Phoenix Middle East Company W.L.L v Exhibition Studios Pty Ltd - [2011] FMCA 842

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PHOENIX MIDDLE EAST COMPANY W.L.L v EXHIBITION STUDIOS PTY LTD

[2011] FMCA 842

PRACTICE & PROCEDURE – Security for costs – quantum – fixing of appropriate scale.

PRACTICE & PROCEDURE – Application to transfer proceedings to another registry of the Court – factors when considering transfer.

Competition and Consumer Act 2010 (Cth)
Federal Magistrates Act 1999 (Cth), s.18
Federal Magistrates Court Rules 2001 (Cth), rr. 8.01(1), 21.10, sch. 1

Irrewarra Estate Proprietary Limited v A & S Arnott Proprietary Limited & Anor [2011] FMCA 188

Applicant:

PHOENIX MIDDLE EAST COMPANY W.L.L

Respondent:

EXHIBITION STUDIOS PTY LTD

File Number:

BRG 484 of 2011

Judgment of:

Jarrett FM

Hearing date:

13 October 2011

Date of Last Submission:

13 October 2011

Delivered at:

Brisbane

Delivered on:

18 October 2011

REPRESENTATION

Counsel for the Applicant:

Mr. Priestly

Solicitors for the Applicant:

Parker and Kissane

Counsel for the Respondent:

Mr. Howe

Solicitors for the Respondent:

Clelands Lawyers

ORDERS

Upon the Applicant providing security in the sum of $13,119.00 for the costs of the respondent to these proceedings up to and including the first day of trial, such security to be provided either by way of:
(a)cash deposit into a controlled monies account controlled by the Applicant’s Solicitors pending further order of the Court; or
(b)alternatively, by way of bank guarantee in a form acceptable to a Registrar of the Adelaide Registry of the Federal Magistrates Court of Australia.
The application in a case for security for costs filed on filed 23 August 2011 be stood over to a date to be fixed with liberty to restore by leave of the Court to be applied for on two days notice to the Applicant.
That pursuant to Rule 8.01 of the Federal Magistrates CourtRules 2001 (Cth), these proceedings be heard in the Federal Magistrates Court of Australia at Adelaide.
That this matter be adjourned for directions before Federal Magistrate Simpson on 14 December 2011 at 9.30am in the Federal Magistrates Court of Australia at Adelaide.
That the costs for the Application in a Case filed on 23 August 2011 be costs in the cause.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 484 of 2011

PHOENIX MIDDLE EAST COMPANY W.L.L

Applicant

And

EXHIBITION STUDIOS PTY LTD

Respondent

REASONS FOR JUDGMENT

By an Application in a Case filed on 23 August 2011, the Respondent to the principal proceedings seeks an order for security for costs, an order for the transfer of these proceedings to the Adelaide registry of the Federal Magistrates Court and an order that the Respondent “receive its costs of this application on a solicitor client basis”.
The application for security is opposed in that there is disagreement between the parties about the form of security and the amount of it, although there is no disagreement that security should be provided. There is dispute between the parties about whether the matter should be transferred to the Adelaide registry of the Court.
The principal proceedings in this matter arise out of the Competition and Consumer Act 2010 (Cth). The claim set out in the statement of claim filed on 12 July reveals that the Applicant alleges that it entered into a contract in Adelaide with the Respondent in or about May, 2008 for the design and construction of a certain environmental model. The Applicant alleges that the Respondent breached the contract. The Applicant further alleges that the contract was entered into on the basis of certain representations made by the Respondent through its agents and relying upon those representations, the Applicant entered into the contract.
It is alleged by the Applicant that the representations were false and by reason of entering into the contract on the basis of those false representations, it has suffered loss and damage. Alternatively it has suffered loss and damage by reason of the Respondent’s breach of contract. The claim therefore is one that arises from misleading or deceptive conduct and damages for breach of contract. In the circumstances the breach of contract claims seems to be within the Court’s associated jurisdiction: s.18 of the Federal Magistrates Act 1999 (Cth).
The Respondent denies the allegations made against it. The Respondent says that there ought to be an order for security for costs and that the security ought to be given by way of bank guarantee in a form acceptable to the Respondent and the Registrar of the Court in the amount of $87,900.00. In support of that application, the Respondent relies upon an affidavit of Thomas Alexander Walker. Mr Walker deposes that he is a partner in the firm of solicitors that acts for the Respondent. He deposes that the Respondent has entered into a costs agreement with his firm that provides for certain costs and charges in respect of work done in the proceedings. In paragraph 23 of his affidavit he sets out the particulars of how the sum of $87,900.00 sought as security is calculated. It is clear, having regard to paragraph 23 of Mr Walker’s affidavit, that what is set out there are solicitor and own client costs calculated according to the fee agreement referred to in paragraph 22 of his affidavit.
Ordinarily on an application for security for costs there is expert evidence about the likely nature and extent of the costs to be incurred in the litigation on the part of the party seeking security. Ordinarily that is done by a solicitor, sometimes the solicitor who is acting for the party, but at least by someone who establishes their expertise to give the evidence set out in their affidavit. Mr Walker does not do that.

