SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2020 0113

RAYMOND JOHN STUART	Applicant	
		
v		
		
KEVIN SAID	Respondent	

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JUDGES:	MAXWELL P and McLEISH JA	
WHERE HELD:	MELBOURNE	
DATE OF HEARING:	5 August 2021	
DATE OF ORDERS:	5 August 2021	
DATE OF PUBLICATION OF REASONS:	20 August 2021	
MEDIUM NEUTRAL CITATION:	[2021] VSCA 226	
JUDGMENT APPEALED FROM:	[2020] VSC 658 (Kennedy J)	

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PRACTICE AND PROCEDURE – Security for costs – Inherent jurisdiction – Plaintiff (applicant) a natural person – Plaintiff impecunious – Whether discretion to order security for costs requires ‘exceptional circumstances’ or ‘additional factor’ – Multiple versions of pleading – Plaintiff unable to formulate claim against defendant – Substantial costs incurred by defendant - Circumstances justifying exercise of discretion not confined to specified categories – Inadequacy or absence of pleadings relevant to exercise of discretion – No error shown – Leave to appeal refused - Lines v Tana Pty Ltd [1987] VR 641, considered, Von Marburg v Aldred [No 3] [2017] VSC 146, approved. 

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APPEARANCES:	Counsel	Solicitors	
			
For the Applicant	Mr J Evans QC with 
Mr W Stark	Mahons with Yuncken & Yuncken Lawyers	
			
