Westpac Banking Corporation v Ninan [No 3]

[2016] WASC 250

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   WESTPAC BANKING CORPORATION -v- NINAN [No 3] [2016] WASC 250

CORAM:   CHANEY J

HEARD:   ON THE PAPERS

DELIVERED          :   15 AUGUST 2016

FILE NO/S:   CIV 2202 of 2014

BETWEEN:   WESTPAC BANKING CORPORATION

Plaintiff

AND

GEORGE NINAN
First Defendant

MOLLY GEORGE
Second Defendant

Catchwords:

Practice and procedure - Security for costs - Counterclaim by defendants - Defendants resident outside jurisdiction - Defendants impecunious - Strength of claim

Legislation:

Rules of the Supreme Court 1971 (WA), O 25 r 1, O 25 r 2, O 25 r 3, O 25 r 4

Result:

Security for costs ordered

Category:    B

Representation:

Counsel:

Plaintiff:     No appearance

First Defendant              :     No appearance

Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Jackson McDonald

First Defendant              :     In person

Second Defendant         :     In person

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

Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497

KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189

Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132

Ninan v Westpac Banking Corporation [2015] WASCA 94

Westpac Banking Corporation v Ninan [2014] WASC 456

Westpac Banking Corporation v Ninan [No 2] [2015] WASC 315

1. CHANEY J:  On 5 December 2014, summary judgment was granted in favour of the plaintiff on its claim in this action:  see Westpac Banking Corporation v Ninan [2014] WASC 456. The judgment required delivery of vacant possession to the plaintiff of a property in Dawesville, and for payment of an amount due under a loan agreement between the plaintiff and the defendants. Before summary judgment was entered, a defence and counterclaim was lodged by the defendants. The defence and counterclaim consists of a long and somewhat disjointed narrative. It is not apparent whether the various matters referred to are pleaded by way of defence or by way of counterclaim or both. In granting summary judgment I dealt with eight matters which the defendants contended amounted to a defence to the summary judgment application. I concluded that none of those eight matters was capable of being an arguable defence to the action. The counterclaim remained unresolved after summary judgment was granted to the plaintiff.

2. The defendants appealed against the orders for summary judgment.  On 13 May 2015, Newnes JA ordered that the defendants provide security for costs of the appeal in the sum of $16,000 by 10 June 2015:  see Ninan v Westpac Banking Corporation [2015] WASCA 94. An application for review of that decision was dismissed by the Court of Appeal on 5 June 2015, and the defendants were ordered to pay the plaintiff's costs of the appeal. On 11 June 2015, the appeal against the summary judgment application was dismissed as a result of the failure by the defendants to pay the amount specified by Newnes JA as security.

3. The defendants subsequently filed an application in these proceedings for discovery in relation to their counterclaim.  Shortly afterwards, the plaintiff filed this application which seeks orders that, within 28 days, the defendants provide security for the plaintiff's costs of defending the counterclaim by payment of $153,329 into court.  Further orders are sought that the counterclaim be stayed pending payment of the amount of the security and that, if the payment is not made within the required time, the counterclaim should stand dismissed and the defendants be ordered to pay the plaintiff's costs in respect of the counterclaim.

4. A dispute arose as to whether the application for security for costs should be dealt with before the defendants' application for discovery.  Because Mr Ninan was unable, through ill‑health, to appear as arranged by telephone, to argue that issue, I dealt with it on the papers.  On 20 August 2015, I delivered reasons for my conclusion that the application for security for costs should be dealt with first:  see Westpac Banking Corporation v Ninan [No 2] [2015] WASC 315. The defendants applied to the Court of Appeal for leave to appeal against the decision to deal with the question of security for costs first. That application for leave to appeal was dismissed on 3 November 2015.

5. The parties subsequently filed submissions in relation to the application for security for costs, and it is that application to which these reasons are directed.

The applicable principles

1. Order 25 r 1 of the Rules of the Supreme Court 1971 (WA) provides that the court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which might be awarded against him. Order 25 r 2 provides that the court may order security for costs where a plaintiff is ordinarily resident out of the jurisdiction. The term 'plaintiff' includes a defendant who counterclaims in respect of a claim not arising out of the claim against him - see O 25 r 4. Mr and Mrs Ninan are resident outside Australia and currently reside in Bangkok, having previously resided in Dubai in the United Arab Emirates.

2. Order 25 r 3 provides that, in exercising the discretion to grant security for costs, the court is required to take into consideration the prima facie merits of the claim, what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff and whether the normal processes of the court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff. Those considerations are not exhaustive. As Newnes J (as he then was) observed in Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132 [57]:

   It is well‑established that the discretion to order security for costs is unfettered and depends upon an examination of all of the relevant circumstances.  The circumstances in which the discretion should be exercised cannot be stated exhaustively.  They will vary from case to case and the weight to be given to any circumstance in a particular case will depend not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed:  PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, 323.

