Supreme Court New South Wales Medium Neutral Citation: Duynstee v Dickins [2011] NSWSC 408 Hearing dates: 6 April 2011 Decision date: 12 May 2011 Before: Price J Decision: 1. The application for leave to appeal and the appeal is stayed until the plaintiff provides security for the defendants' costs by paying into court the sum of $57,709.03, or by otherwise providing security for that amount in a manner satisfactory to the defendants. 2. The security is to be provided before 2 June 2011, on which date the matter is listed before the Registrar to fix a date for hearing of the application for leave to appeal and the appeal, or, in the event that the security has not been provided for an order for dismissal of the application for leave to appeal and the appeal. 3. The plaintiff is to pay the defendants' costs of the motion. Catchwords: Appeal from Local Court - power to order stay of appeal until security for costs is given - principles applicable - failure by a party to meet previous cost orders - interests of justice - consideration of past and anticipated costs. Legislation Cited: Building and Construction Industry Security of Payment Act 1999 Civil Procedure Act 2005 District Court Act 1973 District Court Rules 1973 Local Court Act 2007 Uniform Civil Procedure Rules 2005 Cases Cited: Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251 Duynstee v Dickens & Dickens [2009] NSWSC 292 Morris v Hanley [2000] NSWSC 957 Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 Rajski v Computer Manufacture and Design Pty Ltd (1982) 2 NSWLR 443 Category: Interlocutory applications Parties: Antonius Duynstee (Plaintiff) Neil & Roma Dickins (Defendants) Representation: P Moorhouse (Plaintiff) L Gor (Defendants) Caldwell Martin Cox (Plaintiff) Bryan Gorman & Co (Defendants) File Number(s): 2010/421865 Judgment 1This notice of motion concerns an application for a stay of an application for leave to appeal to this court from a decision of a magistrate of the Local Court until costs in the amount of $127,028.26 are posted. 2Unfortunately, the litigation between the parties, which originally commenced over a claim for $12,867.25, has escalated to such an extent that the costs far exceed whatever might be the issues between them. It appears that the overriding purpose of the Civil Procedure Act 2005 to "facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings", has had no impact upon the resolution of the parties' disputation. The orders sought 3Antonius Duynstee (the plaintiff), by a summons filed on 21 December 2010, sought leave to appeal from a decision of Clisdell LCM on 23 November 2010 dismissing his notice of motion to file and serve expert evidence. Neil Dickins and Roma Dickins (the defendants) have, in an amended notice of motion, applied to this court for the following orders: 3 [The] application for leave to appeal and the appeal be stayed until the plaintiff posts security for the: (a) gross sum costs order made by Magistrate Andrews in Local Court proceeding no. 35 of 2007 in the sum of $28,507.96; and (b) costs orders made by this Honourable Court in proceeding no. 14138/2008 in the sum of $29,201.07; and (c) costs of the current (but stayed) Local Court proceedings no. 7/2010 in the sum of $45,690.80; and (d) costs of the application for leave to appeal and the appeal in the sum of $18,342.50; and (e) review application of costs assessment no. 273885/2009 in the sum of $275; and (f) costs and disbursements of the application for access to the posted security in proceeding no. 14138/2008 in the sum of $5,010.93. 3A Further, the plaintiff post security within 14 days of this Honourable Court ordering him to do so. 3B If the plaintiff fails to comply with prayers for relief in 3 and 3A this application for leave to appeal and appeal be dismissed forthwith without further order of this Honourable Court. 4The defendants are the applicants on the motion and the plaintiff is the respondent. The defendants were represented by Mr L Gor and the plaintiff by Mr P Moorhouse. Background 5As the present motion has arisen in the course of an arduous litigious journey for the parties, it is necessary to recount in a summarised way the events that have brought it before me. 6The defendants, who trade as NRJ Irrigation Systems, were engaged by the plaintiff to install a fire protection and irrigation system on his Oakdale property but a dispute arose as to the quality and scope of the work that was performed and the final payment was not made by the plaintiff. The defendants commenced proceedings in the General Division of the Local Court at Camden (no 35/2007) for the unpaid amount and obtained default judgment against the plaintiff. The default judgment was subsequently set aside and the plaintiff filed a defence and a cross-claim seeking an amount of $36,480 by way of liquidated damages. Before the default judgment was set aside, the plaintiff had lodged a complaint against the defendants in the Consumer, Trader and Tenancy Tribunal (CTTT). The parties were ordered to file submissions, which the defendants did and the complaint was listed for hearing but the plaintiff did not attend. The complaint was dismissed. 