New South Wales Supreme Court CITATION : Sywak v Visnic [No 2] [2010] NSWSC 374 HEARING DATE(S) : 1 April 2010 JUDGMENT DATE : 30 April 2010 JURISDICTION : Equity JUDGMENT OF : Slattery J at 1 ORDERS: DECISION : 1. Dismiss the defendant's amended notice of motion; and, 2. Order the defendant to pay the plaintiff's costs of the amended notice of motion. CATCHWORDS : PROCEDURE - costs - defendant/applicant seeks security for costs - plaintiff/respondent natural person resident in NSW - inherent jurisdiction of Court to make orders for security for costs - whether the plaintiff's claim is bona fide and not a sham - whether the plaintiff has a reasonably good prospect of obtaining the orders sought - whether the plaintiff's action is harassing or vexatious - failure to have the costs orders quantified or assessed - defendant cannot establish that the plaintiff has failed to honour existing costs orders - plaintiff's case is not so unmeritorious that a security for costs order should be made - defendant to pay the plaintiff's costs of the motion LEGISLATION CITED : Civil Procedure Act 2005 (NSW) s 67 Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 42.21 CATEGORY : Consequential orders Byrnes v John Fairfax Publications Pty Limited [2006] NSWSC 251 Friend v Brooker [2009] HCA 21 Idoport Pty Limited v National Australia Bank Limited [2001] NSWSC 744 Morris v Hanley [2000] NSWSC 957 CASES CITED : Port of Melbourne Authority v Anshun (1981) 147 CLR 589 Sywak v Visnic [2010] NSWSC 222 Visnic v Sywak & Ors [2007] NSWSC 701 Visnic v Sywak [2008] NSWSC 427 Visnic v Sywak [2009] NSWCA 173 PARTIES : Plaintiff/Respondent: Peter Orest Sywak Defendant/Applicant: Milan Visnic FILE NUMBER(S) : SC 1146/09 COUNSEL : Plaintiff/Respondent: Mr H Stitt Defendant/Applicant: Mr A Street SC & Mr R Carruthers Plaintiff/Respondent: Polczynski Lawyers SOLICITORS : Defendant/Applicant: Lander & Rogers Lawyers IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SLATTERY J FRIDAY 30 APRIL 2010 1146/09 Sywak v Visnic [No 2] JUDGMENT (Security for Costs) 1 HIS HONOUR: On 5 March 2010 I gave my first judgment on the amended notice of motion in this matter: Sywak v Visnic [2010] NSWSC 222. In that judgment I dismissed paragraphs 2 and 3 of the defendant/applicant's, Mr Visnic's, notice of motion. Now I have been asked to consider the relief claimed in paragraph 1 of the defendant/applicant's notice of motion and issues of costs. Security for Costs 2 The defendant/applicant seeks security for its costs in these proceedings. This is an unusual application for security. It does not fall within any of the categories provided for in r 42.21 Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The plaintiff/respondent is neither a corporation nor a person ordinarily resident outside Australia, nor is there any evidence that the plaintiff is suing on behalf of another person. The plaintiff is a natural person resident in New South Wales. 3 Mr Street SC submits for the defendant on the motion that even in these circumstances there is power in the Court's inherent jurisdiction to award security for costs. Mr H Stitt, who appears for the plaintiff, does not contest the Court's inherent jurisdiction to make orders for security for costs against a natural person ordinarily resident within the jurisdiction. Mr Stitt's concession as to the existence of inherent power to make such orders is appropriately made: Byrnes v John Fairfax Publications Pty Limited [2006] NSWSC 251. The point at issue in the present case is whether in the Court's inherent jurisdiction the Court should exercise its discretion to make an order for security for costs against the plaintiff. 4 The factors relevant to an application for the exercise of this discretion are not controversial. Young J (as his Honour then was) identified these factors in Morris v Hanley [2000] NSWSC 957 at [23]: "(a) whether the plaintiff's claim is bona fide and not a sham; (b) whether the plaintiff has a reasonably good prospect of obtaining the orders he or she seeks; (c) whether an order for security would bring the proceedings to an end; (d) whether the plaintiff has a want of assets and how this was brought about; (e) whether there is anyone standing behind the plaintiff who might benefit from the action but who is unwilling to contribute to the risk involved in the action; and (f) the question of delay." 5 In Morris v Hanley Young J noted that this list of factors is not exhaustive. A common additional question Young J also identified is whether the plaintiff's action is harassing or vexatious. The defendant submits that additional factor is present here. He says that he is now being forced to incur costs in these proceedings by a plaintiff who has failed to pay two sets of costs orders owing to this defendant in closely related proceedings. The circumstances in which the two sets of costs orders were made are described in my principal judgment Sywak v Visnic [2010] NSWSC 222 at [2]-[10]. The defendant Mr Sywak obtained costs orders against Mr Visnic both upon his success on the second hearing before Brereton J (Visnic v Sywak [2008] NSWSC 427) and then on appeal (Visnic v Sywak [2009] NSWCA 173). 6 Few of the factors identified in Morris v Hanley are engaged in the present case. The plaintiff has not sought to advance a case that an order for security would bring the proceedings to an end. The plaintiff has not sought to rely upon his own want of assets. The defendant has not sought to show that there is anyone standing behind the plaintiff seeking to benefit from the action but who is unwilling to contribute to the risk involved in it. There are no issues of delay. The motion was brought promptly after the commencement of these proceedings. Here the defendant only raises factors (a) and (b) in the Morris v Hanley list and raises the issue that these are vexatious or harassing proceedings. 