New South Wales Supreme Court CITATION : Worldwide Australia LLC v Jacobsen Platinum Pty Limited & Ors [2005] NSWSC 846 HEARING DATE(S) : 23/08/05 JUDGMENT DATE : 24 August 2005 Equity Division JURISDICTION : Commercial List JUDGMENT OF : Einstein J DECISION : Security for costs ordered CATCHWORDS : Security for costs - External plaintiff Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 CASES CITED : Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 Worldwide Australia LLC (Plaintiff) Jacobsen Platinum Pty Limited (First Defendant) Kevin George Jacobsen (Second Defendant) Time of my Life Pty Limited (ACN 107 898 966) (Third Defendant) Dirty Dancing Investments Pty Limited (ACN 110 875 600) (Fourth Defendant) PARTIES : Dirty Dancing Asia Pacific Pty Limited (ACN 110 687 628) (Fifth Defendant) Jacobsen Entertainment Limited (ACN 100 000 244) (Sixth Defendant) Amber Lucy Jacobsen (Seventh Defendant) Michael Aaron Jacobsen (Eighth Defendant) Jacobsen - Jack Utsick Pty Limited (ACN 107 433 296) (Ninth Defendant) FILE NUMBER(S) : SC 50183/04 Mr Andronos (Plaintiff) COUNSEL : Ms Sofroniou (Defendants) Piper Alderman (Plaintiff) SOLICITORS : Atanaskovic Hartnell (Defendants) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Wednesday 24 August 2005 50183/04 WORLDWIDE AUSTRALIA LLC v JACOBSEN PLATINUM PTY LIMITED & Ors JUDGMENT The notice of motion 1 There is before the court an amended notice of motion pursuant to which the first to eighth defendants seek security for costs. 2 There are two only areas of discourse for examination: · The first concerns the fact that the plaintiff is a company incorporated in Delaware, USA. The issues which arise are whether any assets within this jurisdiction have been identified with sufficient precision to outflank the usual rule that a plaintiff ordinarily resident out of the State, must pay security for costs unless it has assets within the State of sufficient magnitude to be taken into account · The second concerns the principled exercise of the discretion in terms of amounts and occasions for payment of security in separate tranches External plaintiff - the principles 3 There is no real issue as to these principles. The following authorities identify the proper approach: · "[t]he 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". Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,422 per Gummow J · "To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, 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. [emphasis added]. P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, 323, per McHugh J Security for costs - the principles 4 The provision of security for costs recognises the differential position of parties to litigation. Whereas the plaintiff has a choice if and when to bring proceedings, a defendant has no choice as to its participation in proceedings, unless it is prepared to have default judgment entered against it. The court's inherent jurisdiction to order a plaintiff to provide security for costs, in an appropriate case, lessens the risk that the defendant will have to litigate against a plaintiff who has commenced litigation without the available funds to pay for the legal costs of a successful defence. 5 The principles which inform the exercise of the discretion to order security for costs were closely examined in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 at [44] et seq. The jurisdiction is essentially a protective one, aiming to provide a fair and reasonable amount of costs. The proceedings 6 It is inappropriate to repeat the record. The nature of the proceedings are clearly set out in the summons filed on 17 December 2004. 7 The short position pleaded is that the plaintiff and the first defendant had entered into a Partnership Agreement on 27 January 2004 for the purpose of carrying on a business of promoting, managing and staging, amongst other things, theatrical events principally, but not exclusively, in Australia and New Zealand, the 9th defendant being the nominee of the partners by which the assets of the Partnership were to be held. 8 The dispute concerns: · allegations of breaches by the first defendant of legal obligations said to arise pursuant to the terms of or by reason of the Partnership Agreement which center upon failing to procure for the benefit of the Partnership [or the ninth defendant as its nominee], particular rights principally in connection with a musical dramatic work known as Dirty Dancing ["the Work"]; · allegations of sundry involvement in the breaches of contract by each of the second to eighth defendants put in various ways but including allegations of inducement of breaches of contract and similar; · allegations that certain of the defendants procured the rights to stage the Work and then have sub-licensed to other of the defendants certain of those rights [there being also allegations of inter defendant sub-licences]. 9 It is reasonably clear that the plaintiffs claims extending as they do to the rights to the Work to be exploited on behalf of the Partnership in all territories around the world, will likely lead to extensive evidence on quantum, in all probability drawing in international experts. Funds within the jurisdiction? 10 This matter can be disposed of very shortly. The defendants rely upon a letter of 15 October 2004 sent by Henry Davies York, who asserted that they acted for the first defendant "and the Jacobson group of companies…including the directors of those companies". The letter was written to Minter Ellison who were then the solicitors for the plaintiff in response to a letter from Minter Ellison of 1 June 2004. 11 The 15 October 2004 letter includes the following paragraph: "Mr Utsic [President of the plaintiff company] has been made fully aware of and has been informed on numerous occasions that our clients are holding funds in the amount of AUD 526,000which of Mr Utsic's profits in the Partnership to date. Our client is still awaiting instructions from Mr Utsic as to how he wishes to deal with these funds and continue to offer that this amount can be used by Mr as an investment in the promotion and production of the Show on the same terms as all other investors." 