7A preliminary issue arose in the Local Court proceedings as to whether the defendants could succeed on their claim under the Building and Construction Industry Security of Payment Act 1999 (the BCISP Act) and the plaintiff could pursue his defence and cross-claim. Andrews LCM ordered that this question be separately determined. In Duynstee v Dickens & Dickens [2009] NSWSC 292, R A Hulme J at [5] summarised the issues before Andrews LCM as follows: " If the work was done pursuant to a construction contract under the BCISP Act, once it was established that the defendants had complied with its various provisions and that the plaintiff had failed to pay the amount in question, the defendants would become entitled to judgment and the plaintiff would be prevented from raising any defence or bringing any cross claim: s 15(4) BCISP Act. The plaintiff, however, contended that the [Home Building Act] applied and so the operation of the BCISP Act was excluded." 8On 14 July 2008, Andrews LCM gave judgment for the defendants and made a provisional cost order. 9The plaintiff's appeal to this court against the judgment of Andrews LCM was dismissed by R A Hulme J on 24 April 2009: see Duynstee v Dickens & Dickens [at 36]. His Honour ordered the plaintiff to pay the defendants' costs of the appeal as agreed or assessed. I should add that Matthews AJ on 13 November 2008 had stayed the plaintiff's appeal until he had provided security in the sum of $16,500.00. 10On 25 June 2009, the defendants brought a motion seeking an order that the monies paid into court be paid out to them and the motion was listed for hearing on 10 July 2009. On the day prior to the hearing, the plaintiff agreed to consent orders being made granting access to the monies to the defendants and that the plaintiff would pay the defendants' costs of the motion as agreed or assessed. These orders were made by Fullerton J on 10 July 2009. Bryan Gorman, the defendants' solicitor, assesses the costs of the access application to be $5,567.70 and has been instructed to assess these costs upon the conclusion of the present appeal. 11The magistrate on 15 February 2010 made a gross cost order against the plaintiff in the sum of $33,535.74 in proceedings no 35/2007 and ordered that these costs be paid within 28 days. The plaintiff did not comply with his Honour's orders and the defendants issued a bankruptcy notice for the amount of the costs plus interest in the Federal Magistrates Court. The plaintiff sought an order that the bankruptcy notice be set-aside on the basis that he had a damages claim, which exceeded the amount awarded for costs. The defendants subsequently consented to such an order being made. 12The costs of the appeal that R A Hulme J ordered the plaintiff to pay, were assessed by Assessor Mallik on 23 November 2010 in the sum of $27,506.20 together with the costs of the assessment being $1,694.87. The plaintiff, however, has applied for a review of the costs assessment, which the defendants intend to oppose. 13None of the costs ordered by Andrews LCM have been paid, save for a reduction in the sum of $5,027.78 being the balance left from the security paid into court in accordance with the orders of Matthews AJ. Accordingly, the amount outstanding is $28,507.96 14In early 2010, the plaintiff commenced proceedings in the General Division of the Local Court at Camden (no 7/2010) claiming that the "fire protection system" installed by the defendants was not fit for its intended purpose. Damages are claimed in an amount of $34,980 plus interest. According to Geoff Lloyd, the plaintiff's solicitor, the interest on the amount claimed amounted to $13,568.40 on 14 March 2011. 