Oswal v Australia and New Zealand Banking Group Limited and Ors (Security for trial costs)
[2016] VSC 282
•27 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2011 4653
BETWEEN
| RADHIKA PANKAJ OSWAL | Plaintiff |
| and | |
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) & ORS | Defendants |
S CI 2012 1995
BETWEEN
| PANKAJ OSWAL | Plaintiff |
| and | |
| IAN MENZIES CARSON & ORS | Defendants |
S CI 2015 804
BETWEEN
| YARA PILBARA FERTILISERS PTY LTD (ACN 095 441 151) | Plaintiff |
| and | |
| PANKAJ OSWAL & ORS | Defendants |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 May 2016 |
DATE OF JUDGMENT: | 27 May 2016 |
CASE MAY BE CITED AS: | Oswal v Australia & New Zealand Banking Group Limited & Ors (Security for trial costs) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 282 |
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PRACTICE AND PROCEDURE – Further security for costs applications by defendants – Whether plaintiffs ordinarily resident in Australia; Logue v Hansen Technologies Ltd [2003] FCA 81.
PRACTICE AND PROCEDURE – Amended pleadings – Defendant and cross-claimant ordered to pay costs thrown away – costs not immediately taxable – whether security should be provided for costs thrown away.
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APPEARANCES: | Counsel | Solicitors |
| For Mr and Mrs Oswal | Mr A J Myers QC with Mr P H Wallis | Watson Mangioni Lawyers |
| For the ANZ Banking Group Limited and the Receivers | Mr P H Solomon QC with Mr D Lorbeer | Herbert Smith Freehills |
| For the Apache parties | Mr S M Anderson QC with Mr S L Friere | Clyde & Co |
| For Yara Australia and Chemical Holdings | Mr R Doyle SC with Mr J Gurr | Clayton Utz |
HIS HONOUR:
Introduction
On 24 February 2016, I published reasons for holding that Pankaj Oswal and Radhika Oswal, each a plaintiff were liable to provide security for each defendant’s costs.[1] By later Judgment handed down on 31 March 2016 I fixed the amount of security to be provided up to and including the first day of trial.[2] I will assume familiarity with my earlier Judgments. Defined terms bear the same meaning as in the Judgments. The security has been provided.
[1][2016] VSC 52 (Security Decision Stage One).
[2][2016] VSC 119 (Security Decision Stage Two).
Each defendant now seeks further security essentially for the costs and disbursements of the trial and summonses to such effect have been issued.[3]
[3]The ANZ and Receivers’ Summonses are dated 29 April 2016.
The Apache Defendants’ Summonses are dated 29 April 2016.
Yara Australia’s Summonses are dated 2 May 2016.
Chemical Holdings’ Summonses are dated 2 May 2016.
Security is sought in the following amounts —
·ANZ and the Receivers — $708,762
·Apache defendants — $1,447,000
·Yara Australia — $1,030,186 (plus $114,465 as further security for Mrs Oswal’s claim)
·Chemical Holdings — $218,907 (plus $24,323 as further security for Mrs Oswal’s claim)
The applications are opposed. First the Oswals contend that the earlier jurisdictional basis on which security was ordered no longer exists, as the Oswals are ordinarily resident in Australia. Alternatively it is submitted that as a matter of discretion further security should not be ordered. If security is ordered, it is submitted that it should be confined to the disbursements originally sought in the earlier applications subject to some reduction. If the security is not so confined the amount should be reduced for various reasons set out in the material filed on behalf of the Oswals.[4]
[4]Affidavit of John Biggs dated 17 May 2016 (second Biggs affidavit). Affidavit of Joseph Mazzeo dated 17 May 2016 (Mazzeo affidavit).
Matters of general application
Before dealing with each application there are a number of matters of general application which should be dealt with first.
Ordinarily resident
I do not accept that the Oswals are ordinarily resident in Australia. They have returned to Australia for the trial and are subject to Departure Prohibition Orders (‘DPO’). This does not make them ordinarily resident in Australia.
In Logue v Hansen Technologies Ltd,[5] and after referring to English authority, Weinberg J said —
[5][2003] FCA 81 (‘Logue’).
[26]What these cases, and others like them seem to establish is that the test for ordinary residence depends to a significant degree upon the state of mind of the person whose residence is in question. The language used in a number of the cases focuses upon whether the person habitually and normally resides in the jurisdiction, and does so for a settled purpose.
