King v Liverpool City Council [2017] NSWSC 1148

Supreme Court New South Wales

Medium Neutral Citation: King v Liverpool City Council [2017] NSWSC 1148 Hearing dates: 24 August 2017 Date of orders: 24 August 2017 Decision date: 24 August 2017 Jurisdiction: Common Law Before: Garling J Decision: (1) Order the plaintiff to provide security for costs of the defendant as follows: (a) by depositing into an agreed deposit account the sum of $100,000 within 21 days; (b) the only authorised signatories capable of operating such account are to be Mr Stephen Taylor-Jones and Mr David Marocchi jointly; (c) the plaintiff is to file an affidavit within 21 days containing an undertaking to the Court that he will not sell, encumber or otherwise dispose of his property or any interest in his property at 47 Rickard Rd, Chipping Norton, New South Wales without first giving 14 days' written notice of his intention so to do to the solicitors for the defendant. (2) Order that if security for costs is not provided as specified that the proceedings are stayed. (3) Grant the parties liberty to apply with respect to these orders on 24 hours' notice. (4) Order the plaintiff to pay the defendant's costs of the Motion. (5) List the matter for directions at 9.30am on Thursday 28 September 2017 before Garling J. Catchwords: CIVIL PROCEDURE – security for costs –inherent jurisdiction of the Court – principle of fairness Legislation Cited: Civil Liability Act 2002 Uniform Civil Procedure Rules 2005 Cases Cited: Dae Boong International Co Pty Ltd v Gray [2009] NSWCA 11 Insight Vacations Pty Ltd v Young [2010] NSWCA 137 Madgwick v Kelly [2013] FCAFC 61 Texts Cited: Not Applicable Category: Procedural and other rulings Parties: Bernard King (P) Liverpool City Council (D) Representation: Counsel: M J Gollan (P) A Abadee (D)

Solicitors: Paramount Compensation Lawyers (P) Moray & Agnew (D) File Number(s): 2016/169197 Publication restriction: Not Applicable

