Today's Homes and Lifestyle Pty Ltd (in liquidation) v McCoullough (No 2)
[2020] ACTSC 330
•9 December 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Today’s Homes and Lifestyle Pty Ltd (in liquidation) v |
| McCoullough (No 2) | |
| Citation: | [2020] ACTSC 330 |
| Hearing Date: | 9 December 2020 |
| Decision Date: | 11 December 2020 |
| Before: | Elkaim J |
| Decision: | See [48] |
Catchwords: | CIVIL LAW – APPLICATION IN PROCEEDING – Application for amendment to security of costs order – liquidation matter – |
| whether the plaintiff has established special circumstances exist | |
| – enforcement of judgment overseas – deed of indemnity | |
| Legislation Cited: | Court Procedure Rules 2006 (ACT) r 1905 |
| Cases Cited: | Adeva Home Solutions Pty Ltd v Queensland Motorways |
| Management Pty Ltd [2020] QSC 361 Anderson v Canaccord Genuity Financial Limited (unreported, New South Wales Supreme Court, Ward CJ, 11 November 2020) Brimaud v Honeysett Instant Print Pty Ltd (1998) 217 ALR 44 Rockett v Moneycorp Securities Pty Ltd [2008] QCA 142 | |
| Today’s Homes and Lifestyle Pty Ltd (in liquidation) v | |
| McCoullough [2020] ACTSC 72 Waters v Commonwealth (Australian Taxation Office) [2017] FCA 312 | |
| Parties: | Today’s Homes and Lifestyle Pty Ltd (First Plaintiff) |
| Ezio Senatore and Neil Cussen in their capacity as liquidators of | |
| Today’s Homes and Lifestyle Pty Ltd (Second Plaintiff) | |
| Vicky McCoullough (First Defendant) Peter McCoullough (Second Defendant) | |
| Brendan McCoullough (Third Defendant) | |
| Representation: | Counsel |
| S Mulherin (Plaintiffs) | |
| B Buckland (Defendants) | |
| Solicitors | |
| McInnes Wilson Lawyers (Plaintiffs) Trinity Law (Defendants) | |
| File Number: | SC 428 of 2019 |
| ELKAIM J: |
1. On 6 April 2020 I made orders for the provision of security for costs by the plaintiff. The security, of $75,000, was to be provided either by a deposit into court or a guarantee in
favour of the defendants (Today’s Homes and Lifestyle Pty Ltd (in liquidation) v
McCoullough [2020] ACTSC 72).
2. The plaintiffs were unable to meet the orders and consequently filed an application in proceeding, on 28 September 2020, seeking an amendment to my earlier orders and, in particular, a further order that security could be provided by way of a deed of indemnity.
3. The matter then came before me on 2 October 2020 when I made directions about the filing of further evidence and submissions. The first of those directions was that the
plaintiffs were to “file and serve any further evidence by 23 October 2020 and not on
any date thereafter”.
4. Pursuant to the above directions the plaintiff filed an affidavit of Mr Ezio Senatore on 23 October 2020. Contrary to the directions, at the commencement of the hearing on 9 December 2020, the plaintiff sought to rely on a further affidavit, of Mr John Hill sworn also on 9 December 2020.
The admission into evidence of Mr Hill’s affidavit was opposed but only on the basis
that it contravened my directions. Mr Buckland, on behalf of the defendants, candidly admitted that his case was not prejudiced by the affidavit and, if it was admitted, he
would not be seeking an adjournment. He was ready to proceed ‘either way’.
6. Because of the absence of any prejudice and because I wanted the parties to put the
whole of their arguments before me, I allowed Mr Hill’s affidavit to go into evidence.
Mr Hill’s affidavit is unusual. It annexes two affidavits that were relied upon in
proceedings in the New South Wales Supreme Court on 11 November 2020. The matter before the court is Anderson v Canaccord Genuity Financial Limited (unreported, New South Wales Supreme Court, Ward CJ, 11 November 2020). A
transcript of the proceedings is annexed to Mr Hill’s affidavit.
