Von Marburg v Aldred & Anor (No 3)
[2017] VSC 146
•29 March 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
S CI 2014 06065
BETWEEN:
| ROLAND VON MARBURG | Plaintiff |
| v | |
| ETHAN ALDRED | First Defendant |
| PIETER MOURIK | Second Defendant |
S CI 2014 06844
AND BETWEEN:
| ANNA VON MARBURG | Plaintiff |
| v | |
| ETHAN ALDRED | First Defendant |
| PIETER MOURIK | Second Defendant |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 March 2017 |
DATE OF JUDGMENT: | 29 March 2017 |
CASE MAY BE CITED AS: | Von Marburg v Aldred & Anor (No 3) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 146 |
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PRACTICE AND PROCEDURE – Security for costs – Application for security for costs against a natural person – Where application for security for costs made where plaintiff resides outside of Victoria – Supreme Court (General Civil Procedure) Rules 2015, r 62.02(1)(a) – Civil Procedure Act 2010, ss 29(d) and (f) and the inherent jurisdiction of the Court – Whether circumstances of the case and interests of justice justify order for security for costs being made – Whether prior conduct of plaintiffs in both proceedings has breached overarching obligations and justifies order for security for costs – Trkulja v Dobrijevic (No 2) [2016] VSC 596.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs (in both proceedings) | Mr M D Tehan | Russell Kennedy |
| For the First Defendant (in both proceedings) | no appearance - claim against First Defendant dismissed | |
| For the Second Defendant (in both proceedings) | Ms N J Hickey | Minter Ellison |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 1
Dr Mourik’s Submissions................................................................................................................. 8
Rule 62.02(1)(a) and the Inherent Jurisdiction.......................................................................... 8
Section 29 (d) and (f) of the CPA............................................................................................... 11
Delay............................................................................................................................................. 12
Quantum...................................................................................................................................... 12
Plaintiffs’ Submissions................................................................................................................... 12
Applicable Law................................................................................................................................. 14
Section 29 of the CPA.................................................................................................................. 18
Analysis.............................................................................................................................................. 20
Conclusion......................................................................................................................................... 23
HIS HONOUR:
Introduction
The second defendant (‘Dr Mourik’) in both S CI 2014 06065 and S CI 2014 06844 (‘the Proceedings’) applies in unusual circumstances for an order that the plaintiffs (‘the von Marburgs’) in each proceeding provide security for Dr Mourik’s costs of the proceeding pursuant to r 62.02(1)(a) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) and s 29(1)(d) and (f) of the Civil Procedure Act 2010 (‘the CPA’).[1]
[1]Summons filed by the second defendant on 9 March 2017.
The application is both protective in nature and is based on past events that include:
(a) difficulties encountered by Dr Mourik in extracting payment of legal costs from the plaintiff in in proceeding S CI 2014 6065 (‘Dr von Marburg’);
(b) the failure of the von Marburgs to attend mediations in person and the need for Court orders compelling them to attend;
(c) the von Marburgs’ failure to take the steps required to be ready for the trial set down for 3 April 2017;[2] and
(d) other factors, including that having regard to Dr Mourik’s offer of amends and a waiver of payment of costs, and the refusal of that offer, the prospect of success of the defamation claims made by the plaintiffs are weak and reveal an ulterior motive.
[2]See Order 12 of the Orders made by Keogh J on 26 May 2016 (‘26 May 2016 Orders’) in proceeding S CI 2014 6065, noting that each proceeding has been set down for trial on an estimate of 10 days.
Background
The Proceedings have a long history. Each plaintiff sues Dr Mourik for defamation. The plaintiff in proceeding S CI 2014 6065 is Dr Roland von Marburg. The plaintiff in proceeding S CI 2014 06844 is Mrs Anna von Marburg (‘Mrs von Marburg’). The claims made in each proceeding against the first defendant have been settled and dismissed.
Dr von Marburg is a medical practitioner who resides in regional New South Wales and has a medical practice in Albury, New South Wales. Dr von Marburg supports a local anti-abortion organisation called ‘Abortion Hurts Albury’, which has the purpose of providing information to local women on the physical, emotional and social risks associated with abortion. He is also a supporter of an international anti-abortion organisation called the ‘Helpers of God’s Precious Infants’ that is affiliated with the Catholic Church (‘HoGPI’). HoGPI conducts vigils and prayers at a variety of sites in Australia and the United States of America, generally near medical clinics where pregnancy termination procedures are conducted. One of them is in located outside such a clinic in Englehardt Street, Albury.[3]
[3]Affidavit of Dr Roland von Marburg sworn 12 November 2014, [9]-[13].
On 16 October 2014, Dr von Marburg attended such a vigil outside the Englehardt Street clinic and was photographed. That evening, Dr von Marburg became aware that a photo of him had been posted on the ‘Right to Privacy Albury’ Facebook page. The photo was accompanied by a comment about his presence at the vigil (‘the Post’). Other Facebook users subsequently posted comments below the Post (‘the Thread’).[4]
[4]Ibid [14]-[17].
Dr Mourik is also a registered medical practitioner and retired specialist obstetrician and gynaecologist who is a spokesperson for ‘Rights to Privacy Albury’, an unincorporated community group of people seeking an exclusion zone around women’s medical clinics in New South Wales.
The Post was in these terms:[5]
[Photo of Plaintiff]
Here is a photo of the only doctor in Albury Wodonga who would stand outside a legal, Women’s Health Clinic, violating women’s privacy! This is, in our opinion, highly unethical and against the public statement by the highest authority of Women’s Health in Australia, the Royal Australian and New Zealand College of Obstetricians and Gynaecologists:
RANZCOG Statement, April 2013: “Women have the right to access any medical service without their privacy being infringed or being subjected to harassment”.
