Connop and Anor v. Varena Pty Ltd and Ors

[1984] NSWLR 71

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(Judgment by: Rath J)

Connop and Another
v Varena Pty Ltd and Others

Court:

Judge:
Rath J

Subject References:
Practice
Security for costs
Plaintiff ordinarily resident outside State
Discretion to order security
Matters relevant to exercise of discretion
Form of order
Costs
Residence out of jurisdiction

Legislative References:
Supreme Court Rules 1970 - Pt 53 r 2(1)(a)

Case References:
Inland Revenue Commissioners v Lysaght - [1928] AC 234
Percy & Kelly Nickel, Cobalt & Chrome Iron Mining Co Re - (1876) 2 Ch D 531
Rajski v Computer Manufacture & Design Pty Ltd - [1982] 2 NSWLR 443; [1983] 2 NSWLR 122
Barnes v Addy - (1874) 9 Ch App 244
Crozat v Brogden - [1894] 2 QB 30
International Factors Ltd v Rodriguez - [1979] QB 351
Kohn v Rinson & Stafford (Brod) Ltd - [1948] 1 KB 327
O'Brien v Dawson - (1942) 66 CLR 18
Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd (No 2) - [1924] 1 KB 1
Philpott v Subritzsky - (Mahon J (New Zealand) 10 October 1979, unreported)
Rutherford v Poole - [1953] VLR 130
Said v Butt - [1920] 3 KB 497
Stanley-Hill v Kool - [1982] 1 NSWLR 460

Hearing date: 29 February 1984
Judgment date: 13 March 1984

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Judgment by:
Rath J

Security for costs:

The dismissal of the third defendant's striking out motion leaves standing the plaintiffs' offer of a stay of proceedings, and the third defendant has indicated that he will accept that offer, if the court finds (as it has now done) that it will not strike out the proceedings against the third defendant. I accordingly propose to make an order staying the proceedings in this Court by the plaintiffs against the third defendant pending the determination of proceedings numbered A No 1331/83 in the High Court of New Zealand. It cannot at present be foreseen what proceedings (if any) will take place in this Court after the determination of the proceedings in the High Court of New Zealand, and I think that the proper course at present is to stand over the third defendant's motion for security for costs generally with leave to restore it on seven days notice.

Turning now to the notice of motion by the first and second defendants that the plaintiffs give security for the costs of the first and second defendants, there was evidence from Mr B A Brown, solicitor for the first and second defendants, that the proceedings would take between five and ten days, that it would be necessary to bring at least four witnesses from New Zealand, or to seek an order and make arrangements for evidence to be taken on commission in New Zealand and that the first and second defendants' costs on a party and party basis would be not less than $40,000. In a letter dated 29 February 1984 from the plaintiffs' solicitors to the solicitors for the first and second defendants it was asserted that the hearing was not likely to take more than six days. Mr Brown also deposed that an issue in the case was whether the babaco plants in question constituted a unique variety of babaco plants, and whether there are material variations in the sweetness of the juice of the plants. The letter mentioned claims that there is no such issue in the case. Having regard to my analysis of the plaintiffs' cause of action, as framed in the further amended statement of claim, I am satisfied that the plaintiffs' contention in this regard is correct, and that there is no such issue in the case.

In their motion the first and second defendants also relied upon an estimate by the solicitors for the third defendant of the duration of the trial of between one and two weeks, and costs of a five day trial exceeding $43,000. This estimate was also based on the necessity for expert witnesses who would, it was said, be involved in lengthy and costly scientific testing and analysis prior to the trial. Again it seems to me that this alleged necessity for scientific evidence is based on a serious misapprehension of the plaintiffs' case. I do not see questions of expert evidence arising relevantly at the trial.

Thus in my view the estimates of the length and cost of the case are based on wrong assumptions, and give little or no guidance on the application for security for costs.

It does appear that the plaintiffs' assets in New South Wales are meagre, and even in New Zealand their financial position is hardly flourishing. At one of the days of hearing it was conceded on behalf of the plaintiffs that their assets within the jurisdiction amount to $1,238.78. In addition the plaintiffs have a contractual interest in a babaco growing venture in New South Wales under which they provide consultant services on the basis of 25 per cent of the nett profits of the babaco growing venture. However to that date no nett profits had been provided by the venture.

In New Zealand the plaintiffs own a 30 acre property which is being developed by them as an orchard. The property was purchased by them in or about December 1982 for $NZ160,000 and is subject to mortgages totalling $NZ58,500. The first plaintiff owns a one quarter share in a 3 acre property, upon which are two greenhouses and a residence. It was valued in 1983 at $NZ158,000 and is subject to a mortgage to secure $NZ40,000. The plaintiffs also own a tractor purchased for $NZ17,000 some ten or eleven months ago.

The plaintiffs' business in New Zealand is known as Connops Orchards & Nurseries, and the first plaintiff is the manager of that business. Since about March 1983 the plaintiffs have been engaged part of their time in New South Wales in regard to the establishment of the consultant business in New South Wales. This, and the present litigation, have required a number of visits to New South Wales. The plaintiffs (according to an affidavit of the first plaintiff) "commenced" to occupy a house at Maroota in connection with the project, apparently some time in September 1983, but this appears from the affidavit to have related to an agreed visit to this State for an initial three months. The first plaintiff "resumed" occupation at Maroota on 27 December 1983, but on 7 January 1984, he returned to New Zealand "to attend to his other business concerns". This summary shows the pattern of the first plaintiff's visits to New South Wales, though it does not cover all the alleged detail. Very little is said of the movements of the second plaintiff over the period.

