Kealy v SHD Services Pty Limited as Trustee of the SHDS Unit Trust and Ors [2011] NSWSC 709 (7 July 2011)

Last Updated: 4 November 2011

This decision has been amended. Please see the end of the decision for a list of the amendments.

Supreme Court New South Wales

Case Title:	Kealy v SHD Services Pty Limited as Trustee of the SHDS Unit Trust and Ors
Medium Neutral Citation:	[2011] NSWSC 709
Hearing Date(s):	6 July 2011
Decision Date:	07 July 2011
Jurisdiction:	Common Law
Before:	Johnson J
Decision:	With respect to the Notice of Motion filed 29 April 2011, the following orders are made: 1. Pursuant to Rule 42.21(1) (a) Uniform Civil Procedure Rules 2005 , the Plaintiff, within 14 days of today, is to provide security for the Defendants' costs of an incidental to these proceedings by paying into Court the sum of $AU40,000.00. 2. Until such security is given, the proceedings are stayed. 3. The Defendants are granted liberty to apply in the event of default in Order 1 by the Plaintiff, so that the Defendants can move the Court for an order that the proceedings be dismissed. 4. Costs are to be costs in the cause.
Catchwords:	PRACTICE AND PROCEDURE - security for costs - Plaintiff returns to Ireland while proceedings on foot - no longer ordinarily resident in New South Wales - protection of Defendants from unacceptable disadvantage resulting from Plaintiff leaving jurisdiction - order made confined to costs of enforcement of judgment in Ireland
Legislation Cited:	Foreign Judgments Act 1991 (Cth) Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005
Cases Cited:	PS Chellaram & Co v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321 Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 Re Bryan Fencott v Eretta Pty Limited [1987] FCA 102
Texts Cited:
Category:	Interlocutory applications
Parties:	Cian Kealy (Plaintiff) SHD Services Pty Limited as Trustee of the SHDS Unit Trust (First Defendant) Brian Boyd (Second Defendant) Mark Morgan (Third Defendant)
Representation
- Counsel:	Counsel Mr IC Latham (Plaintiff) Mr AC Casselden (Defendant)
- Solicitors:	Solicitors McArdle Legal (Plaintiff) Morgan Lewis (Defendants)
File number(s):	2009/298002
Publication Restriction:

Judgment (on application by Defendants for security for costs)

1. JOHNSON J : By Notice of Motion filed 29 April 2011, the Defendants, SHD Services Pty Limited (as Trustee of the SHDS Unit Trust), Brian Boyd and Mark Morgan seek an order for security of costs against the Plaintiff, Cian Kealy.

The Principal Proceedings

2. The present proceedings were commenced by Statement of Claim filed on 15 December 2009. The claim in its present form is contained in the Second Amended Statement of Claim filed on 11 August 2010.

3. The claim arises out of the dismissal of the Plaintiff from his employment with the First Defendant. Put shortly, the Plaintiff alleges that the First Defendant unlawfully terminated the Plaintiff's contract of employment, and that the Second and Third Defendants interfered with the Plaintiff's contractual relations.

4. A Cross-Claim has been brought against the Plaintiff by the Defendants.

5. The Court was informed that the quantum of the Plaintiff's claim against the Defendants is in the order of $AU450,000.00, and the quantum of the Defendants' Cross-Claim against the Plaintiff is in the order of $AU186,000.00 (T10-11, 6 July 2011).

6. The proceedings have moved through various interlocutory stages with evidence being served. A hearing date has not yet been allocated.

The Present Application

7. A number of affidavits were read at the hearing of the application and some additional documents were tendered.

8. The Defendants seek an order under Rule 42.21(1)(a) Uniform Civil Procedure Rules 2005 ("UCPR") that the Plaintiff provide security for the Defendants' costs of and incidental to the proceedings by payment into Court of the sum of $AU430,000.00.

9. In the alternative, an order is sought that the Plaintiff provide security for costs in such sum as the Court thinks fit.

10. Orders are also sought that, until security is given, the proceedings be stayed and that, in default of security being given, the proceedings be dismissed.

Factual Matters

11. The evidence reveals the following facts, which I find for the purpose of this application.

12. The Plaintiff was an employee of the First Defendant, as its Chief Executive Officer, from about May to October 2009.

