Reschke v Trevor Reschke Nominees Pty Ltd - [2020] SASC 60

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RESCHKE v TREVOR RESCHKE NOMINEES PTY LTD; RESCHKE v AUSTRALIAN EXECUTOR TRUSTEES LTD
[2020] SASC 60
Judgment of The Honourable Justice Blue
23 April 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - STIFLING OF LITIGATION
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION - JUSTICE OF CASE
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION
The plaintiff in separate actions sues the beneficiaries of the estates of, or gifts by, his father and grandmother claiming an entitlement to the beneficial ownership of, or alternatively a lien over, land in the Coonawarra region. He relies on causes of action of constructive trust, estoppel and equitable lien.
The defendants in each action apply for security for costs. They seek security for costs totalling $300,000 and rely on evidence that the value of the plaintiff’s assets is $400,000 and on a contention that the plaintiff’s assets are likely to be exhausted by paying his own legal costs by the end of the actions, such that they will not recover their costs if they are successful in the actions. They contend that an order for security is necessary in the interests of justice within the meaning of rule 194(1)(e) of the Supreme Court Civil Rules 2006 (SA).
Held:
1. The defendants have discharged the onus of proving on the balance of probabilities that, if security is not ordered, the plaintiff’s financial position is such that they will not recover their costs if they are successful in the actions (at [54]).
2. The plaintiff did not adduce any evidence that an order for security will stultify the actions (at [55]).
3. Orders for security should be made. The parties are to be heard on the terms of the order (at [64]-[66]).
Supreme Court Civil Rules 2006 (SA) r 194(1); Corporations Act 2001 (Cth) s 1335(1), referred to.
Idoport Pty Limited v National Australia Bank Limited (No 35) [2001] NSWSC 744; John Irving as Liquidator of Mawson KLM Holdings Pty Ltd (In Liq) v Starmaker (No 51) Pty Ltd (No 2) [2005] SASC 310; Li v State of New South Wales [2013] NSWCA 165; Oshlack v Richmond River Council (1998) 193 CLR 72; Roctor Tanks Pty Ltd v Adam [2001] SASC 196; Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60; Dictating Machine Centre Pty Ltd v Combe (1981) 26 SASR 316; Strazdins v ANZ Banking Group Ltd [2017] SASC 3; Pearson v Naydler [1977] 3 All ER 531; Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1; Duke Holdings Ltd (in liquidation) v Duke Group Ltd (in liquidation) [2009] SASC 245, considered.

RESCHKE v TREVOR RESCHKE NOMINEES PTY LTD; RESCHKE v AUSTRALIAN EXECUTOR TRUSTEES LTD
[2020] SASC 60
Civil
BLUE J:

In these actions, the plaintiff Burke Reschke (Burke) claims that he has an entitlement to the beneficial ownership of, or alternatively a lien over, land in the Coonawarra region formerly owned or controlled by his father Trevor Reschke (Trevor) and grandmother Emiline Reschke (Emiline). He relies variously on causes of action of constructive trust, estoppel and equitable lien.
The defendants in each action have applied for security for costs. They seek security for costs totalling $300,000 and rely on evidence that the value of the plaintiff’s assets is $400,000 and on a contention that the plaintiff’s assets are likely to be exhausted by paying his own legal costs by the end of the actions, such that they will not recover their costs if they are successful in the actions. They contend that an order for security is necessary in the interests of justice within the meaning of rule 194(1)(e) of the Supreme Court Civil Rules 2006 (SA).
These reasons address the security for costs applications.
Background
Land ownership and transfers
In his current statements of claim in the two actions, Burke pleads details of the ownership and transfer of land the subject of the actions. Defences are yet to be filed to those statements of claim.[1] Set out below is a summary of the effect of Burke’s pleadings which may or may not prove to be contentious when relevant defences are filed. Self-evidently, I make no findings of fact but, for ease of expression, set out the matters pleaded as if they were uncontroversial.
[1] A defence was filed to the original statement of claim in the first action. No defence has been filed in the second action.
