Supreme Court New South Wales Medium Neutral Citation: Davis v Halliday Financial Management Pty Ltd [2016] NSWSC 494 Hearing dates: 19 February and 15 April 2016 Decision date: 22 April 2016 Jurisdiction: Equity Before: Stevenson J Decision: (1) Set aside the orders of 19 February 2016. (2) The third defendant pay the third plaintiff's costs of the third defendant's notice of motion of 4 August 2015 from 10 August 2015. (3) The fourth, fifth and sixth plaintiffs pay the third defendant's costs of the motion from 14 January 2016. (4) Otherwise the costs of the motion be the third defendant's costs in the cause. (5) The motion be otherwise dismissed. Catchwords: PRACTICE AND PROCEDURE – security for costs – what orders should be made concerning the costs of the application for security – whether earlier orders should be set aside and the question reconsidered on basis that the parties were not heard in full Legislation Cited: Suitors Fund Act 1951 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300 Ken Tugrul v Tarrants Financial Consultants Pty Ltd (No 4) [2014] NSWSC 291 Category: Procedural and other rulings Parties: John Hart (Applicant/Third Defendant) Albatross Investments Pty Ltd (Respondent/Third Plaintiff) Zambo Pty Ltd as trustee for The William Cooke Superannuation Fund (Respondent/Fourth Plaintiff) Nick Falloon and Diane Falloon as trustees for the Falloon Family Trust (Respondent/Fifth Plaintiff) Mann SuperCo Pty Ltd as trustees for the Mann Family Superannuation Fund (Respondent/Sixth Plaintiff) Representation: Counsel: C N Bova (Applicant /Third Defendant) S E Gray with M Fernandes (Respondents/Third, Fourth, Fifth and Sixth Plaintiffs) Solicitors: Lander & Rogers (Applicant/Third Defendant) Dixon Holmes Lawyers (Respondents/Third, Fourth, Fifth and Sixth Plaintiffs) File Number(s): SC 2014/49773 Judgment 1. By notice of motion filed on 4 August 2015, the third defendant, Mr Hart, sought an order that the third, fourth, fifth and sixth plaintiffs provide security for his costs of the proceedings. 2. I heard argument on the motion on 17 December 2015. 3. On Mr Hart's application, and in the circumstances I describe below, the motion was adjourned, part heard, to 19 February 2016. 4. By then, the motion was able to be resolved on the basis of a number of undertakings. 5. First, on behalf of the third plaintiff, Albatross Investments Pty Ltd, Mr Monojit Ray gave an undertaking that he would be personally liable for any costs ordered against Albatross Investments. 6. Second, the fourth, fifth and sixth plaintiffs (each of whom is a trustee: I will call them the "Trustee Plaintiffs") undertook to exercise their rights of indemnity under the relevant trust instruments in respect of any costs ordered against those parties. They also undertook to do nothing to diminish the value of each trust's assets available to meet that indemnity. 7. On 19 February 2016, the only matter that remained in dispute was the costs of the 4 August 2015 motion. 8. Mr Bova made oral submissions as to costs on behalf of Mr Hart. Mr Gray responded on behalf of the Trustee Plaintiff. 9. In the course of Mr Gray's submissions, and without hearing further from Mr Bova, I indicated that I proposed to make no order as to the costs of the motion. I then noted the undertakings to which I have referred and ordered that the motion be dismissed with no order as to costs. 10. Now, by notice of motion filed on 4 March 2016, Mr Hart seeks an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) Pt 36.16(3A) to set aside the orders I made on 19 February 2016. 11. The basis of Mr Hart's application is that "by accident and without fault on his part he has not been heard" and that I proceeded on a "misapprehension of the facts" that "cannot be attributed solely to the neglect or default" of Mr Hart (per Mason CJ in Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300 at 302 and 303). 12. I heard argument on that application on 15 April 2016. 13. During the course of argument, I indicated to Mr Bova and Mr Gray that I accepted that on 19 February 2016 I had acted precipitately in not awaiting the conclusion of Mr Gray's submissions and not calling on Mr Bova to respond and that I considered that my order of 19 February 2016 should be set aside. 