Stanton Partners Australasia Pty Ltd v Christou - [2010] WASC 370

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: STANTON PARTNERS AUSTRALASIA PTY LTD -v- CHRISTOU [2010] WASC 370

CORAM: MASTER SANDERSON

HEARD: 23 NOVEMBER 2010

DELIVERED : 13 DECEMBER 2010

FILE NO/S: CIV 2252 of 2009

BETWEEN: STANTON PARTNERS AUSTRALASIA PTY LTD
First Plaintiff
STANTON ACCOUNTANTS & ADVISORS PTY LTD
Second Plaintiff
AND
NICK CHRISTOU
First Defendant
CORPORATE SYSTEMS PUBLISHING PTY LTD
Second Defendant
LAVAN LEGAL
Third Party

Catchwords:

Practice and procedure - Defendants' application for security for costs - Defendants repeated failure to comply with case management directions - Relevance in determining if security should be ordered

Legislation:

Nil

Result:

Order for security refused

Category: A

Representation:

Counsel:

First Plaintiff                :     Mr M A MacLennan
Second Plaintiff            :     Mr M A MacLennan
First Defendant            :     Mr A P Rumsley
Second Defendant        :     Mr A P Rumsley
Third Party                  :     No appearance

Solicitors:

First Plaintiff                :     Lavan Legal
Second Plaintiff            :     Lavan Legal
First Defendant            :     Alan Rumsley
Second Defendant        :     Alan Rumsley
Third Party                  :     No appearance

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

Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21
Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542