…
[34]The impression which I have formed from reading the two affidavits filed on behalf of the applicant is that the main reason that he is still here today is to pursue this litigation. In my opinion, he has not formed a ‘settled purpose’ to remain in this country. Were it not for this litigation, he would probably have remained in Hong Kong, or gone to some other place where the prospects of employment for someone with his background would be significantly greater. Although, the onus rests upon the respondents to demonstrate that the applicant is not ordinarily resident in Australia, that onus can be discharged by proving that he was last ordinarily resident outside this country, and has not yet acquired ordinary residence in this country. That onus is met by establishing that the applicant has not formed a settled purpose to remain in Australia.
In Wu v Avin Operations Pty Ltd (No 3),[6] Kenny J said —
[6][2006] FCA 1321.
[27]The expression ‘ordinarily resident’ is one that is used by the law to signify that, for the time being, a person, here the applicant, has chosen to live everyday life in a particular place, on a settled basis and for some continuous period of time. In the present context, if an applicant is ordinarily resident outside Australia, a respondent may reasonably apprehend that there will no funds or other assets within the jurisdiction to meet orders for costs made in the respondent’s favour.
…
[31]Each case will, naturally enough, depend on its own facts. A person may be said to habitually and normally reside in the jurisdiction, even though he or she settled there comparatively recently. The onus rests on the respondents to show that the applicant is not now resident in Australia. They have not demonstrated this to my satisfaction, on the balance of probabilities.
It is tolerably clear that the Oswals do not habitually and normally reside in the jurisdiction and but for the trial they would not have returned. It cannot be said that they have formed a ‘settled purpose’ to remain in this country. This is not where they have chosen to live their ‘everyday life’. They were clearly ‘last ordinarily resident outside this country’ and the evidence does not establish that they have ‘acquired ordinary residence in this country’.
Unlike the cases referred to there is very little evidence relating to where the Oswals are ordinarily resident. They have not deposed to any relevant facts. In an affidavit sworn 17 May 2016, their solicitor, John Biggs deposes as follows —
20.I am told by Mr Oswal and I believe that as at 18 December 2015 they were resident in Dubai in the United Arab Emirates.
21.Mr and Mrs Oswal are involved in a number of proceedings with the Commissioner of Taxation in the Federal Court of Australia.
22.By interlocutory application dated 18 December 2015 filed in one of those proceedings (WAD 264 of 2012), Mrs Oswal sought orders that her testimony (and that of Mr Oswal) in that proceeding either occur by videolink or be taken by commission in Hong Kong.
23.The basis for the relief sought by Mrs Oswal was an apprehension on the part of Mr and Mrs Oswal that they would be made the subject of Departure Prohibition Orders (DPOs) if they were to return to Australia to give evidence in that proceeding.
24.By reasons delivered on 23 December 2015 (reported under the citation Commissioner of Taxation v Oswal (No 5) [2015] FCA 1504) Justice Gilmour of the Federal Court of Australia dismissed Mrs Oswal’s interlocutory application.
25. In the first half of April 2016, Mr and Mrs Oswal arrived in Australia.
26.On 18 April 2016, they were both issued with DPOs expressed to be issued pursuant to section 14S of the Taxation Administration Act 1953 (Cth). Copies of the DPOs are annexed and marked “A”.
27.The DPO issued to Mr Oswal states that he is indebted to the Commonwealth for a total of $6,283,543.40. The DPO issued to Mrs Oswal states that she is indebted to the Commonwealth for a total of $185,996,750.29.
28. I am told by Mr Oswal and I believe that:
(a)he and Mrs Oswal cannot pay the amounts for which they are said in the DPOs to be indebted to the Commonwealth; and
(b)if either of them were to be free to depart from Australia, he/she would not be willing to do unless the other were also fee to depart from Australia.
The DPO is the only basis on which it was submitted that the Oswals are ordinarily resident in Australia. As pointed out, there is no other evidence to displace the position that they are (despite their physical presence) not ordinarily resident in Australia.
Mr Myers QC sought to distinguish the cases referred to on the grounds that in those cases the relevant person had a choice. Where there was no choice (as in the case of a DPO) it was submitted that the matter was different and subjective intention less relevant. Reference was made to the lunatic who was ordinarily resident in the United Kingdom for income tax purposes.[7]
[7]Re Mackenzie [1741] Ch 69 referred to in Logue at [25].
Although the DPO may prevent the Oswals from leaving Australia, this does not in and of itself make them ordinarily resident in Australia. This is particularly so having regard to the nature of the order and the ways or means by which the order may be discharged or revoked. In addition to the right to appeal a DPO may be revoked if the Commissioner is satisfied that the tax liabilities are completely irrecoverable.[8]
[8]Section 14T(1)(b) of Taxation Administration Act 1953.