Burke’s paternal grandparents were Reginald Reschke (Reg) and Emiline. Reg inherited, was gifted and acquired land in the Hundred of Comaum in the Coonawarra region, which was held in his own name or by a corporate trustee on behalf of a trust effectively controlled by him (collectively Reg’s land). All references in these reasons for judgment to sections or lots are references to sections or lots in the Hundred of Comaum.
Reg and Emiline had five children: Trevor, Tricia Schooley (nee Reschke) (Tricia), Vivienne Reschke (Vivienne), Leone Falcone (nee Reschke) (Leone) and Jennifer Tolley (nee Reschke) (Jennifer).
Reg died in 1986. He devised some of Reg’s land to Emiline, being allotments 1, 2 and 3 in section 438 (Emiline’s land). Reg devised the balance of Reg’s land held in his own name, and ownership and control of the land-holding trusts and trustee companies, to Trevor. Emiline also acquired section 439 (section 439), either by devise from Reg or in some other manner.
In the meantime, Trevor had married Vivian Reschke (Vivian). They had three children: Burke, Dru Reschke (Dru) and Joanne Edwards (nee Reschke) (Joanne). Trevor inherited, was gifted and acquired land in the Hundred of Comaum, which was held in his own name or by a corporate trustee on behalf of a trust effectively controlled by him (collectively Trevor’s land).
Burke established or acquired Reschke Vineyards Pty Ltd (and other companies). Dru established or acquired Altruism Holdings Pty Ltd (Altruism) as trustee of the Altruism Trust.
Before 2007, Trevor transferred sections 440, 441, 442 and 444 to a trustee of a superannuation fund of which the beneficiaries were Trevor and Vivian (the Reschke Super Fund).
Before 2007, Emiline transferred section 439 to Altruism.
Trevor died in 2008. At that time, Trevor’s land included:
·sections 226, 227 and 228 owned by Trevor (the Reg Reschke vineyard);
·allotment 4 in section 438 owned by Trevor (lot 4);
·sections 233, 234 and 235 (Glenroy) owned by Trevor Reschke Nominees Pty Ltd (TRN);
·sections 239, 377 and 379 (Rocky Castle) owned by Fabriano Pty Ltd (Fabriano); and
·an interest in sections 440, 441, 442 and 444 (Portion Home Block) via his interest (shared with Vivian) in the Reschke Super Fund.
By his will, Trevor left the Reg Reschke vineyard to Burke; lot 4 to Dru; his shares in TRN (and hence control of Glenroy) to Dru; and his shares in Fabriano (and hence control of Rocky Castle) to Vivian. Trevor left his superannuation interests in the Reschke Super Fund (and thereby in Portion Home Block) to Vivian by their being transferred to VF Reschke Super Pty Ltd (Vivian Reschke Super) as trustee of the Vivian Reschke Super Fund.
Emiline died in 2014. Emiline appointed Australian Executor Trustees Ltd (AET) as her executor. Emiline left her estate as to 20 per cent to each of Tricia, Vivienne, Leone and Jennifer; 10 per cent to Burke; eight per cent to Dru and two per cent to Joanne. Burke and Dru were given an option to purchase Emiline’s land at valuation.
Actions by Burke
In January 2017 Burke lodged a caveat over Glenroy owned by TRN. He instituted action 122 of 2017 in this Court (the caveat action) seeking an extension of time for removal of the caveat. An extension was initially granted but was subsequently set aside and a fresh application for an extension was refused. Appeals by Burke against the setting aside and refusal decisions were dismissed by single Judges and ultimately the Full Court.[2]
[2] Reschke v Trevor Reschke Nominees Pty Ltd [2019] SASCFC 27.
