Supreme Court New South Wales Medium Neutral Citation: Aquatic Air Pty Limited v Siewert (No 3) [2018] NSWSC 624 Hearing dates: Written submissions, in chambers Date of orders: 08 May 2018 Decision date: 08 May 2018 Jurisdiction: Equity Before: Brereton J Decision: Direct that notice of application for payment out of funds in court as security for defendants' costs be given to former plaintiffs who had contributed to the fund. Liberty to apply ex parte for payment out if no notice of objection lodged. Catchwords: FUNDS IN COURT – security for costs – payment out – procedure for – where liable plaintiff and defendants agree on defendants' entitlement to security fund – where other plaintiffs have contributed to that fund – notice must be given to all parties potentially interested Cases Cited: Aquatic Air Pty Limited v Siewert (No 2) [2016] NSWSC 10 AT Air Group Pty Limited v Dieter Siewert (No 3) [2014] NSWSC 1129 AT Air Group Pty Ltd v Dieter Siewert [2013] NSWSC 1993 Avco Financial Services Ltd v Commonwealth Bank (1989) 17 NSWLR 679 Commonwealth Bank of Australia v Estate of the Late Mahmoud Slieman [2010] NSWSC 661 In the matter of MINMXT Holdings Pty Limited [2017] NSWSC 1678 JKB Holdings v de la Vega [2013] NSWSC 501 Rahme v Benjamin & Khoury Pty (ACN 104 057 043) [2016] NSWSC 774 Palmer v Orix Australia Corp Ltd & ors [2006] NSWSC 1208 Category: Consequential orders (other than Costs) Parties: Aquatic Air Pty Limited (in liq) (P3) Dieter Siewert (D1) Lieselotte Siewert (D2) Representation: Counsel: A. Johnson (solicitor) (Ds) Solicitors: Rydge Evans Lawyers (P3) Marsdens (Ds) File Number(s): 2012/169096 Judgment 1. The final orders made in these proceedings on 2 February 2016 included an order that the third plaintiff Aquatic Air Pty Limited pay 80% of the first and second defendants Dieter and Lieselotte Siewert of the proceedings, and that from the moneys standing in court to the credit of these proceedings by way of security for the defendants' costs, the further sum of $110,000 be forthwith paid out to the first and second defendants, on account of and without prejudice to the costs to which they are entitled under the foregoing costs order, and subject to their undertaking to the Court (which was given) that they would reimburse any sum by which the amount so received by them may exceed the amount ultimately allowed to them on assessment under that order. [1] The liquidator of Aquatic (which went into liquidation after the determination of the substantive proceedings) has agreed that the Siewerts are entitled to the balance held in court by way of security for the defendants' costs, and the Siewerts now apply for the payment out of court to their solicitors of "all moneys standing in court to the credit of the proceedings as security for the Defendants' costs, including any interest accrued thereon". 2. When the proceedings were commenced on 28 May 2012 there were four plaintiffs. Although the first plaintiff AT Air Group Pty Limited went into liquidation on or about 25 July 2012, it did not then cease to be an active party. 3. On 7 August 2012, Registrar Howard made an order that the plaintiffs give security for the costs of the first and second defendants in the sum of $180,000, and reserved liberty to apply for further security. The second plaintiff Ross Seller discontinued (with leave) on 13 August 2012 - after the order for security was made, but before Bartier Perry (the solicitors then on the record for the plaintiffs) paid into court, on 22 August 2012, the sum of $180,000. 4. On 11 March 2013, AT Air assigned its causes of action against the defendants to Aquatic, and thereafter played no further active part in the proceedings. The fourth plaintiff Avtex Air Services Pty Limited went into liquidation on 4 July 2013. Its proceedings against the defendants were dismissed on 12 August 2013, when a further amended statement of claim, in which only Aquatic was named as a plaintiff, was filed, and orders were made that the fourth plaintiff pay the defendants' costs of its proceedings, and that the defendants may on assessment of those costs recover from the moneys held by way of security under the order of 10 August 2012 the amount assessed. Consequent upon completion of that assessment, on 31 October 2014 the assessed and certified sum of $90,848.61 was paid out to the Siewerts. 5. Meanwhile, by notice of motion filed on 25 October 2013, the first and second defendants sought an order that the third plaintiff provide security for their costs in the further amount of $690,000 and consequential orders, and on 18 November 2013 it was ordered that the plaintiffs give further security for the defendants' costs of the proceedings in the sum of $235,000, such security to be provided in a form acceptable to the Registrar. [2] On or about 5 December 2013, the third plaintiff paid into court the said sum of $235,000. 