12 Notwithstanding that one at first blush, might treat this paragraph in the letter as an admission, the entirety of the evidence presently before the Court on the motion is sufficient to rebut any such approach. The following matters make plain that it is inappropriate to approach the current motion upon the assumption that the defendants or any of them are shown with any form of clarity to presently hold $526,000 in trust for the plaintiff: · there is before the Court a Loan Agreement dated 27 January 2004, the parties being: - World Wide Entertainment, Inc [a Delaware company related to the plaintiff] described as "the 'lender'; - the first defendant and the plaintiff referred to as "both trading in partnership as the Jacobson-Worldwide Partnership" and described as 'together the borrower'; - the ninth Defendant described as 'the nominee'. · The loan agreement includes an introduction in the following terms: A. The borrower and the nominee propose to enter into a partnership agreement simultaneously with the entry into of this agreement for the purpose of carrying on a business together in Australia and New Zealand ('Partnership Agreement') on the terms and conditions set out in the Partnership Agreement. B. The nominee, under the Partnership Agreement, proposes to hold all assets of the partnership to be created by the Partnership Agreement ('Partnership') as agent for the borrower as tenants in common. C. The lender has agreed, at the request of the borrower, to provide a loan facility to the nominee on behalf of the borrower, the principal amount of which is not to exceed AUS $1,000,000, subject to clause 10.3, in the manner set out in clause 3.4. D. The lender, the borrower and the nominee have agreed to enter into this agreement to set out the terms and conditions of the loan facility. · The evidence is in an entirely unsatisfactory state as to whether or not an amount in the sum of $526,000 [being the approximate total of two sums [$148,710.15 and $377,143] was loaned by World Wide Entertainment, Inc to the above partnership or was so loaned by medium of an intervening loan first to the plaintiff and then on loaned by the plaintiff to the Partnership. · importantly the ninth defendant nominee of the partnership to hold all partnership assets, is not represented. · it is common ground that where a partnership dispute arises, the proper remedy for determination of asset ownership is by seeking the taking of accounts. However no such proceedings are apparently on foot. · both parties addressed on the document purporting to be a reconciliation [appearing as annexure C to the affidavit made by Ms Wright on 11 March 2004]. The genealogy of this document is entirely inchoate. Indeed one may observe that the affidavit of Ms Wright identifies two sums under the description "Worldwide Entertainment – CL" of $148,710.15 and $377,143.00 as representing the $526,000 which the plaintiff alleges is being held by the defendants. If this is accepted as correct, then the reconciliation statement also seems to suggest that there is another approximate $2.5 million outstanding to the plaintiff from the defendants. This is because similar sums of money are described in the same columns as the $148,710.15 and $377,143.00 amounts which total $2.5 million. However, this is not what is suggested by either party. The document is of no assistance to the Court whatever in relation to the instant question. 13 I proceed upon the assumption that the security for costs application requires to be determined on the basis that the plaintiff is not shown to have any or any ready access to funds within the jurisdiction sufficient to be taken into account on the application. Amount of security 14 Extensive evidence was adduced by both parties in relation to the proper approach to be taken in determining the amount of the security for costs which should be ordered to be paid first to eighth defendants. 15 It has to be borne in mind that no defences have yet been filed by those defendants. 16 Notwithstanding the state of the pleadings it is common ground that an application for security for costs requires to be prosecuted swiftly and the defendant applicants are presently complying with that dictate. 17 It is preferable where possible, to avoid a case management regime which will inexorably lead to more than one security for costs application. 18 To my mind the Court is in a reasonable position to assess the highly likely issues to be litigated from the materials in evidence and from the terms of the Summons. 19 Those issues are likely to include: · complex questions of fact; · evidence being given by a number of witnesses; · issues of law of some complexity [but of a type commonly experienced in litigating breaches of fiduciary obligation/breaches of contract/breaches of good faith obligations and related]. 20 It is unnecessary to descend to the particular detail to be found in the respective affidavits. 21 At the end of the day one has a situation in which the defendants contend that the appropriate amount for security for costs should be as follows: · Preparation up to hearing $402,920 [being 80% of $503,650] [the figure of $402,920 including provision for experts of $55,200]; · Hearing and preparation during hearing $233,940 [being 80% of $292,425] Total claimed - $636,860 22 The plaintiff contends that the appropriate amount for security for costs should be as follows: · Preparation up to hearing $157,600 · Hearing itself $46,200 · Experts fees $46,200 Total claimed - $363,800 23 It is accepted on the authorities that the discretion is exercised taking into account all of the relevant considerations and bearing in mind the necessity for an appropriate reduction to be made for uncertainties. The types of uncertainty in the present situation involve importantly the length of the hearing and the extent to which quantum related issues will be particularly expensive. Decision 24 The appropriate order is that the plaintiff pay security for costs of the first - eighth defendants in the total sum of $500,000 as follows: Tranche 1 - payment of $250,000 within 28 days Tranche 2 - Payment of the balance within 90 days Costs of the application 25 The parties are to bring in short minutes of order on which occasion costs may be argued. I certify that paragraphs 1 - 25 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given 24 August 2005 ___________________ Susan Piggott Associate 24 August 2005 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.