For the Respondent	Mr S R Horgan QC with Mr N A Frenkel	HWL Ebsworth Lawyers	

MAXWELL P 
McLEISH JA:
1	The respondent succeeded before an associate judge, and again in an appeal conducted by way of hearing de novo before a judge in the Trial Division, in obtaining an order that the applicant provide security for his costs of a proceeding pending in the Trial Division.  The applicant sought leave to appeal on the basis that the judge erred in finding, and relying on the fact, that the respondent had failed to articulate a properly defined claim despite extensive opportunities to do so.  
2	In his written case, the applicant’s argument had two aspects.  He contended that the finding that he had failed to articulate a properly defined claim against the respondent was in error.  He also contended that the cases imposed a legal standard in this respect which the judge failed to apply in any event.  
3	In oral argument, senior counsel for the applicant did not press the former argument.  He properly conceded that the applicant had failed to articulate an adequately pleaded claim against the respondent, and that, in those circumstances, he had been responsible for excessive costs and delay.  However, he maintained the submission that the judge had erred in law in relying on this finding as a basis for ordering security for costs.
4	The latter submission was advanced in various ways, as outlined below.  Having heard full argument, we formed the view that the submission was wrong in law and we made orders refusing leave to appeal accordingly.  Our reasons follow.
Principles
5	Rule 62.02 of the Supreme Court (General Civil Procedure) Rules 2015 provides that, in specified circumstances, the Court may order that the plaintiff give security for the defendant’s costs of the proceeding and may stay the proceeding against that defendant until the security is given.  However, the Court also retains an inherent jurisdiction to order security for costs.  As Derham AsJ explained in Von Marburg v Aldred [No 3]: 
The Court retains an inherent jurisdiction to order security for costs as an adjunct to the Court’s power to regulate its own procedure.  The inherent jurisdiction to order security for costs provides an important safeguard.  It permits the Court to require security for costs where that is necessary in the interests of justice in circumstances that fall outside the categories found in r 62.02 of the Rules.
6	Derham AsJ went on to make a point that is important to the disposition of the present application:
It is also true that the inherent jurisdiction is not restricted to the examples in the decided cases, in the sense of denying the existence of the power for any other case.  The fact that the power has been regularly exercised in a limited number of cases and refused in others proves the existence of, but does not restrict, the jurisdiction.
7	Security for costs was ordered in this matter in the inherent jurisdiction of the Court.  The question for the judge was therefore whether it was necessary in the interests of justice to order security for costs.  The issue involved an exercise of discretion on the part of the judge.  On any appeal, therefore, the principles in House v The King apply.  
The judge’s decision
8	The history of this matter appears sufficiently from the following parts of the judge’s reasons:
The plaintiff commenced this proceeding against the Mordialloc Sporting Club (MSC) by statement of claim filed on 3 September 2018 (V1).  
The plaintiff is a member and former director of MSC which is an association incorporated pursuant to the Associations Incorporation Reform Act 2012 ... 
MSC is also a tenant of property owned by John Barr Investments Pty Ltd (JBI).  The lease between JBI and MSC gave MSC a right to purchase the freehold.  MSC has subsequently sought to exercise that right and to on sell the property to third parties with a lease back arrangement. 
The plaintiff in this proceeding seeks orders setting aside the sale.  JBI seeks the same relief in a separate proceeding, S ECI 2018 01223.
On 4 June 2019 the plaintiff sought to add [the respondent] and five others as defendants and exhibited a proposed amended statement of claim (V2).
On 5 June 2019 orders were made giving leave to the plaintiff to add Mr Said and the others who are all directors of MSC. 
On 17 June 2019 the plaintiff’s solicitors filed an amended writ and amended statement of claim adding the six defendants (the ASOC).  However, the version filed was different to V2 (V3). 
…
Apart from MSC, none of the defendants have yet filed a defence.
In the prayer for relief contained in the ASOC, the plaintiff sought injunctions restraining MSC from taking any steps to purchase, sell, transfer, or otherwise deal with its interest in the property, along with various declarations about the acts of MSC which are impugned by the plaintiff.  In addition, the plaintiff sought damages against each of the second to seventh defendants.
Following correspondence between the parties as to alleged deficiencies in the ASOC, on 29 July 2019 the plaintiff’s solicitors sent an email to the court attaching an affidavit … seeking leave to add six further defendants, and to file and serve a proposed further amended statement of claim dated 30 July 2019 … (V4).
…
On 20 September 2019 the plaintiff’s solicitors filed and served a summons and affidavit … seeking leave to join JBI as the second plaintiff as well as to add a further six defendants (the same six sought to be added on 29 July 2019).  They also filed and served a second proposed further amended statement of claim …, which was the first joint pleading prepared by the solicitors and counsel for both the plaintiff and JBI (V5) (107 pages).  Both sought orders setting aside the on-sale deed. 
…
On 18 November 2019 the plaintiff served an affidavit … exhibiting a further proposed further amended statement of claim (V6) (112 pages) prepared by legal practitioners for both the plaintiff and JBI.  V6 again sought orders setting aside the on-sale deed. 