13. When the Plaintiff commenced proceedings in December 2009, he was ordinarily resident in the State of New South Wales. The Plaintiff is now 41 years' old, and was born in Dublin in the Republic of Ireland. He is a citizen of Ireland and, since 30 June 2010, also a citizen of the Commonwealth of Australia.

14. On about 7 August 2010, the Plaintiff left Australia and is now ordinarily resident in Dublin. He resides in a house in Malahide, County Dublin with his wife and two daughters. The Plaintiff returned to live in Ireland as his wife had secured employment there.

15. Since his return to Ir eland, the Plaintiff has obtained employment, commencing in May 2011, as Corporate Finance and Lending Manager of the National Treasury Management Agency, an agency of the Government of Ireland, with annual remuneration of Euro 110,000.00 plus an annual bonus.

16. Although the evidence on this application is somewhat imprecise, I accept that the Plaintiff has the following assets in Ireland and Australia:

(a) both he and his wife have an interest in the property in Malahide, County Ireland subject to a mortgage;

(b) in addition, the Plaintiff has cash of approximately Euro 50,000.00, investments in the sum of approximately Euro 50,000.00 and a motor vehicle worth about Euro 15,000.00 in Ireland;

(c) the Plaintiff has approximately $AUAU50,000.00 in cash in Australia.

17. For present purposes, I accept that the current exchange rate is about 74 Euro cents to an Australian dollar.

18. The Plaintiff's wife is the owner of a property in Swords, County Dublin, subject to a charge to a building society. In an affidavit sworn 30 June 2011, the Plaintiff asserted that the Swords property was one of his assets, but a title search reveals that his wife is the registered owner of that property. Whether the Plaintiff has an interest in the Swords property, beyond the fact that it is owned by his wife, is not capable of determination in this application.

19. The Plaintiff did not inform the Defendants in any correspondence that he had left New South Wales in August 2010 to reside in Ireland. However, the Plaintiff declared his Malahide, County Ireland address in an affidavit verifying the Plaintiff's List of Documents sworn by him on 7 October 2010, which was served on the Defendants on 12 October 2010.

20. On 15 March 2011, the Plaintiff served an Amended Defence to the Defendants' Amended Cross-Claim which also contained the Malahide, County Ireland address.

21. It does not seem that the Defendants' legal representatives became conscious of the Plaintiff's return to Ireland until about mid-March 2011.

22. Pursuant to directions made by the Court on or about 4 August 2010, the Defendants were required to serve their evidence in the proceedings by 15 October 2010, with this order being varied subsequently to 17 January 2011. Accordingly, the Defendants served a substantial body of evidence before the Defendants' legal representatives became conscious of the Plaintiff's return to Ireland.

23. Ireland is not a party to any reciprocal enforcement agreement with Australia for the purposes of the Foreign Judgments Act 1991 (Cth) .

Expert Evidence Concerning Cost of Enforcement in Ireland

24. There is some evidence before the Court, tendered by both the Plaintiff and the Defendants, in the form of expert evidence from Irish solicitors concerning the cost of enforcement of a New South Wales judgment in Ireland.

25. The Defendants' report provides a range of up to Euro 55,000.00 to Euro 80,000.00 for a plenary hearing, with a lesser figure if the matter were dealt with by way of summary hearing (Euro 10,000.00 to Euro 30,000.00 ) or a Judge's List hearing (Euro 30,000.00 to Euro 55,000.00).

26. The Plaintiff's report suggests a range of Euro 10,000.00 to Euro 20,000.00.

27. In my view, the Defendants' report contains a more detailed analysis and is to be preferred, although there is still much leeway and flexibility in the Defendants' report because of the possible different hearings, and the differen t cost ranges which would apply to those hearings.

Quantum of Defendants' Costs

28. There is evidence concerning the past and future costs of the Defendants before the Court on this application.

29. Past costs from 3 November 2009 to 17 June 2011 total $AU641,666.00, of which $AU525,529.00 is professional costs.

30. Future costs are assessed as a total of $AU235,620.00 upon an assumption of a 10-day hearing in this Court.

31. The total sum of past and future costs of the Defendants is $AU877,286.00.

32. No submissions were made on this application touching on the quantum of the Defendants' costs. At some point in the litigation, issues may arise concerning the just, quick and cheap resolution of the proceedings (for the purposes of s.56 Civil Procedure Act 2005 ) and the need for proportionality of costs (in s.60 of that Act), in view of the size of the claim and Cross-Claim and the nature of the issues in the proceedings. However, no submission was made to the Court with respect to that issue. I say no more about it on this application.