MASTER SANDERSON: This is the defendants' application for security for costs. The defendants say the application is brought both under O 25 of the Rules and s 1335 of the Corporations Act 2001 (Cth). It was not in dispute the first plaintiff was impecunious and would not be able to meet any costs order. Prima facie then, the defendants are entitled to an order for security at least against the first plaintiff.
On behalf of the plaintiffs, it was submitted the court ought exercise its discretion and not order security. Counsel argued this position on a number of grounds. It was not entirely clear whether counsel submitted any orders for security would stultify the proceedings. Paragraph 4.4 of counsel's written submissions refers to an order for security being refused when an application is oppressive. However, during the course of his oral submissions, counsel indicated if an order for security was made it would be met by a director of the first plaintiff. So any order for security would not stultify the proceedings.
In my view there is nothing in the evidence which would indicate the application is oppressive in the sense referred to by Clarke J in Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542, 545. It is generally the case an order for security for costs will cause a plaintiff some difficulty. After all, such an order would only be made under s 1335 if there is a finding the company will be unable to meet any costs order made against it. There is a difference between the situation where an order is inconvenient and perhaps difficult to meet and a situation where the application is oppressive. I am not satisfied there is anything in the evidence in this case which would lead to a conclusion the application was oppressive.
Nor am I satisfied there is anything in the merits of the case which would sway my decision one way or the other. The claim is prima facie regular on its face and discloses a cause of action. It was put by the defendants they had a good defence based on the Limitation Act 1935 (WA). That may be so but it is not a matter to be examined in an application such as this. The merits or otherwise of the claim have not influenced my decision one way or the other.
This action appears to be another chapter in an endless saga of litigation between these and related parties. The sorry tale is set out in pars 5 and 7 of the affidavit of Darren Kurt Zusman sworn 15 September 2010 and filed in opposition to this application. Given the complexity of the interrelated actions, I am not in a position to conclude the impecuniosity of the first plaintiff was the result of the defendants' conduct. As I understand the position based upon the decision of Beech J in Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21, the directors of the plaintiffs have in their favour the costs order. These costs have not yet been taxed but a bill has been prepared and it totals $137,266.78. On the other hand, his Honour found the first defendant was entitled to distributions from trusts controlled by the present first and second plaintiffs in an amount of $747,954.19. There was a further $164,612 payable on top of that amount. Nothing has been paid. I understand that is because his Honour found there was an entitlement on the part of the first defendant but the funds are not available to pay out that entitlement.
All of this simply confirms how complex and murky the financial dealings between these parties are. I am not in a position to conclude that the impecuniosity of the first plaintiff is due to the actions of the defendants. This issue has not influenced my decision one way or the other.
The plaintiffs relied on two principal matters in opposing the application. The first was delay. It was the defendants' case they first became aware of the first plaintiff's impecuniosity through an affidavit of Keith Graeme Lingard sworn 30 March 2010: see affidavit of Alan Phillip Rumsley sworn 20 August 2010 exhibit 2. However, the plaintiffs point out the financial statements of the first plaintiff were attached to a previous affidavit of Mr Lingard sworn 10 September 2009 in COR 8 of 2004. That affidavit was served on Mr Rumsley (the solicitor for the defendants) on 11 September 2009. It is the plaintiffs' case then the defendants knew of the first plaintiff's impecuniosity since the time the September 2009 affidavit of Mr Lingard was served. I accept that to be the case.
These proceedings were commenced by writ on 10 July 2009 and served on the defendants on 15 July 2009. A defence was filed by the defendants in October 2009 ‑ approximately one month after the defendants became aware of the first plaintiff's financial position. The first notice the plaintiffs received of the defendants' intention to seek security for costs was on 15 June 2010: see Mr Zusman's affidavit pars 13 and 14. As the plaintiffs point out in their submissions, the notice was given almost a year after proceedings were commenced and nine months after the defendants first became aware of the first plaintiff's financial position.
Mr Rumsley in his affidavit deposes that he first received instructions to seek security for costs after a directions hearing on 20 July 2010: see par 10. However, at a status conference held before Registrar Dixon on 15 June 2010, the learned registrar declined to make orders sought by the plaintiffs' solicitor on the basis the defendants intended to bring a security for costs application within seven days from the date of the status conference: see Mr Zusman's affidavit pars 16 ‑ 19.
The explanation given by Mr Rumsley for the delay in making the application was his workload: see par 10 of his affidavit. With respect, that explanation is not entirely convincing. Doubtless Mr Rumsley does have a heavy workload and heavy demands upon his time. But an application for security for costs where the impecuniosity of at least the first plaintiff was admitted is not a complex matter. As an experienced litigation solicitor Mr Rumsley must also have known delay in bringing an application was a factor to be taken into account in determining whether security was ordered.
The delay in bringing this application is significant and in my view is very much in the plaintiffs' favour and against security being ordered.
The second matter relied upon by the plaintiffs is the apparent failure of the defendants to meet a series of deadlines set by the case management registrar. In my view these defaults are of some significance and I will set out the case management history in some detail. This history is drawn largely from the submissions put on behalf of the plaintiffs. However, the file confirms the accuracy of these submissions and there was no challenge on the part of the defendants.
On 25 August 2009, Registrar Dixon (who has been the case management registrar throughout) ordered the defendants to file and serve a defence by 22 September 2009. The defence was eventually served on the plaintiffs on 2 October 2009 subsequent to a letter being sent by the plaintiffs' solicitors dated 29 September 2009.