Ref: Women’s Health Statements C-Gyn 17
This is why the petition to NSW government banning anti-abortion protesters outside Women’s Health Clinics MUST succeed.
[5]See reasons for judgment of John Dixon J in von Marburg v Aldred & Anor [2015] VSC 467 [5]; von Marburg v Aldred & Anor (No 2) [2016] VSC 36 [5].
The plaintiff alleges that Dr Mourik was an author or the originator of the Post.
The Post attracted additional comments by others directly to the Facebook page in the Thread. These comments were posted on 16 and 17 October 2014 and three comments in the Thread are as follows:[6]
(a)‘Is this Roland Van Marburg, the “Butcher” …’ (Under the name Julie Newell);
(b)‘Careful with those rosary beads Roland, wouldn’t want to accidently [sic] snort them up with your cocaine’ (Under the name Anna Ferrinda); and
(c) ‘To each his own Erin, but the man butchered me during surgery and then provided no post op care whatsoever. Julie has a right to express her personal opinion as do you’ (Under the name Cade Newell).
[6]Ibid [7].
The proceeding was originally commenced against the administrator of the Facebook page, the first defendant (Ethan Aldred) and against Facebook Australia Limited as the controller and manager of the domain. The proceeding against Facebook was resolved soon after it commenced and the proceeding against Mr Aldred was recently settled and dismissed.[7]
[7]By order made on 22 March 2017.
According to an affidavit of Mr Michael Main, of Russell Kennedy, the solicitor acting for the von Marburgs, the Proceedings commenced in November 2014 with the primary objective of having those defamatory comments removed. An application for a mandatory injunction was made. The Post and Thread were removed before the return of applications for injunctive relief.[8]
[8]Affidavit of Michael Main of 20 March 2017, [16] (‘the Main Affidavit’).
The von Marburgs had difficulty formulating their claims against Dr Mourik.[9] By December 2015, Dr von Marburg had made seven failed attempts to plead an arguable case against Dr Mourik.[10] As a result of these failed attempts, Dr von Marburg was ordered to pay some of Dr Mourik’s costs immediately. Eventually, the eighth iteration of the statement of claim was successful after John Dixon J delivered his reasons for judgment on 9 February 2016.[11] The result was a document called the fourth statement of claim, which Dr Mourik’s counsel described as at least the ninth version of the statement of claim.[12]
[9]The pleadings issues, which were raised by the defendants, were pursued in Dr von Marburg’s proceeding and Mrs von Marburg’s proceeding was stayed pending the resolution of those issues. The Proceedings have otherwise been treated together and orders setting down the Proceedings had been made for them to be heard consecutively or concurrently over the same period.
[10]See the observations of John Dixon J in von Marburg v Aldred & Anor (No 2) [2016] VSC 36 [2].
[11]Von Marburg v Aldred & Anor (No 2) [2016] VSC 36.
[12]There were versions provided inter partes.
Dr Mourik has delivered a further amended defence and counterclaim dated 28 October 2016. In it, amongst many other responses to the fourth statement of claim of Dr von Marburg, Dr Mourik refers to an open apology made on 18 April 2016.[13] That pleading also refers to an open offer to waive the costs owed to Dr Mourik by the von Marburgs, which has been refused. That offer was also made on 18 April 2016 with a deadline for acceptance on 26 April 2016. It was rejected at about 9.28pm on 18 April 2016. At that time the costs estimated to be due by the von Marburgs was in the order of $65,000.00.[14]
[13]Further amended defence and counterclaim dated 28 October 2016, [37].
[14]Ibid [38].
Dr Mourik counterclaims against the von Marburgs, also for defamation, arising out of the publication of a series of posts which appeared on the ‘Rights to Privacy Albury Exposed’ Facebook page, that was established after this proceeding began. It is, according to the outline of submissions filed by Dr Mourik’s counsel, an anonymous site dedicated to criticising Dr Mourik and the ‘Right to Privacy Albury’. The counterclaim also concerns a claim for defamation in relation to a comment made by Dr von Marburg himself on about 3 February 2016 that was written and posted to the ‘Rights to Privacy Albury Exposed’ Facebook page,[15] and other posts made between July 2015 and February 2016.[16]
[15]Further amended defence and counterclaim dated 28 October 2016, [42]-[45].
[16]Further amended defence and counterclaim dated 28 October 2016, [46]-[58].
It is made clear in the submissions made on behalf of Dr Mourik that he does not press his counterclaim to be heard separately to the trial of the claim made by the von Marburgs if their Proceedings are stayed. Dr Mourik is content for his counterclaim to be stayed as well.
Dr Mourik encountered great difficulty in collecting the costs ordered to be paid by Dr von Marburg. They were paid finally by 2 March 2017. The solicitor acting on behalf of Dr Mourik, Ms Veronica Clare Scott, has sworn three affidavits in support of the application for security for costs.[17] In her first affidavit, Ms Scott gives a lengthy account of the correspondence between the parties over the period from about 21 November 2016 to 28 February 2017 in relation to both the payment of the costs orders by the von Marburgs and the holding of mediations. It is a part of the contentions of Dr Mourik in this application that the correspondence shows that the von Marburgs conduct has been largely unproductive, inefficient, costly and has caused delay. In addition, it has been at times intemperate.
[17]Affidavits of 2 March, 9 March 2017 and 21 March 2017.
