Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Michael Wilson & Partners Ltd v Emmott (No 2) [2022] NSWCA 48 Hearing dates: 25 February 2022 Date of orders: 25 February 2022 Decision date: 25 February 2022 Before: Brereton JA Decision: 1. The appellant be released from its obligation to provide security to the respondent for the respondent's costs of the application for leave to appeal and the appeal. 2. The respondent forthwith return to the appellant or its nominated bankers both of the originals of the guarantees provided in accordance with the orders of 6 August 2019 and 25 November 2019, being guarantees numbered 55541928 and 555615578, for cancellation, and do all things and execute all documents necessary in order to give effect thereto. 3. The respondent pay the appellant's costs of the motion of 13 January 2022 on the ordinary basis. 4. The Court declines to make an order for interim payment. Catchwords: COSTS — Security for costs — On appeal – Security for costs of appeal provided by appellant in form of bank guarantee – Terms of bank guarantee required appellant to pay costs to respondent "in the event that its appeal is unsuccessful and it is required to do so by Court Order" – where interlocutory costs orders made against appellant – where appellant substantially successful in appeal – Finding that proceedings not "unsuccessful" and guarantee not engaged – Order that security be released COSTS — Security for costs — Security provided in form of bank guarantee — Held, costs ancillary to administering bank guarantee not recoverable in circumstances where guarantee was an indulgence for convenience of party providing security Cases Cited: Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315 Category: Consequential orders Parties: Michael Wilson & Partners Ltd (Appellant) John Forster Emmott (Respondent) Representation: Counsel: Michael Wilson (in person) (Appellant) J Baird (Respondent) Solicitors: Duggan Legal (Respondent) File Number(s): 2019/103863; 2019/170998 Publication restriction: N/A Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division, Commercial List Citation: [2019] NSWSC 218 Date of Decision: 8 March 2019 Before: Ball J File Number(s): 2016/34380 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment (ex tempore) 1. HIS HONOUR: On 6 August 2019, the respondent Mr Emmott having filed a motion for security for costs, the Registrar by consent made orders as follows: "1. The Appellant/Applicant provide the Respondent with security in the sum of $27,500.00 in respect of the Respondent's costs of the application for leave to appeal (proceedings no. 2019/170998) and the appeal (proceedings no. 2019/103863). 2. The security referred to in order 1 is to be provided by bank guarantee, in the form annexed hereto and marked "A", to be served on the Respondent within 30 days of the date of these orders. 3. If the security referred to in order 1 above is not provided in accordance with order 2, proceedings no. 2019/170998 and no. 2019/103863 are stayed without further order unless and until the security is provided. The Court notes the agreement between the parties as follows:- 4. These orders are made without admission of any obligation for the Appellant/Applicant to provide the security. 5. The Respondent acknowledges that these orders cannot be relied on in any further application for security for costs in these proceedings or in the substantive proceedings (no. 2016/34380)." 1. The form of guarantee referred to in order 2 as being annexed and marked 'A' was relevantly as follows: "Taking into consideration that: (i) Michael Wilson & Partners, Limited (the "appellant") filed an appeal Nos. 2019/103863 and 2019/170998 in the Court of Appeal of the Supreme Court of New South Wales (the "Court"), against the first-instance judgment and order of Ball J of 8 March 2019, in the court below in claim no SC No. 2016/3438, where John Forster Emmott is the counter party (the "Respondent"), (the "Action"); and (i) the Appellant, in accordance with the Short Minutes of Order made by consent and entered on [ ] August 2019, agreed to procure the issue of a guarantee in support of its potential obligation to pay costs to the Respondent (the "Security") in the event that its appeal is unsuccessful and it is required to do so by Court Order (a "Costs Order") in an amount to be agreed in writing between the parties, or payable after assessment of costs and the issuing of a Certificate of Determination of Costs (a "Cost Award") up to a maximum amount of [***] Australian Dollars (A$[**]), the "Maximum Amount"). We, St George Private Bank, (hereinafter referred to as "us" or "we") irrevocably undertake to pay to: (i) the Respondent in Australian Dollars, any sum as may be finally ordered by the Court to be paid by the Appellant, and then agreed or assessed, up to a Maximum Amount respectively in the event of the Appellant being in default of its obligation to pay for a period of twenty-eight (28) days, any sum required to be paid, of any sum hereby guaranteed to be paid by the Appellant pursuant to a Costs Order respectively, …" 1. A guarantee in conformity with annexure 'A' was provided by the appellant Michael Wilson & Partners Ltd ("MWP"), on 4 September 2019. On 25 November 2019, the appellant having applied to vacate the date then fixed for hearing of the appeal, the Court made orders relevantly as follows: "4. Vacate the date fixed for the hearing of the appeal and application for leave to appeal. 