Riva NSW Pty Ltd v Mark a Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers

[2018] NSWCA 53

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Riva NSW Pty Ltd v Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers [2018] NSWCA 53

Hearing dates:

19 March 2018

Decision date:

22 March 2018

Before:

Simpson JA

Decision:

(1)   Riva NSW Pty Ltd, within twenty-one (21) days of this date, is to provide security for the costs of Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers in the sum of $70,000, by paying that sum into Court, or, if the parties are able to agree, by way of bank cheque or direct transfer into the trust account of Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers.

 

(2)   In the event of non-compliance with Order 1, the proceedings be dismissed.

 (3)   Riva NSW Pty Ltd is to pay Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers costs of and incidental to this application for security for costs.

Catchwords:

APPEALS – security for costs – order sought in relation to judicial review proceedings – whether exceptional circumstances

Legislation Cited:

Corporations Act 2001 (Cth)
Legal Profession Act 2004 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), Pt 42, Pt 59.11

Cases Cited:

Riva NSW Pty Ltd v Fraser and Clancy Lawyers (District Court (NSW), 3 August 2017, unrep)
Riva NSW Pty Ltd v Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers [2014] NSWCA 454
Riva NSW Pty Ltd v Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers [2014] NSWCA 455

Category:

Procedural and other rulings

Parties:

Riva NSW Pty Ltd (Applicant)
Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers (First Respondent)
District Court of New South Wales (Second Respondent)

Representation:

Counsel:
R K Newton (Applicant)
P Barham (Respondent)

  Solicitors:
Zali Burrows Lawyers (Applicant)
Fraser Clancy Lawyers Pty Ltd (Respondent)

File Number(s):

2017/270892

Judgment

1. SIMPSON JA: This is an application for security for costs made by notice of motion filed on 19 December 2017 in judicial review proceedings commenced in this Court by Riva NSW Pty Ltd (“Riva”). Given the history of the proceedings that will emerge, confusion will be avoided by referring to the parties by their (abbreviated) names. The respondent to the application for judicial review, and the applicant for security for costs, is a firm of solicitors trading as Fraser Clancy Lawyers (“Fraser Clancy”). Since the proceedings in which the application is made are judicial review proceedings, it is necessary that Fraser Clancy establish that exceptional circumstances exist justifying the order they seek: Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), Pt 59.11.

2. A large volume of evidence was put before the Court in support of the application. This consisted partly of affidavits prepared specifically for the purpose of the application, but also affidavits prepared for, and filed in, other proceedings.

3. Ultimately, Fraser Clancy relied upon the following affidavit evidence:

• an affidavit of Dragan Gasic sworn 27 August 2010 in proceedings in the Common Law Division of the Supreme Court between Perpetual Trustee Company Ltd and Agusta Pty Ltd (the predecessor of Riva);

• an affidavit of Mitchell Davis sworn 7 September 2012 filed in District Court proceedings between Riva and Fraser Clancy;

• an affidavit of Christopher Clancy sworn 19 May 2017 in proceedings in the Equity Division of the Supreme Court between Riva and Mark A Fraser (one of the partners of Fraser Clancy) and Christopher Clancy trading as Fraser Clancy Lawyers. The exhibits to this affidavit numbered more than 400 pages;

• an affidavit of Christopher Clancy sworn 9 February 2018 filed in the present application;

• an affidavit of Angelo Ferella sworn 16 March 2018.

4. Fraser Clancy also sought to rely on an affidavit of Mary Forbes sworn 14 March 2018, but this was objected to and rejected.

5. Riva relied upon an affidavit of Angelo Ferella sworn 28 February 2018.

6. It has not been possible in the limited time available to digest the whole of the material tendered on behalf of Fraser Clancy.

7. What the evidence discloses is that the application for judicial review is one step in a long and sorry history of litigation between the present parties, and also between Riva and other parties. Ironically enough, the relationship between Riva and Fraser Clancy commenced in 2010 when Riva retained Fraser Clancy to act for it in an application made against Riva for security for costs in earlier litigation against an unrelated party.