14. Mr Hart's motion of 4 March 2016 stated that Mr Hart did not seek to disturb my order of 19 February 2016 so far as it concerns Albatross Investments. 15. However, there was but one order and if it is to be set aside at all, it must be set aside in whole. 16. In those circumstances, I invited Mr Gray and Mr Bova to put any submissions on the question of the costs of the security motion that had not been put on 19 February 2016. 17. Having now heard those further submissions, I am persuaded that I was in error on 19 February 2016 and that I should now make different orders. 18. To explain my decision, it is necessary to review, in some detail, the correspondence of the parties leading to their final agreement that the security for costs application could be resolved on the basis of the undertakings to which I have referred. 19. Each side accused the other of behaving unreasonably. In particular, Mr Bova submitted that the Trustee Plaintiffs had not engaged with Mr Hart in meaningful negotiations to resolve the issue. 20. The relevant correspondence started on 23 April 2015, when Mr Hart's solicitors wrote to the plaintiffs' solicitors seeking certain financial information. 21. On 25 May 2015 some information was provided under cover of an email which concluded: "The plaintiffs are not prepared to provide any further information or material, except in the event that the defendants make an application for security for costs which will be resisted by our clients". 1. As I have said, the motion for security was filed on 4 August 2015. 2. On 10 August 2015 the plaintiffs' solicitor wrote to Mr Hart's solicitors stating that: "We are instructed that, on a without admission basis, Mr Monojit Ray undertakes to be personally liable in respect of any costs order made against [Albatross Investments] in the proceeding." 1. In his affidavit sworn on 1 October 2015, Mr Ray confirmed that: "As indicated in the letter dated 10 August 2015, I am prepared to give an undertaking to be personally liable to meet any costs orders made against Albatross Investments Pty Ltd." 1. Although there was later, and before me, some debate about the significance of Mr Ray's statement in his affidavit about being "prepared" to give an undertaking (as opposed to actually giving an undertaking), the email of 10 August 2015 makes quite clear that his offer was actually to give an undertaking to be personally liable for any costs order made against Albatross Investments. 2. On 5 November 2015, Mr Hart's solicitors wrote to the plaintiffs' solicitors seeking, so far as concerns Albatross Investments, a more extensive undertaking than Mr Ray had offered. The letter also sought, as against the Trustee Plaintiffs, undertakings to the effect of those ultimately given by the Trustee Plaintiffs, but also a wider range of undertakings. 3. At the outset of the argument before me on 17 December 2015, I suggested to Mr Gray that, were the Trustee Plaintiffs to undertake to exercise their rights of indemnity under the relevant trust instrument "that may well allay any concern the defendant could properly have". 4. The matter was adjourned briefly to enable Mr Gray to obtain those instructions. 5. When the matter resumed Mr Gray said: "I have some instructions but I can't go beyond this proposition, which is at the moment my client is not prepared to give that undertaking to your Honour because of a position being taken in respect of other matters. I can't go into reasons why." 1. Argument continued. One submission that Mr Bova put was that the undertaking offered by Mr Ray was not sufficient as Mr Hart "shouldn't be put to the trouble of needing to enforce against Mr Ray in circumstances where otherwise it would prima facie be entitled to security". 2. Following the luncheon adjournment on 17 December 2015, Mr Bova sought to have the hearing of the motion adjourned on the basis that he was taken by surprise by submissions that Mr Gray had made concerning the significance of some observations made by Kunc J in Ken Tugrul v Tarrants Financial Consultants Pty Ltd (No 4) [2014] NSWSC 291. 3. Mr Gray had referred to the decision in Ken Tugrul in his outline submissions but, orally, had put some propositions which did not emerge clearly (if at all) from his written outline. 