8. The proceedings, before Ward CJ in Eq, concern a Notice of Motion seeking an amendment to previously made orders for security for costs. It is said to be relevant to the proceedings before me because the applicant on the motion was seeking to amend
earlier made orders to include an order that the “fourth tranche” of security be provided
by an indemnity from precisely the same insurer as in the application before me.
The affidavits annexed to Mr Hill’s affidavit concern the material put before Ward CJ in
Eq to convince her Honour that the indemnity was an appropriate form of security. There is no formal judgment on the motion but at page 47 of the transcript her Honour states:
I’m satisfied that the deed of indemnity is an adequate means of providing the fourth tranche of security that’s been ordered, and I’ve had regard to the principles that have
been set out in the authorities to which I have been taken in that regard.
I think that it satisfies the protective object of the security for costs order, namely, to provide a fund or asset against which the successful defendant can readily enforce an order for costs against the plaintiff.
10. The defendant submitted that I should disregard Anderson because it was a case decided on its own facts and in particular the deed of indemnity was but one part (one of four tranches) of an overall provision of security for costs.
I agree with the defendants’ submission that each case must be decided on its own
facts but I think her Honour’s observations, as quoted above, do confirm the general
statement that a deed of indemnity may satisfy an order for security for costs.
12. An important distinction with Anderson is that the orders sought in the Notice of Motion were sought pursuant to leave given in the original orders. That is not the case here so that, as a starting point, the plaintiffs must establish special circumstances as required by r 1905 of the Court Procedure Rules 2006 (ACT).
13. The plaintiffs submitted that the special circumstances existing here were twofold: Firstly there was the fact that the previous orders for security were unable to be fulfilled and secondly, a document (a loan agreement) revealed the plaintiffs had a far stronger case, at least in respect of the first defendant, than previously envisaged. I observed in my April decision that, at that stage, the evidence held by the plaintiffs was weak.
14. In response to the first point, the defendants submitted that there was essentially nothing new in seeking security by way of a deed of indemnity. That could have been sought in the original application. As to the plaintiffs now having a stronger case, the defendants said that was somewhat debatable.
15. Neither party could identify an authority in the ACT relating to the meaning of special circumstances under r 1905.
16. The plaintiff said I should consider the existence of special circumstances by reference to the test referred to by Griffiths J in Waters v Commonwealth (Australian Taxation Office) [2017] FCA 312 where his Honour (at [52]) adopted the following test from Brimaud v Honeysett Instant Print Pty Ltd (1998) 217 ALR 44 at [46]:
In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application.
(Citations omitted).
17. The difficulty with following the test stated in Brimaud is that it relates to a “material change of circumstances” as opposed to “special circumstances”.
18. The defendants said I should follow the test stated in the Queensland Court of Appeal in Rockett v Moneycorp Securities Pty Ltd [2008] QCA 142. The applicable rule in Queensland is identical to the ACT rule. The Court said at [10]:
Counsel on all sides suggested that the test for special circumstances should be regarded as akin to that for seeking to set aside or vary and interlocutory order: that one would generally require new material with evidence of additional facts which have arisen or been discovered since the order was made so as to require a different order; see Goodman v Lorenzen [2000] QCA 11 at [6]. I do not think it necessary in this matter to attempt any definitive test of what is required under Rule 675. What is plain in my view is that nothing in the applicant's material amounts to special circumstances, either in the form of new material or in any broader sense. The fact that a more formal valuation is available hardly suffices, and the removal of the caveats does not make the offer of the second mortgage a strikingly better proposition than was before the learned judge at first instance. No basis has been shown for variation of the order under Rule 675.
19. In my view the test stated in Rockett, especially having regard to it being applicable to an identical rule, is the test that should be applied by me.
20. Looking again at the two bases upon which the plaintiff says special circumstances have been established, I make the following comments:
21. The availability of a deed of indemnity as a form of security obviously existed before my orders in April of this year. However it was the defendants that sought the security for costs and not the plaintiffs who offered to provide it in a particular form. That was a product of my orders.
22. Since my orders the defendants have not been able to provide the dictated security. Mr Senatore, in his affidavit of 23 October 2020 says that he as a liquidator does not have the funds available to meet the ordered security. In addition he says that the creditors of the first plaintiff have also not been able to furnish the necessary funds.