He does not set out in his affidavit the expertise he has in litigation or that in having regard to his expertise in litigation of this nature the steps set out in his affidavit are either reasonable or necessary. In that sense his affidavit is of little weight, although no objection was taken to the admissibility of the evidence contained in it.
Mr Walker does set out the costs agreement and presumably if the work that is set out in paragraph 23 of the affidavit is actually done, leaving aside the question of whether it is necessary, then the Respondent will be charged the amounts set out therein.
However, the authorities demonstrate that an order for security of costs is generally not calculated on an indemnity cost basis or a solicitor and own client basis. Rather, the Court is obliged to fix a sum of security which in all of the circumstances is reasonable.
The Applicant, being the Respondent to the application for security for costs, says that the costs sought are excessive and notwithstanding that it has recently made an offer to provide security in the sum of $50,000.00 by way of cash deposit, the order for security ought to be much less.
In the decision of Irrewarra Estate Proprietary Limited v A & S Arnott Proprietary Limited & Anor [2011] FMCA 188, Cameron FM said at paragraph 60:
“Defining an amount which might be secured presents the Court with the choice of its own scale found in schedule 1 of the rules, or the Federal Court scale as the basis of the calculation. As observed earlier in these reasons, it is too early to make that choice. However, rule 21.10 provides that this Court’s scale is to apply unless the Court orders otherwise. As a result, absent any basis at this point to Order that costs be assessed on a different basis, it must be taken that this Court’s scale should apply when determining the quantum of costs to be secured.”
Just as in Irrewarra Estate, it is at the moment too early to speculate whether costs – if the Respondent is to secure an order for costs – should be calculated on a party and party basis or on a solicitor and client basis, and whether those costs should be assessed according to Schedule 1 of the Federal Magistrates Courts Rules 2001 or the Federal Court scale.
There is no evidence addressed to the issue as to whether it is likely that costs will be awarded, if at all, on the Federal Court scale or the Federal Magistrates Courts scale, which is hardly surprising given the early stage of the litigation. In those circumstances, just as Cameron FM did in Irrewarra Estate, it seems to me appropriate to make an order for security for costs by fixing the quantum according to the scale set by the Federal Magistrates Courts Rules 2001. There seems on the evidence before me, no reason to depart from the prima facie position established by FMCR 21.10.
Orders for security for costs are made in futuro as a general rule. That is, they cover costs to be incurred. It was not suggested that I should take any other approach in this case, although in the event that I am wrong about that, I would decline to do so in any event. In the correspondence that is annexed to the affidavits relied upon by the Respondent, the threat of an application for security for costs was made well before the proceedings were commenced. The proceedings were commenced on 16 June 2011 and on 14 July 2011 I made orders for the delivery of pleadings and the like between the parties. It was not suggested then that nothing should happen until there was an application for security for costs, although such an application was foreshadowed, and indeed was filed. But it seems to me that in those circumstances it would be inappropriate to calculate the quantum of the costs to be secured over the whole of the action rather than in futuro.
In those circumstances I propose to fix the quantum of the costs to be secured having regard to the following items in Schedule 1 of the Federal Magistrates Courts Rules:
a)Stage 4 which is the dispute resolution litigation intervention stage of $2,623.00;
b)Stage 5 being preparation for final hearing up to and including the first day of trial, $5,623.00;
c)Solicitors costs for attending the first day of trial according to the daily hearing fee of $1,873;
d)Counsel’s fees, (which as best as I can work out from the affidavit of Mr Walker will be about $3,000.00 a day) of $3,000.00.
That is a total of $13,119.00.
As to the form of security, the security can be made by way of cash deposit to a controlled moneys account controlled by the Applicant’s solicitors and not to be disbursed without further order of the Court or alternatively by way of bank guarantee in a form acceptable to the registrar of the Federal Magistrates Court in Adelaide.
I turn to the question of transfer. The application should be transferred to Adelaide in my view. The material reveals that the Respondent’s witnesses are in Adelaide. The Applicant’s witnesses are scattered all around the world but none are in Queensland and none are in New South Wales. The Applicant has witnesses from Bahrain, Saudi Arabia and also New York. They will have to travel for the trial, unless arrangements can be made for them to give their evidence in some other way. The witnesses for the Respondent are all in Adelaide.
It is not to the point, it seems to me, to suggest that Queensland – or for that matter New South Wales – has no connection with the cause of action in this matter. This is a federal court and the Applicant is at liberty to commence proceedings in any registry of this Court that it chooses so to do. It is not a jurisdiction which is limited by State boundaries. Having said that, the rules do provide a mechanism whereby proceedings can be transferred within the Court from registry to registry having regard to the matters set out in FMCR 8.01(1)
I have already canvassed the location of the witnesses. In my view it would be more convenient, at least to the Respondent, but no less convenient to the Applicant for the balance of the proceedings to be conducted in Adelaide. As the delivery of this judgment demonstrates both parties can appear by telephone. If the matter is conducted in Adelaide only one of the parties will need to appear by telephone.

