Kieren Leslie Welzel v Stephen Paul Francis (No 3) [2011] NSWSC 858

Supreme Court New South Wales

Medium Neutral Citation: Kieren Leslie Welzel v Stephen Paul Francis (No 3) [2011] NSWSC 858 Hearing dates: 9 August 2011 Decision date: 09 August 2011 Before: Ball J Decision: 1. The plaintiff to pay all costs of the defendant's motion dated 3 March 2011, including the costs of the application before the Chief Judge in Equity on 22 June 2011 to set aside subpoenas issued by the defendant. 2. There be no order for the costs of the hearing on 9 August 2011. Catchwords: COSTS - interlocutory decisions - general rule that costs are costs in the cause - exception where losing party engages in unreasonable conduct- whether costs should be paid forthwith - not where risk of stultifying proceedings Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Practice Note SC Eq 3 Cases Cited: Chen v Keddie [2009] NSWSC 762 Welzel v Francis [2011] NSWSC 477 Welzel v Francis (No 2) [2011] NSWSC 648 Category: Procedural and other rulings Parties: Kieren Leslie Welzel (Plaintiff) OpenIN Pty Ltd (Second Plaintiff) OpenIN Holdings Pty Limited (Third Plaintiff) OpenIN Assets Pty Limited (Fourth Plaintiff) Stephen Paul Francis (Defendant) Representation: R C Gration (Plaintiff) A P Spencer (Defendant) HWL Ebsworth Lawyers (Plaintiff) Holding Redlich (Defendant) File Number(s): 2008/290489

EX TEMPORE Judgment 1The application before me today concerns the costs of a motion brought by Mr Francis, the defendant in the proceedings, for additional security from the plaintiff, Mr Welzel. The motion was originally heard on 20 May 2011. On 30 May 2011, I gave judgment in which I concluded that additional security should be provided, and, in accordance with the parties' request, stood the matter over for further submissions in relation to the amount of that security. 2The matter was relisted for that purpose on 24 June 2011. Prior to that hearing, Mr Welzel made an application to reopen his case to adduce further evidence concerning his financial position. On 22 June 2011, Bergin CJ in Eq also heard an application to set aside subpoenas issued by Mr Francis in relation to the reopening application. Her Honour ordered that the costs of that application follow the costs of the motion. 3The reopening application was abandoned at the hearing on 24 June 2011. Consequently, what is before me today is the question of the costs of the motion, the costs of the application to set aside subpoenas, and the costs of the abandoned application to reopen. 4The relevant facts relating to the application for security for costs are set out in my judgments given on 30 May 2011 ( Welzel v Francis [2011] NSWSC 477) and 30 June 2011 ( Welzel v Francis (No 2) [2011] NSWSC 648) and it is not necessary for me to repeat those facts here. It is, however, relevant to record that, on the findings I made, Mr Welzel failed at the time an application for security for costs was first made by Mr Francis before Bergin CJ in Eq on 17 December 2009 to inform her Honour of facts relevant to that application. Those facts included the fact that Mr Welzel was a beneficiary of a discretionary trust, that that discretionary trust owned a property at Buddina and that the purchase price of the Buddina property was funded from the sale of property owned jointly by Mr Welzel and his wife. In addition, I found that Mr Welzel disposed of his interests in some of those properties and his right to income earned by him in order to avoid having to meet any costs judgment in these proceedings. 5Mr Gration, who appeared for Mr Welzel, made two submissions in relation to costs. First, he said I should follow the principle normally applied in relation to costs on an application for security for costs and order that the costs be the defendant's costs in the cause: see UCPR r 42.7; Chen v Keddie [2009] NSWSC 762 (Davies J). Mr Gration also submitted that I should make an order pursuant to UCPR r 42.4 limiting the amount of costs that Mr Francis can recover, on the basis that the costs that have been incurred by Mr Francis are completely disproportionate to the result - namely, that Mr Welzel should provide additional security of $50,000. 6I do not accept either of those submissions. In my opinion, this is a case where the application for additional security and the costs incurred by Mr Francis in pursuing the application have been brought about by Mr Welzel's unreasonable conduct in not disclosing to Bergin CJ in Eq, at the time the original application for security was made, facts which I think it could reasonably be expected he ought to have disclosed. 7I think that conduct was compounded in the application before me, where Mr Welzel did not disclose the facts that I have recorded earlier. It was only as a result of Mr Francis's investigations that it became apparent how it is that the Buddina property came to be purchased and what funds, that might reasonably be regarded as having belonged to Mr Welzel, were used to fund that purchase. In addition, as I have said, I concluded in my earlier judgments that Mr Welzel took the steps that he did in order to avoid the consequences of a costs order against him. 8For those reasons, I think it is appropriate that Mr Francis have his costs of the current application. I am not satisfied that Mr Francis acted unreasonably in undertaking the investigations he did in order to find out the true position relating to the ownership of the Buddina property and Mr Welzel's contribution to the cost of acquiring it. If those costs were disproportionate to the result which, looking at it objectively, they almost certainly are, that circumstance has largely been brought about by Mr Welzel's conduct. Consequently, I am not prepared to make an order in accordance with UCPR r 42.4. 9Mr Spencer, who appeared for Mr Francis, submitted that I ought to make an order that the costs payable by Mr Welzel should be payable forthwith in accordance with para 57 of Practice Note SC Eq 3, which governs proceedings in this list. In the normal course of events, I accept it would be appropriate to make an order in accordance with that practice note. However, in this particular case, the consequence of making an order that costs be payable forthwith may be that Mr Welzel has to pay those costs before the proceedings are complete. 10In my judgment of 30 June 2011, one matter that I thought was highly relevant to the amount of security that should be ordered was that I should not make an order for security which would have the effect, or would run a substantial risk, of stultifying the proceedings. It seems to me that an order that costs be payable forthwith will, in the circumstances of this case, have a similar effect to an order for security over and above the security that I thought it was appropriate to order. 11Mr Francis submitted that, even if I made an order that costs be payable forthwith, that order would not take effect immediately, and may take some time - possibly six to nine months - before it would result in an order that Mr Francis could enforce. Even accepting that, I think there is a substantial risk that that order will be capable of enforcement before these proceedings are completed, and in those circumstances I do not think it is appropriate to make the order in this case. 12Mr Francis also submitted that, even if I was not prepared to make an order that all of the costs of the application for security be payable forthwith, I ought to make an order that the costs thrown away by Mr Francis as a consequence of the abandonment of the reopening application should be payable forthwith. Although I have some sympathy with this argument, I think the amount of costs involved and the difficulty of separating those costs out from the balance of the costs of the motion do not warrant making an order in those terms. 13For those reasons, Mr Welzel should pay the costs of Mr Francis's motion dated 3 March 2011, including the application to set aside the subpoenas and the re-opening application. I think it is appropriate to make no order for the costs of today.