Further, and whatever the position, it cannot be said at this stage — after only a few weeks — that they are all of a sudden involuntary ordinary residents. They have expressed no desire or subjective intention to be ordinary residents and it is difficult to see how an administrative procedure, extant for only a few weeks, with uncertain and potentially different outcomes converts them to ordinary residents. The argument may have greater force if they were in Australia for a far longer period of time.
For these reasons, in my opinion the jurisdiction remains enlivened.
Discretion
As a matter of discretion, I do not accept that security should not be ordered. In my view it is appropriate that further security be provided. The existing security is not sufficient. The jurisdictional basis remains, there is no evidence of stultification and the trial is likely to be long and complex. The fact that they are individuals living (but not ordinarily resident) in Australia is not in my view sufficient in the circumstances to justify the exercise of my discretion not to order further security for costs.
Approach
The remaining issue is how much to each defendant? Before dealing with each defendant’s position there are some general matters that should be addressed.
I propose to take the same broad brush approach that I took in fixing the amount of security for costs in the Security Decision Stage Two.
Solicitors’ fees
It is apparent that the security for costs (of the trial) now sought by the defendants (other than the ANZ and the Receivers) goes beyond the security for costs (of the trial) sought in the earlier applications. The amount sought in the earlier applications, so far as related to the trial, were less and specifically did not include solicitors fees. It was confined to future disbursements. The Oswals contend that these defendants are not free to now depart from the basis (and amount) in which the earlier applications were made, notwithstanding that the Court only ordered security for costs up to and including the first day of trial. To do so, it was submitted would be opportunistic and inappropriate at this stage. Rather, it was submitted that the Court should regard the applications as an extension of the earlier applications and that accordingly the same approach should be adopted, namely, limiting any determination of quantum to disbursements during the trial.
The relevant defendants disagreed and submitted that the earlier applications having been disposed of, they were now entitled to frame the application so as to include solicitors fees and all disbursements likely to be incurred. The security for costs of the trial should, it was submitted be approached on the evidence before the Court, notwithstanding the earlier applications.
There is force in the submission made on behalf of the Oswals. For the reasons given I do not propose to depart from the basis upon which the previous security for costs was ordered, namely future disbursements. This was the basis on which the relevant defendants sought security for the trial. Had they succeeded in what they specifically applied for, security would have been limited to future disbursements. The present applications should be so limited.
Issues of quantification remain. Each defendant will be considered separately.
ANZ and the Receivers
ANZ and the Receivers have limited their claim to further disbursement. The claim, which it was submitted was conservative, is in the sum of $708,762 as set out below —
·Senior Counsel — $388,032 47 days at $8256/day
·Junior Counsel — $225,600 47 days at $4800/day
·Experts — $39,900 Five days are claimed for each of Barry Honey (at $350/hr for 6 hours/day) and Craig Edwards (at $600/hr) for preparation and 2 days each at the same rate for the giving of evidence
·Transcript — $38,168 The total cost for real time transcript is $76,336. Half has been deducted on account of proceeding 804
·E-trial facilities — $17,062 The total cost is $34,124. Half has been deducted on account of proceeding 804.
The Oswals submitted that the appropriate amount is $558,089 as set out below —
·Senior Counsel — Only 35 days should be allowed not 47
·Junior Counsel — Only 41 days should be allowed not 47
·Expert fees — Should be reduced from $39,900 to $30,628 because of a miscalculation and that Edwards’ fee exceeds the daily allowance
·Transcript fees — Should be reduced from $38,168 to $21,853 on account of overstatement and not taking into account 20 days for proceeding 804.
·E-Court fees — Should be reduced from $17,062 to $11,588 for the same reason.
In relation to Senior and Junior Counsel, it is not possible to predict with any degree of certainty, either the duration of the trial, or the likely number of days that relate to the 804 proceeding. Nevertheless doing the best I can I consider that there should be no reduction in the number of days for Junior Counsel. In relation to Senior Counsel, I consider that 40 days should be allowed. In relation to the 804 proceeding, I consider that in light of the amended defence and consequent reduction of issues, the number of days that the 804 proceeding will take, will be substantially reduced. The reduction for Senior Counsel’s fees is the sum of $57,792. The revised figure is $330,240.
I propose to reduce experts’ fees to $30,628 for the reasons given.[9]
[9]Mazzeo affidavit, [10]-[11].