In relation to the payment of the costs by the von Marburgs, on 11 November 2016, the Court ordered Dr von Marburg to pay Dr Mourik $57,322.80. On 6 December 2016, Minter Ellison wrote on behalf of Dr Mourik to Dr von Marburg’s solicitors, noting that no payment has been received in consequence of the order, that the sum was payable immediately and that steps would be taken to enforce the order unless payment was made. On the same day, Mr Main responded to the effect that he did not have the trust account details, and would obtain instructions. However, the solicitor for Dr Mourik pointed out that the trust account details had been provided three weeks earlier. Assurances were then provided by the solicitors for the von Marburgs, but not met. There was a somewhat amazing failed attempt to pay by credit card shortly before Christmas after a lay representative of Dr von Marburg enquired directly of Dr Mourik’s solicitors’ accounts department and was told that payment could be made by credit card. That representative attempted to pay by card and was told that the transfer of money into trust was required, so that credit card payment was not possible. A little thought, and communication by the von Marburgs’ solicitor, would have avoided this unfortunate error.
On 25 January 2017, a security for costs application was foreshadowed in circumstances where payment of the costs order was not forthcoming. The letter threatening an application for security identified the following matters in support of the application:[18]
[18]Exhibit VCS-1 to the affidavit of Ms Scott sworn 2 March 2017, pp 61-63.
(a) the von Marburgs commenced proceedings in the Supreme Court as opposed to the County Court against two individuals, a young student (the first defendant) and Dr Mourik (who is a retired individual) concerning Facebook comments on a community page which neither of them posted, were posted by other authors identifiable to the von Marburgs, were available on the page for only a short period, had been removed since November 2014 and for which Dr Mourik has apologised;
(b) the real issue between the parties is not the subject of the proceeding (it is not said what that issue is and it is not appropriate for me to speculate for the purposes of this application);
(c) the proceeding has been on foot for over three years and there have been numerous substantive hearings (including in the Costs Court) as well as a number of directions hearings;
(d) the von Marburgs challenged the effect of the costs orders made by John Dixon J and the basis of Dr Mourik’s claim for his taxed costs in circumstances where Dr Mourik has incurred substantial costs;
(e) the von Marburgs have failed to comply with four costs orders;
(f) no costs orders have been made against Dr Mourik in the main proceeding and Dr Mourik has set off his costs ordered in the Costs Court;
(g) a mediation took place at the Court’s direction in December 2015. The von Marburgs advised at short notice that they would not attend;
(h) the von Marburgs subsequently rejected an open offer to settle the claim which included an apology and a substantial sum of money;
(i) after filing and serving more than six different versions of his statement of claim, Dr von Marburg was finally given leave to file the fourth statement of claim in its ninth version; and
(j) Dr Mourik has filed a counterclaim which the von Marburgs attempted to strike out. Further and better particulars of the von Marburgs’ defences requested by Dr Mourik have not been given.
After the failed attempt on Dr von Marburg’s behalf to pay the costs by credit card, Dr von Marburg commenced making instalment payments into the trust account of Dr Mourik’s solicitors. After further orders on 2 February 2017, payment was finally completed by 2 March 2017.[19]
[19]Main Affidavit, [12].
Dr Mourik also had great difficulty in conducting an effective mediation of the Proceedings. The first mediation in 2015 was not attended by the von Marburgs or their lawyers. After three months of correspondence, it was only at the last moment that the von Marburgs’ solicitors disclosed that neither of them intended to attend the mediation that had been agreed to be held on 3 March 2017 in Melbourne. Mr Main explained that the von Marburgs reside in New South Wales and ‘consequently they will attend the mediation by telephone’. The mediation on 3 March 2017 did not proceed. The matter was brought back to Court and Keogh J ordered the von Marburgs to attend in person, with counsel.[20] That mediation took place on 14 March 2017 and was unsuccessful.
[20]Counsel for Dr Mourik states in her outline of submissions that, for the avoidance of doubt, Dr Mourik seeks the costs in connection with the Court hearing on 3 March 2017 and has included those costs in the calculation of its security for costs.
Dr Mourik’s Submissions
Dr Mourik seeks security for costs pursuant to Rule 62.02(1)(a) of the Rules, ss 29(d) and (f) of the CPA and/or the inherent jurisdiction of the Court.[21]
[21]Summonses dated 9 March 2017.
Rule 62.02(1)(a) and the Inherent Jurisdiction
Even though the von Marburgs are individuals, security may be sought from them pursuant to the Rules given that they reside outside Victoria. That said, it is not their place of residence per se which is relied on to enliven the jurisdiction. Rather, the totality of circumstances justifies the order having regard to the Court’s inherent jurisdiction, noting that one of those circumstances is the von Marburgs’ reliance on their place of residence to excuse compliance of their obligations in relation to mediation.
Dr Mourik relies on the decision of Garde J in Trkulja v Dobrijevic (No 2),[22] a defamation case where the allegation against the defendant was one of secondary publisher, involving numerous pleadings. An observation of Dixon J[23] (in an earlier interlocutory ruling in the same matter) referred to by Garde J is relevant to the facts here:
His unmeritorious conduct in continuing to seek out of time to charge the first defendant with publication of defamation appears part of a wider dispute concerning the affairs of the Serbian Orthodox Church … The inference of an ulterior motive is open from the dogged insistence of Mr Trkulja on retaining the first defendant in the proceeding despite the substantial and increasing passage of time since the events complained of.[24]
[22][2016] VSC 596 (‘Trjkulja’).
[23]As he then was (now John Dixon J).
[24]Trkulja [14].