6. One issue in the proceedings involved the respective claims of the parties to 2/13B Pearl Bay Avenue, Mosman. When that property was sold by the National Australia Bank as mortgagee, there was a surplus of $392,370.77, which the bank paid into court on or about 10 July 2015, to the credit of these proceedings. [3] 7. Consequent on the determination of the substantive proceedings, it was ordered on 18 August 2015 that there be paid out of court, from the sum standing to the credit of the proceedings, to the defendants' solicitors the sum of $150,000, such sum to be attributable to the amount held by way of security for the defendants' costs, on account of and without prejudice to their ultimate entitlement to costs on assessment. [4] That order was implemented on or about 10 September 2015, when $150,000 was paid out to the defendants' solicitors Marsdens. 8. In the final orders, made on 2 February 2016, it was ordered that from the moneys standing in court to the credit of these proceedings, the sum of $392,370.77 paid into court by the National Australia Bank on 10 July 2015 together with interest attributable to it be paid out to the first and second defendants; and from the moneys standing in court to the credit of these proceedings by way of security for the defendants' costs, the further sum of $110,000 be forthwith paid out to the first and second defendants, on account of and without prejudice to the costs to which they are entitled pursuant to order (6), subject to the first and second defendants' undertaking to the court that they will reimburse any sum by which the amount so received by them may exceed the amount ultimately allowed to them on assessment under that order. [5] Pursuant to those orders, the sum of $392,370.77 plus interest on it of $3,964.97, and the further sum of $110,000, was paid out to the defendants on 18 February 2016. 9. The present application was made informally, by email on 23 February 2018 accompanied by the proposed consent order signed on behalf of the defendants and the third plaintiff. It was unsupported by evidence, and apparently relied on the consent of the parties. 10. As has been repeatedly emphasised, the entitlement to funds in court must be strictly proved, and notice given to any person which might have a claim on them. [6] Before ordering payment out of funds in court, it is incumbent on the court to be satisfied that all those with a claim on the funds in court have been given notice and an opportunity to be heard, and that the entitlement of those to whom payment is to be made is established. The procedures applicable to payment into and out of court are intended to achieve these ends, and should be strictly followed. Thus in addition to evidence establishing the entitlement of the claimant, the following must be established, by admissible evidence: 1. the amount of the funds in court, 2. the circumstances in which they were paid in and by whom, 3. the name and address of each person who has an interest in or claim to the funds (or that there are no other persons with a claim), 4. that notice has been given to each of them, other than those who have consented, and 5. that there are no "stop orders" under UCPR r 41.16. 1. Had it only been the third plaintiff by or on behalf of whom funds had been paid into court, the matter would nonetheless have been relatively straightforward. However, consideration of what at first sight might appear a relatively straightforward application has been complicated by a number of matters. First, in these proceedings funds have been paid into court, on multiple occasions, and by more than one party, and not only as security for costs. Funds have also been paid out, both from those paid in as security for costs, and from those paid in on other account. The order as sought would leave the Registry unable to ascertain how much was to be paid out, because it neither specifies a sum, nor deals in terms with the whole of the funds, but would require the Registry somehow to identify what funds were held as security for defendants' costs and what were held on other account. Such material as was originally provided in support of the proposed consent order did not show whether the funds remaining in court were exclusively attributable to security for the defendants' costs, or to other accounts. Secondly, although ultimately the party against whom the final costs order was made was the third plaintiff only, some of the funds paid in as security for costs were at least arguably paid in on account also of the first, second and fourth plaintiffs, who might have an interest in the security fund. Thirdly, the order sought was for payment to the Siewerts' solicitors, not to the defendants personally. Courts do not order payments to which parties are entitled to be made to their solicitors, but to or as directed by the party entitled; it is only appropriate to direct payment to a party's solicitor if there is evidence of the solicitor's authority to receive, and there was no such evidence. 2. Because it appeared that the matter was affected by the complexities referred to above, the Court on 1 March 2018 issued requisitions to the defendants' solicitors, as follows: 1. 