In relation to transcript and e-court fees, I propose to allow a total of $44,000.
Accordingly doing the best I can, and taking a broad brush approach, and given my substantial knowledge of the case, I consider that the appropriate amount for security for the costs of the trial is the sum of $630,468. I will round this off to $630,000.
Security (as between the two proceedings) should be provided on the same basis as my previous order, save that I consider that it should be provided in two equal tranches. The first tranche is to be provided by 4.00 pm on 6 June 2016 and the second tranche by 4.00 pm on 4 July 2016.
The Apache defendants
The Apache defendants have claimed $1,447,000. The precise quantification is set out in Schedule A to their submissions filed 19 May 2016.
I refer to Schedule A. For the reasons given, I will not allow solicitors’ fees. I will not allow 61 days for Senior and Junior Counsel and a further five days for Senior Counsel’s time in Houston. The Oswals submitted that the allowance should be 21 days for Senior Counsel and 31 days for Junior Counsel on the basis that the Apache defendants will have less of an involvement in the case and that insufficient days have been given or allocated to the 804 proceeding.
I do not accept either parties’ submissions. The position, needless to say, is somewhere in the middle. Given the issues so far as the Apache defendants are concerned and the position of the ANZ and the Receivers both in relation to their involvement and the security provided in relation to Counsel’s fees, I consider 61 days to be excessive. I also consider 21 and 31 days for Senior and Junior Counsel respectively to be insufficient particularly in view of the reduction in scope of the 804 proceeding.
In all of the circumstances and again doing the best I can, I consider that the position should be no better than the ANZ and the Receivers. I have allowed the ANZ and the Receivers 40 and 47 days for Senior and Junior Counsel respectively. With some hesitation, I propose to allow the same number of days for Junior Counsel and 36 days for Senior Counsel. Broadly speaking, as parties sought to be held liable on the basis of ‘accessorial liability’, they are entitled to participate in the trial.
Accordingly, security for counsel’s fees will be as follows —
·Senior Counsel — 36 days at $8,181 = $294,516
·Junior Counsel — 47 days at $2,727 = $128,169
In relation to experts’ fees, the Apache defendants claim five days for preparation (at US$800/hour or $12,260/day) being $61,300 and 10 days (at the same rate) attendance at trial, being $122,000. The total is $183,900.
The Oswals submitted that the maximum amount is $15,965 for five days of the experts’ time at scale rates. The Oswals rely on the Mazzeo affidavit at [17]. I accept the analysis and the revised amount. I note that I have previously provided some security for experts’ preparation costs.
The next item relates to flights (both domestic and international) and accommodation expenses. An amount of $182,322 is claimed.
The Oswals submit that an amount of $23,546 is the more appropriate figure. They submit that no allocation should be made for the Sydney solicitors or the proposed trip to Houston. The remaining items, assessed at scale amount to $23,546. The Oswals rely on the Mazzeo affidavit at [18]-[23]. I accept the analysis and the revised amount. I note that I have previously provided some security for travel arrangements in relation to preparation for the trial.
In relation to transcript and e-trial fees I propose to allow the same amount as the allowance to the ANZ and the Receivers.
Accordingly, the amount of security is as follows —
• Senior Counsel — $294,516 • Junior Counsel — $128,169 • Experts’ fees — $15,965 • Flights and accommodation — $23,546 • Transcript and e-trial — $44,000 Total $506,196
I will round this off to $506,000. Security should be provided on the same basis as the ANZ and the Receivers. I refer to paragraph 29 above.
Yara Australia
Yara Australia seeks security in the sum of $1,030,186.
An amount of 40 days (at $8256) has been allowed for Senior Counsel and 61 days (at $5150) for Junior Counsel. The Oswals submit that the appropriate allowance is 21 and 31 days respectively given the issues in relation to Yara.
I consider that in relation to Junior Counsel the position should be no better than that of the ANZ and the Receivers. Indeed it should be the same as the Apache defendants. I will allow 47 days. In relation to Senior Counsel, I propose to allow 36 days, the same as the Apache defendants. The amounts for Senior and Junior Counsel respectively are $297,216 and $242,050.
I do not propose to allow solicitors’ costs for the reasons set out earlier.
I will allow expert witness fees in the sum of $28,737. I note that I have previously allowed some security for experts’ fees in relation to preparation for trial.
In relation to transcript and e-trial fees I propose to allow $44,000 on the basis set out earlier. One half should be allocated to Chemical Holdings.