5. Order the appellant / applicant to pay the respondent's costs thrown away by the vacation of the hearing date in the sum of $10,000. 6. Order that the appellant / applicant provide further security for the costs of the appeal, in a form acceptable to the Registrar, in the amount of $12,500. 7. Order that the costs in order 5 be paid and the further security in order 6 be provided on or before 5pm on 23 December 2019. 8. If order 7 is not complied with, the prosecution of the appeal and application for leave to appeal is stayed until that payment is made and further security provided." 1. Orders 5 and 6 were not complied with by the appellant within the time limited by order 7. Subsequently, on 2 October 2020, the Court made the following further orders: "1. The prayers for relief in paras 1, 2 and 3 of the amended motion dated 6 April 2020 filed on 29 April 2020 be dismissed with costs. 2. The notice of motion dated 24 July 2020 filed on 25 July 2020 be dismissed with costs. 3. The time for complying with Orders 5 and 6 made on 25 November 2019 be extended to the date 14 days from the making of these orders. 4. The appeal and the application for leave to appeal be dismissed if either Order 5 or Order 6 made on 25 November 2019 is not complied with in accordance with the previous order. 5. The motion dated 22 March 2020 filed on 23 March 2020 be otherwise dismissed. 6. The respondent to the motion filed on 23 March 2020 pay the applicant's costs of that motion." 1. Insofar as those orders extended time for provision of the further security referred to in order 6 of 25 November 2019 "in a form acceptable to the registrar," further security in the form of a bank guarantee identical to that referred to in the order of 6 August 2019 was ultimately provided on 14 October 2020. 2. The appeal was ultimately heard on 20 July 2021. Following the appeal, the appellant filed a motion which was disposed of by orders made on 6 September 2021, which included an order that the appellant pay the respondent's costs of that motion. The appellant filed a further motion on 14 September 2021. That motion was dealt with in the reasons for judgment of the Court on the appeal delivered on 17 December 2021; see Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315, when this Court made orders relevantly dismissing the motion of 14 September 2021 with costs, granting leave to appeal and allowing the appeal, setting aside the orders made in the Equity Division and making orders favourable to MWP in lieu thereof and: "5. Save in so far as any interlocutory costs order otherwise provides, no order as to costs of the appeal to the intent that each party bear its own costs." 1. On 17 December 2021, the day on which that judgment was delivered, MWP sent an email to the solicitor for Mr Emmott requesting return of the two bank guarantees. A further request was made on 20 December 2021. On 21 December, Mr Emmott's solicitor responded, pointing out the exception in order 5 of 17 December 2021 for interlocutory costs orders, foreshadowing that applications for assessment of the interlocutory costs orders were being made and asserting that the bank guarantees were security for them. On 24 December 2021, Mr Emmott's solicitor sent a letter to MWP asserting that the total interlocutory costs were $79,263. 2. Before the Court today is a motion filed on 13 January 2022 by MWP seeking the following relief: "Pursuant to r.36.17 of the Uniform Civil Procedure Rules 2005 the Orders of this Honourable Court dated 17 December 2021 be amended to include the following additional paragraph (6) as set out below – (6) The appeal being allowed: 1) with effect from 17.12.21 the Appellant be released forthwith from its obligations to provide security to the Respondent for the Respondent's costs of the appeal, pursuant to: a. paragraphs 1 and 2 of the Order of 04.08.19; b. paragraph 6 of the Order of 25 .11.19; and c. paragraph 3 of the Order of 02.10.20, collectively hereinafter referred to as the "Orders". 2) the Respondent shall forthwith return to MWP (or its nominated bankers) both of the originals of the guarantees provided in accordance with the Orders in the amounts of A$27,500 (No. 55541928) and A$12,500 (No.555615578) (collectively the "Guarantees"), respectively, for cancellation, and shall issue, sign and deliver to MWP (or its nominated bankers) all necessary correspondence and documents in order to give effect to the same; 3) the Respondent shall be responsible for and shall forthwith reimburse MWP on the indemnity basis for all fees, costs and expenses howsoever relating to the procurement, issue and maintenance of the Guarantees; and 4) the Respondent shall be responsible for and shall pay MWP on the indemnity basis for all of its fees, costs and expenses, howsoever relating to this Order, to be assessed if not agreed." 1. The issue raised by claims 1 and 2 is ultimately a question of construction of the order for security for costs, and is essentially whether the security ordered and given covers the interlocutory costs orders to which reference has been made. The orders of 6 August 2019 were consensual and fall to be construed on that basis. In other words, the question involves ascertaining objectively the common intent of the parties reflected in those orders. Primarily, that is a textual exercise. 