New South Wales Supreme Court CITATION : Paul Douglas Williams & Anor v Abbott Australasia Pty Ltd & Anor [2003] NSWSC 425 HEARING DATE(S) : 08/05/03 JUDGMENT DATE : 8 May 2003 JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Application dismissed. CATCHWORDS : Security for costs - Orders made for payment of specific amount - Application to vary orders by substitution of personal guarantee - Principles LEGISLATION CITED : Supreme Court Rules CASES CITED : Telstra Corporation v BT Australasia Pty Ltd (1998) 85 FCR 152 Paul Douglas Williams (First Plaintiff) PARTIES : Serenity Cove Business Park Pty Limited (Second Plaintiff) Abbott Australasia Pty Limited (First Defendant) Abbott Laboratories (Second Defendant) FILE NUMBER(S) : SC 50095/02 COUNSEL : I Harrison SC, GA Farmer (Plaintiffs) FM Douglas QC, G Parker (Defendants) SOLICITORS : Summit Law (Plaintiffs) Clayton Utz (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Thursday 8 May 2003 ex tempore Revised 20 May 2003 50095/02 Paul Douglas Williams & Anor v Abbott Australia Pty Ltd & Anor JUDGMENT The Notice of Motion 1 There is before the court a notice of motion by which the plaintiffs seek an order varying the orders now in place for the payment by the second plaintiff of amounts by way of security for the defendants' costs of the proceedings. Those orders were first made following a closely contested interlocutory hearing whereunder: · the plaintiffs sought a number of interlocutory orders restraining the first defendant from exercising rights pursuant to a mortgage by the second plaintiff; restraining the first defendant from exercising its purported power of sale under the mortgage; and restraining the first defendant from relying upon or taking any action pursuant to a notice dated 23 July 2002 purportedly issued pursuant to section 52 (2) (b) of the Real Property Act; · the defendants sought security for costs from the second plaintiff. 2 A detailed judgment was delivered ex tempore on 3 October 2002 [bearing revised date 18 October 2002]. Upon the plaintiffs giving the usual undertaking as to damages and a further particular undertaking, orders were made on 15 October 2002 restraining the first defendant until further order from exercising any rights it may have pursuant to the mortgage or the guarantee given by the first plaintiff and for the provision by the second plaintiff of security for the defendants' costs in the sum of $380,000 to be provided in two tranches: $190,000 was payable within 30 days; a further $190,000 was payable within 30 days of the date on which the matter was fixed for final hearing or a fixed for reference pursuant to Part 72 of the Supreme Court Rules. 3 A careful reading of the 3 October 2002 judgment discloses the extent to which a number of factors material to the determination were interrelated and certainly material to the manner in which each of the cross motions was dealt with. 4 The order for payment of the second tranche security for costs amount was later varied by McClellan J who ordered that these monies be paid on or before 31 March 2003. 5 The proceedings are now fixed for final hearing to commence on 10 June 2003. 6 On 28 March 2003 leave was granted to the plaintiffs to file the motion presently before the court which sought orders for the return to the second plaintiff of the first tranche security funds, an order vacating the varied order for provision of the second tranche funds and an order that the first plaintiff provide a personal guarantee to the defendants in the sum of $380,000 as security for the cost of the second plaintiff. 7 The second tranche security funds were paid one day following the date of the order but no exception to this occurrence is, of course, taken by the defendants. The orders are treated as having been honoured. 8 A short judgment was delivered on 28 March 2003 [revised 11 April 2003] granting leave to the defendants to pursue the motion and directions were given for the way forward. No stay of the extant orders for payment of the second tranche monies was granted. Dealing with the Motion 9 The second plaintiff relies upon what is said to be new evidence, in its attempt to have the existing security for costs regime varied. The new evidence said now to be available is as follows: · that of Mr Williams, the first plaintiff, who is now prepared to give a personal guarantee to the defendants in the sum of $380,000 by way of the security for costs of the defendants. His evidence is that the fact that he could give a personal guarantee was first properly explained to him by his solicitor on 23 March 2003 in conference with his counsel. His further affidavit of 7 April 2003 treats with this general issue in paragraphs 5 to 9 and those paragraphs and are as follows: "5. I first raised the issue of the security for costs order by way of wanting my solicitors to review that order and what my obligations were during the week of the 17th to the 21st of March 2003. In this regard I had a conference with my solicitor David Catts and Counsel Mr Farmer and Mr Biscoe QC at Mr Biscoe's chambers at 5pm on Sunday 23rd March 2003. This was the first occasion that Mr Biscoe QC could see us and properly allocate a number of hours to the issue of the security for costs order and also with respect to this matter generally. 