In that case, security for costs was ordered pursuant to the Court’s inherent jurisdiction, on the basis that this offers an important safeguard where necessary in the interests of justice in circumstances falling outside the categories in r 62.02 of the Rules[25] (noting that Dr Mourik is within those categories).
[25]Ibid [20].
In Trkulja, Garde J applied[26] factors identified by the Court of Appeal[27] as relevant to the exercise of the Court’s inherent jurisdiction. As applied to this case, they include:
[26]Ibid [17](per Garde J).
[27]Trkulja v Dobrijevic & Ors [2015] VSCA 281.
(a) the prospects of success – in this case they are low because there is a serious risk that even if successful, only modest or nominal damages would result, and it is difficult to see why Dr Mourik should be responsible for comments on the Thread that he did not author;
(b) the degree of risk that a costs order would not be satisfied – these are high for the reasons given below;
(c) whether the making of an order would be oppressive by stifling a reasonably arguable claim – no, the von Marburgs concede that the primary objectives of the litigation were met almost three years ago by the removal of the Post and the Thread;
(d) whether any impecuniosity of the appellant (or applicant) arises out of the conduct complained of — no, the von Marburgs are solely responsible for the choices they have made in this litigation, and the resulting financial consequences;
(e) whether there are any aspects of public interest militating against the making of such an order — no, the public interest goes the other way in that the von Marburgs’ conduct has been devoted to their own interests; and
(f) whether there are any particular discretionary matters relevant to the application — yes, the von Marburgs conduct has been oppressive and disproportionate to what is at stake, and it would be vexatious and not in the interests of justice to allow the proceeding to continue without security.[28]
[28]Morris v Hanley [2000] NSWSC 957 (per Young CJ in Eq); Melville v Craig Nowlan & Assocs Pty Ltd (2002) 54 NSWLR 82, 119.
It was submitted that the failed attempts to pay by credit card, the subsequent instalment payments and consequential delay in payment, give rise to a reasonable inference that the von Marburgs, if they are not impecunious now, are at risk of being unable to meet any cost order in favour of Dr Mourik in connection with his defence, at the conclusion of the Proceedings.
The letter from the von Marburgs’ accountant regarding their financial position, supplied in the affidavit of Mr Main[29] does not, it was submitted, alleviate these concerns[30] and is insufficient proof. The matters in Ms Scott’s affidavit sworn 21 March 2017 suggests that the conclusions are unsound because:
[29]The Main Affidavit.
[30]Exhibit MDM-1 to the Main Affidavit.
(a) the properties owned by the von Marburgs are mortgaged to the National Australia Bank, the values of the properties appear overstated and the asset positon includes a superannuation fund to which access by a successful Dr Mourik is uncertain or impossible;
(b) Dr von Marburg’s medical practice is only an asset if he proposes to cease practicing, which is not suggested;
(c) save for $10,000.00 in a business bank account, there are no liquid assets; and
(d) income and expenses are otherwise hopelessly generalized and incapable of being relied upon, noting that even if correct, it is difficult to see how the ensuing income could comfortably fund a family of 10 people,[31] their litigation costs, with sufficient left over to pay costs ordered in Dr Mourik’s favour.
[31]The von Marburgs have 8 children.
Further, it is reasonable to infer from the history of this proceeding, including the necessity to obtain Court orders so that the von Marburgs would attend the recent mediation in person, that Dr Mourik is at significant risk of being forced to pursue any costs order in his favour through the courts, potentially without success.
The von Marburgs have been neither diligent nor efficient in preparing the Proceedings for trial. The setting down fees appear not to have been paid,[32] and there have been no pre-trial directions sought. This means that the question of the preparation and timing of the Court Book, amongst other things, is at large.
[32]The Court correspondence is at Exhibit VCS-1 to Ms Scott’s 21 March Affidavit. Counsel for the von Marburgs informed the Court that the Notice of Trial had been filed and the setting down fee paid on 23 March 2017.
Finally, the weakness of the claim, the offer of amends by Dr Mourik and the limited prospect of damages going beyond nominal damages, indicate that there is an ulterior motive for the continuance of the Proceedings. That is personal animosity or a commitment to the anti-abortion cause, or both. In the words of Counsel for Dr Mourik, the circumstances of this case are close to those that would call for a stay of the Proceedings as an abuse of the process of the Court.
Section 29 (d) and (f) of the CPA
In addition to these matters, Dr Mourik goes further and relies upon paragraphs 29 (d) and (f) of the CPA on the basis that by their conduct of the Proceedings, the von Marburgs have breached their overarching obligations:
(a) to only take steps to resolve or determine the dispute;[33]
[33]Section 19 of the CPA.
(b) to cooperate in the conduct of the proceeding;[34]
[34]Section 20 of the CPA.
(c) to use reasonable endeavours to resolve a dispute by agreement between the persons in dispute, including, if appropriate, by appropriate dispute resolution;[35]
[35]Section 22 of the CPA.
(d) to narrow the issues in dispute;[36]
(e) to ensure costs are reasonable and proportionate;[37] and
(f) to minimize delay.[38]
[36]Section 23 of the CPA.
[37]Section 24 of the CPA.
[38]Section 25 of the CPA.
Delay
The delay in the making of the application was explained by Counsel for Dr Mourik as arising from the recent difficulty apparently encountered by the von Marburgs in meeting the payment of the costs order. Before the events described above concerning the payment of these costs, the ability of the von Marburgs to meet costs of Dr Mourik were not an issue. But those events pointed to the likelihood that in the event that Dr Mourik is successful in his defence of the claims there was a risk that payment would not be able to be made or would be difficult to enforce. That circumstance, when combined with the other matters identified above, including the weakness of the claims and the low prospect of an award of damages, if the claims were successful, being other than nominal, made the application necessary in the interests of Dr Mourik.
