Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Police & Community Youth Clubs NSW Ltd v Refurb Interiors Pty Ltd (in liquidation) [2015] NSWCA 67 Hearing dates: 10 March 2015 Date of orders: 10 March 2015 Decision date: 24 March 2015 Before: Macfarlan JA; Leeming JA; Sackville AJA Decision: Reasons given for making order on 10 March 2015 dismissing with costs the applicant's application for leave to appeal. Catchwords: PRACTICE AND PROCEDURE – security for costs at first instance – primary judge declined to make security order because its effect would be to stultify the proceedings – opportunity given to plaintiff before being required to give security to obtain evidence in response to defendant's evidence – no error shown Cases Cited: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; 98 ACSR 301 In the Will of F B Gilbert (1946) 46 SR(NSW) 318 Category: Principal judgment Parties: Police & Community Youth Clubs NSW Ltd (Applicant) Refurb Interiors Pty Ltd (in liquidation) (Respondent) Representation: Counsel: D S Weinberger (Applicant) S Ghedia (Solicitor) and Submitting Appearance (Respondent) Solicitors: File Number(s): CA 2014/282735 Decision under appeal Court or tribunal: District Court Jurisdiction: New South Wales Date of Decision: 29 August 2014 Before: Levy DCJ File Number(s): DC 2013/356170 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: These are the Court's reasons for dismissing an application for leave to appeal from a judgment of Levy DCJ of 29 August 2014. By the judgment his Honour rejected a security for costs application made by Police & Community Youth Clubs NSW Ltd ("PCYC") in proceedings brought against it by Refurb Interiors Pty Ltd (in liquidation) ("Refurb"). 2. In the proceedings, Refurb sued for a debt of $339,904.21 that it alleged PCYC owed it under a building contract dated 4 January 2012. In its defence, PCYC alleged that as a result of incomplete and defective work under the contract, Refurb owed PCYC $485,424 (seemingly less the amount claimed by Refurb). The defence referred to detailed expert reports obtained by PCYC to support its case. PCYC's defence was in substance that it had a set-off, although it was not pleaded as such and no cross-claim was filed. 3. Pursuant to consent orders made in the District Court, Refurb filed an affidavit to support its case in chief. This Court has not been shown that affidavit but it is presumably short and formal as the real issues between the parties arise out of PCYC's allegations of incomplete and defective work. PCYC has supplied its experts' reports to Refurb to support those allegations. Refurb has not yet responded as it is in liquidation and the liquidators do not have funds available to instruct experts. In cross-examination before Levy DCJ, one of the liquidators stated that he had thus far been unable to obtain funds from creditors or others to enable experts to be instructed. He indicated that the possibility of experts being instructed on a "no win, no pay" basis was being considered. 4. Although prior to the proceedings being commenced PCYC foreshadowed to Refurb that it would, if sued, seek security for its costs, it did not do so until about seven months after that commencement. In the interim there was a good deal of correspondence between the parties concerning, inter alia, the setting aside of a default judgment entered by Refurb. When PCYC did seek security, it sought the amount of $97,500 which, from its itemisation, appears to a large extent to represent costs already incurred. 5. The primary judge dismissed PCYC's application because he considered that Refub should be given the opportunity to obtain expert evidence to respond to PCYC's expert reports. He concluded that to order Refurb to provide security for costs now would have the effect of stultifying the litigation. His reasons contemplated the possibility of an application for security at a later time. 6. This approach did not involve any error of principle or constitute an unreasonable exercise of his Honour's discretion. The next step in the proceedings should logically be Refurb's provision of evidence in response to PCYC's expert reports. If it can do that, an application for security for costs can then be considered, taking that evidence into account. It is possible that the evidence may be sufficiently forceful to enable the liquidators to raise funds to finance the remainder of the litigation. 7. Whilst the liquidators are attempting to obtain the evidence, PCYC will not be incurring costs in the litigation and accordingly will not be prejudiced by not obtaining security for costs at this stage. If the liquidators cannot obtain such evidence, PCYC may decide to apply for summary judgment. Alternatively, PCYC may pursue a further application for security for costs. These applications could then be determined on the basis that the liquidators have no evidentiary answer to PCYC's allegations of incomplete and defective work. 8. It was thus open to his Honour to take the view that, as Refurb would not be able to provide security for costs at this stage and the proceedings would be stultified if it was ordered to do so, an order for the provision of security should not be made before the liquidators had been given a full opportunity to explore funding opportunities, there being no obvious prejudice to PCYC in that course being taken. 9. As PCYC did not demonstrate any error in principle on the part of the primary judge or that his decision lay outside the bounds of a reasonable exercise of his discretion, it was appropriate that its application for leave to appeal be dismissed. The appropriateness of that course is emphasised by the fact that the decision at first instance concerned a matter of practice and procedure, in relation to which appellate courts exercise particular caution before intervening (In the Will of F B Gilbert (1946) 46 SR(NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 at 177; Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; 98 ACSR 301 at [21]). ********** 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: 24 March 2015