Paton v Lloyd - [2016] WASC 421

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: PATON -v- LLOYD [2016] WASC 421

CORAM: ACTING MASTER STRK

HEARD: 22 SEPTEMBER 2016

DELIVERED : 23 DECEMBER 2016

FILE NO/S: CIV 1506 of 2016

MATTER :Section 77(1) of the Trustees Act 1962 (WA)
The Estate of James Laurence Paton

BETWEEN: PETER JAMES PATON
Plaintiff
AND
JULIE MARIE LLOYD as Executrix of the Estate of JAMES LAURENCE PATON
First Defendant
JULIE MARIE LLOYD as Beneficiary under the Will of JAMES LAURENCE PATON
Second Defendant

Catchwords:

Practice and procedure - Application for security for costs - Discretionary decision - Turns on own facts

Legislation:

Family Provision Act 1972 (WA)
Rules of the Supreme Court 1971 (WA), O 25

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr P R MacMillan
First Defendant             :     Mr M L Bennett
Second Defendant         :     Mr M L Bennett

Solicitors:

Plaintiff:     Griffiths Rice & Co
First Defendant             :     Bennett + Co
Second Defendant         :     Bennett + Co

Case(s) referred to in judgment(s):

Mataska v Browne [2013] VSC 62
Moran v Schwartz Publishing Pty Ltd [No 2] [2015] WASC 35

ACTING MASTER STRK: This is the defendant's application for security for costs made under O 25 of the Rules of the Supreme Court 1971 (WA) (the Application).
For the reasons set out below, I am satisfied that an order for security for costs should not be made.

Factual background and the basis for the Application

In support of the Application, the defendant (Ms Lloyd) relied on an affidavit sworn by a solicitor, Ms Jonelle Di Lena on 16 August 2016. The plaintiff (Mr Paton) relied on three affidavits: the affidavits of Mr Paton sworn on 21 March 2016 and 7 September 2016; and the affidavit of Mr Daniel Rice, a solicitor, sworn on 5 September 2016.

Status of the proceedings

These proceedings were commenced by way of originating summons on 30 March 2016, supported by the affidavit of Mr Paton sworn on 21 March 2016 and an affidavit of Emily Louise Hughes, a solicitor, sworn 30 March 2016.
On 15 August 2016, the case management registrar made an order that the matter is to proceed as if the proceedings had commenced by writ of summons. A statement of claim was filed on 6 September 2016 and further and better particulars of that statement of claim were filed on 16 September 2016. On 15 August 2016, the case management registrar also made programming orders for the hearing of this Application. These proceedings are at a relatively early stage and Ms Lloyd has not yet filed a defence.

Nature of the proceedings

In these proceedings Mr Paton seeks among other things the revocation of this court’s grant of probate to Ms Lloyd, and the removal, or partial passing over, of Ms Lloyd as the executor of the estate of James Laurence Paton (deceased), who died on 11 April 2015. Mr Paton, who is not a beneficiary under the will of the deceased, seeks a grant of letters of administration with the will annexed and the appointment of his daughter (either temporarily or permanently) as the administrator of the deceased estate so that among other things, investigations regarding an inter vivos transaction may be undertaken.
The inter vivos transaction involves a contract for sale by offer and acceptance of the deceased's former matrimonial home in Applecross (the Property) to Ms Lloyd's daughter and her partner in January 2015.
The estate of the deceased as at his death in April 2015 comprised cash assets in the amount of $305,053.28, which has now been largely distributed to Ms Lloyd as sole beneficiary under the will of the deceased.[1] Mr Paton says that the Property was sold in January 2015 for $800,000; the deceased received at settlement $414,795; and the deceased had received prior to settlement $384,819.42 in part payment of the purchase price. By these proceedings Mr Paton seeks to have the disposition of moneys between January and April 2015 investigated. Written requests were made on behalf of Mr Paton for an explanation as to, among other things, the manner in which the net proceeds of sale of the Property were exhausted or disposed of prior to Ms Lloyd's application for the grant of probate.[2] Mr Paton says that he has not received a substantive response to the same.
[1] Affidavit of Peter James Paton sworn 21 March 2016, 'PP4' and 'PP5'.
[2] Affidavit of Peter James Paton sworn 21 March 2016, [16] – [19].
Ms Lloyd is the first defendant in these proceedings, joined in her capacity as executrix of the estate of the deceased. Ms Lloyd is also joined as the second defendant in these proceedings in her capacity as beneficiary under the will of the deceased.
Ms Miranda Shannon Paton (Mr Paton's daughter) consents to being granted a limited grant of letters of administration of the estate of the deceased.[3]
[3] Affidavit of Emily Louise Hughes sworn 30 March 2016, 'ELH1'.
In addition to these proceedings, Mr Paton had made (an earlier) application for provision pursuant to s 7 of the Family Provision Act 1972 (WA). Mr Paton is the plaintiff in CIV 3016 of 2015 and Ms Lloyd is again joined as first and second defendant, in her capacity as executrix and beneficiary respectively. Mr Paton relies on his application in CIV 3016 of 2015 to provide him with standing to seek relief in these proceedings.
Ms Lloyd says that CIV 3016 of 2015 will primarily be defended on the grounds that Mr Paton has engaged in 'disentitling conduct' such as to justify him having been omitted from his late father's will.[4] As at the hearing of the Application, the filing of affidavits in opposition to Mr Paton's claim in CIV 3016 of 2015 had been programmed but were not yet due to be filed.