15It is unnecessary to recount here all of what has transpired before Clisdell LCM in the Camden Local Court. It is sufficient to state that the plaintiff did not comply with directions made by his Honour to file his evidence in chief (lay and expert) by 14 September 2010. The plaintiff filed a notice of motion on 15 September 2010 seeking an order "pursuant to Uniform Civil Procedure Rules regulation 31.9 [for] leave to file an expert's report in these proceedings from Mr John McNab". When the matter came before Clisdell LCM on 28 September 2010, it appears that his Honour had in mind dismissing the proceedings because of the plaintiff's non-compliance with his orders but was persuaded by the defendants' counsel that the matter could be dealt with by making further orders. The magistrate ordered the plaintiff to "serve the report of Mr McNab (in the final form) by 5 October 2010 (the report to be in draft)". The plaintiff's notice of motion was stood over to 23 November 2010. The plaintiff was ordered to pay the defendants' costs of that day by 12 October 2010, in default of which his amended statement of claim was to be dismissed. The plaintiff paid these costs in accordance with the court's order. 16The defendants filed a notice of motion on 19 November 2010 seeking an order that they be given leave to file and serve the report of Peter Brueck of 19 November 2010. The notice of motion was returnable on 23 November 2010. 17At the hearing on that date, Mr Gor represented the defendants and Mr Brennan of counsel represented the plaintiff. It seems from the transcript that Mr Gor advised Clisdell LCM that the plaintiff had served in final form a draft of Mr McNab's report in accordance with the orders, but Mr Brennan informed the magistrate that the report did not comply with Uniform Civil Procedure Rules 2005 (UCPR): ex 2 GL 14 T1. He referred to the plaintiff's motion for leave to file an expert's report and submitted that "if the motion is granted, my client will pay Mr McNab what's necessary for him to do the report and then there'll be a report": ex 2 GL 14 T 3. After a short hearing the magistrate made orders dismissing the plaintiff's motion, with the defendants' costs assessed or agreed, to be paid by the plaintiff. It is these orders that are the subject of the plaintiff's application for leave to appeal. His Honour further ordered that the plaintiff was to pay the costs of the defendants' expert report in the sum of $1,782.50 within 28 days and fixed the matter for hearing on 15 February 2011.The defendants withdrew their motion for leave to rely on Mr Brueck's report. 18There were further motions before the magistrate on 14 January 2011 including a motion by the plaintiff for a stay of proceedings pending the appeal and vacation of the hearing date. When his Honour granted the stay, he noted that he was not staying the cost order of 23 November 2010. The amount of $1,787.50 was paid into the Local Court on 23 February 2011. 19Mr Gorman estimates that the defendants' costs of the application for leave to appeal and the appeal will amount to $18,342.50 and the costs of the current Local Court proceedings (no 7/2010) will be $45,690.80. Matters of evidence 20I do not propose to detail all of the extensive material that was tendered upon the motion, as the purpose of most of it was to inform the court of the difficult history of the litigation and of matters relevant to the quantum of the costs identified in the motion. There are, however, some matters that must be referred to. Mrs Dickins in her affidavit sworn 17 February 2011 (ex D) stated at par 69: "At about 7.30pm on Sunday, 23 April 2010, I was at the Mount Annan Village Shopping Centre buying milk. While I was walking to my car, I avoided a vehicle that was reversing out of a parking space in the car park. As I walked past, I glanced at the passenger side window and saw that the occupant of the passenger seat was Mr Duynstee. I also recognised his wife in the driver's seat. Mr Duynstee opened his car door and we had a conversation in words to the following effect: Mr Duynstee: "Hello, how are you?" Me: "Hello. My solicitors have issued a Bankruptcy Notice against you. Have you received it?" Mr Duynstee: "No. It does not matter anyway because I don't own anything". Me: "You know this is silly. We really ought to negotiate a solution." Mr Duynstee did not respond. He got in his car, shut his door, and he and his wife drove off." 21Mr Gorman, in an affidavit sworn 17 February 2011, deposed at par 47 to the plaintiff being a former bankrupt and a National Personal Insolvency Index search was annexed. The relevance of this evidence is that he was familiar with bankruptcy matters when he spoke to Mrs Dickins on 23 April 2010 and the conversation discloses his attitude towards payment of the cost order by Andrews LCM. It is evident that he considered that the action taken by the defendants would not adversely impact upon him. I should mention that I did not find either the ASIC searches or releases to be of relevance. 