New South Wales Supreme Court CITATION : Bhagat v Murphy [2000] NSWSC 892 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2892/97 HEARING DATE(S) : 18/08/2000 JUDGMENT DATE : 7 September 2000 PARTIES : Hari Bhagat (P) John William Murphy (D) JUDGMENT OF : Young J COUNSEL : Plaintiff in person J W Stevenson (D) SOLICITORS : Plaintiff in person Mallesons Stephen Jaques CATCHWORDS : PROCEDURE [670]- Security for costs- Principles- Litigant in person- No assets- Small stake in trust- Complex and expensive proceedings- Security granted. Cowell v Taylor (1885) 31 Ch D 34 Janus v AGC (Advances) Ltd (19.10.1988) M A Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97 Morris v Hanley (Young J, 25.8.2000) CASES CITED : Orr v Lusute Pty Ltd (1987) 72 ALR 617 Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 Usil v Brearley (1878) 3 CPD 206 Waddell v Blockey (1878) 10 Ch D 416 DECISION : Security granted. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG J THURSDAY 7 SEPTEMBER 2000 2892/97 - BHAGAT v MURPHY & ORS JUDGMENT 1 HIS HONOUR: This is a notice of motion for security for costs in the sum of $300,000 brought by the first, second, third and fourth defendants against the plaintiff. 2 The proceedings were commenced in June 1997. Essentially the plaintiff says that the trustees of the Estate Mortgage Depositors' Trust (the "Trust") misled the Court by seeking judicial advice, and then fraudulently or negligently intermingled the moneys of various trusts under their control to the detriment of the plaintiff and many others. 3 The proceedings are set down for hearing before me on 28, 29, 30 November and 1, 5 and half of 6 December 2000. 4 The plaintiff basically alleges breach of fiduciary duties. He claims mainly monetary orders including damages and an order that certain of the defendants pay back fees with interest that they may have received as trustee and manager of the Estate Mortgage Depositors' Trust No. 4. 5 The present application is not made under the Supreme Court Rules but under the inherent jurisdiction of the Court. The inherent jurisdiction of the Court is basically to prevent abuse of process, but in this particular area it enables the Court, where it can see that there may be injustice to a party, to make an order for security for costs so that unsuccessful proceedings will not occasion injustice to the defendants. 6 I considered the inherent power recently in Morris v Hanley (25 August 2000, as yet unreported), where I considered the authorities and held that the purpose of exercising the inherent power is to prevent abuse of the Court's processes by putting a brake on proceedings which would otherwise operate oppressively and vexatiously against a defendant. 7 Mr Stevenson of counsel who appears for the moving defendants, concedes that the Court does not ordinarily make an order under the inherent power and that it is incumbent to show that there are circumstances warranting the making of such an order. 8 Mr Stevenson says that there are a series of matters in the present case which should lead to that conclusion, the most significant of which are: (a) there have been a whole host of interlocutory skirmishes in these proceedings. In one of those Mr Bhagat succeeded before Master McLaughlin in not having parts of the statement of claim struck out and got an order for costs. However, on all other occasions he has been unsuccessful and costs orders have been difficult to enforce; (b) this litigation, and indeed so far as is relevant, associated litigation has been conducted in an assertive manner with many technical points taken and complicating steps pursued which, to use Mr Stevenson's phrase, "Incurs costs at a frightening rate"; and (c) as some of the defendants are trustees and as at least some part of the defence in these proceedings constitutes a proper defence of the Trust fund, it may be that the other unit holders in the Trust will be bearing some of the costs. 9 Mr Bhagat, on the other hand, has been saying for a long time that he is sticking his neck out to protect the pensioner unit holders at his own expense (though see my comments on this later). He points out that this is not an application under Pt 53 of the Supreme Court Rules. However, he says that similar principles apply, that is, whether there is an abuse of process and whether injustice may be occasioned to the defendants. He submits that in the instant case, no such abuse or injustice is established. He further says that his ability to pursue the litigation might be stultified if an order for security for costs is made and the application should be refused. 10 When the argument on the motion was heard on 18 August 2000, Mr Bhagat declined to give any information as to his personal assets. I delivered a short judgment ordering that security for costs be provided. Mr Bhagat then said that it would be impossible for him to meet that security. I reminded him that he had declined to give evidence about his assets. He then sought to reopen to give that evidence. After some initial opposition, Mr Stevenson agreed to that course. I then withdrew my previous reasons and orders, though a copy of the reasons was directed to be engrossed and left with the papers. 