Quantum
Dr Mourik’s solicitors have filed two affidavits dealing with the quantum of any security for costs. The affidavit of Ms Scott of 9 March 2017 estimates the costs based upon the likely duration of the trial being about 20 days, comprising 10 days for Dr von Marburg’s proceeding and 10 days for Mrs von Marburg’s proceeding. Those costs are said to amount to $392,348.00. In her affidavit of 20 March 2017, Ms Scott recalculates the costs consequent upon settlement of the von Marburgs’ claims against the first defendant and the likelihood that Dr Collins QC will not be available to appear at trial in the light of competing commitments. The trial is estimated to be seven days and the costs are reduced by a reduction in the duration of the trial and the possibility that Dr Collins QC will be unavailable. This latter affidavit also addresses details as to the financial position of the von Marburgs as revealed in the affidavit of Mr Main and exhibits title searches and land value searches and other material.
Plaintiffs’ Submissions
The von Marburgs submitted that application by Dr Mourik for security for costs ought be refused because:
(a) it is not made at the earliest available opportunity, and no explanation for the delay is provided;
(b) it is made so close to trial that it would work practical injustice on the von Marburgs;
(c) Dr Mourik fails to establish that there is any real reason to believe that the von Marburgs will be unable to pay the Dr Mourik’s costs; and
(d) it seeks, impermissibly, to impose security as a penalty for perceived procedural defaults by the von Marburgs.
The plaintiffs then make a number of short points:
(a) the application for security has not been made promptly and no explanation for that delay has been made in any of the three affidavits in support filed. The von Marburgs have incurred substantial costs in respect of their preparation for trial. Given the impending trial fixed to commence on 3 April 2017, to order security at this late stage would impose significant injustice on the von Marburgs. It might also jeopardise the trial date, a matter acknowledged in Dr Mourik’s submissions;
(b) to the extent that the merits of von Marburgs’ claim can or ought be assessed, it is clear that is not so unarguable as to merit an award of security. After a number of pleading skirmishes, the claim is now in such a state that Dr Mourik has filed his defence, and the matter stands ready to proceed to trial. Given the long pleading history of the Proceedings, the Court can infer that the claim is sufficiently strong so as not to require an order of security to prevent a hopeless case from proceeding;
(c) the application seeks to rely on perceived procedural difficulties (including concerning a mediation which has already occurred, and to take steps to be ready for trial) as a basis for an order of security. First, those alleged difficulties have been overcome: the mediation has occurred. Secondly, and more importantly, an order for security for costs is not the appropriate remedy for non-compliance with procedural orders;[39]
[39]See Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 [26]-[27].
(d) although it has taken some time for the von Marburgs to pay the costs ordered against them, the costs order has been satisfied;
(e) the von Marburgs’ financial position is summarised in a letter from their accountant dated 20 March 2017.[40] The material on which Dr Mourik relies to attempt to undermine that summary does not establish a proper foundation for calling into doubt the letter from the von Marburgs’ accountant; and
(f) this case should be distinguished from the decision in Trkulja v Dobrijevic (No 2).[41] The factual basis is so far removed from the present case as to make any analogous reasoning inapplicable.
[40]Exhibit MDM-1 to the Main Affidavit.
[41]Trjkulja.
Applicable Law
Rule 62.02 of the Rules provide, so far as relevant, that where the plaintiff is ordinarily resident out of Victoria, the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.
The purpose for ordering security for costs against an applicant ordinarily residing outside the jurisdiction is protective, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign jurisdiction and as to the time and complexity of the action there which might be necessary to effect enforcement.[42] Residence outside Victoria but in Australia does not give rise to any difficulty of enforcement. The Service and Execution of Process Act 1992 (Cth) provides an effective means of enforcing any judgment for the plaintiffs to pay Dr Mourik’s costs. It is not the practice to order security for costs against a plaintiff living out of Victoria, but in Australia.[43] Thus, although the jurisdiction is opened, it is barely a ‘crack in the door’.
[42]Energy Drilling Inc v Petroz NL [1989] ATPR 40-954, 50-422 (per Gummow J); see also Yara Australia Pty Ltd v Oswal (2013) 41 VR 245.
[43]Calvert v Melbourne Harbour Trust Cmrs [1939] VLR 94; Williams, Civil Procedure Victoria [62.02.25].
In any event, residence out of Victoria alone is insufficient. Security for costs will not be ordered against a party simply because that party resides outside the jurisdiction.[44] Discretion to award security for costs is unfettered, but must be exercised judicially[45] and the Court must weigh all of the circumstances of the case.[46]
[44]CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270, 284-5.
[45]US Realty Investments LLC #1 & Ors v Need [2013] VSC 590 [21].
[46]PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 at 323. This case involved a company incorporated in Hong Kong with no assets in Australia. McHugh J observed that for many years the practice has been to order a non-resident party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. Where the Foreign Judgments Act 1991 (Cth) applies: See DIF III Global Co-Investment Fund, LP & Anor v BBLP LLC & Ors [2016] VSC 401; Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2015] VSC 692.
The Court retains an inherent jurisdiction to order security for costs as an adjunct to the Court’s power to regulate its own procedure.[47] The inherent jurisdiction to order security for costs provides an important safeguard. It permits the Court to require security for costs where that is necessary in the interests of justice in circumstances that fall outside the categories found in r 62.02 of the Rules.[48] It is also true that the inherent jurisdiction is not restricted to the examples in the decided cases, in the sense of denying the existence of the power for any other case. The fact that the power has been regularly exercised in a limited number of cases and refused in others proves the existence of, but does not restrict, the jurisdiction.[49]
[47]Lines v Tana Pty Ltd [1987] VR 641; Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 at 447 (‘Rajski’).