22In Mr Lloyd's affidavit sworn 14 March 2011, the following appears at par 73: "I refer to paragraph 69 of Mrs Dickins' Affidavit. I am informed by Mr Duynstee, and believe, that he did meet with Mrs Dickins in the Mount Annan shopping centre and that while he was in the carpark (not in a car, as stated by Mrs Dickins) they had a conversation during which Mrs Dickins said words to the following effect: "Have you received a bankruptcy notice?" I am informed by Mr Duynstee, and believe, that in response to that comment Mr Duynstee did not make any response but got into his car and drove off. I am informed by Mr Duynstee, and believe, that he never said any words to the effect of: "It does not matter anyway because I don't own anything." 23Mrs Dickins was not required for cross-examination and, to say the least, it is unusual that the plaintiff has sought to respond to Mrs Dickins evidence, through his solicitor, and not by swearing his own affidavit. I give little weight, to the contents at par 73 of Mr Lloyd's affidavit, notwithstanding the nature of the present motion. I accept Mrs Dickins' account of the conversation. 24It is convenient to record here the contents of par 22 of Mr Lloyd's affidavit as they provide the plaintiff's reasons for not paying the costs ordered by Andrews LCM: "I am informed by Mr Duynstee, and believe, that: (a) in his view his dispute with Mr and Mrs Dickins has not yet been determined, and in particular there has been no determination of his claim that the sprinkler system installed by Mr and Mrs Dickins is not in accordance with the contract which he made with them for installation of a bushfire protection system, and is not fit for its intended purpose; (b) he does not want to pay Mr and Mrs Dickins the amount specified in the costs order made by Local Court Magistrate Andrews on 15 February 2010 in circumstances where his substantive claim against the Dickins is yet to be determined, and is for an amount (including interest) that exceeds the amount required to be paid pursuant to that costs order; and (c) he will meet all costs orders made in all proceedings once his substantive claim against Mr and Mrs Dickins has been finally determined." 25Mr Moorhouse had objected to pars 9 to 13, and pars 16 to 18 of Mr Dickins' affidavit sworn 17 February 2011. Objection was also taken to pars 7 to 24 and pars 51 to 55 of Mrs Dickins' affidavit. Each of these paragraphs, were admitted subject to relevance being established. I have found that this evidence was relevant as it provides the history (or background) to the present motion. Argument 26Mr Gor submitted that s 67 Civil Procedure Act empowers the court to order a stay in order to do justice between the parties and the power is not confined by the terms of UCPR Pt 42 r 21. The defendants' argument principally focused upon; (i) the prospects of success of the appeal and the Local Court proceedings; (ii) the risk that the defendants will not recover their costs; (iii) the plaintiff's bona fides; (iv) the prior history of litigation between the parties; (v) the ability to take enforcement action for existing cost orders; (vi) the likely injustice to the defendants. 27Mr Gor pointed out that the litigation in one form or another has been on-going since early 2007. The evidence was said to demonstrate that the plaintiff has not sought to proceed to a determination of his damages claim, but has chosen to put the defendants to as much cost and inconvenience as possible. Furthermore, the plaintiff has been happy to invoke the processes and procedures of "various fora", but only to comply with orders and directions when it suits him. Mr Gor submitted that the evidence shows "a plaintiff brazenly content to disregard cost orders". He contended that there was little prospect of the plaintiff succeeding on appeal as the plaintiff had inexplicably abandoned reliance on Mr McNab's report and his prospects of meeting the requirements of s 40(2) Local Court Act 2007 were "Herculean". Without expert evidence, the plaintiff's case in the Local Court was bound to fail. Furthermore, the plaintiff had unequivocally conveyed to the defendants that he is "judgment proof". The injustice to the defendants was said to be the very real likelihood that they will not recover their costs. 28Mr Moorhouse confirmed that the plaintiff opposed the motion. The prior litigation and the appeal were all part of an effort by him to have his claim heard. As to the plaintiff's failure to pay the costs made by Andrews LCM, Mr Moorhouse argued that the evidence was not that the plaintiff would never pay the costs, but would meet them once his substantive claim was heard. There was no evidence of risk that the defendants' costs would not be satisfied. 