3. In KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189, Beazley J referred to the review of authorities in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 509 and identified the following guidelines which the court typically takes into account (197):

   Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application.  They are:

   1.That such applications should be brought promptly. This is a principle of longstanding:  see Grant v The Banque Franco‑Egyptienne (1876) 1 CPD 143; see also Smail v Burton [1975] VR 776 per Gillard J at 777; Caruso Australia Pty Ltd v Portec (Australia) Pty Ltd (1984) 1 FCR 311 at 313; Bryan E Fencott at 514 …

   2.That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations:  see M A Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 at 100; Bryan E Fencott at 514. 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 a reasonable prospect of success. (Bryan E Fencott at 514).

   3.Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim:  see M A Productions v Austarama Television at 100.

   4.Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate:  see M A Productions v Austarama Television at 100; Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 per Clarke J at 545; Bryan E Fencott at 513. In Yandil Holdings at 545 Clarke J stated the principle in these terms:

   '[t]he fact that the ordering of security will frustrate the plaintiff's rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order.  Nonetheless it will usually operate as a powerful factor in favour of exercising the court's discretion in the plaintiff's favour.'

The plaintiff's submissions

1. The plaintiff relies on the defendants' residence overseas and the absence of any assets within the jurisdiction which would be available for satisfaction of any order for costs as the basis for seeking the present orders.  The plaintiff relies on the observations of Newnes J in Mabrouk Minerals Pty Ltd where his Honour said [58] ‑ [60]:

   The fact that a plaintiff is ordinarily resident out of the jurisdiction is a ground upon which an application for security for costs may be granted: O 25 r 2(a). The basis of the rule in O 25 r 2(a) is the risk that either an order for costs is likely to be unenforceable or that it will be enforceable only by a significant expenditure of time and money: Berkeley Administration Inc v McClelland [1990] 1 All ER 958, 963. But while residence out of the jurisdiction enlivens the court's jurisdiction, it is not of itself a sufficient ground for making an order. Whether or not an order will be made will depend upon the circumstances of the case. In Energy Drilling Inc v Petroz NL [1989] ATPR 50,418, Gummow J put the position as follows:

   'The purpose of ordering security for costs against an applicant ordinarily resident outside the jurisdiction is to ensure that a successful respondent will have a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement:  Kent Heating Ltd v Cook‑on‑Gas Products Pty Ltd (1984) 59 ALR 277 at 279. On the other hand, the mere circumstance that an applicant is resident outside the jurisdiction does not necessarily invite an exercise of discretion in favour of ordering security, the question being how justice will best be served in the particular case. [50,422]'

   Where a party resident out of the jurisdiction has no assets within the jurisdiction, that will usually be a factor weighing heavily in favour of an order for security.  In PS Chellaram & Co Ltd v China Ocean Shipping Co, McHugh J said:

   '… the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made.  Indeed, for many years the practice has been to order such a 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.  (323)'

   But it will generally not be appropriate to order security if the court is satisfied that the plaintiff has assets within the jurisdiction which will remain available to meet the defendant's costs if the plaintiff is unsuccessful at trial.  In determining whether the plaintiff has such assets, it may be relevant to consider the value and the nature of the assets, including whether they are of a fixed and permanent nature:  Ebrard v Gassier (1884) 28 Ch D 232, 235; or whether the court can ensure that the assets will not be dissipated: De Bry v Fitzgerald [1990] 1 All ER 560, 563.

2. The plaintiff contends that the defendants will be unable to meet any order for costs that might be made in relation to the plaintiff's defence of the counterclaim.  The affidavit of Mr Squires deposes to the fact that there is likely to be a shortfall in the amount expected to be realised on the sale of the Dawesville property, the subject of the summary judgment orders.

3. The amount of the judgment against the defendants was $1,552,630.27.  Mr Squires, in his affidavit, says that the plaintiff took possession of the Dawesville property on or about 20 January 2015.  It subsequently obtained a valuation of the property at $725,000.  A subsequent auction on 28 March 2015 failed to result in a successful bid.  A second valuation was then obtained from different valuers who assessed the market value at $700,000.  As at the date Mr Squires made his affidavit, the property had not been sold.  There is no evidence that the defendants own any other property in Australia.  Indeed, in affidavits previously sworn in these proceedings by the first defendant, he describes himself as 'penniless', an assertion which he has maintained in his communications with the court in relation to the current application.  A search of the Land Titles Registry in Western Australia has failed to locate any other land in Western Australia owned by the defendants.

