour of making an order that the applicant provide security for the respondents’ costs, for the reasons set out by Kenny and Edelman JJ in Commissioner of Taxation v Vasiliades[2016] FCAFC 170; (2016) 344 ALR 558 at 578 to 580 [71] to [75]:[71]The discretion conferred by s 56 is a broad one, subject only to the limitation that it must be exercised judicially. The discretion has been sometimes described as unfettered and to depend on the particular circumstances of the case: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 at 4. The latter observation might be thought a truism, save that it strongly indicates that the exercise of the discretion is not determined by rules. [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). …[74]Regarding the first principal consideration to which we have referred, however, there was no evidence before her Honour concerning either Mr Vasiliades’ assets or ordinary residence, although it was common ground that he was an Australian non-resident without apparent assets in Australia. The significance of this consideration was emphasised in PS Chellaram & Co Ltd v China Ocean Shipping Co 102 ALR 321 (in which the respondents applied for an order that the appellant provide security for the costs of its appeal). In reasons for judgment awarding security, McHugh J stated (at 323):To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.[75]The fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction is clearly a significant circumstance militating in favour of an applicant for security for costs. As the above passage highlights, however, there is no rule that security for costs will be awarded as of course where an applicant is resident out of the jurisdiction and has no assets within the jurisdiction. A case may disclose countervailing circumstances that properly justify refusing an application. (emphasis added)(2) Delay

Ratio Decidendi

Legal Principle Established

The evidence of the applicant was that he would be able to provide security of $200,000 within 21 days if ordered to do so.CONSIDERATION The application is brought pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and r 19.01 of the Federal Court Rules 2011 (Cth). The relevant principles are well settled. In Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1, Allsop CJ and Middleton J at 4 [6] quoted with approval the following statement by the primary judge (Murphy J) in Kelly v Willmott Forests Ltd (in liquidation) [2012] FCA 1446; (2012) 300 ALR 675:It is established that the discretion conferred by s 56 is broad and unfettered. Many attempts to set limitations upon the discretion have been rejected by the Courts, and the only limitation is that it must be exercised judicially: Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1…at 3 per Sheppard, Morling and Neaves JJ. It is a discretion to be exercised according to the merits of each case and without any particular predisposition: Bryan E Fencott Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497…at 511 per French J. The discretion is to be exercised by reference to the particular circumstances arising in each case: Woodhouse v McPhee (1997) 80 FCR 529…at 533 per Merkel J. I turn now to the particular matters which inform the exercise of the discretion in the present case.(1) The applicant is not presently ordinarily resident in Australia and his assets in Australia are insufficient to satisfy any adverse costs order As noted at [2] above, the appellant conceded for the purposes of this application that he is not presently ordinarily resident in Australia and that his assets in this country are insufficient to satisfy any costs order that may be made against him if he were to be unsuccessful in the proceeding. These factors constitute a significant circumstance militating in favour of making an order that the applicant provide security for the respondents’ costs, for the reasons set out by Kenny and Edelman JJ in Commissioner of Taxation v Vasiliades[2016] FCAFC 170; (2016) 344 ALR 558 at 578 to 580 [71] to [75]:[71]The discretion conferred by s 56 is a broad one, subject only to the limitation that it must be exercised judicially. The discretion has been sometimes described as unfettered and to depend on the particular circumstances of the case: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 at 4. The latter observation might be thought a truism, save that it strongly indicates that the exercise of the discretion is not determined by rules. [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). …[74]Regarding the first principal consideration to which we have referred, however, there was no evidence before her Honour concerning either Mr Vasiliades’ assets or ordinary residence, although it was common ground that he was an Australian non-resident without apparent assets in Australia. The significance of this consideration was emphasised in PS Chellaram & Co Ltd v China Ocean Shipping Co 102 ALR 321 (in which the respondents applied for an order that the appellant provide security for the costs of its appeal). In reasons for judgment awarding security, McHugh J stated (at 323):To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.[75]The fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction is clearly a significant circumstance militating in favour of an applicant for security for costs. As the above passage highlights, however, there is no rule that security for costs will be awarded as of course where an applicant is resident out of the jurisdiction and has no assets within the jurisdiction. A case may disclose countervailing circumstances that properly justify refusing an application. (emphasis added)(2) Delay