29Mr Moorhouse drew my attention to Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 and submitted that the defendants must demonstrate that the circumstances justifying security are "exceptional" or that there is "a strong case... that this course is necessary in the interests of justice". He invited me to find that the present circumstances were neither exceptional nor was an order necessary in the interests of justice. Mr Moorhouse put to me that the appeal has reasonable prospects of success and it was likely that leave to appeal would be granted. 30No questions arise in the motion as to the impecuniosity of the plaintiff or of a public interest in the litigation. Decision 31Section 67 Civil Procedure Act is as follows: "Subject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day." 32It is well established that a stay in proceedings may be granted unless and until security for costs is given: Phillips Electronics v Matthews ; Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251. 33Specific provision is made for an order for security of costs in UCPR r 42.21. The defendants do not contend that the present circumstances fall within any of the five categories identified in that rule. The court's power to stay proceedings on terms that security be provided is not limited by non-conformity with UCPR r 42.21. As Hodgson JA observed in Phillips Electronics at [47]: "However, in my opinion, apart from any effect that Pt 40, r 1 of the District Court Rules might have, s 156 of the District Court Act is wide enough to give the District Court power to make an order staying proceedings unless and until security for costs is given, where the judge considers this reasonably necessary in order to do justice between the parties." 34Section 156 District Court Act 1973 is essentially in the same terms as s 67 Civil Procedure Act and the District Court Rules 1973 Pt 40 r 1 (repealed) is in the same terms as UCPR r 42.21. 35Hodgson JA observed at [53]: "I think it would be reasonable to take the rule as indicating the usual circumstances in which security for costs would be ordered, and also reasonable not to exercise the power to stay proceedings under s 156, until security is given, unless a strong case is made out that this course is necessary in the interests of justice." 36Mason P agreed with Hodgson JA's reasons but noted at [13]: "None of this suggests that a judge of the District Court has a free-wheeling discretion to ignore the gravitational force of Pt 40, r 1. The cases in which the power to order a stay is conditional upon the grant of security in categories falling outside the five addressed in that rule remain exceptional (as Hodgson JA points out)." 37Unlike the District Court, the Supreme Court has an inherent power to order security for costs: Rajski v Computer Manufacture and Design Pty Ltd (1982) 2 NSWLR 443; Byrnes v John Fairfax Publications per Simpson J at [17]. The factors that a court must take into account when considering the inherent power to exercise security for costs were identified by Young J (as his Honour then was) in Morris v Hanley [2000] NSWSC 957 at [23] to include: "(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." 38His Honour noted that the list was "non-exhaustive", and an additional question is whether the plaintiff's action is harassing and vexatious. 39Notwithstanding the various acts of non-compliance with court orders and other difficulties that have accompanied the plaintiff's participation in the litigation, I do not find that his claim is a sham, nor is it vexatious or oppressive. The current Local Court proceedings are essentially the same as the cross-claim brought by the plaintiff in proceedings (no 35/2007), which was not heard by Andrews LCM because of the determination that the claims be heard separately. I am unable to assess, on the evidence before me, the prospects of success of the plaintiff's claim. 40It is not easy to assess the plaintiff's prospects on appeal. Whilst it is true that he requires leave under s 40(2) Local Court Act , I do not think that the task confronting him is as "Herculean" as Mr Gor's hyperbolism suggests. My reading of the transcript indicates that Mr Brennan informed the magistrate that Mr McNab's report could not be relied upon as it was not in a form that complied with the UCPR and he was seeking the court's indulgence for further time to file a report from Mr McNab that complied with the rules. The grounds of appeal raise issues of procedural fairness and insufficiency of reasons, which on the material before me appear to be arguable. Undoubtedly, issues will arise from the plaintiff's non-compliance with the magistrate's directions. The principles identified by the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 might assume some significance in the disposition of the appeal. I am not