[48]Trkulja v Dobrijevic (No 2), [2016] VSC 596, [20].
[49]Rajski at 449 (per Holland J).
It was not in dispute between the parties that the basic rule is that a natural person who sues will not be ordered to give security for costs however poor they are.[50] The rule does not mean that there are no circumstances in which a natural person without assets will be required to provide security for costs, or subjected to a stay of proceedings until security is provided.[51]
[50]Pearson v Naydler [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533 (per Megarry VC).
[51]Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157, [48]; [2002] 54 NSWLR 598, 610 (per Hodgson JA).
Usually some other or additional factor to the plaintiff’s impecuniosity must be present in order that an individual plaintiff provides security for costs.[52] In Knight v Beyond Properties Pty Ltd,[53] Lindgren J noted the following:
In the cases in which natural persons have been ordered to provide security, some factor in addition to impecuniosity has been present; cf Barton v Minister for Foreign Affairs (1984) 2 FCR 463 (Morling J) at 594 (impecuniosity and residence outside Australia); Cunningham v Olliver (unreported, Burchett J, 21 November 1994) (but for delay, security would have been ordered on ground of impecuniosity and bringing of claim to a significant extent for benefit of others); Chang v Comcare Australia [1999] FCA 1677 (Moore J) at [32] (impecuniosity and lack of prospects of success); Loque v Hansen Technologies Ltd [2003] FCA 81 (Weinberg J) (impecuniosity and residence outside Australia); Morris v Hanley [2000] NSWSC 957 (Young J) at [21], [38] and [39] (but for delay, Young J would have ordered security on grounds of impecuniosity and lack of prospects of success and large costs involved to defendants. Young J's decision was reversed on appeal on the ground that defendants had not adequately explained their delay in moving for security, but the Court of Appeal did not consider other aspects of his Honour's reasons: see Morris v Hanley & Ors [2001] NSWCA 374 at [30]-[31]); Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82 (CA) at [132] (per Heydon JA) (impecuniosity and applicant's failure to show that order would stultify proceeding and sum ordered by primary Judge not oppressive).The defendants contended that the plaintiff is a man of straw and, what is more, is a man who generally avoids his creditors and his financial responsibilities.
[52]Knight v Beyond Properties Pty Ltd [2005] FCA 764; see also Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247.
[53][2005] FCA 764, [33].
If the Court has jurisdiction to order security, the burden rests on the defendant, from first to last, to persuade the Court that the order for security for costs should be made.[54] There are, however, particular discretionary matters in respect of which the plaintiff must necessarily have the carriage. Thus, if the plaintiffs assert that an order for security would impose on them such a financial burden as to stultify or frustrate the litigation, they must establish the facts which make good that assertion.[55]
[54]Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377, Maxwell P and Buchanan JA at [21] (‘Livingspring’); Colmax v Polytrade [2013] VSC 311 [18].
[55]Livingspring, [22].
Delay in applying for security may be ground for refusal. The plaintiffs are usually entitled to know their position in relation to security at the outset and before they embark to any real extent on the litigation, and certainly before they makes a substantial financial commitment toward litigating the claim.[56] In Christou v Stanton Partners Australasia Pty Ltd,[57] the Western Australian Court of Appeal observed:
It is incumbent upon a defendant who wishes to obtain security for its costs to apply promptly for that relief once it is, or ought reasonably be, aware that the plaintiff would be unable to meet an order for costs. Security for costs is not a card that a defendant can keep up its sleeve and play at its convenience. Delay is an important consideration in the determination of an application for security for costs because it is capable of causing prejudice or unfairness to the plaintiff. A plaintiff is entitled to know at the earliest opportunity, before it has committed substantial resources to pursuing the litigation, whether it will be required to provide security. The later an application is made the greater the likelihood that it will cause substantial disruption or distraction in the conduct of the plaintiff's case, and if the plaintiff is unable to provide security, the greater the costs that will have been wasted…
I would add that in an era when the need to ensure the efficient use of judicial resources has become increasingly important, delay may also be significant in that regard. A late application which frustrates the action will mean that the judicial resources already devoted to the case will have been wasted. Where it results in the adjournment of an imminent trial it will often have the result that the trial dates will be wasted…
There are, however, degrees of delay and the effect of delay will vary according to the circumstances. The reason for the delay will also be an important consideration. Where delay has occurred it will not necessarily bar an order for security for costs, but generally the longer the delay, the more proximate the hearing and the more that has been done by the plaintiff to advance the case, the greater will be the significance of the delay and the more difficult it will be for the defendant to persuade the court that an order for security for costs will not be unfair or oppressive…
In order to show prejudice it is not necessary for a plaintiff to establish what it would have done differently if the application had been made earlier (although such evidence would be an important consideration in the exercise of the discretion); prejudice will generally be regarded as inherent in substantial delay.[Citations and Footnotes omitted]
[56]Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301, 309 (NSWCA); Smail v Burton; Re Insurance Assocs Pty Ltd (in liq) [1975] VR 776; Christou v Stanton Partners Australasia Pty Ltd (2011) WASCA 176.
[57](2011) WASCA 176, [20]-[23].