1 Provide evidence of the amount of funds remaining in court, and how much thereof is as security for defendants' costs and interest thereon. Funds were paid into court in these proceedings by different parties and for different reasons. It may well be that all funds (and interest) other than in respect of security for the defendants' costs has already been paid out, but that needs to be established by evidence. Some of the funds paid in as security for costs may have already been paid out; that needs to be established by evidence. To do this, provide an account of amounts paid in and paid out, and on what basis they were paid in and out, and evidence of the remaining balance (the balance to be confirmed by Registrar's certificate or statement). 2. 2 Provide (1) either (a) the consents of the plaintiffs other than the 3rd plaintiff, or (b) an explanation as to why their consents should not be regarded as necessary. 3. 3 Provide evidence that no other person has an interest in or claim on the funds, and that there is no stop order (which should be ascertained from the registry). 4. 4 Provide evidence of the authority of the defendants' solicitors to receive the funds on behalf of the defendants. 1. By the reference to "evidence", it was contemplated that the Court would be provided with affidavit evidence of the matters referred to. Courts act on evidence, not on assertions. Affidavit evidence was not provided, but the Court was provided with a letter from the defendants' solicitors Marsdens in the nature of submissions, which annexed an email provided to the defendants' solicitors by the Court Revenue and Trust Account Coordinator, and a copy of an email from the Siewerts to their solicitor, containing a direction to the Registry that their solicitors were authorised to receive all funds released by the Court. I have assumed that, subject to what follows, the matters asserted in the letter can be verified. 2. Evidence as to the amount of funds in court, and the absence of any stop order, was conventionally provided by a certificate of the court's accountant – now, the Court Revenue and Trust Account Coordinator. The email provided hardly merits the description of a certificate, but it is a statement by the relevant functionary in the course of his duties of the relevant matters. It sufficiently establishes that, as at 11 March 2018, the total held was $88,669.87, comprising capital of $64,151.39, and net interest (after commission) of $24,518.48. 3. As to stop orders, reference is made to a stay ordered on 28 April 2016 pending an appeal which was dismissed on 24 November 2016. Such a stay is not a "stop order"; a "stop order" is an order made pursuant to UCPR r 41.16 prohibiting the transfer, sale, delivery out, payment or other dealing in respect of the whole or any part of the funds in court, or of any income derived from the funds, without notice to the applicant. However, I treat the statements by the Court Revenue and Trust Account Coordinator and the defendants' solicitor that there are no other persons of whom they are aware who have an interest in or claim on the funds as covering any creditor with a stop order; if that is not so it will no doubt be corrected in the affidavit which the defendants' solicitor will be required to depose under the directions I propose to make. 4. From the above history and the statement of the Court Revenue and Trust Account Coordinator, it can be concluded that the whole of the moneys paid in other than as security for the defendants' costs, together with interest on them, has already been released: the $392,370.77 paid in by the National Australia Bank, plus interest on it of $3,964.97, was paid out on 18 February 2016, pursuant to the order of 2 February 2016. Thus the only remaining funds in court are security for the defendants' costs. Thus the defendants' entitlement to costs constitutes the first charge on the whole of the remaining funds in court. However, those costs have not been assessed; rather, it has apparently been agreed between the third plaintiff's liquidator and the defendants that the defendants are entitled to the residue of the security fund. 5. The remaining issue arises from the circumstance that the defendants' entitlement has been ascertained by agreement between them and the third plaintiff, and not by assessment. The essential question is whether all necessary parties are party to that agreement. The defendants' solicitor submits that because the only active parties are the third plaintiff and the defendants, only their consent should be required, and that because the first, second and fourth plaintiffs have discontinued, they have no interest in or claim on the funds. For the reasons that follow, I am unable to agree. 