4. The plaintiff also notes that the defendants have applied for, and received, a waiver of filing fees in relation to documents filed in the appeal on the ground of financial hardship.  It also relies on the defendants' failure to pay into court the amount of $16,000 as security for the plaintiff's costs in defending the appeals, and the defendants' failure to pay any costs in relation to the dismissed appeal.

5. The plaintiff also submits that a review of the defence and counterclaim suggests that the defendants have very low prospects of success in the action.

6. The amount sought as security for costs is based upon a draft bill of the plaintiff's anticipated costs if the matter were to proceed to trial with various likely interlocutory disputes, and assuming a five‑day trial.

The defendants' response

1. On delivering reasons for dealing with the application for security for costs before other applications in the proceedings, I made directions for the filing of submissions and further evidence.  The timetable for those directions was overcome by the defendants' application for leave to appeal.  After that appeal was dismissed, the plaintiff lodged its submissions on 27 January 2016.  By reason of ill‑health, Mr Ninan, who has represented both defendants at all times during the course of the proceedings, requested that he be allowed until 15 March 2016 to make submissions.  That request was granted.  Submissions were initially filed on 15 March 2016.  A request was subsequently received on 9 May 2016 from Mr Ninan to be allowed to lodge 'revised submissions' and he was given leave to do that by 13 May 2016.  Revised submissions were subsequently received.

2. On 15 May 2016, Mr Ninan emailed the court requesting that the proceeding be suspended for 30 days to enable him to take a step which he said 'may turn out to be crucial in this proceeding'.  He was not prepared to disclose the step which he intended to take.  On 17 May 2016, Mr Ninan forwarded to the court a letter asserting 'serious fraud' on the part of a number of judges and others.  In any event, Mr Ninan was advised that by reason of the court's commitments, a decision was unlikely to be delivered for some time.

3. On 11 June 2016, Mr Ninan wrote to the court.  He requested that, in addition to his submissions of 13 May 2016, a letter of 2 June 2016 setting out five conditions, another letter of 11 June 2016 setting out what he described as the 'Critically Crucial Condition' and his affidavit of 21 May 2016 filed in his appeal CACV 30 of 2016 be accepted as part of his submissions.

4. The letter of 2 June 2016 purported to 'impose another set of strict conditions', apparently on the court.  The conditions are nonsensical, but in any event the letter demonstrates a complete misconception as to the judicial process.

5. The letter of 11 June 2016 purports to impose a requirement for the court to include in its decision the specific reasons for rejecting 10 enumerated facts.  The asserted facts repeat various allegations of fraud, conspiracy and deception by the plaintiff and others made by Mr Ninan in his email communications with the court, and in at least some cases in the counterclaim.  Except to the extent that it is necessary to consider the apparent strength of the counterclaim as revealed by the pleadings, Mr Ninan's attempt to impose a condition on the writing of reasons is obviously misconceived.

6. The affidavit of 21 May 2016 was filed in CACV 30 of 2016.  That is an appeal by the defendants in which the Valuer General is respondent.  It traverses many allegations against many people and courts.  It contains a number of assertions that the summary judgment decision was wrong.  The affidavit is irrelevant for present purposes.

7. The defendants' submissions of 13 May 2016 run to 29 pages.  In all but two respects, the submissions appear to be directed to an attack on the summary judgment decision, and to allegations of fraud by me in the making of that decision and on the part of the judges of the Court of Appeal who had any involvement in the appeal from that decision or the requirement for security for costs in relation to that appeal.  I do not propose to address the lengthy and repetitive assertions made in the submissions which label as 'fraud' anything that amounts to a non‑acceptance of the defendants' arguments.  That is because, shorn of the offensive manner in which they are couched, they amount to no more than arguments that the decision to grant summary judgment was in error.  The assertion that the summary decision was in error and should be set aside can only be made in the context of an appeal against that decision.  An appeal was instituted, and it has been dismissed. 

8. The question to be addressed in the present application is whether, having regard to the circumstances of the case, an order for security for costs is appropriate. At pages 27 and 28 of the defendants' submissions, they touch upon matters relevant to the question of security for costs. The defendants rely on the statement found in O 25 r 1 of the Rules of the Supreme Court that no order shall be made 'merely on account of the poverty of the plaintiff'.  They submit that '[i]t is a fact that our property investment in Australia only made us poor' and that they should not be held out of pursuing their counterclaim by reason of that impecuniosity.  They also submit that their place of residence is irrelevant because they have no funds anywhere, either in or out of the jurisdiction of this court, so that recovery of costs would be impossible regardless of where the defendants lived.

