N2893

PAPUA NEW GUINEA

[National Court of Justice at Waigani]

WS 1560 of 2000

BETWEEN

NELSON & ROBERTSON EXPORTS PTY LTD
First Plaintiff

AND

COMTRAD PTY LTD
Second Plaintiff

AND

INVESTCO. LTD
Third Plaintiff

AND

RICHARD BARRELL
First Defendant

AND

MICHAEL NEWALL WILSON, ROD ROBINSON
And WILLIAM FRIZZELL trading as
WARNER SHAND LAWYERS (a firm)
Second Defendants

Waigani:	Gavara-Nanu, J
2004: 17th November & 08th December

COSTS – Security for costs – National Court Rules, Order 14 r 25 (1) (a) –First and second plaintiffs resident outside Papua New Guinea – No assets in Papua New Guinea – Third plaintiff de-registered – Orders granted.

PRACTICE & PROCEDURE – Security for costs – Proceedings not making real progress – Bona fides of the claim.

COSTS – Security for costs – Amount to be sufficient - Court’s discretion – Amount should not be based on mere estimates – Amount should be based on evidence and realistic estimates - Exercise of inherent powers unnecessary and inappropriate– Powers given to the Court by Order 14 r 25 (1) (a) of the National Court Rules sufficient.

Cases cited:
Avia Aihi -v- The State [1981] PNGLR 81.
Brinks Pty Ltd & Ors -v- Brinks Incorporated [1996] PNGLR 75.
Driver -v- Swanson [1977] PNGRL 30.
Mauga Logging Company Pty Ltd -v- South Pacific Oil Palm Development Pty Ltd (No. 2) [1977] PNGLR 467.
Odata Ltd -v- Ambusa Copra Oil Mill Ltd (2001) N2106.
Osprey Industries -v- Hallam [1992] PNGLR 557.
Yarlett -v- New Guinea Motors Ltd [1984] PNGLR 155.

Counsel:
T. Nonggorr, for plaintiffs/respondents.
I. Molloy, for defendants/applicants.

GAVARA-NANU, J:	By a Notice of Motion filed on 05th November, 2004, the defendants seek orders for the 1st, 2nd and 3rd plaintiffs (hereinafter referred to as ‘the plaintiffs’) to give security in the sum of K150,000.00 for their costs and incidentals to the proceedings within twenty eight days from the date of the Order. The amount requested is based on the estimates given in Mr. Frizzell’s affidavit sworn on 4th November, 2004. The amount includes the estimated K60, 000.00 for the overseas counsel’s fees. 

The defendants also seek orders that the proceedings be stayed until the security is given and in the event that the plaintiffs fail to give security within twenty eight days from the date of the Order, the proceedings will automatically stand dismissed with costs. The defendants also ask for the costs of this application.

The application is made pursuant to Order 14 r 25 (1) (a) of the National Court Rules, which provides:

25.	Cases for security.

(i)	where in any proceedings, it appears to the Court on the application of a defendant -

(a)	that a plaintiff is ordinarily resident outside Papua New Guinea;

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 was submitted by Mr. Molloy that apart from the powers given to the Court by this Rule to grant the orders sought, the Court also has its inherent powers to grant the orders.

The defendants are asking for security for costs because the first and second plaintiffs are resident outside Papua New Guinea and that they have no assets in Papua New Guinea. Besides, the third plaintiff has been de-registered.

Mrs. Nonggorr has conceded that the first and second plaintiffs are resident outside Papua New Guinea and that the third plaintiff has been de-registered.

In deciding the issue of whether the plaintiffs should be ordered to give security, following factors should be considered:- 

1.	Whether the claim is bona fide.
2.	Whether there is a reasonable prospect of the plaintiffs’ claim or action succeeding.
3.	Whether there is an admission by the defendants of the plaintiffs’ claim in the pleadings.
4.	Whether money has been paid into account.
5.	Whether the application is being used oppressively against the plaintiffs.
6.	Whether the plaintiffs’ want of means has been brought about by the defendants’ conduct.
7.	Whether there has been an undue delay by the defendants in making this application.

The list is not exhaustive but these factors in my view provide sufficient basis to decide the issue.

Following cases should provide valuable guidance: Yarlett -v- New Guinea Motors Ltd [1984] PNGLR 155, Osprey Industries -v- Hallam [1992] PNGLR 557 and Odata Ltd -v- Ambusa Copra Oil Mill Ltd N2106.

The plaintiffs’ claim relates to matters which occurred between 1990 and 1995 and the claim is in essence based on the alleged breach of duty by the defendants to their clients who are the plaintiffs. In that regard, it is noted from the Statement of Claim that the plaintiffs’ claim stems from what they claim was the failure by the defendants to exercise due care, skill and diligence in their advice to them as a result of which they say, they suffered substantial financial loss. 