6. At the time of the hearing that led to the security for costs order I had discussions with my then legal representatives with respect to the other matters that were being heard and also the security for costs matter. Everything was done in haste. I did not understand at that time, if my lawyers were explaining it to me that way, that I was being asked to give a personal guarantee. I have personally guaranteed the entire purchase by SCBP and I am prepared to also personally guarantee the costs order sum of $380,000.000. I did not understand this at this time. It has now been explained to me by my current legal representatives. 7. I had a conference with my Counsel, Mr Farmer and Mr Biscoe QC and my solicitor on Sunday 23 March 2003 at 5pm. In that conference my lawyers reviewed the judgment of Einstein J made on 18 October 2002. 8. A lengthy discussion was had between my lawyers. The judgment was reviewed especially with respect to me giving a personal guarantee instead of SCBP as a company having to pay the money. Cases were reviewed and after approximately 45 minutes my solicitor explained to me that what His Honour Justice Einstein had apparently meant was that I did not want to give a personal guarantee at the time of the hearing that led to the security for costs order and accordingly the security for costs order was made. It was further put to me that if that was the case then if I preferred I should make it known to the Court that I am prepared to give a personal guarantee for the sum of $380,000.00 and that guarantee may suffice if the court was minded to substitute the payment into Court of the sum of $380,000.00. 9. The plaintiffs have now provided to the first and second defendants all of the plaintiff's evidence." · evidence that Parist Holdings Pty Ltd is prepared to also guarantee to the defendants, the sum of $380,000 by way of security for costs; · evidence said to prove that the second plaintiff is precluded from deriving any income from the property because of the wrong committed by the defendants; · evidence said to prove that the loans by Parist to the second plaintiff have put a strain on its cash flow, that the financing of the payments of security is extremely expensive and that Parist requires such moneys to assist in its development of its own land. [See generally Affidavit of 7 April 2003 subject to the rulings on admissibility paragraphs 12 – 31] 10 The circumstance that Mr Williams was not prepared to give a personal guarantee is generally dealt with in the 3 October 2002 judgment and it is unnecessary to now repeat what was there said. 11 The defendants seek to investigate by cross-examination and production of material on subpoena, the veracity of Mr Williams evidence as to his lack of awareness until March 2003 of the fact that he could provide a personal guarantee for the defendants costs, at least so much was indicated in the defendants' written submissions. Claims are made by the plaintiffs, at least this was suggested in the defendants' written submissions, that the documentary material is subject to legal professional privilege and should not be made available to the defendants on the hearing of the motion. The defendants at least in their written submissions, claim that any privilege which may otherwise have attached to such materials have now clearly been waived in the light of the issue tendered by the plaintiffs for determination: cf Telstra Corporation v BT Australasia Pty Ltd (1998) 85 FCR 152. The defendants' submission at least in the written submissions, was that the knowledge of his legal advisers is Mr Williams knowledge. 12 In my view none of these matters require further consideration as even accepting for present purposes, Mr Williams evidence in this regard, I have come to the clear conclusion that the motion should be dismissed for a number of reasons. 13 As already indicated, very importantly the orders which were made in relation to security for costs following the contested hearing were part of an overall resolution of the matter. The defendants had sought orders to protect their interests, including the payment of a sufficient amount of money into court to protect the defendants against interest accruing upon the unpaid balance of the purchase price of the property the subject matter of the proceedings. That consideration was significant in terms of the weighing up exercise reflected in the 3 October 2002 judgment. 14 In relation to the parties having proceeded upon the assumption that the security regime in place was also ordered, there is presently before the court detailed evidence as to the steps taken by the defendants between 3 October 2002 and the present time in terms of preparation for the final hearing. The evidence is that the defendants have incurred considerable expense in so defending the proceedings. It is unnecessary to repeat the detail to be found in the affidavit of Mr Lucas of 15 April 2003 save to point out that: · an amended summons was filed on 20 December 2002, · a cross claim was filed on 20 December 2002, · an amended defence was filed on 18 February 2003, · substantial discovery by the defendants has taken place, · the defendants are currently in the process of completing the preparation of evidence both from lay as well as from experts witnesses due to be filed and served on 22 May 2003. · as part of the preparation for the hearing the defendants have issued numerous subpoenas numbering at least 37. 