11 Mr Bhagat then said on oath that he has no assets at all. Mr Stevenson cross-examined. It was disclosed during cross-examination that Mr Bhagat lives in an apartment in Liverpool Street, Sydney in a building called "the Connaught", a building which is considered to be very up market. Mr Bhagat said he has not the faintest idea who owns the unit or how his occupation of it is funded. He said that his wife looks after such matters and that the unit is her affair. 12 Cross-examination also produced evidence that, although the amended statement of claim alleged that Mr Bhagat was "at all material times" the beneficial owner of 760,000 units in Estate Mortgage Depositors Trust No 4, he disposed of most of those units some time ago, possibly to his wife. Mr Bhagat admitted that he owns some property in Poona, India, but said that it is all in some form of co-ownership with other members of his family. 13 Mr Bhagat kept repeating that his wife may well hold property, but that is her affair and he does not know the extent of her holdings. He also seemed to consider that property in co-ownership is somehow or other exempt from being the subject of execution for payment of costs. He may well be wrong in this last assumption. However, the general flavour of his evidence was that any assets he may once have held are now out of reach of his creditors. 14 In my withdrawn reasons I noted that two of the submissions for the defendants were (my summary),"Mr Bhagat has put on no evidence at all of his financial position ... . In one sense the litigation is representative litigation in that Mr Bhagat claims to be the representative of a large number of pensioners who with him have been damnified by the actions of the defendants in this case". 15 Mr Bhagat answered the first of these points by giving oral evidence, as I have indicated. He then went on to make it abundantly clear that the proceedings are in no sense representative proceedings. Mr Bhagat is bringing these proceedings for his own personal gain. I must confess that I had assumed from the constant reference to "protection of hordes of pensioners" during case management of this and associated pieces of litigation that Mr Bhagat is a person who has collected a fighting fund to vindicate the rights of all those who have been detrimentally affected by the activities of the defendants. However, when one ignores the hype and looks at the pleadings, Mr Bhagat is quite correct. The present proceedings are for Mr Bhagat's own personal gain and not for any other purpose. 16 Mr Stevenson thus puts that the case is one of a person who now holds relatively few units in the Trust over which he is litigating, who has litigated aggressively over a period of at least three years at great cost to the defendants. The affidavit of Tania Noonan, solicitor, whom Mr Bhagat cross-examined, notes that the defendants' costs to date in these proceedings are $98,000 and for the whole of the sets of proceedings total over $520,000. She notes that there are or have been 16 sets of proceedings related to the current issue. There have been over a dozen interlocutory motions of which Mr Bhagat has succeeded in one in these proceedings and, I think, only two in total. In respect of the others, various orders for costs have been made. Ms Noonan says that in respect of costs orders already obtained by the defendants, "Various actions taken by the defendants in an effort to enforce those costs against the plaintiff, including the issue of writs for levy of property and the issue of a garnishment notice, have to date proved unsuccessful. In respect of the writs for levy of property, despite numerous attempts the Sheriff was unable to gain access to the plaintiff's residence to execute those writs." The plaintiff does not seem disposed to open his door to Sheriff's officers. 17 Ms Noonan further says that in respect of the hearing fixed for November, she estimates the costs for the defendants will be between $286,150 and $346,150. Obviously, there are a fair amount of "guesstimates" involved in those figures but they are probably as good as any estimate that could be made at this stage. 