It is commonly said in applications of this nature that:
(a) as a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with reasonable prospects of success;[58]
(b) assessing a plaintiff’s prospects of success is not really a practicable test in any case of reasonable complexity.[59] Although it will ordinarily not be practicable to reach any clear view about the merits of a plaintiff’s claim, that is not to say that the merits are always irrelevant (unless totally lacking) or that the bona fides of the claim may be disregarded;[60] and
(c) the Court is not obliged to consider at length the merits of the claim, and to do so would ordinarily be a waste of resources.[61]
[58]See Bryan E Fencott and Assocs Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497; KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189; 13 ACLC 437 at 439.
[59]Interwest Ltd v Tricontinental Corp Ltd (1991) 5 ACSR 621; 9 ACLC 1218 (VSC).
[60]Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 at 199; [1999] VSCA 43.
[61]Impex Pty Ltd v Crowner Products Ltd (1994) 13 ACSR 440 (QSC).
The discretion to award security for costs requires the Court to take into account all of the relevant facts, matters and circumstances. In exercising the discretion, the Court is concerned to achieve a balance between ensuring that adequate and fair protection to the defendant, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings.[62]
[62]Rosenfield Nominees Pty Ltd v Bain and Co (1988) 14 ACLR 467 at 470 per Giles J (as he then was); Idaport Pty Ltd & Ors v National Australia Bank Limited & Ors [35] [2001] NSWSC 744 at [47].
Section 29 of the CPA
Section 29 is in Part 2.4 of the CPA and governs the Court’s power to issue sanctions for contraventions of the overarching obligations. The Court’s powers under s 29 of that Act include the power to sanction legal practitioners and parties for a contravention of their obligations.[63]
[63]Yara Australia Pty ltd v Oswal, [2013] VSCA 337; (2013) 41 VR 302, (‘Yara’) at [20].
Section 28(1) of the CPA provides that in exercising any power in relation to a civil proceeding, a court may take into account any contravention of the overarching obligations. Section 28(2) provides that without limiting subsection (1), in exercising its discretion as to costs, a court may take into account any contravention of the overarching obligations.
Section 29(1) provides, so far as relevant to the application, if a court is satisfied that, on the balance of probabilities, a person has contravened any overarching obligation, the court may make any order it considers appropriate in the interests of justice including, but not limited to:
(a) an order that the person take any steps specified in the order which are reasonably necessary to remedy any contravention of the overarching obligations by the person;[64] and
(b) any other order that the court considers to be in the interests of any person who has been prejudicially affected by the contravention of the overarching obligations.[65]
[64]Section 29(1)(d) of the CPA.
[65]Section 29(1)(f) of the CPA.
In Yara Australia Pty Ltd v Oswal,[66] the Court of Appeal reviewed the statutory regime and obligations imposed by the CPA. The Court made many pertinent observations about the purpose and operation of the Act so as to provide a guidance as to the extent of the Court’s powers and the means by which parties or their legal representatives can be penalised for any contravention.[67] There is much in the reasons of the Court that is now a part of the general landscape in which proceedings are now conducted. It is enough for these reasons to note what is said about s 29 of the CPA:
Section 29 in particular is a unique provision, conferring powers broader than those in any other jurisdiction in Australia, to sanction legal practitioners and parties who fail to meet their overarching obligations. For example, the Civil Procedure Act 2005 (NSW) provides that the overriding purpose of the Act ‘is to facilitate the just, quick and cheap resolution of the real issues in the proceedings’.[68] Although there are also provisions relating to more specific obligations such as effective case management, delay and proportionality of costs,[69] the NSW provisions remain more aspirational than obligatory. The Court’s powers as to costs are still governed by the Rules of the Court. There are no broad powers to issue sanctions for contravention of the obligations. Similarly, the Federal Court provisions merely empower the Court to take into account a failure to comply with the duty to act consistently with the overarching purpose when exercising the discretion as to costs.[70]
[66][2013] VSCA 337 (per Redlich and Priest JJA and Macaulay AJA).
[67]Ibid [5].
[68]Section 56(1).
[69]See ss 57, 59 and 60.
[70]Section 37N(4) of the Federal Court of Australia Act 1976 (Cth).
Analysis
It is clear from what I have said above that the residence of the von Marburgs out of Victoria but in Australia is not itself a foundation for an order for security. The protective nature of an order for security is simply not called for by virtue of their residence alone. It is necessary for Dr Mourik to rely upon the inherent jurisdiction of the Court and show it to be necessary in the interests of justice for there to be an order to protect them from the risk that, if he is successful in the Proceedings, his costs will not be paid.
The fact that the plaintiffs are natural persons places a significant barrier in the way of an order for security. Although the extent of their assets and liabilities are unclear and have been questioned, indeed attacked head on, by Dr Mourik, I am unable to find that they are impecunious. They appear to have assets of about $2m with ongoing earning capacity through Dr von Marburgs medical practice, said to have averaged an income of $1.6m and operating expenses of $0.85m over the last 4 years.
If it were the case that they are impecunious, there would need to be another factor or other factors like those identified by Lindgren J in Knight v Beyond Properties Pty Ltd.[71]The factors identified by Dr Mourik that might justify an order for security are those applied by Garde J in Trkulja, including the low prospects of success, the risk that a costs order would not be satisfied by the von Marburgs, the fact that on their own evidence, the primary objective of the Proceedings has been realised, that such impecuniosity of the von Marburgs as is established is not said to arise out of the conduct complained of in the Proceedings, that there is no matter of public interest involved in the Proceedings, and because the von Marburgs conduct of the case has been oppressive and disproportionate to the matters at stake in the Proceedings.
[71][2005] FCA 764, [33].