At the conclusion of the pleadings contest on 19 November 2019, Randall AsJ refused the plaintiff’s application for leave to file and serve V6 and ordered that the plaintiff provide another proposed further amended statement of claim to the defendants on or before 18 December 2019.  The various applications were otherwise adjourned subsequently to 13 March 2020.   
…
On 19 December 2019 the plaintiff provided a further proposed further amended statement of claim to the defendants (V7).  In this proposed pleading the plaintiff sought to join JBI as the 14th defendant, not as the second plaintiff. 
... 
On 20 February 2020 the plaintiff provided yet another proposed further amended statement of claim to the defendants (V8). 
The claim is extensive, spanning some 128 pages.  It included claims purportedly made on behalf of MSC and sought relief, inter alia, to set aside the transactions surrounding the sale.  Although damages were sought on behalf of MSC, there was no longer a claim for personal damages in the name of the plaintiff.  
At the hearing of the pleadings contest, on 13 March 2020 and 25 March 2020, Randall AsJ described the pleading as a ‘dog’s breakfast’.  He refused the plaintiff leave to file and serve V8, but said that he would give the plaintiff leave to re-plead.  
The parties are now awaiting formal reasons and orders from his Honour. 
Any further pleading will constitute the ninth version of the statement of claim in circumstances where the plaintiff has not yet obtained leave to file any pleading since 5 June 2019. 
9	The judge found, and it is not in dispute, that there was reason to believe that the applicant would be unable to pay the respondent’s costs if the applicant were unsuccessful in the proceeding.  However, the judge stated that ‘it is usual that some other or additional factor to a plaintiff’s impecuniosity must be present in order that an individual plaintiff provides security for costs’.
10	The judge found that, in the present case, the relevant ‘additional factor’ was supplied by the fact that ‘the plaintiff has been unable to articulate a properly defined claim of merit despite having extensive opportunities to do so’, taken together with ‘the associated costs and delay’.  As indicated, in so far as this finding refers to the case against the respondent, it is no longer in dispute.
11	The applicant contended that, in relying upon the ‘additional factor’ that she identified, the judge applied an incorrect test.  In the written case, this argument was put in three ways.  
12	First, the applicant submitted that security for costs will be ordered against a natural person ‘only in a few exceptional circumstances’.  In support of this proposition, the applicant relied on Lines v Tana Pty Ltd.  The relevant passage needs to be set out so that it can be understood in context.  The Full Court in that case said:
There can be no question that the power to order security for costs exists and derives from the Court’s inherent power to regulate its own procedures.  There was some debate as to whether the power is ‘fettered’ or ‘unfettered’.  We think little is to be gained by striving to resolve that question.  Even if it is to be described as ‘unfettered’, the authorities that establish that the poverty of a plaintiff alone is not a sufficient ground for a grant of security are unanimous and manifold.  It is true also that the cases make it plain that an order will be made ‘only in a few exceptional circumstances’.  
On the other hand, if it should be chosen to describe the power as ‘fettered’, we would be reluctant to lay down as an inviolate rule the proposition that … an order will be made only if the plaintiff falls within one or other of … three categories … .
13	In our view, it is plain that the Court was not prepared to confine the circumstances justifying the exercise of the discretion to order security to defined categories, and that it was equally not purporting to confine the exercise of that power to ‘exceptional circumstances’.  Rather, the Court was at pains to preserve the breadth of the discretion.  In any event, as the respondent submitted, more recent decisions provide no support for the application of a specific test of ‘exceptional 
circumstances’ limiting the discretion of the Court to order security for costs.  As Derham AsJ put it in the second passage cited above from Von Marburg, the fact that the inherent jurisdiction has been regularly exercised in a limited number of cases and refused in others proves the existence of, but does not restrict, that jurisdiction.
14	Secondly, the applicant submitted that, to justify security for costs on the basis of an unsatisfactory pleading, the defendant must show that there are ‘ill-pleaded allegations’.  Reliance was placed on the following passage from the judgment of Young J in Bhagat v Murphy:
The Court needs to make sure that its process is not being abused by putting the defendant in a position where it may have to spend half a million dollars to defend itself against ill-pleaded allegations with no hope of any recovery if the defence is successful.
15	The applicant noted that, in Fitzsimmons v Commonwealth Bank of Australia, Bergin CJ in Eq held that an ‘unusual’ pleading did not fall within the description given by Young J in Bhagat and went on to refuse to order security on the basis of the pleadings.  