Mr Paton's financial circumstances

[4] Affidavit of Jonelle Di Lena sworn 16 August 2016, [6].

In these proceedings, Mr Paton asserts that he has no assets.[5]
[5] Statement of claim filed 6 September 2016, [7].
In CIV 3016 of 2015, Mr Paton deposes to owning no real property in Western Australia or any other jurisdiction; residing in a property provided by Homeswest; owning personal property of nominal value; having an earning capacity limited to the government disability pension which he has been in receipt of since about 1989; having a net monthly income of $776.70; and expending his entire income on the basic necessities of day to day living.[6] He deposes to the same in these proceedings.[7]
[6] Affidavit of Peter James Paton sworn on 1 February 2016, [16] – [21].
[7] Affidavit of Peter James Paton sworn on 7 September 2016, [3] – [8].
Mr Paton also deposes to having no means whatsoever to provide security for costs in these proceedings; that there is no other person that can provide security for costs on his behalf in this matter; and in the event that the security for costs application succeeds, his application in these proceedings will be stifled and in turn so will his claim for further provision in CIV 3016 of 2015.[8]

The funding of these proceedings

[8] Affidavit of Peter James Paton sworn on 7 September 2016, [9] – [11].

The affidavits relied upon by Mr Paton in support of the Application do not disclose how he is funding these proceedings and CIV 3016 of 2015, despite his impecuniosity. There is no affidavit evidence before the court as to the existence or terms of any fee arrangement as between Mr Paton and the firm Griffiths Rice & Co.
In the written submissions filed on behalf of Ms Lloyd on 29 August 2016 it is asserted that 'As a result of the plaintiff's disclosed impecuniosity, the defendant requested but the plaintiff has refused to disclose who is paying or liable for the legal fees incurred in these proceedings as well as the legal fees in relation to the plaintiff's application for provision under the deceased's estate'.
During the course of the hearing of the Application, counsel for Mr Paton stated that Mr Paton 'has no assets and the solicitors are acting on a deferred fee basis. There's nothing to criticise in that, on my understanding. And to suggest that the solicitors involved should themselves provide the security is perhaps a little unrealistic, and perhaps also a little unfair'.
At the conclusion of the hearing of the Application, I enquired of counsel as to whether it is uncontested that the solicitors for Mr Paton act on a deferred fee basis and counsel confirmed the same.