4. I was persuaded that an adjournment was warranted and acceded to Mr Bova's application. 5. Thereafter, on 22 December 2015, Mr Hart's solicitors made an open offer to settle the security application on the basis of Mr Ray giving an undertaking to the effect of that he had offered on 10 August 2015 and on the basis of the Trustee Plaintiffs giving an undertaking which was, in substance, that which they ultimately offered. 6. The offer was expressed to be open until 14 January 2016. 7. On 13 January 2016 the plaintiffs' solicitors wrote: "So that we may seek out clients' informed instructions, would you kindly separately identify the costs that [Mr Hart] contends will be attributable to each of the Third to Sixth Plaintiffs." 1. That information was ultimately provided in an affidavit sworn by Mr Hart's solicitor a short time later. 2. In the meantime the 22 December 2015 offer lapsed. 3. Finally, on 10 February 2016, the plaintiffs confirmed Mr Ray's undertaking and offered undertakings on behalf of the Trustee Plaintiffs to the effect of those ultimately given. 4. In those circumstances, my conclusions are as follows. 5. So far as concerns Albatross Investments, Mr Ray was, from 10 August 2015 prepared to give the undertaking ultimately accepted. 6. It was, in my opinion, unreasonable of Mr Hart not to have accepted that undertaking at the time that it was given. 7. In those circumstances, the appropriate order for costs between Mr Hart and Albatross Investments is that Mr Hart pays the costs of Albatross Investments of Mr Hart's notice of motion of 4 August 2015 from 10 August 2015 and that otherwise the costs of the motion be Mr Hart's costs in the cause. 8. So far as concerns the Trustee Plaintiffs, it was in my opinion unreasonable of them not to have accepted Mr Hart's offer of 22 December 2015 to settle the security for costs application upon the basis of the undertakings then sought (which are the undertakings that I suggested on 17 December 2015). 9. Mr Gray submitted that, in light of Mr Hart's response to Mr Ray's proffered undertaking (on behalf of Albatross Investments), it was reasonable for the Trustee Plaintiffs to suppose that, had they on 17 December 2015 offered the undertakings now proffered, those undertakings would not have been accepted by Mr Hart. 10. That may be right, although I express no view about it. But the fact is that five days after that hearing, Mr Hart did offer to accept such undertakings. 11. Nonetheless, they were not offered until 10 February 2016. 12. I do not see the plaintiffs' solicitor's enquiry of 13 January 2016 (as to the costs attributable to each of the third to sixth plaintiffs) as having any relevance to the question. 13. In all the circumstances, I am persuaded that, as between Mr Hart and the Trustee Plaintiffs, the appropriate order is that Mr Hart have his costs of the motion for security from 14 January 2016. By that date, acting reasonably, the Trustee Plaintiffs would have accepted Mr Hart's 22 December 2015 offer. Otherwise, as between Mr Hart and the Trustee Plaintiffs, the costs of the motion should be Mr Hart's costs in the cause. 14. For those reasons, I note the undertakings given to the Court on 19 February 2016 and order that: 1. My orders of 19 February 2016 be set aside. 2. The third defendant pay the third plaintiff's costs of the third defendant's notice of motion of 4 August 2015 from 10 August 2015. 3. The fourth, fifth and sixth plaintiffs pay the third defendant's costs of the motion from 14 January 2016. 4. Otherwise the costs of the motion be the third defendant's costs in the cause. 5. The motion be otherwise dismissed. 1. Neither counsel made any submission, in terms, as to the costs order that should be made in respect of Mr Hart's motion of 4 March 2016. The need for that motion did not arise as a result of any "fault" of the parties. The fault was mine. My preliminary view is that I should order that the costs of that motion be costs in the cause and give the parties leave to approach the Director-General for an order under s 6C of the Suitors Fund Act 1951 (NSW). However, I will hear the parties about this. ********** 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: 22 April 2016