Submissions of Parties

33. Mr Casselden, counsel for the Defendants, submits that an order should be made in the exercise of the Court's discretion as sought in the Notice of Motion, to protect the Defendants from unacceptable disadvantage flowing from the Plaintiff's foreign residence.

34. He submits that an order should be made for sufficient security.

35. Mr Casselden points to the lack of direct notification to the Defendants of the Plaintiff's return to Ireland, and the fact that substantial work was carried out by the Defendants between October 2010 and March 2011 to prepare and serve evidence. He submits that the Defendants made this application promptly once the Defendants' legal representatives detected, in March 2011, the Plaintiff's change of address.

36. Mr Casselden submits that any order for security ought extend beyond the costs of enforcement of the judgment in Ireland. He submits that, in the interests of justice, an order ought to be made, to ensure that the Defendants are not subjected to unacceptable disadvantage.
37. Mr Latham, counsel for the Plaintiff, emphasised the breadth of the discretion to be exercised on an application such as this. He submitted that an order should not be made to punish a litigant.

38. He submitted that an offer was made by the Plaintiff on 27 May 2011 to provide security for the costs of enforcement in Ireland in an unspecified sum (the figure was contained in without-prejudice correspondence).

39. During the course of the hearing (T21, 6 July 2011), Mr Latham submitted that he could not argue against the Plaintiff's Australian fund ($AU50,000.00) being used as security for enforcement costs, if the Court was otherwise satisfied that an order should be made.

40. Mr Latham submitted that, in accordance with relevant principles, the Plaintiff's claim should be accepted as bona fide with reasonable prospects of success. He submitted that any substantial order would shut the Plaintiff out from pursuing his claim, and that an order for security of costs should not operate oppressively.

41. It was submitted that the Plaintiff had assets in Ireland and held a responsible position with a Government agency, so it may be taken that the Plaintiff would not wish to put at risk his employment by the prospect of bankruptcy.

42. Counsel submitted that the Plaintiff did not leave the jurisdiction of New South Wales to advance his position in the litigation.

43. He submitted that no order should be made or, if an order was to be made, it should be confined to the enforcement element of a costs order in Ireland. In that case, he submitted that any order should not exceed the sum which the Plaintiff has within the jurisdiction of the State of New South Wales.

Decision

44. The sole leg of Rule 42.21(1) UCPR relied upon by the Defendants in this application, is subrule (a) - that the Plaintiff is ordinarily resident outside New South Wales.

45. It was acknowledged at the hearing by counsel for the Defendants that, if the Plaintiff was still ordinarily resident in New South Wales, there would be no basis for the Defendants to make an application for security for costs (T11, 6 July 2011).

46. In considering this application, the Court is exercising a wide discretion, to be exercised judicially and in accordance with the justice of the case.

47. As McHugh J observed in PS Chellaram & Co v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321 at 323, for over 200 years the fact that a party bringing proceedings is resident out of the jurisdiction, and has no assets within the jurisdiction, has been seen as a circumstance of great weight in determining whether an order for security for costs should be made.

48. In Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 (page 50418 at 50422), Gummow J observed that the purpose of ordering security for costs against a Plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this Court, against which it can enforce a judgment for costs, so that the defendant does not bear the risk as to the certainty of enforcement in the foreign country, and as to the time and complexity of necessary action to effect enforcement. On the other hand, Gummow J observed that the mere circumstance that a plaintiff is resident outside the jurisdiction does not necessarily invite an exercise of discretion in favour of ordering security, the question being, how justice will best be served in the particular case.

49. I bear those principles in mind in this case.

50. The Court should approach the application on the basis that the Plaintiff's claim is bona fide with a reasonable prospect of success: Re Bryan Fencott v Eretta Pty Limited [1987] FCA 102 at [136].

51. It is the case that the Plaintiff did not directly inform the Defendants of his move to Ireland. However, information was contained within documents served on the Defendants' legal representatives which so indicated, and which was not picked up by them until March 2011. I accept that work was undertaken by the Defendants' legal representatives in that period.

52. In the end, I think these factors effectively cancel each other out. Even if the Defendants were notified immediately in October 2010, or had closely read the document which contained the relevant information with respect to the Plaintiff's move to Ireland, the application would still have been one where the primary focus would be on security for enforcement in Ireland of any costs order.

