District Court New South Wales Medium Neutral Citation: Rydstrand v Ganjekar [2015] NSWDC 428 Hearing dates: 14 August 2015 Date of orders: 14 August 2015 Decision date: 14 August 2015 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Refuse the application for security for costs. (2) Dismiss the defendant's notice of motion. (3) Stand over for further directions on Monday, 24 August 2015 at 10am before the Judicial Registrar. (4) No order for the costs of the application on the basis that each party should bear their own costs. Catchwords: CIVIL PROCEDURE – interlocutory applications – security for costs – corporation impecunious – sole director a co-plaintiff – director's proceedings likely to continue in any event – overlap of issues – director amenable to cost order – defects in pleadings – delay – costs Legislation Cited: Uniform Civil Procedure Rules 2005, r 42.21 Cases Cited: Everett v Neale [2012] NSWDC 73 Fiduciary v Morningstar Research [2004] NSWSC 664 Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523; (1984) 8 ACLR 835; (1984) 2 ACLC 356 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCA 189 Texts Cited: Ritchie's Uniform Civil Procedure NSW Category: Procedural and other rulings Parties: Victoria Rydstrand (first plaintiff) The Switch Decor Company Pty Ltd (Switch Decor) (second plaintiff) Sayeeprasad Ganjekar (defendant) Representation: Counsel: Mr A Maroya (defendant) Solicitors: Mark Baker (defendant) File Number(s): 2014/47726 Publication restriction: None Judgment 1. The defendant, Sayeeprasad Ganjekar, applies for an order for security for costs against the second plaintiff, The Switch Decor Company Pty Ltd ("Switch Decor"). 2. The plaintiffs comprise Switch Decor and its sole director and shareholder, Victoria Rydstrand. There is no issue that Switch Decor is impecunious and thus "that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so" (see r 42.21(1)(d) of the Uniform Civil Procedure Rules 2005). 3. The terms of the notice of motion for security are brief. It seeks an order for security of Mr Ganjekar's costs, but does not nominate the amount of security sought, the form of security or whether any orders should be made in the event that the security ordered is not provided. 4. After repeated inquiries by the Court, Mr Ganjekar identified that he sought the sum of $35,000, or such other sum as the Court might think appropriate, to be provided by way of bank cheque or other appropriate security to be held by Mr Ganjekar's solicitor pending determination of the proceedings and that the whole proceedings, including the proceedings of Ms Rydstrand, be stayed if security was not provided. 5. Ms Rydstrand, who appeared self‑represented and also appeared as the sole director of Switch Decor, opposed this method of amending the notice of motion. She did not seek any adjournment to deal with it but sought to have the motion proceed. 6. I do not think any application against Ms Rydstrand (including an application to stay her proceedings) can be pursued today as there was no indication of an order against her being sought. The amount and form of security sought against Switch Decor are, however, matters of detail that are foreshadowed by the order for security sought. They are also the subject of the evidence of Mr Ganjekar's solicitor. 7. Accordingly, I propose to allow the motion to be considered with the particulars of the amount and form of security identified in submissions. 8. As UCPR 42.21(1) makes plain, the Court may order the plaintiff to give security if one of the elements in paragraphs (a) through to (f) is satisfied. And as I indicated, it is not in dispute that paragraph (d) is satisfied. The real question concerns the Court's discretion, namely, whether it would be an appropriate exercise of discretion in this case to order security. 9. Sub-rule (1A) of r 42.21 lists a number of potentially relevant matters in determining whether an order for security should be made. The list is not exhaustive. The matters listed in the paragraphs of the sub-rule were not the subject of reference by any party. 10. One primary policy reason for an order for security is to prevent a party from hiding behind "the skirts" of a company and thereby not being at risk of an adverse costs order if that party is unsuccessful (see KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCA 189). That particular reason for security has no application here. Ms Rydstrand is a party to the proceedings and is, therefore, fully exposed to a costs order. Although Mr Ganjekar accepted that Ms Rydstrand was exposed to a costs order, he submitted that there was no evidence of the value of her exposure since there was no evidence of Ms Rydstrand's assets. He submitted that one consequence of conducting business in the name of a company is that the company will be required to provide security for costs if the company wishes to commence litigation, at least if the company is not shown to be one of substance. 11. I do not accept this submission. A party should not be unfairly advantaged by litigating in the name of a company, but neither should that party be unfairly disadvantaged. Here the first plaintiff, Switch Decor, is a small company, and the sole director and shareholder is prepared to stand behind the company and be liable for an adverse costs order if the litigation is unsuccessful. Thus, the reasons for security are met by the sole shareholder and director being a party. 