7 Mr Street SC puts the defendant's claim for security for costs on three main grounds: first, the plaintiff has failed to pay two prior costs orders made in favour of the defendant; second, the plaintiff's case is unmeritorious and not brought bona fide; and finally, Mr Street SC says that the quantum of the defendant's claim for security for costs is fully established and an order should be made in the sum claimed. Outstanding Costs Orders 8 First Mr Street SC submits that unpaid costs orders are a ground upon which a security for costs order may be made: Byrnes v John Fairfax Publications Pty Limited. The plaintiff has failed to pay the defendant's costs of the proceedings before Brereton J and the Court of Appeal. There is, as Mr Street SC says, no evidence of the plaintiff having taken steps to or "rushed" to pay the defendant's costs of those proceedings. Mr Street SC says that this lack of evidence leads to a strong presumption that the plaintiff will continue to fail or refuse to pay existing outstanding costs orders for as long as he can and further supports the conclusion that a security for costs order should be made in this case. 9 The main difficulty with Mr Street SC's first argument is that the costs orders upon which he relies have never been assessed. In Byrne's case where security for costs in the inherent jurisdiction were not ordered but where a stay under s 67 Civil Procedure Act 2005 (NSW) was granted, an important basis for the grant of the stay was that the plaintiff had failed to pay the defendant approximately $250,000 in assessed costs orders in closely related proceedings in another jurisdiction. In this case not only have the costs not been assessed but there is no evidence that the defendant has even made any attempt to quantify them or that the results of that quantification have been served upon the plaintiff. Whether or not this indicates that the costs orders were not particularly important to Mr Visnic or whether he thought there was little prospect of recovery of costs in the short term or whether there is some other reason may not much matter. The effect of not taking out the costs orders is that there is not a precise amount of costs that the defendant can point to which has been demanded and remains unpaid. 10 The non-payment of these prior costs orders is an important logical step in the defendant's argument. The core element of vexation, where a plaintiff sues before satisfying prior costs orders that the defendant has against the plaintiff, may be readily identified. It is to ensure that a plaintiff does not make further use of Court processes, where the plaintiff is already misusing Court processes by failing to honour existing Court orders. Allowing the second case to proceed risks increasing the financial burden upon the defendant, who has already suffered the detriment of unpaid costs orders. 11 Here the failure to have the costs orders quantified or assessed means that the defendant cannot establish that the plaintiff has failed to honour existing costs orders. There is as yet no identifiable sum that the plaintiff can be called upon to pay under those costs orders, because no precise amount has been demanded and no assessment has taken place. Of course, the defendant may proceed to have the two prior costs orders assessed. If after assessment a demand is made upon the plaintiff and remains unsatisfied then the defendant can make a further application for a security for costs order. 12 The conclusion against a security for costs order is further strengthened by several matters to which Mr Stitt points. (a) There are prior unassessed costs orders in favour of the plaintiff but which would nevertheless tend to offset the costs orders relied upon by the defendant. (b) The inference that might otherwise arise from unpaid costs orders that the plaintiff would not honour a costs order in these proceedings is less powerful here because the plaintiff does have some assets and within the jurisdiction. In the first hearing ( Visnic v Sywak & Ors [2007] NSWSC 701) Brereton J declared that the plaintiff has a 50% shareholding in each of two companies being wound up in this jurisdiction, Adellos Pty Limited and Castlove Pty Limited. Both these companies hold real estate of substantial value. (c) It is for a defendant who asserts a need for security to provide credible testimony that can establish that there is reason to believe that the plaintiff will be unable to pay the defendant's costs if ultimately unsuccessful: Idoport Pty Limited v National Australia Bank Limited [2001] NSWSC 744. The defendant had the opportunity to seek and then to adduce evidence of the need for security. None was advanced. Unmeritorious Claim 13 Mr Street SC's second argument is that the plaintiff's claim is unmeritorious and not brought bona fide. There are several difficulties with this second argument. It is not obvious that the plaintiff's claim is either unmeritorious or lacking in bona fides. The Court has already found in the plaintiff's favour in the argument on paragraphs 2 and 3 of the defendant's motion. In the Court's principal judgment (Sywak v Visnic [2010] NSWSC 222) the Court was not prepared to find that the plaintiff is estopped from bringing these proceedings either on the basis of issue estoppel or Anshun doctrines (Port of Melbourne Authority v Anshun (1981) 147 CLR 589). The Court found that the plaintiff is not engaged in an abuse of the Court's processes by bringing these proceedings. 