These additional factors would establish, in my view, a basis for an order for security for costs against the von Marburgs if there were sufficient evidence that they are impecunious. As I have said, that evidence does not establish their impecuniosity sufficiently to warrant such an order.
Even if it were the case that the risk of non-recovery of costs by Dr Mourik was higher than it appears to be, there are other countervailing factors, as set out below.
It is not practicable to reach any clear view of the merits of the plaintiffs’ claims. John Dixon J has allowed the current statement of claim after extensive argument, deliberation and the giving of written reasons. I consider that in these circumstances that I am obliged to proceed on the basis that the claims are bona fide and have reasonable prospects of success, at least in vindicating the reputation of the von Marburgs, whether or not the damages are nominal or not.
If the claim is found in the end to be successful but not worthy of anything more than the amends that have been offered and refused, it remains possible, even likely, that there will be an award of some damages, even if they are limited to the amends offered, being the costs already paid.
The appropriate time to assess the contraventions of the overarching obligations, and the several separate obligations, alleged by Dr Mourik against the von Marburgs is when the question of the imposition of any sanction is to be dealt with. It is not appropriate to consider the imposition of sanctions, whether they be by the payment of costs or some other step, at this stage of the proceeding. An order that the von Marburgs provide security for costs is a protective measure and should not be used as a punishment for breaches of the obligations arising under CPA.
The delay in making the application for security in this case is significant. If it were the case that the von Marburgs were clearly impecunious, and that fact had only emerged when payment of the costs order was sought, then there would be some justification for the delay. But my conclusion that the von Marburgs are not impecunious, and the fact that the Proceedings are very nearly ready for trial, means that delay is an important factor. In my view, the timing of the application provides a good reason to refuse to order security. I note that there is no evidence of the costs the von Marburgs have expended in prosecuting the Proceedings so far. It is not known whether their claims are supported in any way by others interested in their cause. But in my view, there is presumptive prejudice to the von Marburgs arising out of the delay. As the Court of Appeal said in Christou v Stanton Partners Australasia Pty Ltd,[72] prejudice will generally be regarded as inherent in substantial delay.
[72](2011) WASCA 176, [20]-[23].
Further, the position of the von Marburgs is significantly different from the circumstances that led Garde J to order security in Trkulja. As counsel for the von Marburgs submitted, there is no real analogy between the circumstances facing the Court in Trkulja and the circumstances in this case. In Trjkulja, the plaintiff:
(a) had commenced six other proceedings against the defendant, as well as other proceedings against the Serbian Orthodox Church;
(b) had thirteen costs orders outstanding against him;
(c) had made no payment of any costs order against him and was bankrupt;
(d) had been heavily criticised concerning his conduct of the proceedings and other proceedings; and
(e) the proceeding was less advanced than the Proceedings here. The statement of claim had been struck out, and no defence had been filed. The proceeding was nowhere near a trial, in contrast to the present case.
In addition, there are other differences. The von Marburgs are not, so far as the evidence shows, serial litigants. They have not commenced other proceedings against Dr Mourik. They have paid, albeit slowly, the only cost order against them. They are not bankrupt, and there is no evidence to suggest that there is a prospect of them becoming bankrupt. Unlike the position in Trkulja, they have had no adverse judicial commentary made against their conduct, except for the failings of their earlier statements of claim, which may or may not be due to their instructions.
Insofar as the application is based on s 29 of the CPA, it is important to record, as I have already noted, that Part 2.4 of the CPA governs the Court’s power to issue sanctions for contraventions of the overarching obligations. An order for security for a litigants costs is protective. It is not the occasion for punishment of the plaintiffs. That does not mean, however, that contraventions of the overarching obligations cannot or should not be taken into account in the assessment of the circumstances that may justify an order for such security.
Section 28(1) of the CPA, although within Part 2.4 and presumptively to be concerned with sanctions, is so worded as to permit the Court to take into account any contravention of the overarching obligations when exercising any power in relation to a civil proceeding. The power of the Court, whether under the Rules or pursuant to the inherent jurisdiction of the Court, to make orders for security for costs is plainly the exercise of a power within the meaning of that provision. The conduct of the von Marburgs in relation to the payment of the costs order and the mediation matters discussed earlier, may well constitute breaches of the overarching obligations cast on them.
In my opinion, this application is not the occasion to attempt to assess whether the conduct of the von Marburgs warrants any sanction. The appropriate time to assess whether the von Marburgs have breached their overarching obligations, and to take into account the other matters identified by Dr Mourik, (including the submission that having regard to the offer and refusal of amends that the claims are weak and reveal an ulterior motive) is at the trial after any attempt by the von Marburgs to vindicate their reputations has been tested and determined, one way or the other. They face the risk that the Court will take the course adopted in Actrol Parts Pty Ltd v Coppi (No 3)[73] to dismiss the Proceedings because the provisions of the CPA insist upon reasonable proportionality between the achievement of litigious objectives (having regard to the issues raised in the proceeding) and the legal costs that are expended in the pursuit of those objectives.[74]
[73][2015] VSC 758.
[74]Ibid [116].
Conclusion
For the reasons set out above, I will refuse to order that the von Marburgs, or either of them, give security for Dr von Marburg’s costs of the Proceedings. In the circumstances, I consider that the costs of the summonses should follow the event.
When the matter was referred to me, there was reason to think that a judge of the Court was available to hear the proceeding commencing on 3 April 2017. That is now not the case. Moreover, because there have been no trial directions of the kind usually made, to leave the trial date as it is will give rise to further wasted costs and expenses. It is appropriate to vacate the trial date and make trial directions with a view to the Proceedings being fixed for trial on 5 June 2017.
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