New South Wales Supreme Court CITATION : NSL Pty Limited & Anor v 2 Roslyn Street Pty Limited & Anor [2006] NSWSC 142 HEARING DATE(S) : 9 March 2006 JUDGMENT DATE : 15 March 2006 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) Notice of motion filed 8 September 2005 is dismissed; (2) The decisions of Deputy Registrar Haggett dated 12 August 2005 are affirmed; (3) The first defendant is to pay the plaintiffs' costs. CATCHWORDS : Review Registrar's decision - security for costs - costs LEGISLATION CITED : Rules 42.21 & 45.19 - Uniform Civil Procedure Rules 2005 (NSW) Abram v National Australia Bank Limited [2001] NSWSC 916 Beaufort Air-Sea Equipment Pty Ltd v Emhart Australia Pty Ltd (NSWSC unreported, Master Malpass, 18 December 1992) Brijeski v Sunbeam Corporation Limited (NSWSC unreported, Master Greenwood, 29 January 1997) CASES CITED : Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 Mariala Estates Limited v Athanasi & Ors [2001] NSWSC 1013 Modern Woodcraft Pty Ltd v Nott (NSWSC unreported, Young J, 7 March 1997) Moussa v Eski Export Pty Ltd [2001] FCA 878 Rosenfield Nominees POty Ltd v Bain and Co (1988) 14 ACLR 467 NSL Pty Limited (First Plaintiff) Peter Clare (Second Plaintiff) PARTIES : 2 Roslyn Street Pty Limited (First Defendant) Pink Star Entertainment Pty Limited (Second Defendant) FILE NUMBER(S) : SC 20009/2005 Mr J Hogan-Doran (Plaintiffs) COUNSEL : Mr C A Vindin (First Defendant) Davis Breen Conti (Plaintiffs) SOLICITORS : J Biady & Associates Pty Ltd (First Defendant) LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : 20009/2005 LOWER COURT JUDICIAL OFFICER : Deputy Registrar Haggett IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON WEDNESDAY, 15 MARCH 2006 20009/2005 - NSL PTY LIMITED & ANOR v 2 ROSLYN STREET PTY LIMITED & ANOR JUDGMENT (Review Registrar's decision - security for costs; costs) 1 HER HONOUR: By notice of motion filed 8 September 2005 the first defendant seeks firstly, an order that the decision of Deputy Registrar Haggett of 12 August 2005 be review pursuant to Rule 45.19 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR); secondly, that the decision of Deputy Registrar Haggett of 12 August 2005 and the consequent orders be set aside, other than orders 1 and 2; thirdly, in place of the order made by Deputy Registrar Haggett, that orders be made in terms of the first defendant's notice of motion filed 2 June 2005 together with present orders 1 and 2; fourthly, at the hearing of the notice of motion, that leave be granted to cross examine Peter Clare on his affidavit sworn 12 August 2005; and fifthly, costs. The first defendant is seeking review of orders made in relation to security for costs. 2 The first plaintiff is NSL Pty Limited (NSL). The second plaintiff is Peter Clare. The first defendant is 2 Roslyn Street Pty Limited (2 Roslyn Street). The second defendant is Pink Star Entertainment Pty Limited (Pink Star). 3 From about 2001 to 15 June 2004 NSL ran a nightclub from premises at Part Ground Floor, 2 Roslyn Street, Kings Cross. NSL leased the premises from the 2 Roslyn Street. Between 2001 to February 2002 NSL undertook a bar and nightclub fit out. It is alleged that on about 14 July 2004 2 Roslyn Street had converted the bar fit out, nightclub fit out and stock in trade for its own use. NSL seeks damages. Review 4 There are some cases that are authority on the consideration that ought to be given on review. They are Beaufort Air-Sea Equipment Pty Ltd v Emhart Australia Pty Ltd (NSWSC unreported, Master Malpass, 18 December 1992); Brijeski v Sunbeam Corporation Limited (NSWSC, unreported Master Greenwood, 29 January 1997); Westpac Banking Corporation v Abemond Pty Ltd and Westpac Banking Corporation v Cameron (NSWSC unreported, Santow J, 3 November 1994); Modern Woodcraft Pty Ltd v Nott (NSWSC unreported, Young J, 7 March 1997); Mariala Estates Limited v Athanasi & Ors [2001] NSWSC 1013; and Abram v National Australia Bank Limited [2001] NSWSC 916. 5 From these decisions, the approach that should be taken is that I should inform myself of all the material before the Registrar at the time when he made the decision and the Registrar's decision. I can also allow fresh evidence to be tendered. I should make my own decision based on the material before me after having the benefit of counsel's submissions. 6 There is one discrete point I shall refer to first. 2 Roslyn Street seeks an order that at the hearing of this review, Mr Clare be cross examined. On 20 July 2005 Mr Clare, director of NSL, provided by letter from his solicitor, details of his assets and liabilities to 2 Roslyn Street's solicitor. On the day prior to the hearing 2 Roslyn Street put on necessary evidence in its case for security, namely an estimate of the costs it expended in its defence of NSL's claim. In response, on the morning of court, Mr Clare swore an affidavit which was in similar terms to his letter dated 20 July 2005. 2 Roslyn Street's counsel did not object to the reliance upon that affidavit. Nor did he request that Mr Clare be cross examined. In these circumstances it is my view that Mr Clare should not now be required for cross examination. Grounds of appeal 7 As to security for costs 2 Roslyn Street appeals on the grounds that the discretion exercised by the Deputy Registrar failed to give adequate weight to firstly, NSL's admission of inability to meet any costs order; secondly, the lack of evidence demonstrating any ability on the part of Mr Clare to meet any costs orders imposed on NSL, especially in the absence of any evidence as to NSL's own costs and the ability of either plaintiff to pay those costs; thirdly, the revelation (without qualification) of other presumably significant debts of NSL and the apparent inability of either plaintiff to pay them (paragraph 17 of the affidavit of Peter Clare sworn 12 August 2005); and fourthly, the history of other proceedings between the parties (affidavit of James Biady sworn 2 June 2005), including unsatisfied costs orders. 