16	Neither of these cases supports the argument that, in order for the state of pleadings to be relied upon to justify an order for security for costs, it must be shown that the pleading contains ‘ill-pleaded allegations’.  While the existence of such allegations may well be a factor relevant to the exercise of a discretion whether to order security for costs, there is no basis for limiting the discretion to cases fitting that description.  In Bhagat, Young J was merely instancing circumstances in which security would be appropriate.  Fitzsimmons is immediately distinguishable from the present case because pleadings had reached the stage where a defence had been filed and so issue was joined.  Bergin CJ in Eq did not accept that the pleadings before her contained ‘ill-pleaded allegations’, and in any event did not suggest that this was a necessary criterion for making an order for security.
17	Thirdly, the applicant contended that it was necessary for the judge to be satisfied that the pleadings were in such a state that the proceeding was in some way ‘hopeless’ or ‘harassing or vexatious’.  He relied on the following statement of Black J in Re Sundara Pty Ltd (recs & mgrs apptd) (in liq):
Neither impecuniosity, nor relative weakness of a case pleaded, falling short of hopelessness which would provide a basis for summary dismissal, would in themselves warrant an order for security for costs, unless something can be added that would lead to a conclusion that the proceedings are in some way harassing or vexatious.
18	This case is distinguishable because the relevant pleading was one as to which the judge found that there were no concerns;  the real issue was whether the case was seriously arguable.  Black J was therefore not addressing, or excluding as a relevant consideration, the failure of a plaintiff adequately to plead a case over a sustained period of time.  In our view, therefore, the case is not to be taken to be laying down a rule of law amounting to a fetter on the exercise of the discretion to order security for costs.  To the extent that Black J might be thought to have done so, we respectfully disagree that the inherent jurisdiction is subject to any such fetter, which would be contrary to the authorities referred to above emphasising the breadth of the discretion.
19	In oral argument, senior counsel for the applicant advanced a more developed submission.  He contended, first, that the requirement that there be an ‘additional factor’ was, in effect, a precondition that must be satisfied in order to enliven the discretion to order security.  Secondly, he submitted that the absence of a properly pleaded case could not in law amount to that necessary additional factor.
20	Importantly, counsel conceded that the absence of a properly pleaded case, and the attendant cost and delay thereby occasioned, would be matters relevant to the exercise of the discretion. He maintained, nevertheless, that this circumstance did not avail the respondent as it was not capable — on the authorities — of satisfying the ‘additional factor’ precondition and, hence, the discretion was never enlivened. 
21	Neither aspect of these submissions can be accepted.
22	Leaving aside the case of corporations, it has long been the case that security for costs will not be ordered against a plaintiff solely on the grounds of that plaintiff’s poverty or impecuniosity.  This has been described as a ‘rule’ or ‘principle’, or as a manifestation of a ‘disinclination’, or as the ‘usual’ position.  But whatever the strength or rigidity of this identified practice of the courts, no authority supports the proposition that the discretion to order security for costs is not enlivened unless an ‘additional factor’ is first identified.  
23	Such a proposition also finds no support in principle.  The exercise of the discretion to order security for costs usually involves a balancing of competing considerations.  On the one hand, there is the Court’s concern not to place obstacles in the way of a plaintiff who seeks to invoke its jurisdiction to secure a remedy using its processes.  On the other, there is the concern that a defendant who is ultimately successful in resisting a claim, and who could then ordinarily expect to have a costs order in his or her favour, might find that order to be worthless;  the operation of the costs regime to discourage unnecessary litigation may thus be undermined.
24	The circumstances in which these competing considerations may arise for evaluation are as varied as the human interactions between individuals which may give rise to litigation.  For that reason, the courts have long been at pains not to seek to circumscribe in advance the possible bases for ordering that security for costs be provided.  In Rajski v Computer Manufacture & Design Pty Ltd, Holland J said: 
the inherent jurisdiction to award security for costs cannot validly be said to be restricted to … examples in the decided cases in the sense of denying the existence of the power for any other cases.  It may be postulated that the general practice in the exercise of the power is to be found in the cases but it is another thing to say that an ever present inherent power to regulate the court’s procedure so as to attain the ends of justice can wither away or become shrunken by limited past examples of its exercise.  In my opinion, the fact that in the past the power has been regularly exercised in a limited number of cases and refused in others proves the existence of but does not restrict the jurisdiction.
25	Yet the applicant’s suggested approach would have the opposite effect.  It would impose a straitjacket on the inherent jurisdiction by confining its operation to certain categories of case.  That is the framework upon which r 62.02 proceeds, but the very purpose of the inherent jurisdiction is to expand the jurisdiction to any situation where the justice of the case requires. 
26	The suggested approach also involves an element of formalism that is not supported by the authorities or by any consideration of principle.  As we have mentioned, senior counsel for the applicant accepted, quite properly in our view, that the state of the pleadings was a matter relevant to the exercise of the discretion, if it were enlivened.  That follows from the fact that the inherent jurisdiction exists to protect and enhance the processes of the Court.  But no reason was advanced, and we can think of none, why that relevant consideration would be unable to be considered until some additional and different matter favouring an order for security were first identified.