14 The ingredients of the plaintiff's cause of action in these proceedings are not complicated. As the principal judgment makes clear at [21], to succeed in his cause of action against the defendant, the plaintiff only has to prove the plaintiff made payments under the Deed of 30 April 1996, that the plaintiff's liability as a guarantor to make the payments under the Deed is co-ordinate with the defendant's liability. Upon proof that the defendant has not paid his share of the payment the law then implies the defendant's obligation to contribute to the plaintiff's payments under the Deed. 15 Mr Street SC says that the defences that the defendant will field to this action must succeed and that as a result the plaintiff's case must fail. I do not agree. It cannot be said here that the plaintiff's case must fail because of the strength of the defendant's discretionary defence. Mr Street SC refers the Court to Friend v Brooker [2009] HCA 21 and says that the plaintiff is a claimant for equitable contribution. He submits that the plaintiff must also do equity by bringing to account in this action all the benefits he has in fact received from Parlamartu Pty Limited and Adellos Pty Limited. Mr Street SC identifies a payment of $271,432 from Adellos Pty Limited to Mr Sywak's Superannuation Fund. When those benefits are brought to account, Mr Street SC says that they offset the plaintiff's claim. 16 There are several problems with this argument. The particular amount Mr Street SC identified would not fully offset the plaintiff's claim. Even on the document to which Mr Street SC has referred me to there is room for debate as to what payments have in fact been made and whether payments from Adellos to Mr Sywak's Superannuation Fund should be brought to account at all in relation to the plaintiff's action. 17 The plaintiff's case is not so unmeritorious that a security for costs order should be made. The simplicity of the ingredients in the plaintiff's cause of action would make it difficult for the defendant to advance any case of want of bona fides in the plaintiff. The defendant has not made out such a case here. The Quantum Issue 18 In light of my findings it is unnecessary to consider Mr Street SC's third argument that he has established the quantum of the costs that the defendant claims by way of security for its costs. I have found that an order for security for the defendant's costs should not be made against the plaintiff on other discretionary grounds. It is unnecessary to consider the adequacy or otherwise of the evidence as to the quantum of the costs that the defendant claims will provide it with sufficient security for its costs of the proceedings. 19 Before the issue of security for costs is completed it should be noted that in Byrne v John Fairfax Publications Pty Limited the applicant defendant succeeded before Simpson J on the basis at [33]-[38] that, apart from the claim for security for costs, the plaintiff's action should be stayed under s 67 Civil Procedure Act on grounds of fairness. The stay operated in Byrne v John Fairfax Publications Pty Limited, until the prior costs orders were paid. Here the defendant also sought a stay under s 67 (order 2 of the amended motion). But the defendant's case for a stay based on s 67 would fail because in the absence of a determination of assessed costs that can be paid, the element of unfairness grounding a stay is absent. Costs 20 The parties also put argument about who should bear the costs of this application. 21 The defendant has now failed to gain any of the relief sought in Orders 1, 2 or 3 of its amended notice of motion. Ordinarily costs should follow the event: r 42.1 UCPR. That is the order I propose to make. 22 Mr Stitt argues that even were I to order other than costs following the event that the leave granted to the defendant to bring an amended notice of motion, requiring as it did an adjournment, involved the grant of an indulgence to the defendant which should result in a costs order in the plaintiff's favour in respect of costs arising from the amendment and the adjournment. 23 Mr Stitt also points out that the special application bringing the matter before the Court at short notice to seek extension for time to appeal was also a matter which, independently of my costs order, should have resulted in costs being awarded to the plaintiff in respect of the appearance before the Court on 18 March 2010. His submission is that the Court does not have power to extend time at first instance. 24 I do not have to decide either of the issues Mr Stitt raises because I am ordering the defendant to pay the plaintiff's costs of the motion. However to assist any assessment of costs on the motion I now make clear that the amendment of the motion and the adjournment to accommodate argument on the amended motion and the application before the Court on 18 March 2010 are all part of the costs of the motion that should be included in the assessment in favour of the defendant. 25 Mr Street SC seemed ready to concede that costs should follow the event, were I to decide the security for costs issue against him on the motion. That is the order that I will make. Orders and Conclusions 26 As I have found that the defendant is not entitled to security for costs from the plaintiff and as I have found the defendant to be unsuccessful on all the relief sought in its notice of motion, I will dismiss the motion. In the result then the orders are: 1 Dismiss the defendant's amended notice of motion; and, 2 Order the defendant to pay the plaintiff's costs of the amended notice of motion. ********** 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.