8 As to costs, the Deputy Registrar erred in exercising his discretion on the grounds that firstly, the Deputy Registrar found that 2 Roslyn Street should have accepted the offer contained in the letter of the solicitor for the NSL dated 23 June 2005 immediately upon receipt of information provided by the solicitor's letter dated 20 July 2005, secondly, the undertaking contained in order 2 was not proffered until counsel's address at the hearing on 12 August 2005; and thirdly, 2 Roslyn Street should have obtained a costs order at least until the date upon which it was open to the Deputy Registrar to conclude that 2 Roslyn Street should have accepted NSL's offer. Security for costs 9 Rule 42.21 of the UCPR provides: "Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside New South Wales, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or (c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. ...." Deputy Registrar's reasons 10 In his reasons Deputy Registrar Haggett stated: "Firstly, there are certain matters that the court takes into consideration when making an order for security for costs. Most of those are irrelevant to these particular proceedings but one of which is any person standing behind the company has offered any personal undertaking to be liable for the costs and if so the form of such undertaking. I am satisfied that on the evidence that has been put before the court that the proposal by the plaintiff/respondent to the notice of motion is the acceptable way to go. Accordingly, the director of the plaintiff company will be made a party to the proceedings and will also furnish the undertaking as set out by counsel." 11 On 12 August 2005 the Deputy Registrar ordered firstly Peter Clare, be joined as a party to the proceedings; secondly, he, by his solicitor Tim Breene of Davis Breene Conti Solicitors thereby undertook to the court that he shall not dispose of any of his assets other than in the ordinary course of satisfying his living expenses; and thirdly, that the 2 Roslyn Street pay the plaintiffs' costs after 20 July 2005 on the notice of motion for security for costs. 12 There is a wide discretion to make an order for security for costs. As Giles J (as his Honour then was) made plain in Rosenfield Nominees Pty Ltd v Bain and Co (1988) 14 ACLR 467 at 470, in exercising the discretion as to whether or not to make an order for costs, the court must have a concern to achieve a balance between ensuring that adequate and fair protection is provided to the defendant, and avoiding injustice to an impecunious plaintiff by necessarily shutting it out or prejudicing it in the conduct of the proceeds (see also, Street CJ in Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 at 304). 13 The motion proceeded on the basis that NSL (formerly Nameless, Shameless, Legless Pty Ltd) is insolvent (although it received a judgment and costs order in its favour in the Local Court). NSL has its registered office is in New South Wales. Mr Clare is a director and shareholder of NSL. He resides in New South Wales. 14 One of the reasons why there is statutory or court rule provision for security for costs is that it is obviously unfair if a corporate plaintiff without resources brings a proceeding in circumstances where persons behind the company will reap the rewards if the plaintiff obtains judgment, but not be liable for the defendant's costs if the claim fails. The present situation is different because Mr Clare is a person behind NSL and is himself an applicant. If the claim fails, he will be liable for costs – see Moussa v Eski Export Pty Ltd [2001] FCA 878. 15 Mr Clare is not impecunious. He has been employed as a food services manager for Royal Prince Alfred Hospital, currently on secondment to St Vincent's Hospital. He had been working for either of these hospitals for over 20 years. 16 For the year ending 30 June 2005 Mr Clare's salary was $51,349. While he does not own any real property, he has a collection of antiques, fine art and porcelain estimated at a value of $60,000, he has $8,000 in the bank but owes $6,000 on credit cards. He has assets of furniture and jewellery estimated to be worth $80,000. He currently has shares in Tuloch Pty Limited (33.3%) which are valued at $200,000. He has a made loan to Tuloch in the sum of $157,810. Tuloch runs a nightclub in Oxford Street and is currently making a profit. Additionally, Mr Clare has given an undertaking that he will not dispose of any of his assets other than in the ordinary course of satisfying his living expenses. 17 It is my view that Deputy Registrar's order strikes a balance in the competing interests of the parties. 2 Roslyn Street is adequately protected against the non-payment of a costs order made in its favour. 18 There is a wide discretion in relation to costs. Deputy Registrar Haggett made a costs order in favour of the plaintiffs' dating back to 20 July 2005. That was the date when NSL provided an offer that Mr Clare was willing to become a second plaintiff or alternatively he was willing to enter into the undertaking not to dispose of his assets. At the time Mr Clare also disclosed his assets and liabilities to 2 Roslyn Street. I accept that the determination of the Deputy Registrar ultimately meant that both events occurred. 19 The costs order is one which the Deputy Registrar was entitled to make. I see no reasons to disturb either decision. I dismiss the notice of motion filed 8 September 2005. I affirm the decisions of Deputy Registrar Haggett dated 12 August 2005. 20 Costs are discretionary. Costs usually follow the event. The first defendant is to pay the plaintiffs' costs. The Court orders: (1) The notice of motion filed 8 September 2005 is dismissed. (2) The decisions of Deputy Registrar Haggett dated 12 August 2005 are affirmed. (3) The first defendant is to pay the plaintiffs' costs. ********** 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.