18 I noted the factors and guidelines that need to be taken into account in this type of application in my judgment in Morris v Hanley (supra), a list principally derived from Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 and MA Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97. See also Colbran, Security for Costs (Longman Professional, Melbourne, 1993). I will briefly deal with the main factors in the light of the facts before me. 1. What is the strength of the plaintiff's case? 19 This is extremely hard to work out. Hodgson CJ in Eq, Austin J and myself have each at various times told the plaintiff that we can perceive a glimmer of a good case, but the glimmer is very much obscured by the vast amount of irrelevancies thrown up around it. The plaintiff's general approach has changed little since these observations. The best forecast, then, is that this state of affairs will continue. Thus, the plaintiff may succeed in the suit, but a lot of time and energy will be spent on peripheral issues on which the plaintiff will lose. 2. The bona fides of the plaintiff's case 20 Up until the plaintiff gave oral evidence on this motion, this has been assumed. However, it now seems that the plaintiff has transferred most of his units in the Trust. We just do not know whether that transfer included the transfer of the fruits of the litigation. 21 Again, the Courts have not been particularly impressed with people who own one share in a corporation and use it to give them standing in expensive litigation involving the affairs of that corporation, a fortiori when they cannot meet any order for costs that might be made against them. 3. The plaintiff's want of assets 22 The authorities make it clear that the poverty of the plaintiff is no reason by itself for the making of an order for security for costs. This guideline is of fundamental importance; see Cowell v Taylor (1885) 31 Ch D 34, 38 and Orr v Lusute Pty Ltd (1987) 72 ALR 617, 620. In particular, poverty which was induced by the act sued upon reinforces this fundamental principle. 23 However, where the plaintiff has so organized his affairs as to put his assets out of the reach of the defendants, he cannot shelter behind the general poverty rule: Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443, 452. On Mr Bhagat's oral evidence, this exception appears to fit the present case. 4. Will an order for security stultify the litigation? 24 On the present evidence, this question must be answered, "Yes". 5. The nature of the proceedings and the manner of their prosecution. 25 Colbran at p 271, based on Usil v Brearley (1878) 3 CPD 206 notes that this matter is a discretionary consideration in these applications. The point involves what the plaintiff has truly lost and how he is going about recovering it. A significant factor is the proliferation of actions or motions: Waddell v Blockey (1878) 10 Ch D 416. This point tells against the plaintiff. 6. Unsatisfactory or unusual pleadings 26 This is again a discretionary factor listed by Colbran at p 267, based on what Pincus J said when he was a member of the Federal Court in Janus v AGC (Advances) Ltd (19 October 1988, unreported). Again this factor tells against the plaintiff. 7. Delay 27 The main point that disturbs me is that the application is made relatively late. The case was fixed for hearing a few months ago and is on for hearing in about three months' time. Ordinarily one would expect that this sort of application should be made earlier than this. Often a person who does not commence an application for security for costs in good time may be found to have waived its right to seek security: see Delaney on Security for Costs (LBC, 1989) p 124. However, this is only something that disturbs me, it is not a matter that has been specifically raised by the plaintiff in this particular case. Conclusion 28 As I said in Morris v Hanley, the above factors are merely guidelines which the Court employs to deal with the real question, which is whether it would be vexatious and oppressive to the defendant to permit the action to continue in all the circumstances without the provision for security for costs. 29 Even giving due weight to the serious factors favouring the plaintiff, particularly the fact that if the plaintiff is to be accepted, any order for security for costs will stultify his action, in my view security should be ordered. The Court needs to make sure that its process is not being abused by putting the defendant in a position where it may have to expend half a million dollars to defend itself against ill pleaded allegations with no hope of any recovery if the defence is successful. 30 The defendants seek security in the sum of $300,000. This amount seems to be within the range, but, I suspect that even if the amount was $200,000 it would make little difference. 31 Accordingly I make the following orders: 1. Order that the plaintiff provide security for costs to the first, second, third and fourth defendants in the sum of $300,000. 2. Order that the proceedings be stayed until the said security is provided. 3. Order that if the said security is not provided and the Court is notified of such failure by 4pm on 4 October 2000, the fixture for 28 November to 6 December 2000 is to be vacated. 4. Order that the plaintiff pay the defendants' costs of this motion. ************* Last Modified: 09/27/2000 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.