EX TEMPORE Judgment 1. By Notice of Motion dated 26 June 2017 and filed by the defendant, Liverpool City Council, the Council seeks orders for security for costs against the plaintiff, Bernard King. 2. The proceedings in which the Motion is brought are representative proceedings brought by the plaintiff against the Council on behalf of himself and a group of owners and occupiers of a number of properties in Chipping Norton in New South Wales. The members of the group are those nominated in Annexure A to the Amended Statement of Claim. In total, in addition to the plaintiffs, there are 41 named individuals. However, it does appear from the Statement of Claim itself that the number of properties the subject of the claim are considerably fewer. In other words, a number of the group members jointly own the relevant property. 3. The plaintiff claims that in or about June 2014, the Council caused soil contaminated with asbestos to be dumped in the area outside the homes of the plaintiff and group members. It is alleged that such conduct constituted a cause of action in negligence and also in nuisance. It is claimed that as a consequence of the conduct of the Council, the plaintiff and group members have suffered loss and damage, which includes the diminution in value of their real and personal property, and in one case, the diminution in the value of a business conducted from the property. As well, the plaintiff claims that he and the group members have suffered vexation, worry, distress and inconvenience. 4. I note that with respect to the claim for distress, worry, anxiety and inconvenience on the present state of authority, in particular Insight Vacations Pty Ltd v Young [2010] NSWCA 137, these claims will fall to be assessed under Pt 2 of the Civil Liability Act 2002. I note that depending on the evidence ultimately adduced, any such claim may not reach the requisite threshold fixed by s 16 of that Act. The principal claim appears to be one for economic loss relating to a diminution in the value of the real estate as detrimentally affected by the Council's conduct. 5. The representative proceedings have reached the stage where lay statements have been completed and expert evidence is to be prepared. The Council resists the proceedings, denies that it was negligent and further denies that any nuisance has occurred. 6. There is no dispute that in or around June 2014, the Council created a series of dirt mounds in the area near to the plaintiff's house. The Council will contend at any final hearing that by no later than 26 June 2015, that is to say, about 12 months after the mounds were initially placed, all of the mounds were removed and that, thereafter, there is no basis for any claim that any asbestos remained in any mounds in the area, assuming that asbestos was there in the first place. It follows that the claims of the plaintiff and the group members are likely to be, if the Council is successful in the proof of removal of the mounds, limited by the period of about 12 months that the mounds remained in place. That does not mean that if a diminution in value of the land is established, such diminution may not continue. 7. Both parties accept, for the purpose of this application, that the Court should regard this litigation and these proceedings as being genuinely brought, that from the plaintiff's perspective the proceedings have reasonable prospects of success, and from the Council's perspective that the Council has reasonable prospects of resisting the claim. 8. The evidence satisfies me that the plaintiff is not personally funding this litigation. By that I mean that the plaintiff has the benefit of an agreement with his solicitor, Mr David Marocchi, that Paramount Compensation Lawyers will fund all disbursements on behalf of the plaintiff and group members, and that if the plaintiff is unsuccessful in the proceedings he will not be charged legal costs by his own solicitor. The evidence also satisfies me that there is no commercial litigation funder standing behind the plaintiff. 9. The plaintiff has put on evidence as to his financial position. That evidence was not the subject of cross-examination but, to the extent that it includes some estimates of the value of motor vehicles, a boat, work tools and other work assets, the Court recognises that these values are estimations and may not necessarily be readily obtainable if instant sale of these items is required. 10. Broadly speaking, the plaintiff's assets fall into three categories. The first is that he owns the property at 47 Rickard Road, Chipping Norton and that the property is unencumbered. The property is a block of approximately 800m² upon which is erected a three-bedroom fibro home. There is also erected a two-bedroom granny flat on the premises. There is no evidence from the plaintiff of the present market value of that home. Equally, the Council, which would be aware of the unimproved capital value of the property (because the property falls within its Local Government Area) and the unimproved capital value of the property (because such value is the basis upon which the Council assesses and imposes rates on the owner of the property), did not put on any evidence of that value with respect to the home. 11. The only material from which a value can possibly be assessed is the statement of the plaintiff that he purchased the home from his parents for about $120,000. However, he does not tell the Court when he purchased the home, whether that was a true market value, and it therefore is a wholly inadequate basis to enable the Court to conclude what the value of the property is. 12. The second broad category of assets that the plaintiff has is cash. At the time he swore an affidavit on 2 August 2017, the plaintiff deposed to having a sum of about $191,000 in various investment and saving accounts, and a further sum of about $27,000 in another bank account which he uses for the purpose of his work. 13. The third group of assets can be described as motor vehicles, a runabout boat, the contents of his house, and work tools and chattels. In total, those items are assigned an approximate value by the plaintiff of about $100,000. The plaintiff is presently self-employed. He does building maintenance and bricklaying, and earns from that a modest taxable income. 14. Although the plaintiff has lived in the area where his house is for a very long time and although he bought his present property from his parents, because the property is unencumbered, there is nothing preventing the plaintiff, should he choose, from selling that property at any time and without notice to the Council. 15. The Council submits that the Court ought find that the plaintiff is, within the meaning of the term as it is used in proceedings of this kind, impecunious; that is, on the state of the evidence before the Court, there is a reasonable apprehension that he would not be able to meet an adverse costs order should the proceedings be unsuccessful. Certainly, on the value of the plaintiff's assets that are disclosed, I am satisfied that the plaintiff would not be able to meet an adverse costs order should the proceedings be unsuccessful. It seems to me that the mere fact of ownership of the property which is unencumbered, in circumstances where, without any evidence before the Court as to what the value of that property is, or the existence of any restriction on the sale of it, the Court is unable to attribute to it a value sufficient to indicate that the plaintiff would be able to meet an adverse costs order should the proceedings be unsuccessful. 16. Accordingly, I am satisfied that the Council has demonstrated that the plaintiff is impecunious for the purposes of this Notice of Motion. 