In May 2017 Burke instituted action 595 of 2017 (the Trevor estate action)[3] against TRN, Altruism, Vivian Reschke Super and Fabriano. In August 2019 Burke filed a substituted statement of claim. By that statement of claim, he pleads that a common assumption was made within the Reschke family that, if the eldest son worked the family farm, he would ultimately inherit it; that assumption was communicated to and discussed with him over the years by Reg, Emiline, Trevor and Vivian; he relied on that assumption by working on and improving the farm; and he would suffer detriment if the defendants were now permitted to depart from it. He relies on causes of action of conventional, promissory and proprietary estoppel. He claims that he is entitled to the beneficial ownership of lot 4, section 439, Glenroy, Rocky Castle and portion Home Block or alternatively to a beneficial interest to the extent that he contributed to the maintenance, improvement and preservation of that land and/or equitable compensation.
[3] This defined term is used for ease of reference. It is slightly misleading because part of the claim relates to the transfer by Emiline to Altruism of section 439 and part relates to the transfer by Trevor before he died of sections 440, 441, 442 and 444 to the Reschke Super Fund.
In August 2017 Burke instituted action 993 of 2017 (the Emiline estate action) against AET. In November 2017 Jennifer, Tricia, Leone and Vivienne were joined as additional defendants and AET was excused from further participation, effectively agreeing to abide the event. In March 2020 Joanne and Dru were joined as additional defendants and a second statement of claim was filed. By that statement of claim, Burke pleads that promises and representations were made to him by Emiline and others in her presence or to her knowledge that, if he worked the family farm including Emiline’s land, he would ultimately inherit it; he relied on those promises and representations by working on and improving the farm including Emiline’s land; and he would suffer detriment if the defendants were now permitted to depart from it. He relies on causes of action of proprietary estoppel, constructive trust and equitable lien. He claims that he is entitled to the beneficial ownership of Emiline’s land or alternatively to a beneficial interest to the extent that he contributed to the maintenance, improvement and preservation of that land and/or equitable compensation.
In June 2019 the defendants in the Trevor estate action applied, amongst other things, for security for costs of $150,000 in respect of their costs to the end of trial on the assumption of a 10 day trial.
In July 2019 Jennifer, Tricia, Leone and Vivienne in the Emiline estate action applied, amongst other things, for security for costs of $150,000 in respect of their costs to the end of trial on the assumption of a 15 day trial. For ease of reference, I refer to Jennifer, Tricia, Leone and Vivienne as the defendants in the Emiline estate action, even though AET is formally a defendant and Joanne and Dru are now also defendants.
Applications were also made at the same time in both actions by the defendants for dismissal of the actions and by Burke for permission to amend his statements of claim. Those applications were ultimately resolved when Burke filed new statements of claim, the latter of which was filed in the Emiline estate action in March 2020.
Evidence on security for costs applications
The defendants in the Trevor estate action tendered an affidavit by their principal solicitor Mark Gowans and a portion of an affidavit by a more junior solicitor Kelly Fussell. The defendants in the Emiline estate action tendered an affidavit by their principal solicitor Pam McEwen and an affidavit by Jennifer which exhibited Emiline’s will and a statement of assets and liabilities of the estate. The applications were heard on the basis that evidence adduced by either set of defendants was evidence for the purposes of both applications. Burke did not adduce any evidence.
Mr Gowans deposed to searches undertaken at the Lands Titles Office in relation to real property owned by Burke and gave evidence that the only real property owned by him is section 443 (section 443). The certificate of title for section 443 shows that the land is approximately 30 acres. Mr Gowans produced two tables that had been exhibited to an affidavit by Burke in the caveat action setting out his assets (Burke’s tables). Burke’s tables show that Burke’s only asset in his own name is section 443 and Burke attributed a value to it of $120,049. The certificate of title for section 443 appears to show that the land is subject to a mortgage in favour of the National Australia Bank. However, Burke’s tables do not show any liability associated with section 443 and counsel for the defendants in the Trevor estate action (without demur by counsel for the defendants in the Emiline estate action) accepts that section 443 is not subject to any mortgage. I therefore proceed on that premise.
The affidavits of Mr Gowans and Ms Fussell show that Burke had formerly been a proprietor of his former matrimonial home at North Adelaide but his interest was transferred to his then wife in 2015 and the property has now been sold in any event.