2. Order 1 of 6 August 2019 quantifies the amount of security to be given "in respect of the respondent's costs of the application for leave to appeal and the appeal." Order 2 defines the scope of that security, by specifying that it is to be provided by a bank guarantee in a particular form. I do not accept the respondent's submission that order 2 is subsidiary to order 1, or that order 1 has primacy. As it seems to me, order 2 defines and particularises the security required by order 1. In that way, it incorporates, in the form of security required by order 1, the terms of the bank guarantee in the form annexed and marked A. 3. When one turns to the terms of the bank guarantee, the important aspects are, first, that it recites the nature of the proceeding for which security is provided. It recites, first, that MWP has filed the appeal proceedings in this Court and, secondly, that the appellant has agreed to procure the issue of a guarantee in support of its potential obligation to pay costs to the respondent (defined as "the security"), "in the event that its appeal is unsuccessful and it is required to do so by court order" (defined as "a costs order"). The terms of the guarantee provide, in cl 1, that the bank undertakes to pay (emphasis added): "any sum as may be finally ordered by the Court to be paid by the Appellant, and then agreed or assessed, up to a Maximum Amount respectively in the event of the Appellant being in default of its obligation to pay for a period of twenty-eight (28) days, any sum required to be paid, of any sum hereby guaranteed to be paid by the Appellant pursuant to a Costs Order." 1. Thus the scope of the guarantee is defined by reference to a costs order, which relates back to the defined term to which I have referred. That defined term encompasses the event that the appeal is unsuccessful and a requirement to pay costs to the respondent by court order. In my view, what that contemplated was a costs order adverse to the appellant upon the appeal failing. 2. The condition is plainly not satisfied. It cannot be said that the appeal was unsuccessful. To the contrary, although it was far from wholly successful, it succeeded in procuring the setting aside of the orders made at first instance and their substitution with orders more favourable to the appellant. As it cannot be said that the appeal was unsuccessful, the event contemplated by the defined term in the guarantee, "a costs order," has not eventuated and the guarantee is not engaged. 3. For those reasons, the security must be released. 4. The motion also claims, in order 3, the costs ancillary to the provision of the bank guarantee. Traditionally and conceptually, security for costs is provided by the party giving security paying the amount required into court. It may be permitted to provide security in an alternative form such as a bank guarantee. Such alternatives are provided for the convenience of the party providing the security. If it incurs costs in doing so, they are the costs of the indulgence of being able to provide security in an alternative form. I do not see why the respondent should be responsible for the appellant having that indulgence, particularly given that the costs of maintaining the security over a protracted period are largely a result of the appellant not being ready to proceed with the appeal at an earlier time. 5. Order 4 seeks the costs of the present motion on an indemnity basis. I must say that when the motion and the fact that it was opposed first came to my attention, it seemed to me that the appellant might well be entitled to its costs on the indemnity basis. However, the motion has been conducted by the appellant in such a way, with such excessive and unnecessary evidence and material, as to disqualify the appellant from being entitled to the costs on the indemnity basis. The appropriate costs order is, as Mr Baird submitted, on the ordinary basis. 6. The Court therefore orders that: 1. The appellant be released from its obligation to provide security to the respondent for the respondent's costs of the application for leave to appeal and the appeal. 2. The respondent forthwith return to the appellant or its nominated bankers both of the originals of the guarantees provided in accordance with the orders of 6 August 2019 and 25 November 2019, being guarantees numbered 55541928 and 555615578, for cancellation, and do all things and execute all documents necessary in order to give effect thereto. 3. The respondent pay the appellant's costs of the motion of 13 January 2022 on the ordinary basis. 4. The Court declines to make an order for interim payment. 1. After those orders were pronounced, Mr Wilson applied for an interim payment of $15,000 on account of the costs order. In the absence of affidavit evidence, I was not prepared to make such an order, all the moreso because MWP had countervailing liabilities to Mr Emmott under the interlocutory costs orders which the evidence suggested might amount to as much as $79,000. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 March 2022