As at the date of the issue of the application for security, the defendants had failed to provide discovery. Registrar Dixon first ordered discovery be given by the defendants at a status conference on 22 December 2009. By orders made the parties were to give discovery by 1 March 2010. A series of extensions to those orders were made culminating in the plaintiffs providing their discovery to the defendants on 14 May 2010.
Ten days after receiving the plaintiffs' discovery, the defendants requested a further seven‑day extension to provide their discovery. The plaintiffs consented and the time for the defendants to provide discovery was extended to 1 June 2010. That deadline was not met. On 11 June 2010 the plaintiffs filed a notice of non‑compliance with case management directions. The notice also dealt with the defendants' failure to provide particulars of its statement of claim against a third party in the proceedings.
On 15 June 2010 the parties attended a status conference before the registrar. The registrar ordered the defendants provide discovery by 21 June 2010. The matter was otherwise adjourned sine die on the basis the defendants were going to bring a security for costs application within seven days of the status conference. These orders were made despite the plaintiffs' desire to program the matter to a position where it could be entered for trial. A copy of the minute of proposed orders dated 15 July 2010 appears as annexure DKZ2 to Mr Zusman's affidavit.
The matter came on again before Registrar Dixon on 20 July 2010. Registrar Dixon ordered the defendants to provide discovery by 30 July 2010. The defendants again failed to comply with these orders and the plaintiffs invited the defendants to submit a proposed revised timetable for discovery. No response was received to that invitation and on 16 August 2010 the plaintiffs wrote to the defendants requiring discovery to be provided by 20 August 2010 otherwise the plaintiffs would apply for a springing order.
No response was received from the defendants. The plaintiffs wrote inviting the defendants to provide a revised timetable for discovery but that request was ignored. The matter then went back before Registrar Dixon on 24 August 2010 where a springing order was made. That springing order has been stayed pending determination of this application.
The plaintiffs also referred to the failure to comply with certain orders made in the proceedings between the defendants and the third party. While it is clear the defendants have failed to comply with certain case management orders that is a matter as between the third party and the defendants. While it may serve to reinforce the casual nature of the defendants' approach to this litigation, it cannot in my view influence this application for security for costs.
So far as I am aware a failure to comply repeatedly with case management directions has not been a factor taken into account when determining whether or not security ought be ordered. Of course the wording of s 1335 confers a general unfettered discretion on the court to refuse an order, even where impecuniosity of a plaintiff is established. That being so, it would be inappropriate to limit the discretion and each case must be determined based upon the interests of justice.
Moreover, there is an argument for saying the case management regime can look after itself and defaults in compliance with case management orders should be dealt with in the context of the case management regime. To allow case management principles to intrude upon a determination whether or not security for costs ought be ordered is to confuse two separate and distinct areas of practice and procedure. Counsel for the defendants submitted if some fault was found on the part of the defendants as to their conduct of proceedings, then security should only be ordered for costs incurred after the application for security was made.
In my view, there is every reason to look critically at the conduct of the defendant in the course of litigation in determining whether security for costs ought be ordered. A party in the position of the plaintiffs has every right to conclude the defendants, by their conduct, are simply delaying progress of the action. An application for security will be seen as yet another step to delay the action. While not necessarily determinative in every case, in my view it is appropriate to take into account the way the defendants have participated in the litigation process. In this case, the defendants' repeated failures to comply with case management orders is, in my view, a factor to be taken into account in determining whether or not security ought be ordered.
It is then necessary to weigh all these matters in the balance. In favour of granting security is the fact the first plaintiff is impecunious. That satisfies the requirements of the section. An order for security would not stultify the proceedings as security will be provided by a director of the plaintiff.
On the other hand and in the plaintiffs' favour is the fact of the delay in bringing this application. The delay is largely unexplained or the extent it is explained is not satisfactorily explained. Mitigating this factor in favour of the defendants is the fact security can be ordered from the date of the application so as not to cover any costs incurred prior to the application. The other factor against granting security is the defendants' inexcusable conduct in repeatedly failing to comply with case management directions. Again, in part, that failure can be covered by ordering security only from the date the application was made and not ordering security in the full amount sought by the defendants. If security was ordered only in a certain amount with liberty to apply to top up the security, it might encourage the defendants to comply with case management orders.
On balance, I am satisfied this is not an appropriate case to order security. In my view, the delay in bringing the application and the conduct of the defendants in the course of litigation outweigh the factors in favour of granting security. Accordingly, I would refuse the application.
Throughout these reasons I have referred to the impecuniosity of the first plaintiff. Although the chamber summons sought security against both plaintiffs, the evidence and the submissions appear to focus entirely on the first plaintiff. Mr Rumsley in his affidavit in support of the application makes no reference at all to the second plaintiff. On that basis, it is difficult to see how any order for security could be made against the second plaintiff. Of course a security for costs order can be made against one plaintiff and not another. Given there was no evidence as to how any costs order in favour of the defendants might operate in relation to the respective plaintiffs, it is perhaps reasonable to assume that costs would be split equally in the event the claim was unsuccessful. While that would be a factor to consider if I was to order security for costs, I have not taken it into account in determining this application. There is no suggestion as I have indicated above, an order for security against the first plaintiff would stultify the proceedings by the first plaintiff leading to some difficulty in the second plaintiff continuing the action.
I will hear the parties as to costs.