Burke’s tables show assets and liabilities of four companies owned or controlled by him, being Reschke Vineyards, Reschke Pty Ltd, Koonara Management Pty Ltd and Rocky Castle Finance Pty Ltd. Conversely the defendants adduced evidence that Koonara Management Pty Ltd and Rocky Castle Finance Pty Ltd have incurred a significant cost liability as a result of their prosecution of an unsuccessful action in the Federal Court. It was agreed by all parties that, for the purpose of my assessment of Burke’s resources for the purpose of the current applications, any assets or liabilities associated with Burke’s corporate entities are to be ignored.
The statement of assets and liabilities of Emiline’s estate shows that the Valuer-General’s valuation of the Emiline land as at 2014 (when Emiline died) was $1,620,000 and the value of all assets of the estate was $2,892,296. Expenses of the estate would include commission payable to AET and funeral expenses, which are not shown in the statement of assets and liabilities.
Mr Gowans estimated that the trial of the Trevor estate action will be 10 days in duration and the defendants’ costs of defending the Trevor estate action to the completion of trial will be $278,470. Taking into account that, if successful, the defendants would prima facie be entitled only to an order for party/party costs, the defendants seek security in the sum of $150,000 in respect of their party/party costs to the end of trial. Burke does not challenge the quantum sought but does challenge that the defendants have any entitlement to security for costs.
Ms McEwen estimated that the trial of the Emiline estate action will be 15 days in duration and the defendant’s costs of defending the Emiline estate action to the completion of trial on a party/party basis will be not less than $150,000. Burke does not challenge the quantum sought but does challenge that the defendants have any entitlement to security for costs.
The interests of justice ground
Subrule 194(1) of the Supreme Court Civil Rules 2006 (SA) provides:
194—Security for costs
(1) The Court may order a plaintiff to provide security for costs if—
(a)the action is brought in a representative capacity and the plaintiff is insolvent or would have insufficient resources to meet an order for costs if the action were to prove to be unsuccessful; or
(b)the plaintiff is ordinarily resident outside Australia; or
(c)there are reasonable grounds to suspect that the action may have been brought for an ulterior purpose; or
(d)the order is authorised by statute; or
(e)the order is necessary in the interests of justice.
The evident purpose of ordering security for costs is to ensure that, if the plaintiff fails in the action, an order for costs will be efficacious. A plaintiff may have the means at the commencement of an action to pay costs but those means may be dissipated by the end of the action when a costs order is made. There may be persons standing behind or supporting the plaintiff who are willing to provide security for costs in advance to ensure the action can proceed but who would not do so at the end of the action after the plaintiff has failed.
Thus paragraph (a) applies when a plaintiff, if unsuccessful, would have insufficient resources to meet an order for costs and the action is brought in a representative capacity. The persons represented by the plaintiff may have resources that could meet an order for costs.
Paragraph (b) applies when a plaintiff is ordinarily resident outside Australia. The plaintiff may not have resources in Australia available to meet an order for costs and it may be difficult to enforce a costs order against the plaintiff in a foreign jurisdiction.
Paragraph (c) applies when there are reasonable grounds to suspect that the action may have been brought for an ulterior purpose. This paragraph appears somewhat anomalous but an order would only be made on this ground if there is a sufficient risk that the plaintiff would not be able to meet an order for costs if the action is unsuccessful.
Paragraph (d) applies when the order is authorised by statute. The most common applications under this paragraph are made under subsection 1335(1) of the Corporations Act 2001 (Cth), which 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.
In that case, paragraph (d) applies when there is reason to believe that the plaintiff company if unsuccessful will be unable to meet an order for costs.
Paragraph (e) is a residual category to cater for all circumstances in which it is necessary in the interests of justice to order security for costs to ensure that an ultimate costs order in favour of the defendant will be efficacious.
In Idoport Pty Limited v National Australia Bank Limited (No 35)[4] Einstein J identified the purpose of ordering security for costs in the following terms:
"[T]he jurisdiction to award security for costs should thus be seen as protecting the efficacy of the exercise of the jurisdiction to award costs. The discretion should be exercised with the same rationales in mind, namely that, to the extent it can be avoided, the court should not permit a situation to arise where a party’s success is pyrrhic."