If the matter remained in Brisbane, at least one, but more probably both will appear by telephone at any directions hearing.
The Court, on my enquiry, can accommodate these proceedings in Adelaide and, if necessary, allocate trial dates for up to and including five (5) days, as early as March next year. That can be accommodated as well in Brisbane in the same timeframe so that factor is neutral.
I canvassed during the course of submissions whether the application for transfer could be stood over until the proceedings reached a more mature stage, but on reflection it seems to me inappropriate to take that course. These are commercial proceedings and this Court manages its workload through a docket system. It is appropriate, it seems to me, that the Federal Magistrate who will ultimately hear and determine these proceedings, conduct the directions applications and any other interlocutory matters that need attention during the course of the preparation of the matter for hearing.
In those circumstances, I make an order that the proceedings be transferred to the Adelaide registry of the Federal Magistrates Court of Australia and that the matter be listed in the docket of Federal Magistrate Simpson, for mention at 9.30am on 14 December 2011.

[Recorded – not transcribed]

The order for costs will be that the costs of the application in case filed on 23 August 2011 be in the cause. I make that order for these reasons. The application in a case sought relief in respect of two matters. The transfer application was successful. The security for costs application might not have been as successful as it was hoped to be. It was pointed out in submissions that there was a warning letter, sent as early as 2009, suggesting that there would be an application made to transfer the matter to Adelaide if the proceedings were commenced in any other jurisdiction other than South Australia. The same heresy that South Australia was the only state with jurisdiction in the proceedings argued on the transfer application was continued in submissions in respect of the application for costs.
The Applicant is entitled to commence proceedings anywhere in Australia given the jurisdiction of this Court. It may well have been that once there was some understanding of the nature and the extent of the case and the witnesses to be called, that this was an appropriate choice of venue. It may not have been. But at the end of the day it seems to me that, having regard to the federal nature of the jurisdiction exercised by this Court and the convenience to the Applicant, that it was not inappropriate to commence the proceedings where they were commenced.
They were certainly not commenced in a way which would justify an order for indemnity costs – something which seems to be asked for in every costs application, these days – but without reference to the authorities or the principles that inform the exercise of a discretion to grant an order for indemnity costs.
In my view the circumstances are not even sufficient in this case to warrant an order for party and party costs. The order will therefore be that costs be costs in the cause.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date: 1 November 2011