Counsel for the plaintiffs contended that the evidence showed that the plaintiffs were ordinarily resident in New South Wales. I do not think that the evidence does show this. The expression used in the relevant rule (Supreme Court Rules 1970, Pt 53 r 2(1)) is "ordinarily resident outside the State," and in my view the evidence establishes that the plaintiffs are ordinarily resident outside the State of New South Wales, whether the word "ordinary" means "usually", or refers to some lesser degree of residence: cp Inland Revenue Commissioners v Lysaght [1928] AC 234 at 243-245.

Part 53, r 2(1) reads:

"

(1)

Where, in any proceedings, it appears to the Court on the application of a defendant -

(a)

that a plaintiff is ordinarily resident outside the State;

...

the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given."

It is apparent that this rule gives the court a discretion whether it will order security or not, and as to the amount of security, if the court thinks fit to make an order: see the English Supreme Court Practice 1982, vol 1 at 430 - on O 23. As the basis of the rule is ordinary residence outside the State, it must be relevant to consider the connection between the State and the plaintiff, the extent of the plaintiff's assets both within and outside the State, and in particular in the place where the plaintiff is ordinarily resident, and the availability of the plaintiff's assets outside the State for the satisfaction of any judgment for costs obtained against him in the State.

In New Zealand, the Reciprocal Enforcement of Judgments Act 1934 (1934, No 11) provides for the enforcement by registration in New Zealand of judgments of the Supreme Court of New South Wales (especially s 4, and the New Zealand Order in Council serial number 1940/88 of 14 May 1940). The procedure for registration is set out in rules under that Act (Order in Council, 18 November 1935; 1935 NZ Gazette, 3600). Registration is effected by application on motion, supported by evidence as to the rate of exchange and the right to registration. An order for costs against the plaintiffs in this case would present no difficulties of any significance upon registration proceedings in New Zealand, and though there is provision for setting aside registered judgments none of the cases (as they are called in the Act) for so doing would be applicable. There is provision in the rules for security for costs, and it is possible that delay in enforcement could arise as the result of appeals in the New South Wales appellate system.

Thus there may be some delay, inconvenience and expense arising from registration and execution of a judgment in New Zealand; but apart from this I see no difference in regard to the costs of the first and second defendants between the circumstances of this case and those of a similar case where a plaintiff is not ordinarily resident outside the State. With only minor reservations, a judgment for costs will be as effective against the plaintiffs here as it would be in the case of a plaintiff who did not ordinarily reside outside the State: see Re Percy & Kelly Nickel, Cobalt and Chrome Iron Mining Co (1876) 2 Ch D 531 per Jessel MR at 531.

Counsel for the first and second defendants also relied upon the inherent jurisdiction of the court: see Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443; affirmed, [1983] 2 NSWLR 122. My attention, however, was not drawn to any relevant additional power arising from the court's inherent jurisdiction.

During the hearing I mentioned the availability of bankruptcy proceedings in Australia as a possible factor in support of an order for security for costs, but the matter was not pursued and I do not think that in the circumstances the matter should affect the exercise of my discretion.

As the plaintiffs' only substantial assets are in New Zealand, and as the enforcement of a judgment for costs may give rise to additional costs, I propose to order the plaintiffs to give security for costs, but that such security should be limited to the costs of registration and execution in New Zealand of a judgment for costs in this Court in favour of the first and second defendants against the plaintiffs. The selection of a figure is essentially an arbitrary exercise that I could justify only on a general appreciation of costs. I shall fix the amount of security at $750, which may be provided by payment into court, bank guarantee, or a trust account, as the parties may agree, or failing agreement, as the Registrar may direct (provided that I do not contemplate any form of trust account being directed by the registrar). Subject to these directions, security in the said sum of $750, for the purpose mentioned, shall be provided by the plaintiffs as the Registrar may direct. I shall order that proceedings be stayed until the security is given.

Costs and conclusion:

On the motion for striking out the plaintiffs have been successful, but they offered belatedly a stay of proceedings which the third defendant has accepted. No special problem arose in regard to the motion for security for costs. In my view the costs of the third defendant's motion should be costs in the cause.

On the first and second defendants' motion for security for costs the first and second defendants have failed on the major issue and succeeded on a minor issue. In my view the first and second defendants should have their costs of this motion if they are successful ultimately in obtaining an order for costs. This result may I think be achieved by an order that the costs of the first and second defendants' motion should be first and second defendants' costs in the cause.

The order of the court will be:

(1)

As to third defendant's notice of motion:

(a)

order that these proceedings be stayed against the third defendant pending the determination of proceedngs A No 1331/83 in the High Court of New Zealand;

(b)

order that the costs of the motion be costs in the cause;

(c)

order that motion for security for costs be stood over with leave to restore on seven days notice;

(d)

order that the notice of motion be otherwise dismissed.

(2)

As to the notice of motion of the first and second defendants:

(a)

order that the plaintiffs give security for the costs of the first and second defendants limited to the costs of registration and execution in New Zealand of a judgment for costs in this Court in favour of the first and second defendants against the plaintiffs;

(b)

order that the amount of such security be $750;

(c)

order that such security may be provided by payment of money into court or by bank guarantee or (if it is so agreed between the plaintiffs and the first and second defendants) by the establishment of a trust account (with such provisions as to disposal of income as may be agreed by such parties):

(d)

order that, except as hereinbefore ordered, security in the said sum of $750, for the purpose mentioned, shall be provided by the plaintiffs as the Registrar may direct;

(e)

order that proceedings herein between the plaintiffs and the first and second defendants be stayed until the said security is provided:

(f)

order that the costs of the first and second defendants of this motion shall be first and second defendants costs in the cause.

Orders accordingly