The purpose of a security for costs order is therefore a protective jurisdiction to ensure that the primary purposes for having costs orders themselves, can be achieved. A defendant is protected against the risk that a costs order obtained at the end of the day may turn out to be of no value by reason of the impecuniosity of the plaintiff. The jurisdiction therefore assists both the compensation purpose as well as the public interest objective.[5]
[4] [2001] NSWSC 744.
[5] At [51]-[52]. Einstein J attributed the passage in the first extracted paragraph to McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97. However, that passage does not appear in the judgment of McHugh J in that case.

This passage has been cited with approval by the New South Wales Court of Appeal[6] and by numerous single judges in other jurisdictions. In this Court, in John Irving as Liquidator of Mawson KLM Holdings Pty Ltd (In Liq) v Starmaker (No 51) Pty Ltd (No 2),[7] Layton J cited the passage extracted above from the judgment of Einstein J as authority for the following proposition:
These principles are to be considered in the context of the purpose for which security for costs is given, namely as a matter of public interest to ensure that at the end of the day a successful defendant is not deprived of the effect of a judgment by reason of the impecuniosity of a plaintiff. [8]
[6] Li v State of New South Wales [2013] NSWCA 165 at [20] per Ward JA (with whom Macfarlan and Gleeson JJA agreed).
[7][2005] SASC 310.
[8] At [33]. See also Rocter Tanks Pty Ltd v Adam [2001] SASC 196 at [25] per Lander J.
The purpose of ordering security for costs may be seen as loosely analogous to the purpose of making a freezing order (Mareva injunction), which is to protect the efficacy of the exercise of the jurisdiction to grant judgment against a defendant so as not to permit a situation to arise where a plaintiff’s success is pyrrhic.
In Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd[9] Doyle J said (in the context of an application under paragraph (d)):
There is no predisposition in favour of, or against, requiring security. The Court must balance the potential hardship or injustice a defendant may suffer if there is no security for its costs against the hardship or injustice the plaintiff may suffer if required to give security.[10]
[9][2016] SASC 60.
[10] At [12].
The potential prejudice that a defendant may suffer if there is no security for costs is obviously the fact that the defendant will have been obliged to incur costs to defend the action but be unable to recover them if the plaintiff will not have sufficient resources to meet them when a costs order is made.
When a security for costs application is made under one of the specific paragraphs (a) to (d), the Court has a discretion whether to make an order for security for costs imported by the use of the word “may” in the chapeau and by the content of those specific paragraphs.
In Dictating Machine Centre Pty Ltd v Combe[11] Mitchell J identified seven potential factors that are often considered, namely:
1The true role of the plaintiff;
2The existence of any special relationship between the plaintiff and the defendant;
3The time at which the application for security for costs is made;
4Whether the plaintiff's claim is bona fide;
5The prospect of the plaintiff's claim succeeding;
6The oppressive use of the application for security;
7The plaintiff's want of means induced by the defendant.
[11] (1981) 26 SASR 316.
These factors are relevant to balancing the potential prejudice a defendant may suffer without a security order against the potential prejudice a plaintiff may suffer with a security order. If the plaintiff’s claim is not bona fide or the prospect of the plaintiff’s claim succeeding is remote, this will reduce or eliminate the potential prejudice suffered by the plaintiff to be weighed in the scales. If the defendant’s application is made at a relatively late stage, this will tend to reduce the potential prejudice suffered by the defendant and may increase the potential prejudice suffered by the plaintiff. If the action is prosecuted for the benefit of a third party, it will be relevant to take into account the means of the third party to provide security for costs. If the application for security is oppressive to the plaintiff, this will tend to increase the prejudice suffered by the plaintiff. If the plaintiff’s want of means was induced by the conduct of the defendant, this will tend to weigh the scales towards the plaintiff. If there is a special relationship between the parties, this may affect the weighing of the scales in either direction.