Yara also seeks travel expenses of $132,511. I propose to allow $15,000 for the reasons set out in the Mazzeo affidavit at [25]. I note that I have previously allowed some security for travel arrangements in relation to preparation for the trial.
Yara has also sought accommodation and incidental expenses of $81,323. I propose to allow $3,250 for the reasons set out in the Mazzeo affidavit at [26]-[27].
Accordingly, the amount of security is as follows —
• Senior Counsel — $297,216 • Junior Counsel — $242,050 • Expert fees — $28,737 • Transcript and e-trial — $22,000 • Travel and accommodation $18,250 Total $608,253
I will round this off to $608,000. Security should be provided on the same basis as the ANZ and the Receivers. I refer to paragraph 29 above.
I do not propose to allow any further security for Mrs Oswal’s claim.
Chemical Holdings
Chemical Holdings seeks security in the sum of $218,907.
An amount of $188,000 is claimed for Junior Counsel based on 47 days at $4000 per day. No amount is claimed for the attendance of Senior Counsel. The Oswals submit that 15 days for Junior Counsel is sufficient.
I propose to allow 20 days for Junior Counsel ($80,000) plus $22,000 in respect of transcript and e-trial fees.
I will round this off to $100,000. Security should be provided on the same basis as the ANZ and the Receivers. I refer to paragraph 29 above.
I do not propose to allow any further security for Mrs Oswal’s claim.
Security for costs thrown away — YPFPL (the 804 proceeding)
Having abandoned the Costs Overrun Agreement Claims (and related claims) Mr Oswal was ordered to pay the costs thrown away by reason of his recently amended Defence and Counterclaim which maintains only the ‘free acceptance claims’.
It was submitted that the costs are clearly wasted or thrown away and that they are, given the nature of the claims, substantial. Although Mr Oswal has been ordered to pay costs thrown away, it was submitted that security should be given for such costs. The costs are not hypothetical but real. They have been incurred and are readily assessable and accordingly security should, it was submitted be ordered.
Mr Oswal argued that, as I had not permitted any security for costs in respect of Proceeding 804, I should not do so now and the fact of the amendment (albeit to abandon a substantial defence and counterclaim) was neither here nor there. The amendment was permitted, reduced the contest and the issue of costs should, it was submitted, be for the trial judge and the Costs Court.
As noted YPFPL contends that in light of the changed circumstances, security is appropriate.
I regret that I am not in a position to assess how much security should be provided, in the event that I was otherwise minded to order security for such costs. Even on a broad brush basis. Actual costs thrown away have been ordered as against Mr Oswal and they should be assessed and taxed in the usual way. Although there is some attraction in making an order for the immediate taxation of such costs (under Rule 63.20.1), I consider that in this case, such an order would be an unnecessary distraction.
It is not entirely clear to me, to what extent costs have been thrown away by reason of the abandonment or withdrawal of the Costs Overrun Agreements claim. It is asserted that substantially all costs associated with the issue are wasted. Although the actual agreements are no longer in issue, having been withdrawn or abandoned, payments made (previously said to be made under the agreements) may still be relevant and provide the underlying factual framework and basis for the free acceptance restitution claim.
In any event, I am unable to accept, without more, that YPFPL will recover 75% of its professional costs and 80% of Counsel’s fees. There is no adequate path of reasoning and the amounts are probably too high. I am simply on the material unable to assess the matter properly, notwithstanding an invitation to, in effect, fix whatever amount I considered to be appropriate. Clearly some amount is appropriate, but it will have to wait.
Finally, and putting aside issues in relation to quantum and methodology, I do not consider, in the exercise of my discretion and in the circumstances of this case (that is the 3 proceedings which are being heard together) that security for such costs should be ordered.
It is indeed unusual to order security for wasted costs or costs thrown away where there is an order to pay such costs and they relate to an amended pleading that has the effect of reducing the number of issues in the case. In such cases although the work done in vain should properly be the subject of a costs order, there is no reason why such costs should necessarily be secured. Such is the consequences of litigation by pleadings and inevitable amendments, even substantial amendments.
Finally, I consider that the counterclaim made by Mr Oswal is sufficiently defensive. In defending and refuting a substantial fraud claim he has provided a factual and legal basis for his conduct. Having reconsidered the matter, and based on advice, he has simplified the nature and basis of his asserted justification. The justification, although on one view not technically defensive, still raises factual issues associated with payment of numerous amounts on behalf of others. But for the claim, the cross claim would presumably not have been made.
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