Supreme Court New South Wales Medium Neutral Citation: Lachlan AB Pty Ltd v Brisull Investments (Forbes) Pty Ltd [2024] NSWSC 133 Decision date: 13 February 2024 Jurisdiction: Equity - Real Property List Before: Peden J Decision: Motion is dismissed; see [28]. Catchwords: COSTS – Security for costs – Review of registrar decision – Court's discretion – Discretion to intervene in Registrar decision – Whether solicitors standing behind litigation – Whether beneficiaries of a trust obtaining benefit of litigation Cases Cited: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 Lawrence v Sammut (No 5) [2023] NSWSC 1476 Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690 Tomko v Palasty (No 2) (2007) 71 NSWLR 61 Category: Costs Parties: Lachlan AB Pty Ltd a trustee of the Lachlan AB Trust (Plaintiff) Brisull Investments (Forbes) Pty Ltd as trustee for the Bridull Forbes Trust (First Defendant) Brisull Investments Pty Ltd (Second Defendant) Robert John Britt (Third Defendant) Representation: Counsel: P Gaffney (Plaintiff) F Maghami (Defendants) Solicitors: Malcolm Murray & Associates (Plaintiff) Solve Legal (Defendants) File Number(s): 2023/00173587 Publication restriction: Nil Ex Tempore Judgment 1. The defendants move on a notice of motion filed on 22 November 2023 seeking review of the Registrar's decision dated 25 October 2023. In a reserved judgment of 67 paragraphs, the Registrar dismissed the defendants' original application for security for costs. I do not repeat the facts as outlined in that decision, but adopt them in circumstances where no party raises any complaint as to their accuracy. Therefore, that decision ought to be read in the context of these reasons. 2. For the following reasons I consider the defendants' application ought to be dismissed. In doing so, I adopt many of the submissions, both oral and written, made by Mr Gaffney, counsel for the plaintiff. Standard of review 1. The plaintiff raised a preliminary issue of the relevant standard applicable where a review of a Registrar's decision concerning security for costs is undertaken. Reference was made to the Court of Appeal decision in Tomko v Palasty (No 2) (2007) 71 NSWLR 61, particularly Hodgson JA at paragraphs [5] and following. 2. While that decision concerned the review of a decision of the Registrar of the Court of Appeal, neither party took issue with the principles there stated, nor suggested they were not applicable here. 3. Mr Maghami, counsel for the defendant, helpfully referred to a recent decision of Lonergan J in Lawrence v Sammut (No 5) [2023] NSWSC 1476 at [13]-[14], where her Honour set out the principles relevant to the review of a Registrar's decision in this Court. Of note, those authorities indicate, by way of summary: 1. While House v The King principles do not apply directly, similar policy considerations may arise in relation to a review and whether a court is prepared to intervene in a registrar's decision. 2. The applicant seeking intervention has the onus to make out the case for why the court ought to exercise its discretion to intervene. 3. Where a decision involved practice or procedure, usually the applicant must be prepared to demonstrate an error of law, or House v The King error, or material change in circumstances. 1. See also Longjing Pty Ltd v Perpetual Nominees Ltd [2017] NSWSC 1690 (Longjing) at [11]-[13] (Parker J). 2. Mr Maghami, submitted Longjing was authority for the proposition that a decision about security for costs is not a decision concerning "practice or procedure", however, he provided no submission suggesting that Macfarlan JA's conclusion to that effect in Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65 at [21] was incorrect. 3. Where a decision of practice and procedure has the legal or practical effect of determining the proceedings a court may be more willing to intervene: Tomko v Palasty (No 2) at [9] (Hodgson JA) and [52(4)(a)] (Basten JA). 4. Here, I do not accept Mr Maghami's submission that the Registrar's decision had the legal or practical effect of determining the proceedings. In Longjing, Parker J accepted that the application to review and overturn the Registrar's decision to order security for costs did fall within that category, because the plaintiff was unable to pay the security ordered, and if the order stood, the proceedings would have been stultified. That is not the case here. Because no security was ordered by the Registrar, the decision has not finally determined the proceedings. 5. The defendants do not suggest that there has been any change in circumstances since the Registrar's decision. Nor do they seek to rely on any fresh evidence. 6. Therefore, the defendants must persuade me that this is an appropriate case to exercise my discretion to intervene in the Registrar's decision, including by raising any House v The King error. Ought the discretion to intervene be exercised? 1. The well-known House v The King grounds for interfering with a discretionary decision are: 1. the decision maker acted on a wrong principle or allowed extraneous or irrelevant matters to guide or affect her; 2. the decision maker mistakes the facts; 3. the decision maker does not take into account some material consideration; or 4. the result is unreasonable or unjust. 1. The only "error" identified by the defendants was that the Registrar's decision was "unreasonable or unjust" because: 1. other persons could have given security, namely the beneficiaries of the plaintiff's discretionary trust or the plaintiff's solicitors who are acting on a speculative basis; and 2. there was insufficient evidence that litigation funding or litigation insurance was unavailable. This was submitted to be a "lacuna" in the evidence. 