8. Riva is the trustee of the Cavallino Unit Trust and holds its assets on behalf of the beneficiaries named in the Trust Deed. The director of Riva is Ms Tiziana Ferella. However, she has taken no part in the proceedings, at least in recent times. The managing director of Riva is Angelo Ferella, Ms Tiziana Ferella’s brother. It is Mr Ferella who has been the driving force, and the person making the decisions in respect of the litigation. In 2006 he was disqualified for a period of 5 years from holding company directorships. This was as a result of a fraud conviction in 2003.

9. The litigation between Riva and Fraser Clancy arises out of a bill of costs rendered to Riva following the earlier application for security for costs, which terminated adversely to Riva. As was its right, Riva required assessment of the bill of costs under the provisions of the Legal Profession Act 2004 (NSW). Dissatisfied with the result of the assessment, it appealed to the Costs Review Panel (again as was its right), and, dissatisfied also with the result of that appeal, it appealed unsuccessfully to the District Court. Still dissatisfied with the result, it purported to appeal to this Court. That purported appeal was struck out as incompetent.

10. On each occasion Riva was ordered to pay Fraser Clancy’s costs. It has never voluntarily met a costs order. On one occasion, Fraser Clancy successfully obtained a garnishee order and recovered a sum of somewhat less than $20,000. The costs outstanding to date are in excess of $200,000.

11. On 11 April 2014 Curtis DCJ made, by consent, an order that had the effect of restraining Riva from dealing with funds amounting to $106,000 held in its name in an account with Macquarie Bank. Notwithstanding that the order was made by consent, Riva sought, by judicial review, to have it set aside as beyond the jurisdiction of the District Court. On 29 October 2014 that application was summarily dismissed by Emmett JA: Riva NSW Pty Ltd v Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers [2014] NSWCA 454. Later, Emmett JA ordered that Riva pay lump sum costs calculated at $35,000: Riva NSW Pty Ltd v Mark A Fraser & Christopher P Clancy t/as Fraser Clancy Lawyers [2014] NSWCA 455.

12. Three years later, Riva again sought in the District Court to have the orders set aside as beyond jurisdiction. That application was dismissed by Wilson DCJ: Riva NSW Pty Ltd v Fraser and Clancy Lawyers: District Court (NSW), 3 August 2017, unrep. It is that decision that is the subject of the judicial review application made by Riva in this Court, and the subject of Fraser Clancy’s present application for security for costs. Fraser Clancy further seek an order that the costs be quantified on the indemnity basis.

13. On 11 December 2017, in the Equity Division of the Supreme Court, Slattery J ordered that Riva was not to dispose of, charge, or deal with the assets and undertaking of the Cavallino Unit Trust, including identified real estate, other than in the ordinary course of business. On Riva’s application, he adjourned the proceedings that were then before him, subject to conditions that Riva supply certain financial information.

14. Fraser Clancy adduced evidence that, on 10 September 2010, Mr Ferella had said (in another context), that Riva would not pay security for costs, and on 5 December 2016, had said, in District Court proceedings (recorded on transcript) that Riva did not propose to pay Fraser Clancy’s costs. None of this was denied.

15. There was other evidence that Mr Ferella had no or little aptitude for compliance with orders of courts; for example, proceedings in the District Court have repeatedly been adjourned because he has failed to produce documents required to be produced.

16. Riva produced no evidence in rebuttal or explanation of this history. Mr Ferella’s affidavit merely contended that the funds in the Macquarie Bank account, restrained to the extent of $106,000, provided sufficient security. That overlooks the fact that those funds are restrained by reason of earlier indebtedness of Riva to Fraser Clancy. It offers no protection to Fraser Clancy with respect to costs to be incurred in the judicial review proceedings.

17. Mr Ferella also pointed to the 11 December 2017 orders of Slattery J, restricting its capacity to deal with its assets, or the assets of the Cavallino Unit Trust. Again, any benefit to Fraser Clancy in relation to the costs of the judicial review proceeding is illusory. The orders do not give any priority to Fraser Clancy in the event of distribution of those assets.