15 A mere glance at the voluminous court file suffices to make the point that, the contested final hearing will be complex indeed. 16 Nor am I satisfied that on the evidence presently before the court the personal guarantee now offered would adequately protect the defendants' interests. The financial position of Parist Holdings Pty Ltd ["Parist"] remains one which in my view, on the existing evidence, can only be said to be one of real complexity leaving considerable doubt. Nor is the shareholding in Parist clear, the evidence leaving doubt, it seems to me, as to Mr Scott's position and as to whether he holds his shares on trust for Mr Williams or whether he holds his shares as added security for the loan made by Rintree Pty Ltd to Parist and this notwithstanding the latest affidavit by Mr Williams of 7 April 2003 cf paragraph 38. 17 Mr William's own financial position remains a matter of the highest doubt - it being fair to say it seems to me that there is simply no reliable evidence necessarily put forward in this regard at all and this notwithstanding his statement in paragraph 38 of his latest affidavit that he owns 520 of the 1,000 shares issued in Parist as well as the balance of 480 shares held in trust for him as further security for the Rintree loan. 18 Further if Mr Williams financial substance is in fact such as to give the defendants a proper assurance that should they succeed in the proceedings, the amount for which he proposes to provide the guarantee will in fact be paid, there should be no reason why he could not advance those funds presently to assist the suggested Parist cash flow problems. 19 Further on the evidence Burrawong Investments Pty Ltd which holds an unregistered mortgage stands it seems to me to benefit from the success of the second plaintiff's case and no attempt has been made to show that it would be unable to put up security for costs. 20 It is beyond doubt that all of these matters raised at the heel of the hunt with the final hearing now looming and occupying the attention of the parties and relevantly the defendants (now engaged in the exercise of preparation of their evidence due to be filed very shortly) represents a major shift in terms of the carefully laid out path following the earlier contested interrelated security for costs and injunctive applications. Whilst in particular circumstances the court will strain to permit a new evidence situation clearly requiring attention to be revisited in terms of the security regime and in rare circumstances will, during the course of the final hearing, permit the same exercise, each situation must always be looked at in terms of the particular facts matters and circumstances which obtain. Here one has what can only be described as an application properly described as 'last-ditch', very complex and only supported in a number of areas by messy or opaque foundational evidence. 21 It seems to me that the current application represents a belated attempt to revisit on incomplete and indecisive materials, a matter which was hotly contested some six months ago. The proper exercise of the Court's discretion is also underpinned by Part 1 of the Supreme Court Rules (as modified by Amendment No 337). That amendment articulates the overriding objective of enabling the Court to deal with cases justly: Rule 1 (1). The overriding purpose of the Rules is to facilitate the just, quick and cheap resolution of the real issues in civil proceedings. Albeit that in certain circumstances a clearly altered position may result in a security for costs regime being varied at the very doorstep of the final hearing, the effect on the parties of an application such as the present, in terms of the usually fairly frenetic forensic attempts to ready themselves for a final hearing, constitutes yet a further factor to be taken into account in terms of the justice of the situation. 22 To my mind the proper exercise of the court's discretion in terms of the justice of the situation when the proceedings are now fixed for hearing so soon and bearing in mind the fact that the parties have both proceeded upon a certain path on certain assumptions and understandings in terms of the regime which had been fixed for provision of security for costs is clearly to dismiss the motion. 23 There being a real onus resting upon the applicants to establish that there would be no prejudice to the defendants by the making of the orders are now sought, the proper exercise of the discretion in terms of the interests of justice mandates that the motion should be dismissed, the applicants having failed to establish with requisite clarity any basis for a variation of the existing security for costs regime. 24 For those reasons the motion will be dismissed. I order that the plaintiff pay the defendants' costs of the motion. I certify that paragraphs 1 - 24 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 8 May 2003 ex tempore and revised on 20 May 2003 ___________________ Susan Piggott Associate 20 May 2003 Last Modified: 05/30/2003 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.