27	Even if it were necessary, in order to enliven the discretion to order security for costs, to identify an ‘additional factor’, we also reject the argument that the state of the pleadings cannot satisfy that requirement.  In this part of the argument, the applicant pointed to the existence of procedural mechanisms for amending and challenging the adequacy of pleadings, with attendant procedural and costs consequences depending on the outcome of specific applications.  It was contended that resort to such tailored remedies, and not the blunter instrument of security for costs, was the appropriate way of dealing with inadequate pleadings.
28	No doubt the above argument may weigh in a court’s evaluation of a security for costs application advanced on the basis of deficient pleadings.  But we fail to see how its effect is so powerful as to altogether preclude treating an examination of the state of pleadings in such an application as the suggested ‘additional factor’.  
29	The applicant argued that the relevant ‘additional factor’ in such an application was an assessment, not of the state of the pleadings, but of the plaintiff’s prospects of success.  (The judge had identified ‘lack of prospects of success’ as an example of an ‘additional factor’ relied on for this purpose).  There are several answers to this argument.
30	First, it may equally be said that there are interlocutory processes available for addressing a case said to lack prospects of success.  The applicant did not explain why that issue, unlike the state of pleadings, was available as an ‘additional factor’ in the context of a security for costs application.
31	Secondly, the suggested distinction is one largely without a difference.  At the most general level, persistent inability to articulate a viable claim would seem to be just as relevant to the discretion whether to order security as the pleading of a claim which the court can assess as having no reasonable prospects of success.  
32	Thirdly, and related to the previous point, persistent inability to formulate a viable claim can properly be regarded as an indicator of poor prospects of success.  The fact that there is not a viable pleading, after multiple attempts to produce one, would usually tend to suggest limited prospects of success, at best.  Conversely, without a pleading, it may not be possible for the Court to be satisfied that, despite that circumstance, the case has reasonable prospects.
33	This last point is related to an observation made by Griffiths J in Ninan v St George Bank Ltd, in the context of ordering security for costs in a case where there were pleadings in a deficient form:
The applicants have declined to address the many deficiencies in their pleadings.  The significance of these matters lies in the fact that the Court cannot properly proceed on the basis of the general rule that, where a claim is prima facie regular on its face and discloses a cause of action, it is appropriate (in the absence of evidence to the contrary) to proceed on the basis that the claim is bona fide and has reasonable prospects of success.  The applicants cannot have the benefit of that approach here.  I do not doubt the genuineness of the applicants’ subjective belief that they have genuine grievances, but that is not the relevant test in the context of the interlocutory applications before me.
34	Once it is accepted that deficient pleadings may bear upon the resolution of an application for security for costs, in our view it follows inevitably, and indeed with greater force, that an absence of pleadings, especially over a sustained period, is likewise relevant.
35	In summary:
(a)	The inherent jurisdiction to order security for costs may be exercised whenever the interests of justice require, in all the circumstances of the case.
(b)	The Court has a discretion which is not otherwise fettered or confined by reference to specified categories.
(c)	The inquiry when the Court’s jurisdiction is invoked involves the single issue of what the interests of justice require and it is not necessary to satisfy any additional precondition to enliven the jurisdiction.
(d)	The power is not usually exercised against an impecunious plaintiff unless there is something in addition to the plaintiff’s impecuniosity to justify making the order.
(e)	There is no requirement that the defendant establish ‘exceptional circumstances’, or that the case is ‘ill-pleaded’, lacks prospects of success, or is harassing or vexatious.  Each of those matters may be relevant in a given case, but they do not constitute conditions to be satisfied before an order can be made.  
(f)	The absence of a properly pleaded case may likewise be relevant to the exercise of the discretion.
Conclusion
36	The judge hearing the application in this matter had a broad discretion and was entitled to exercise it on the basis that the history of the matter and the state of the pleadings revealed that substantial expense and delay had resulted from the failure of the applicant to that point to plead his case satisfactorily.  No error has been identified in the making of that finding, or in the application of the law to the facts of the case.
37	Leave to appeal was therefore refused.
38	We note finally that the parties briefly canvassed an issue that has arisen between them as to the width of the stay ordered by the judge in the event that security was not provided.  The applicant foreshadowed an application to the judge under the slip rule.  If such an application is made in due course, that would be a matter discrete from this application for leave to appeal and we say nothing about it.
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