23. The defendants criticised Mr Senatore stating that he gave no details of the inability of the plaintiffs to provide funds. They pointed out that he and the other second plaintiff were not obliged to have become plaintiffs, but having done so, should have given details of the reasons they cannot provide the security. I pointed out to learned counsel
for the defendants that if Mr Senatore’s statements were to be challenged he could
have been required for cross-examination on his affidavit. Mr Buckland responded that this was an interlocutory procedure making cross-examination inappropriate, and further that the onus was on the plaintiffs to establish on acceptable evidence that the funds for the provision of security were not available.
24. I disagree with Mr Buckland. In my view the statements made by Mr Senatore are
straightforward and capable of acceptance, without more. The ‘more’ could have been
provided by cross-examination or at least a request for detail by correspondence. In fact, quite to the contrary the solicitors for the plaintiffs wrote to their opposing solicitors on 28 September 2020 and stated:
The first plaintiff is a company in liquidation. It has been unable to raise the required security from creditors. It is unable to pay the security as ordered into court or to provide a bank guarantee. We trust the defendants will accept that the plaintiffs cannot raise the security in the form ordered on 6 April 2020. Kindly advise us if you do not agree.
The defendants’ solicitors did not advise that they did not agree. Mr Buckland further
suggested that the need for detail would have been apparent from the content of his written submissions dated 20 November 2020. I do not accept that a party should discern the evidence that is required in a matter on the basis of opposing written submissions.
26. There has been an abundance of correspondence between the respective solicitors. If
real issue was taken with the generality of Mr Senatore’s statements then the invitation
proffered in the above letter of 28 September 2020 should have been accepted.
27. I am accordingly satisfied that there has at least been a change in circumstances in that funds are not available to meet my previous orders and there is now an additional form of security available. If this change in circumstances was the only new material I would limit the categorisation to a material change but not necessarily to the establishment of special circumstances.
28. This brings into consideration the second element relied upon by the plaintiffs. This is the loan agreement between the first plaintiff and the first defendant. The document is
Annexure ‘D’ to Mr Senatore’s affidavit. It is true, as pointed out by the defendants, that
the document has qualifications which might defeat the plaintiffs claim and it is only of
relevance to the case against the first defendant.29. However when compared to the case previously advanced by the plaintiff, in particular before I made my orders in April 2020, there is at least a solid foundation for a case. There is clearly an apparent inconsistency between the loan agreement and the Defence filed by the first defendant, dated 25 October 2019 (in particular at paragraph 3(b)).
30. The defendants have pointed out that there is no source given for the loanagreement, nor any information as to whether it was in the possession of the plaintiffs in April 2020 (when I made the original orders). Mr Senatore simply annexes the document without stating its source.
31. Again, Mr Senatore could have been asked about the document. I think I can infer from the absence of cross-examination and the fact that it was not relied upon in April 2020, that is has since come into the possession of the liquidators.
32. In my view the emergence of the Loan Agreement, taken with the now apparently available form of security, combine to create the special circumstances necessary for me to consider changing the orders I earlier made pursuant to r 1905.
33. The next question is whether I should make the orders now sought. The defendants quoted heavily from the recent decision of Applegarth J in Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd [2020] QSC 361. This judgment contains a comprehensive analysis of principles involved in ordering security for costs. It also, relevantly, examines security being provided by way of a deed of indemnity having its source in an overseas insurer.
34. Applegarth J compared, at [11] and [12] the necessity of a court and a defendant
having to examine the merit of a foreign insurer’s deed compared to security that can
be provided locally in what his Honour describes as “the usual form of security”. The
difference here of course is that the usual forms of security are not available to the
plaintiffs. They simply cannot raise the funds necessary to provide such security.35. At [24] his Honour says that “the appropriate form of security depends upon the circumstances of the particular case”. This observation is trite. His Honour continued,
at [30]:
The issue of whether a particular form of security is adequate in all the circumstances requires consideration of whether the disadvantages to the defendant in not being able to
access security in liquid form within the jurisdiction are unacceptable…
After setting out the defendant’s submissions as to the difficulties with the type of
security under consideration his Honour says, at [47]:
The defendant submits that it should not have to accept a deed of indemnity which has these disadvantages in circumstances in which there is no suggestion or evidence that an order for security in the form sought by it cannot be paid by the funder or will stultify the proceeding.