17. The Council submitted that I would infer from the fact that the plaintiff was not funding his own litigation, that he was not capable of meeting the Council's legal costs if the proceedings were unsuccessful. Such an inference would, in my view, be speculative. There is a significant difference between having capital assets of value and having free cash flow to enable the funding of litigation. As well, the plaintiff was able to negotiate an agreement with his solicitor that meant that he did not have to fund the litigation. This is more advantageous to the plaintiff and therefore does not necessarily ground the inference which the Council seeks. 18. Although there are about 40 group members, no evidence at all was placed before the Court of the asset position of those group members. No evidence at all was placed before the Court of their capacity to contribute to a common fund to support the costs of the litigation or to pay the Council's costs. No evidence was put before the Court that any enquiries had been made of those group members as to their willingness to contribute to such a fund. It is clear, from the pleading, and I infer, that the group members are all owners or else have an interest in real property in the area the subject of the proceedings. However, in the absence of any indication as to whether those properties are encumbered or subject to any other competing claims, it would be unsafe for the Court to conclude that the group members' assets were of a kind which would enable them to contribute to a fund to support any order for security for costs. 19. I do note that Mr Marocchi in his affidavit said that he entered into the terms of the funding agreement with the plaintiff knowing full well that the group members were not in a position to financially satisfy the ongoing legal costs and disbursements of the action. No evidence is offered in support of that conclusion by Mr Marocchi but, even if it is a proper conclusion for him to have reached, it is insufficient in this application to demonstrate that the group members standing to benefit from this litigation are not people who are capable of, or willing to, contribute to any fund for security for costs. 20. In the absence of such evidence I am not satisfied that the plaintiff has been able to discharge such evidentiary onus as rests upon him to prove that an order for security for costs would stultify the proceedings. 21. This application is brought in the inherent jurisdiction of the Court. It does not fall within the provisions of r 42.21(1) of the Uniform Civil Procedure Rules 2005 ("the UCPR"). However, as is clear, the Court retains an inherent jurisdiction with respect to such applications. On such an application and the exercise of the Court's inherent jurisdiction, the Court should not make an order for security for costs unless satisfied that it is in the interests of justice so to do. Relevant to, although not determinative of, an application for security for costs are those matters listed in r 42.21(1A) of the UCPR. 22. As well, the Court, given that this is a representative action, ought to have regard to what has been described as a "principle of fairness". In Dae Boong International Co Pty Ltd v Gray [2009] NSWCA 11 at [27], Justice Hodgson said the following: "Ultimately it seems to me the question to be determined by the Court is whether it is fair that the person being sued by the company should be in the position of having to incur substantial costs, in this case perhaps tens of thousands of dollars of costs, and being at risk of liability to the company's costs, and yet have no real chance of recovering costs even if the action is unsuccessful, when there are persons who would benefit from the proceedings who face no risk of liability for costs themselves, and are either unwilling or unable to provide security." 1. Of that statement, Chief Justice Allsop and Justice Middleton said in Madgwick v Kelly [2013] FCAFC 61 at 20 [82] that the terms of Justice Hodgson's judgment were "particularly apt for adoption in group proceedings". 2. Their Honours further went on to say at [83] that the Court must consider, when determining proceedings for security for costs, what is fair between the parties in all the circumstances. Ultimately, as counsel for the plaintiff submitted, the Court is engaged in an exercise of its discretion which depends upon an evaluation of all of the circumstances which may apply. I have given attention to all of those matters and mentioned many of them in the course of this judgment. 3. The plaintiff's claim is being run not just for his benefit but for the benefit of all of the group members. There is no evidence that the group members are willing or able to contribute to a fund for security for costs. The plaintiff is, in the way which I have described, impecunious. But, on the other hand, the proceedings are genuine and both parties have reasonable prospects of success. To the extent that the plaintiff is impecunious, I am unable to conclude that that impecuniosity is attributable to the Council's conduct. His impecuniosity arises because, on the evidence before me, he has a level of cash savings which is exceeded by the likely costs that the Council will incur. 4. The evidence of the solicitor for the Council is that having regard to past expenditure and future expenditure on legal costs, it is likely that the Council will spend about $450,000 in total in the defence of these proceedings. That estimate is not challenged. Of course, that does not mean that all of those costs are likely to be recovered if the Court were to make an order on a party/party basis. Probably, in cases of this kind, something in the order of 75% of those costs would be recoverable. That suggests a sum of between $330,000 and $340,000 as a likely recoverable amount, if the Council succeeds. I do not regard that sum as being out of proportion to the importance and complexity of the subject matter in dispute, in large part because a significant component of those costs will be directed towards obtaining and deploying expert evidence. 5. I come then to consider the exercise of the Court's discretion. It seems to me, taking into consideration all of the matters to which I have had regard, that it is appropriate and in the interests of justice to make an order for security for costs. Of course, an order for security for costs is not punitive nor is it an order which is intended to stultify proceedings. As well, making an order would be fair between the parties in the way Hodgson JA said in Dae Boong. 6. I have had regard to all of those matters and I am satisfied that the Court should make the following order with respect to security for costs. The form of the order, about which the Court has a broad discretion, will mean that the order ought not to have a punitive effect. 7. I make the following orders: 1. Order the plaintiff to provide security for costs of the defendant as follows: 1. by depositing into an agreed deposit account the sum of $100,000 within 21 days; 2. the only authorised signatories capable of operating such account are to be Mr Stephen Taylor-Jones and Mr David Marocchi jointly; 3. the plaintiff is to file an affidavit within 21 days containing an undertaking to the Court that he will not sell, encumber or otherwise dispose of his property or any interest in his property at 47 Rickard Rd, Chipping Norton, New South Wales without first giving 14 days' written notice of his intention so to do to the solicitors for the defendant. 1. Order that if security for costs is not provided as specified that the proceedings are stayed. 2. Grant the parties liberty to apply with respect to these orders on 24 hours' notice. 3. Order the plaintiff to pay the defendant's costs of the Motion. 4. List the matter for directions at 9.30am on Thursday 28 September 2017 before Garling J.

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