Paragraph (e) of subrule 194(1) is expressed in different terms to the specific paragraphs (a) to (d). Paragraphs (a) to (d) clearly import a two-stage test: first, has the defendant established the prerequisite contained in the relevant paragraph (for example that the plaintiff is ordinarily resident outside Australia in the case of paragraph (a)); secondly, should the Court exercise a discretion to make a security order in all of the relevant circumstances. By contrast, paragraph (e) only applies when the Court is satisfied that a security order is necessary in the interests of justice. Before the Court can so conclude, it must take into account all relevant circumstances. If the Court concludes that a security order is necessary in the interests of justice, there is no room for the exercise of a residual discretion. Accordingly, in the case of paragraph (e), the test involves only a single stage. In this respect, I agree with the following observations by Hinton J in Strazdins v ANZ Banking Group Ltd:[12]
If the Court arrives at the conclusion that an order is necessary in the interests of justice, what discretion is there then to be exercised? All factors relevant to the question of the order being necessary in the interests of justice will have been considered. If the order is necessary, it is necessary. I cannot think of a circumstance where a court, having arrived at a conclusion that an order for security for costs is necessary in the interests of justice, would then decline to make the order. What additional factor not considered as part of determining whether the jurisdictional fact is established would subsequently be considered and, potentially, justify a conclusion that no order be made? Absent any additional factor, the answer arrived at in determining whether the jurisdictional fact was satisfied must be decisive of the exercise of the discretion.[13]
[12] [2017] SASC 3.
[13] At [40].
It is well-established that security for costs ought not ordinarily be ordered against a natural plaintiff if that would stultify the action. Thus, in Pearson v Naydler[14] Megarry V-C said:
The basic rule that a natural person who sues will not be ordered to give security for costs however poor he is, is ancient and well-established. As Bowen LJ said in Cowell v Taylor, both at law and in equity ‘the general rule is that poverty is no bar to a litigant’. The power to require security for costs ought not to be used so as to bar even the poorest man from the courts.[15]
[14] [1977] 3 All ER 531.
[15] At 533. (Citation omitted).
In this respect, the position is different as between a natural person and a corporation. In the case of a corporation, stultification of the action if security is ordered is an important factor against ordering security but it is not decisive. In the case of a natural person (absent special circumstances such as the person being resident out of Australia), stultification of the action will preclude an order for security.
It is well-established that the onus of proving that a security order will stultify an action lies on the plaintiff.[16] On the other hand, the onus of establishing the pre-requisite under paragraphs (a), (b), (c) or (d) of subrule 194(1) lies on the defendant.
[16] See for example Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4 per Sheppard, Morling and Neaves JJ; Duke Holdings Ltd (in liquidation) v Duke Group Ltd (in liquidation) [2009] SASC 245 at [21]- [45] per White J.
In conclusion, if the plaintiff, on being unsuccessful in the action, will not have sufficient resources to meet an order for costs and an order for security will not stultify the action, it may be (depending on all of the relevant circumstances) that it will be necessary in the interests of justice to order that the plaintiff provide security for costs.
Necessary in the interests of justice?
As observed above, all relevant circumstances must be considered to determine whether in this case it is necessary in the interests of justice that security for costs be ordered.
Burke’s resources to meet adverse costs orders
There is no dispute about the identity or value of Burke’s present resources. It is common ground that he has two and only two assets: his ownership of section 443 and his 10 per cent interest in Emeline’s residuary estate. It is common ground that the value of the first asset is $120,000 and the value of the second asset is $280,000.
Burke contends that the combined value of his assets of $400,000 is sufficient to meet orders for costs in favour of the defendants in both actions totalling $300,000. However, as the defendants point out, this analysis ignores the liability for costs that Burke will himself incur in prosecuting the actions to trial.
Mr Gowans estimated that the defendant’s costs of defending the Emiline estate action will be $278,470 on the assumption of a 10 day trial. It is yet to be determined whether there will be a common trial of both actions or separate (but consecutive) trials of each action. On the most favourable basis to Burke, assuming a common trial, the trial would take a minimum of 15 days and is likely to take 20 days. The costs incurred by Burke in prosecuting the actions are likely to be at least equal to the value of his assets of $400,000.