12. Another related reason for refusing an order for security is that it is likely that no benefit to Mr Ganjekar will result from an order for security. If Switch Decor's proceedings are stayed because of a failure to provide security for costs, the proceedings would still be continued by Ms Rydstrand. As indicated below, those proceedings would likely deal with the same issues and will thus cause Mr Ganjekar to incur the same level of costs. Further, if Switch Decor ultimately was able to provide security, there is a possibility of a later separate proceeding. The possibility of multiple proceedings is a matter against which the Court should guard. Similarly, paragraph [42.21.75] of Ritchie's Uniform Civil Procedure NSW indicates that where a basis for security is made out against some only of several plaintiffs then security will not be ordered against any of the plaintiffs. This reflects "the entitlement of co-plaintiffs (against whom no arguable basis for security has been established) to have the matter proceed to hearing". 13. The statement of claim indicates considerable overlap between the claims made by the two separate plaintiffs. In many respects, no distinction is drawn between them. It may be the case that the claim of Ms Rydstrand is weaker than the claim of Switch Decor but the proceedings by each plaintiff involve the same issues. This was not a case where there are large areas of the claim that are not common between the plaintiffs. In an analogous decision of Austin J in Fiduciary v Morningstar Research [2004] NSWSC 664 at [68], it was held that: "there is such a high degree of overlapping of the factual grounds of the claims that the probability, should the defendants be successful, of a separate order for costs against the corporate plaintiffs is very low." 1. In Fiduciary v Morningstar, a litigation funding agreement was in place (see [59]). A litigation funder might profit from the successful result of those proceedings but might not be amenable to an order for costs, not being a party. Here there is no litigation funder and no equivalent person was identified: someone who would benefit from the success of the litigation but would not be at risk of an adverse costs order in the event of failure. 2. As Ms Rydstrand is likely to suffer an order for the whole of the costs of the proceedings if the proceedings fail then "an order for security ought not be made against the corporation(s)", see Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523; (1984) 8 ACLR 835; (1984) 2 ACLC 356. 3. The plaintiffs also raised the matter of whether an order for security for costs would stultify the proceedings. Although Switch Decor is impecunious, there was no evidence that the proceedings would be stultified by an order for security for costs (Ms Rydstrand, for example, may meet the order) so the possibility of stultification cannot be considered. 4. Mr Ganjekar also sought to identify defects in the first plaintiff's claim. The amended statement of claim seems to be a history of all contact between Ms Rydstrand and Mr Ganjekar rather than a pleading of the factual elements of the cause of action entitling Ms Rydstrand to the relief she seeks. But no relief concerning the form of the amended statement of claim is sought, and though there may be defects in the amended statement of claim, this is not the occasion to deal with them. 5. Mr Ganjekar also made submissions about the appropriate level of security to be ordered and accepted that past costs would not ordinarily be the subject of an order. Delay in bringing an application for security for costs is also a factor that may weigh against a security order. However, as Ms Rydstrand is a party and exposed to all of the costs, this persuades me that no order should be made. I do not need to consider the significance of the delay in the application for security, nor is it necessary that I determine any amount of security. 6. I propose to refuse the application for security and dismiss the notice of motion. 7. Ordinarily costs follow the event, which in this case would entitle the plaintiffs to an order for costs. However, as the plaintiffs are self‑represented, in accordance with my decision in Everett v Neale [2012] NSWDC 73 at [147] and the authorities there referred to, they would ordinarily only be entitled to disbursements and not to any compensation for time spent. 8. In the present case, however, Ms Rydstrand has sought an order that each party pay their own costs. On the other hand, Mr Ganjekar did not contest this proposed order in respect of this hearing, but sought costs of an earlier adjourned date because the adjournment was said to have resulted from the failure of Ms Rydstrand to prepare an affidavit. 9. The circumstance that the judge at the adjourned hearing regarded the circumstances as warranting an order that costs be reserved leaves open the question of whether any default by the plaintiffs should merit an adverse costs order or whether, in fact, the costs of the earlier date should form part of the costs of this application or of the proceedings generally. 10. Here the plaintiffs forewent a claim for a limited costs order that might ordinarily be the result of their success in resisting the application. If any basis existed for Mr Ganjekar to have an order for the costs of the previous occasion, it is diminished by a lack of success today. Further, the adjourned date would not have been required if this unsuccessful application had not been brought by the defendant. 11. In those circumstances, the costs order shall be that there be no order for the costs of the application to the intent that each party should bear their own costs. 12. Accordingly, the orders of the Court are: 1. Refuse the application for security for costs. 2. Dismiss the defendant's notice of motion. 3. Stand over for further directions on Monday, 24 August 2015 at 10am before the Judicial Registrar. 4. No order for the costs of the application on the basis that each party should bear their own costs. ********** 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: 21 March 2018