6. This question arises because, at least when funds were first paid in as security for costs, the other plaintiffs were still party to the proceedings and prima facie contributors to the amount paid in, and thus might have an interest in any surplus. Another way of looking at the question is, to whom would the balance of the security fund be returned, if it were not exhausted by the defendants' costs. Just because the other plaintiffs who may have contributed to the security fund are no longer active parties does not mean that they have no interest: if they had contributed to the fund, and there were a surplus, they would have a claim on it. 7. Because the second plaintiff Mr Seller discontinued before the first payment in ($180,000) was made, albeit after the order for it had been made, it might well be inferred that no payment in was made on his behalf, and that he could have no personal interest in any residue. However, the same cannot be said of the first and fourth defendants, who remained active parties when the first payment in was made. Plaintiffs other than Aquatic contributed only to the first, and not to the second payment in: only Aquatic was an active party when the second payment in ($235,000) was made, and it may be inferred that that payment was made only by it, or on its behalf. Accordingly, in the absence of anything more, the initial fund of $180,000 was provided jointly by (or on behalf of) the first, third and fourth plaintiffs. The additional fund of $235,000 was provided exclusively by or on behalf of the third plaintiff. It follows that the total security fund of $415,000 was contributed as to $295,000 (being 71%) by or on behalf of the third plaintiff, and as to $60,000 each (being 14.5%) by or on behalf of the first and fourth plaintiffs. 8. The subsequent discontinuance of the proceedings by the first plaintiff AT Air and the fourth plaintiff Avtex when the further amended statement of claim was filed, does not extinguish their interest in the security fund – any more than does the dismissal of proceedings against a sole plaintiff who has given security for costs extinguish its interest in the fund to the extent of any surplus. It further follows that the first and fourth plaintiffs prima facie have an interest, to the extent of 14.5% each, in any surplus in the fund. 9. For that reason, as their interest is affected by the quantum of costs payable by the third plaintiff under the costs order against it, at least to the extent of the security fund, they would be entitled to be heard on the assessment of the defendants' costs, because notwithstanding that the order is against the third plaintiff only, the third plaintiff's liability is secured by a fund in which they are interested. Thus, their interest is not concluded by an agreement between the third plaintiff and the defendants as to the quantification of the defendants' costs entitlement. 10. For those reasons, the first and fourth plaintiffs are entitled to notice of the present application. And as that must be done, for more abundant caution notice should also be given to the second plaintiff. Upon proof that such notice has been given, and the time allowed by it has expired without receipt of any notice of objection, then, subject to verification of the matters asserted in Marsden's letter of 13 March 2018, I would be prepared to make an order for payment out to the defendants' solicitors of the remaining funds in court to the credit of these proceedings. 11. The Court orders that: 1. The defendants give notice in writing by email and/or ordinary mail to the first, second and fourth plaintiffs in the following form, accompanied by a copy of these reasons: 1. The first and second defendants Dieter and Lieselotte Siewert have applied to the court, with the consent of the liquidator of the third plaintiff Aquatic Air Pty Limited, for payment out to them of the remaining funds in court as security for their costs, which amounted to $88,669.87 as at 11 March 2018. If you object to that order, you must within 14 days of service of this notice upon you, lodge notice of objection with the Associate to Justice Brereton (by email to Chambers.BreretonJ@courts.nsw.gov.au) and serve a copy on the defendants (by email to ajohnson@marsdens.net.au) and on the third plaintiff (by email to ross.rydge@relawyers.com.au). If no notice of objection is lodged and served within that time, such order may be made in chambers in your absence without further hearing. 2. A copy of the reasons for judgment given by the Court on 8 May 2018 accompanies this notice. 1. Upon the expiry of the 14-day period referred to in order (1), the defendants have liberty to move ex parte for the order sought by lodging with my Associate an affidavit of their solicitor: 1. proving that notice has been given in accordance with order (1) and that the 14-day period referred to in it has expired and that no notice of objection has been received; 2. annexing and verifying the letter of 13 March 2018 from Marsdens to the Court. ********** Endnotes 1. See Aquatic Air Pty Limited v Siewert (No 2) [2016] NSWSC 10. 2. See AT Air Group Pty Ltd v Dieter Siewert [2013] NSWSC 1993. 3. For the general background to this, see AT Air Group Pty Limited v Dieter Siewert (No 3) [2014] NSWSC 1129. 4. This is explained in Aquatic Air Pty Limited v Siewert (No 2) [2016] NSWSC 10 at [43]-[44]. 5. See Aquatic Air Pty Limited v Siewert (No 2) [2016] NSWSC 10 at [43]-[44], [50]. 6. See Palmer v Orix Australia Corp Ltd & ors [2006] NSWSC 1208; Avco Financial Services Ltd v Commonwealth Bank (1989) 17 NSWLR 679; JKB Holdings v de la Vega [2013] NSWSC 501; Rahme v Benjamin & Khoury Pty (ACN 104 057 043) [2016] NSWSC 774; and In the matter of MINMXT Holdings Pty Limited [2017] NSWSC 1678 at [9]. See generally NSW Court Forms, Precedents & Pleadings, "Payments into & out of Court", [3435]-[3440]. 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: 09 May 2018