1. However, it was not the case that the defendants suggested that the Registrar misstated the facts or failed to take into account the material matters. 2. The Registrar carefully set out all of the evidence and submissions of the parties. Therefore, the complaint appears to be that the discretion ought to have been exercised differently and in favour of the defendants, by giving a different weighting to the question of the reasonableness of finding others as a source of security, and by refusing to accept the litigation would be stultified if security was ordered. 3. I consider each of these in turn. Could others give security? 1. The defendants complain that others are able to give security, namely: 1. Beneficiaries of a discretionary trust; and 2. The plaintiff's solicitors who are acting on a speculative basis. 1. Mr Maghami sensibly only very faintly submitted that beneficiaries of a discretionary trust could be seen as "standing behind" or "likely to benefit from" the litigation, such that they ought to be considered as potential sources of security. I do not accept the submission. Instead, Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 makes it plain the types of persons who might be such potential sources. Beneficiaries of a discretionary trust are not mentioned in that list of potential sources for the sensible reason that they may never see any benefit from the litigation, if successful. 2. As for the solicitors, the defendants did not identify any authority where merely because solicitors are acting on a speculative basis, and they do not want to provide security, they have nevertheless been held to be an available source of security. 3. There are authorities where solicitors, who were already creditors before litigation commenced and had agreed to act for a plaintiff on a speculative basis, have been held to have a material interest in the outcome of the litigation and they are regarded as akin to indirect litigation funders: see eg Green v CGU Insurance Ltd (2008) 67 ACSR 105 at [67] (Basten JA). 4. However, in the circumstances of this case, where the plaintiff's solicitor is prepared to act for an impecunious corporate plaintiff on a speculative basis at a trial, I do not consider it would be reasonable to consider them as an available source of security, where it is not apparent that they are sufficiently "standing behind" the litigation, even though it may be expected they could benefit from the litigation. However, in that regard I note that the primary relief sought by the plaintiff is not a monetary sum, and therefore it is unlikely that there will be a pool of money, from which the solicitors can draw, even if the plaintiff is successful in it its claim. I do not consider the Registrar's conclusion that it was not reasonable to expect the solicitor to provide security was in any way unjust or unreasonable to warrant interference by me. Is there a lacuna in the evidence concerning stultification? 1. In her reasons at paragraph [41], the Registrar set out the defendants' argument about the evidence they expected the plaintiff to bring to establish the likely stultifying effect of an order for security for costs. No complaint is raised that the Registrar failed to have regard to the various arguments of the defendants. 2. In paragraph [43] the reasons state: [W]hilst I might generally see more evidence about loans or litigation funding when a stultification argument is raised this case is somewhat different because the evidence is clear that with such a low salary and given the nature of the claim neither [Mr Johnson getting a loan on his salary nor litigation funding] are realistic. 1. Mr Johnson's evidence is that his salary is $22,000 per annum and he owns no assets. I do not accept the defendants' submission that neither the Registrar nor a court ought take judicial notice that it is unrealistic that any lender would lend $150,000 for security for costs without any real or personal property as security and where there is virtually no income, from which to fund repayment. 2. As for litigation funding, based on the fact that the claim was not for a monetary sum, it was not wrong for the Registrar to determine that funding the litigation would be unattractive for any funder, who would not be able to be repaid out of a judgment sum. It is self-evident that is the case. 3. The defendants also submitted that the plaintiff ought to have sought "adverse costs insurance", which has been accepted in other cases as a form of security. While the plaintiff accepted that such insurance might be accepted as a form of security in an appropriate case, here there is no reason to expect that any insurer would have been prepared to insure for the same reasons that a loan or litigation funding was unlikely to be possible. 4. I do not accept there was a lacuna in the evidence concerning these matters. I do not consider it would accord with the overriding purpose of "just, quick and cheap" for a party in the position of the plaintiff to marshal evidence concerning all possible avenues of funding, where the most obvious ones are unrealistic. Had the defendants considered those funding avenues were readily available, they may have chosen to provide evidence to that effect. Conclusion 1. For these reasons, I do not consider that the defendants have demonstrated that the Registrar's decision was "unreasonable or unjust", such that it is appropriate to exercise my discretion to intervene in the decision and exercise the discretion to order security for costs afresh. ********** 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: 22 February 2024