53. I do not consider that the primary order sought by the Defendants, being security for costs in the sum of $AU430,000.00, ought be made. Such an order will not serve the interests of justice in this case. The focus of this application should be upon the enforcement of any costs order in Ireland, which is the factor arising directly from the Plaintiff's move back to Ireland.

54. I am not persuaded that an order for security for costs should extend beyond the cost of enforcement in Ireland, in the circumstances of this case.

55. I accept that the Plaintiff did not leave New South Wales to advance his interests, in some way, in this litigation. I accept that he moved back to Ireland because of employment reasons relating to his wife. He has ultimately obtained employment himself in Ireland. He, his wife and his daughters are living in Ireland, and they have assets there. The Plaintiff has ties in Ireland, including employment in a responsible Government position, and at least some assets.

56. Although the Plaintiff does have assets and income, as disclosed by the evidence, I am satisfied that any substantial order would operate to stifle his ability to proceed with this litigation. I have this factor in mind, as well, in determining that any order should not go beyond enforcement costs.

57. What does the justice of the case require in the exercise of discretion? I am satisfied that an order should be made. The Plaintiff is residing in Ireland, and there is no reciprocal arrangement with Ireland for the purpose of the Foreign Judgments Act 1991 (Cth) . As a result, there is a practical disadvantage affecting the Defendants with respect to enforcement of a costs order in Ireland, if that point was reached.

58. The evidence concerning costs of enforcement in Ireland discloses a broad range, based upon differing assumptions. In my view, sufficient security in this case, by reference to the cost of enforcement only, would be constituted by the sum of $AU40,000.00. I have borne in mind the exchange rate between the Euro and the Australian dollar, and the Irish expert evidence in reaching this conclusion.

59. An order in that amount will operate to protect the Defendants from the disadvantage flowing from the Plaintiff's move to Ireland. That is the extent of the protection to which the Defendants are entitled on this application.

60. I will hear the parties on the form of the order and any further order which is sought.

[Counsel addressed on orders and costs]

61. The Defendants seek an order that the Plaintiff pay the costs of the Notice of Motion. It is submitted that costs should follow the event as the Defendants have succeeded in obtaining an order for security for costs. The Plaintiff submits that the Court should not make that order, but order that costs be costs in the cause.

62. There are a number of factors which, in my view, are relevant to the question of costs on this application. It is apparent that an offer was made by the Plaintiff to the Defendants in a sum not specified, but less than $AU40,000.00. The Defendants did not accept that offer.

63. On the other hand, the Defendants' claim in the Notice of Motion, and as argued (albeit with a fall-back position) sought an order that exceeds, by nearly 11 times the order which I will make. The strength of the application lay in the area of the enforcement costs in Ireland. The primary claim sought a good deal more than that, and, in my view, was not a realistic position for the Defendants to take on this application.

64. In the end, the Defendants have received a measure of protection - modest compared to what was sought - with respect to enforcement costs. That measure lies significantly below the top of the range of enforcement costs referred to by their Irish expert witness.

65. Both sides have had a measure of success on this application. There is no clear winner or clear loser.

66. In all the circumstances, I am not persuaded that an order should be made that the Plaintiff pay the Defendants' costs of the Notice of Motion. The order I will make, is that costs be costs in the cause.

67. With respect to the Notice of Motion filed 29 April 2011, I make the following orders:

(a) Pursuant to Rule 42.21(1) (a) Uniform Civil Procedure Rules 2005 , the Plaintiff, within 14 days of today, is to provide security for the Defendants' costs of and incidental to these proceedings by paying into Court the sum of $AU40,000.00.

(b) Until such security is given, the proceedings are stayed.

(c) I grant the Defendants liberty to apply in the event of default in Order (a) by the Plaintiff, so that the Defendants can move the Court for an order that the proceedings be dismissed.

(d) Costs are to be costs in the cause.


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Amendments


26 Jul 2011 Defect in Caselaw - doesn't recognise Euro symbol. Manually had to enter the word "Euro" in lieu of symbol. Paragraphs: Throughout Judgment

26 Jul 2011 Defect in Caselaw - doesn't recognise Euro symbol. Manually added the word "Euro" in lieu of the symbol where it appears throughout the judgment. Paragraphs: All throughout judgment