Security for costs

Order 25 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) provides that the Court 'may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him'.
Examples of the grounds on which an order for security for costs might be made are set out in O 25 r 2 RSC. None of the examples have application in this case.
Order 25 r 3 RSC makes it clear that the granting of security shall be in the discretion of the Court. The factors that the Court will take into consideration in the exercise of its discretion include but are not limited to those set out in O 25 r 3 RSC, namely the prima facie merits of the claim; what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff; and whether the normal processes of the Court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff.
Having regard to the affidavits filed and relied upon by the parties, together with the submissions made, I find that the following factors support the grant of the Application.
First, evidence as to Mr Paton's financial position makes it clear that he will have no capacity to pay any cost order which may be made against him if he does not succeed in the action, and that he has no assets in the jurisdiction to satisfy an order for costs.
Secondly, Ms Lloyd has not caused the impecuniosity of Mr Paton, directly or indirectly.
Thirdly, Mr Paton does not take issue with the amount sought by way of security for costs. At the hearing of the Application, counsel for Mr Paton conceded that the amount pressed was modest.
Fourthly, having had regard to all of the circumstances, there was conferral prior to and no significant delay in making the Application.
Fifthly, Ms Lloyd is not, in substance or otherwise a plaintiff in these proceedings.
Despite the above, in all of the circumstances, I find that this is not a case where it is appropriate to require the payment of security for costs. The following factors particularly support that conclusion.
First, I take into account the prima facie merits of Mr Paton's claim in these proceedings.
In this regard, I note that it is not necessary nor is it appropriate that I attempt any detailed consideration of Mr Paton's case at this stage. There is very limited evidence filed and at this time, no filed defence.
As explained above, Mr Paton relies on his application in CIV 3016 of 2015 to provide him with standing to seek relief in these proceedings, citing the decision of McMillan J in Mataska v Browne.[9]
[9] Mataska v Browne [2013] VSC 62.
On the very limited evidence before me, and having regard to the cases cited by the parties, I find that it is arguable that Mr Paton has standing to bring these proceedings. It is not possible on the evidence before me to conclude that Mr Paton's application in CIV 3016 lacks any prima facie merit based on the Mr Paton's disentitling character or conduct.
Further, while there are difficulties with his claim in these proceedings, I find that there is a prima facie case for investigation.
Secondly, Mr Paton deposes to having no means whatsoever to provide security for costs in these proceedings; that there is no other person that can provide security for costs on his behalf in this matter; and in the event that the security for costs application succeeds, his application in these proceedings will be stifled and in turn so will his claim for further provision in CIV 3016 of 2015.[10]
[10] Affidavit of Peter James Paton sworn on 7 September 2016, [9] – [11].
In this regard, counsel for Ms Lloyd referred to the decision of Kenneth Martin J in Moran v Schwartz Publishing Pty Ltd [No 2],[11] and in particular to the passage:
As to evidence regarding the likelihood of such financial support being available, a court is entitled to be bold, when a party fails to give evidence on matters of which it clearly has knowledge: The Insurance Commissioner v Joyce [1948] HCA 17; (1948) 77 CLR 39 [49] (Rich J). However, a court should not speculate and should only draw an adverse inference if a factual substratum exists supporting that conclusion: Montfroy v Roads Corporation [2005] VSC 320 [91]; The Owners of Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 [182]. Thus, if a plaintiff claims the benefit of personal impecuniosity (as a shield, in effect, against the making of an order for security) but clearly does receive considerable third party financial support to prosecute an action, a court may appropriately consider whether an adequate disclosure of the financial circumstances of the plaintiff has been made, including as to the nature, extent and continuity of third party financial support, plus what other evidence exists in relation to this issue [66].
[11] Moran v Schwartz Publishing Pty Ltd [No 2] [2015] WASC 35.
In this case, Mr Paton claims the benefit of personal impecuniosity (as a shield, in effect, against the making of an order for security). It also appears to be the case that the solicitors for Mr Paton act on a deferred fee basis – thereby providing him with considerable third party support to prosecute the action.
There has not been adequate disclosure of the financial circumstances of the plaintiff, in particular the extent and continuity of third party financial support.
However, Mr Paton does depose to there being no other person that can provide security for costs on his behalf in this matter. His evidence is not inconsistent with his solicitors having agreed to act on a deferred fee basis.
I am not prepared to speculate nor am I prepared to draw an adverse inference in all of the circumstances of this case. I am also not able to infer that Mr Paton’s solicitors are likely to pay security for Mr Paton's costs if he is ordered to pay security, nor am I able to infer that these proceedings are being pursued for the benefit of Mr Paton's solicitors.

Conclusion

For the reasons set out above, I am not satisfied that an order for security for costs should be made. I will hear from the parties as to the appropriate form of order.