37. As seen above that is precisely not the situation before me. There is evidence that the normal form of security cannot be paid and, if not paid, the proceedings will not
proceed. Accordingly the plaintiffs’ claim will be frustrated by the inability to provide the
security. Ultimately at [74], his Honour found that:
Having regard to these and other relevant circumstances, I am not persuaded that the form of security proposed by the plaintiff is adequate and does not impose an unacceptable disadvantage on the defendant in the particular circumstances of this case. The interests of justice are best served by not ordering security in a form which imposes disadvantages on the defendant in circumstances where the financial and other advantages to the plaintiff of adopting that form or unproven and uncertain. The interests of justice are best served by making an order for costs in the form proposed by the defendant.
38. His Honour clearly and correctly confines his decision to the facts before him and makes the point, not applicable here, that the better order is that requiring payment in one of the usual forms of security. That is what I originally did. That is what the plaintiffs now cannot meet.
39. The next question that arises is whether the security now proposed by the plaintiffs is adequate. This is where the affidavits annexed to the affidavit of Mr Hill come into play.
40. The affidavit of Mr Humphries is primarily, at least for current purposes, concerned with
the registration and enforcement of a ‘local’ costs order in England. The affidavits of
Mr Ford are concerned with the viability of the insurer. I did not understand the submissions of the defendants to cavil with the latter issue. In saying so I appreciate that counsel for the defendants was confronted with the new affidavit material at a later stage and was not necessarily in a position to take points that he might have taken had he been given a greater opportunity. Nevertheless, I note that no application for further time was made.
41. Mr Buckland did however make telling submissions in respect of the contents of
Mr Humphries’ affidavit. In particular he pointed out that while Mr Humphries gave
specific assessments for the costs of registering a judgment in England (£2000 plus court charges of £66) he did not give any assessment of the costs of enforcing a judgment, although he does make some general observations at [21] and [22].
42. Mr Buckland pointed out that it might be necessary to enforce a number of costs judgments each requiring registration and possible enforcement as well as delay. Although no doubt time would be taken to enforce a judgment locally it is reasonable to expect that enforcing the judgment in England, having regard to the briefing of separate solicitors and providing instructions, might take extra time.
43. Mr Senatore says in his affidavit, at [24] that he is prepared to pay $5,000 into court “for the sole purpose of contributing towards the defendant’s costs in seeking to enforce a
judgment in the UK, should such enforcement action overseas become necessary”.
44. $5000 at an exchange rate in the order of 0.56 converts to £2,785, an amount just sufficient for the registration and court costs of one judgment. Clearly $5000 is not enough.
45. In relation to the form of the Deed of Indemnity the plaintiffs have suggested a deed in
the form Annexed (at “C”) to the affidavit of Mr Senatore. Despite attempts at agreeing
the terms of the deed, the defendants remain concerned about some of its contents.
46. Ultimately I think a deed of indemnity is not the preferable form of security, but where in a case like this, the usual forms are beyond the means of the plaintiffs, a deed of indemnity is adequate.
47. However there needs to be a larger amount paid into court for registration and enforcement of any costs judgment in the UK. I think this amount should be $25,0000.
48. The orders of the Court are:
(a) The orders made on 6 April 2020 are amended so as to permit security for costs to be provided by the plaintiffs by way of a deed of indemnity taken out with Lloyds Syndicate 4000. (b) The form of the deed is to be agreed between the parties within 28 days of the date of these orders. (c) If the parties cannot agree on the form of the deed each party has liberty to restore on 48 hours notice to the other party. (d) It is a condition of these orders that the plaintiffs pay the sum of $25,000 into court to be attributed to any costs incurred for the registration and/or enforcement of any costs judgment in the United Kingdom. (e) The costs of this application are to be costs in the cause.
I certify that the preceding forty-eight [48] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Elkaim.
Associate:
Date: 11 December 2020
2
7
1