18. On close examination, the sparse evidence adduced on behalf of Riva was entirely immaterial. There was no factual challenge to any of the evidence adduced on behalf of Fraser Clancy.

Security for costs

19. There is abundant power in the Court to make an order for security for costs. The power derives from UCPR Pt 42, the Corporations Act 2001 (Cth), and the inherent jurisdiction of the Court. However, particular restraint applies where the order is sought in relation to judicial review proceedings. UCPR 59.11 provides:

“59.11  Security for costs

(1)  A plaintiff is not to be required to provide security for costs in respect of judicial review proceedings except in exceptional circumstances.

(2)  Where a plaintiff:

(a)  invokes an open standing provision, or

(b)  commences representative proceedings,

the court is not to treat the plaintiff as bringing proceedings for the benefit of a third party for the purposes of considering whether exceptional circumstances exist.

(3)  This rule has effect despite rule 42.21.”

Consideration

20. I am satisfied that exceptional circumstances have been made out in this case. The long history of litigation makes it apparent that Riva, through Mr Ferella, will not meet any costs order. Riva itself has no assets other than trust assets which would not ordinarily be available to meet a costs order. Counsel who appeared for Riva pointed out that the Deed establishing the Cavallino Family Trust provides that Riva may claim from trust assets by way of indemnity for legal costs incurred on behalf of the Trust. That, however, is small comfort to Fraser Clancy. The history demonstrates clearly the unlikelihood that those controlling Riva (principally Mr Ferella) would exercise the right to claim the indemnity.

21. It is clear that the administration of Riva is undertaken by Angelo Ferella. Mr Ferella has stated, on more than one occasion, that Riva would not pay costs, or would not pay security for costs. That that is his intention is borne out by the history I have outlined above, and by the fact that no costs have ever been paid (other than by garnishee order), despite costs orders against Riva having been made on at least five occasions.

22. Moreover, it is relevant to take into account Riva’s prospects of success in its judicial review proceedings. The only issue in the application is whether the District Court had jurisdiction to make the order. In his decision of 29 October 2014, Emmett JA stated categorically:

“It is certainly an order within the jurisdiction of the District Court.” (at [23])

23. Counsel for Riva relied upon the principle that security for costs will not be ordered where to do so would “stultify” the proceedings. There was, however, no evidence that that would be the case. There was no evidence that Riva could not meet the order; there was no evidence that, if the order were made, Riva could not proceed with its application. There was no basis on which to conclude, even as a possibility, that the proceedings would be “stultified” if the order were made.

24. There remains a question of the quantum of the order. Fraser Clancy claim an order in the amount of $70,000. That amount is supported by an affidavit of Christopher Clancy, who quantified the costs he anticipated. Counsel for Riva protested, somewhat faintly, that the claim seemed excessive for an application limited to a narrow question of law. However, no evidence contradicting the assessment of Mr Clancy was adduced, and Mr Clancy was not required for cross-examination. In those circumstances I accept his evidence.

25. I note that the order sought is quantified on the basis that costs will be assessed on an indemnity basis. Even if Fraser Clancy is successful, there is no guarantee that costs would be so quantified. However, the history suggests that there is more than a remote possibility that that would be the result. Again taking into account the history, in my opinion, the amount ordered should provide against the possibility that an indemnity costs order might be made against Riva. If that does not eventuate, then any amount remaining can be returned to Riva.

26. I am satisfied that the history is such that a security for costs order ought to be made.

27. The orders I make are:

1. Riva NSW Pty Ltd, within twenty-one (21) days of this date, is to provide security for the costs of Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers in the sum of $70,000, by paying that sum into Court, or, if the parties are able to agree, by way of bank cheque or direct transfer into the trust account of Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers.

2. In the event of non-compliance with Order 1, the proceedings be dismissed.

3. Riva NSW Pty Ltd is to pay Mark A Fraser and Christopher P Clancy trading as Fraser Clancy Lawyers costs of and incidental to this application for security for costs.

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Decision last updated: 22 March 2018