prepared to venture further into the issues upon appeal (nor would it be proper for me to do so), save to say that, in my assessment, the plaintiff's prospects of a successful appeal are no more or less than fair. 41There is neither evidence that an order for security would bring the proceedings to an end nor that anybody stands behind the plaintiff who might benefit from the action but who is unwilling to contribute to the risk involved. No issue of delay arises so far as the defendants' application for a stay until security for costs is given. The defendants filed the present motion promptly. Furthermore, they had applied in the Local Court for security for costs, or, alternatively a stay pending the payment of security but the motion was dismissed by Clisdell LCM on 13 July 2010. 42Notwithstanding what was said by the plaintiff to Mrs Dickins in the conversation quoted at [20] above, there is no evidence that the plaintiff has a want of assets nor does his counsel submit that he would be unable to meet the security sought. 43When considering the interests of justice, a factor that has substantial impact in balancing the competing interests of the parties, is the plaintiff's attitude towards the payment of the costs ordered by Andrews LCM. He says that he has not paid them as his present claim has not been determined. Accepting that for the moment to be his position, I do put it bluntly that the plaintiff does not have the option to choose when he considers it convenient to comply with court orders. When a court makes an order (including an order for costs), a party to the order is obliged to comply with it. In any event, it is grossly unfair to the defendants that they should be burdened by ongoing litigation when the plaintiff has not met previous cost orders. 44The plaintiff asks me to accept that he will meet all cost orders when his claim has been finally determined. The attitude that he displayed during the conversation with Mrs Dickins suggests otherwise. There is some risk that cost orders will not be satisfied should the plaintiff be ultimately unsuccessful upon the further litigation. 45As to the ability to take enforcement action for existing cost orders, I consider that the defendants have taken sufficient steps to enforce the costs ordered by Andrews LCM by issuing the bankruptcy notice and the costs ordered by R A Hulme J by having those costs independently assessed. 46The interests of justice demand in the present circumstances that the appeal be stayed until all amounts previously ordered and assessed are paid into court. I do think that the order should include the costs ordered by R A Hulme J, notwithstanding the application for review. This order was made on 24 April 2009 and as the costs were independently assessed, I am confident that the assessment will be reasonably accurate. The order will not include the costs sought for the access order before Fullterton J, as the defendants have not taken steps to have these costs independently assessed so as to be able to enforce this order. 47I am not persuaded that it is in the interests of justice that the plaintiff be required to post security for the costs of the present litigation in the Camden Local Court or the costs of the appeal. As previously indicated, his prospects of success on appeal are fair and the proceedings before Clisdell LCM are not a sham. 48The defendants ask that the application for leave to appeal and appeal be dismissed, should the plaintiff not comply with any order for payment that is a condition of the stay. I do not think that the interests of justice require such an order to be made. The plaintiff did comply with the orders for payment of security made by Matthews AJ, which suggests that there is a likelihood of payment. Should the plaintiff fail to comply with my orders, an application by the defendants may be made for the dismissal of the appeal. Orders 49For the foregoing reasons, I make the following orders: 1. The application for leave to appeal and the appeal is stayed until the plaintiff provides security for the defendants' costs by paying into court the sum of $57,709.03, or by otherwise providing security for that amount in a manner satisfactory to the defendants. 2. The security is to be provided before 2 June 2011, on which date the matter is listed before the Registrar to fix a date for hearing of the application for leave to appeal and the appeal, or, in the event that the security has not been provided for an order for dismissal of the application for leave to appeal and the appeal. 3. The plaintiff is to pay the defendants' costs of the 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. Decision last updated: 13 May 2011