If no order for security for costs is made, Burke would be free to charge his interests in section 443 and in Emeline’s residuary estate in favour of his lawyers to secure payment of their costs. This would leave effectively no assets available to meet the defendants’ costs if they are successful and costs orders are made in their favour.
Alternatively, Burke would be free to sell his interest in section 443 and, although commercially difficult, to assign his interest in Emeline’s residuary estate and pay the sale proceeds to his lawyers in payment of their costs.
I am satisfied on the balance of probabilities that, if no order for security is made, Burke will not have sufficient resources to meet adverse orders for costs.
Stultification of action
Burke did not adduce any evidence that an order for security for costs will stultify the actions.
Given this circumstance, it is not for me to speculate about how Burke would provide security for costs given his limited assets. However, it is not unknown that plaintiffs, who do not have resources in their own names available to meet an adverse costs order, have access to other resources from which they can provide security for costs if ordered.
Other relevant factors
The defendants do not contend that Burke has not brought the actions in good faith.
The defendants contend that Burke’s prospects are poor and this is a factor that should be taken into account. They point to the assessment by the Full Court of Burke’s prospects of establishing the interest the subject of the caveat in the caveat action in Reschke v Trevor Reschke Nominees Pty Ltd,[17] in which the Full Court characterised his case as “certainly not a strong one” and “not strong”.[18]
[17] [2019] SASCFC 27.
[18] At [21] and [76] per Kourakis CJ (with whom Bampton and Parker JJ agreed). The defendants also rely on observations by the Full Court concerning Burke’s claims that were not the subject of the caveat at [76] and concerning Burke's affidavit evidence at [22]-[32].
The defendants accept that no issue estoppel arises in respect of the Full Court’s assessment. In the case of the defendants in the Emiline estate action, there is no commonality of parties. In the case of the defendants in the Trevor estate action, there is no commonality of the parties except in respect of TRN. In the case of TRN, it accepts that the observations by the Full Court were made in an interlocutory context and are incapable of giving rise to an issue estoppel.
In any event, the observations by the Full Court were based on affidavits that were not tendered in the applications before me. My assessment is necessarily limited to Burke’s statements of claim in the Trevor and Emeline actions. Those statements of claim were not before the Full Court.
It is notoriously difficult when security for costs is considered to assess the plaintiff’s prospects of success. There will be some (rare) cases in which an assessment can readily be made that the case is almost certainly bound to succeed or bound to fail. In most cases, prospects of success will be a neutral factor. In the present case, I accept that constructive trust/proprietary estoppel cases can be difficult to establish but on the other hand they have been established in a number of cases. On the face of Burke’s pleadings, and taking into account his allegations of improvements to the properties and his alternative claim for a lien by reason thereof, I assess this factor as neutral.
Neither party points to any of the other factors identified at [41] above as favouring the grant or refusal of an order for security for costs. Although there was and is a familial relationship between the parties, this is effectively neutral. Burke does not contend that the defendants have unduly delayed in applying for security for costs: very little occurred in the actions between their institution in 2017 and the security applications made in June/July 2019. Burke does not contend that any want of means was induced by the conduct of the defendants. Conversely, the defendants do not contend that Burke is prosecuting the actions for the benefit of a third party.
Ultimately, the defendants will suffer prejudice if security is not ordered because I am satisfied on the balance of probabilities that Burke will not have sufficient resources to meet adverse costs orders. On the other hand, there is no reason to consider that Burke will suffer prejudice if security is ordered because he did not adduce any evidence that such an order will still stultify the actions.
I am satisfied that it is necessary in the interests of justice to order that Burke provide security for the costs of the defendants in the actions.
Conclusion
The defendants are entitled to an order that Burke provide security for costs.
The security sought by the defendants is in respect of their party/party costs to the end of trial. Although it is more common to order security for costs after the first day of trial and consider further security at that point, in view of the manner in which the defendants formulated their requests for security for costs to the end of trial, I am disposed to make an order of that basis. However, I will hear the parties concerning the quantum and form of the security for costs to be ordered.