Should security for costs be ordered?

1. Applications for security for costs should be brought promptly.  Although these proceedings have now been on foot for a long period, that is largely because of the time consumed by the defendants' various appeals.  The application for security for costs was brought reasonably promptly after it became evident that the defendants intended to pursue their counterclaim.

2. By O 25 r 2, the defendants' absence from the jurisdiction is specifically made a ground upon which security for costs may be granted. I do not, therefore, accept the defendants' contention that it is an irrelevant consideration. Absence from the jurisdiction will inevitably increase the complexity and costs associated with any enforcement action that might be made utilising the various procedures available under the Civil Judgments Enforcement Act 2004 (WA).

3. The submission that the defendants' 'property investment in Australia' made them poor must be considered in the context of the counterclaim which they now seek to propound.  The defence and counterclaim is a lengthy document which pleads various matters related to a series of property purchases made by the defendants between 2002 and 2006, or possibly 2007.  The pleading contains complaints as to the conduct of various land developers, valuers and agents of the vendors.  Although difficult to follow, and in no logical sequence, the nub of the defendants' complaint appears to be that they were induced to enter into various transactions to purchase various properties as a result of representations, particularly as to property values, by various people, which representations were false and caused them loss.  It is by no means clear how liability is attributed to the plaintiff for the conduct of others.  While it may be that the defendants' impecuniosity has resulted from a series of unsuccessful property investments, I do not accept that they have identified in their pleading or otherwise why the plaintiff's conduct has caused that impecuniosity.  At [165] of the defence and counterclaim, it is pleaded that '[a]ny contract or mortgage borne out of fraud is invalid and is not enforceable' and therefore must be rescinded.  Paragraph 166 pleads that '[a]ny contract or mortgage borne out of sustained deceptive and fraudulent conduct must be subject to aggravated penalty and restitution of loss and damage suffered including exemplary damages'.  There are pleadings to the application of the Proceeds of Crime Act 2002 (Cth), although how the plaintiff is said to be liable in relation to those matters is unclear. The pleading contains a number of other unsupportable propositions such as '[l]and must be sold only at true market value', that land valuations must be 'within plus or minus 10% of true market values', and that land must be sold 'within plus or minus 10% of true market value'.

1. It is very difficult to see any merit in a claim against the plaintiff based upon the matters pleaded in the defence and counterclaim.

2. Reference is made in the counterclaim to the National Consumer Credit Protection Act 2009 (Cth) and the National Credit Code.  I dealt with that aspect of the defence in the summary judgment decision, and concluded that it was not open for the defendants to rely on that legislation.  Accordingly, I do not consider that there is merit in the counterclaim insofar as it relies upon those matters.

3. In summary, despite the defendants' assertions that their claim is unanswerable, I have grave doubts as to the merits of the counterclaim.

4. The issues raised, were they to go to trial, would involve an examination of a multiplicity of events taking place over a number of years.  There would likely be significant interlocutory dispute.  Any trial would no doubt be lengthy.

5. The defendants have apparently made no effort to, and do not intend to, pay any of the costs which they have already been ordered to pay, and openly admit that they would not be in a position to meet any future costs orders.  Because they are resident out of the jurisdiction, any enforcement action which might be taken would be difficult and expensive.  They seek to promote a case made up of convoluted allegations against a range of people and entities in circumstances where liability for that conduct would not readily appear to be attributable to the plaintiff.  They seek, in effect, to be able to prosecute their action without regard to the costs to the plaintiff and immune from any liability for those costs by reason of their impecuniosity.

6. In my view, this is an appropriate case in which security for costs should be ordered.  The plaintiff seeks security for costs in the sum of $153,329.  The whole of that amount should not be required to be paid into court by way of security for costs at this time.  It is preferable, in my view, to require payment of an amount which would enable preliminary interlocutory steps to be taken which would crystallise the issues and may thereby enable a more accurate estimate to be made of the likely costs of a trial.  On that basis, I propose to make the following orders:

   1.Within 28 days from the date of this order, the defendants provide security for the plaintiff's costs of defending the defendants' counterclaim in the amount of $25,000 by payment of that amount into court with liberty for the plaintiff to apply to increase the amount of security in the event that the amount is inadequate to cover future costs.

   2.Pending payment of the security for costs, the defendants' counterclaim is stayed.

   3.If the defendants do not provide security for costs ordered in par 1 within 28 days, the counterclaim will stand dismissed and the defendants will pay the plaintiff's costs in respect of the counterclaim.

   4.Costs of the application for security for costs are in the cause.