Mr. Molloy told the Court that, although the proceedings were commenced in 2000, they have not really progressed. On that point, it is relevant to note also that on 17th November, 2004, which is the date this application was made, the parties obtained a Consent Order in which they agreed for the defendants to file an amended list of documents within seven days from that date.

Mr. Molloy submitted that the defendants’ costs will be substantial because the issues raised by the plaintiffs in their claim are varied and complex, thus warranting the engagement of an overseas counsel by the defendants. 

The plaintiffs oppose the application. Mrs. Nonggorr submitted that there has been an undue delay by the defendants in making this application. She submitted that the defendants have always known of the plaintiffs’ claim and that the first and second plaintiffs are resident outside Papua New Guinea, yet they did not make this application until now.

Mrs. Nonggorr also argued that the fees for an overseas counsel are not automatic nor are they as of right, as they are for the trial judge to determine and certify. Thus she argued that I cannot pre-empt the decision of the trial judge here by allowing a specific amount in fees for an overseas counsel.

Mrs. Nonggorr also submitted that the lack of progress in the proceedings was caused by the defendants.

The defendants deny that they are the cause of the delay and the lack of progress in the proceedings.

On the question of whether the plaintiffs’ claim is bona fide, Mr. Molloy emphasized that the claim relates to matters which occurred between 1990 and 1995, but the proceedings were not commenced until 2000, and since then, the proceedings have not really progressed. Besides, the third plaintiff has been de-registered. He submitted that these factors must cast doubt on the bona fides of the plaintiffs’ claim.

In regard to the question of whether the plaintiffs’ claim or action has a reasonable prospect of succeeding, Mr. Molloy submitted that the plaintiffs have not produced any evidence at all to show that the claim has such prospect.

Furthermore, Mr. Molloy submitted that there is no admission by the defendants of the plaintiffs’ claim and no money has been paid into account.

Mr. Molloy further submitted that the defendants are not using this application oppressively against the plaintiffs because the application is against the plaintiffs who are resident outside Papua New Guinea and who have no assets in Papua New Guinea; and in the case of the third plaintiff, it has been de-registered. The defendants therefore have the right to come to Court and invoke Order 14 r 25 (1) (a) of the National Court Rules.

In deciding whether I should order the plaintiffs to give security for costs, it is appropriate that I do so by addressing each of the matters listed above.

On the question of whether the plaintiffs’ claim is bona fide, I am of the opinion that the fact that the plaintiffs have not really progressed the proceedings since instituting the action in 2000, does cast doubt on the bona fides of the claim. Allied to this is the fact that the third plaintiff has been de-registered and that raises the serious issue of whether it has a standing in these proceedings. Furthermore, the claim relates to matters which occurred between 1990 and 1995, which is at least nine years ago.

Regarding the lack of progress in the proceedings, I note from the plaintiffs’ Statement of Facts that a request for particulars was made by the defendants on or about 13th February, 2001. The plaintiffs did not provide those particulars until 22nd March, 2002. That was one year after the defendants requested the particulars. Then almost seven months later, on 02nd October, 2002, the plaintiffs filed their amended particulars. Thereafter both parties filed documents relating to further discoveries. The last of which was filed on 17th November, 2004, which is the Consent Order for the defendants to file their amended list of documents. It is quite obvious from this that the proceedings have seriously stagnated.

In regard to the reasonable prospect of the plaintiffs’ claim succeeding, I agree with Mr. Molly that there is really no evidence upon which the Court can make such finding. The claim as I said is denied by the defendants and no admissions have been made by the defendants in the pleadings nor has any money been paid into account. Furthermore, I note from the pleadings that in 1998, the plaintiffs were paid K1,100,000.00 in full and final settlement of their claims. This in my view seriously begs the question of whether the plaintiffs have a cause of action or if not, whether the proceedings are frivolous and vexatious and an abuse of process. These can provide basis for summary determination of the proceedings but that is not what I am concerned with here. All these factors in my view quite plainly lend support to the defendants’ contention that the plaintiffs’ claim lacks a reasonable prospect of succeeding.

The defendants’ application on the other hand appears genuine and is properly grounded on Order 14 r 25 (1) (a) of the National Court Rules. This plainly negates any claim that this application is being used oppressively against the plaintiffs.

It follows from the foregoing that I should order security for costs against the plaintiffs as a matter of course, for it is not in dispute that the conditions upon which such order should be made under Order 14 r 25 (1) (a) of the National Court Rules have been satisfied, viz., the first and second plaintiffs are resident outside Papua New Guinea and have no assets in Papua New Guinea. Although it is not a requirement under the Rule for the plaintiffs to have assets in Papua New Guinea, it is a relevant factor to take into account when ordering security for costs against the plaintiffs. In respect of the third plaintiff, it is not registered. This is also a relevant factor to take into account because as noted, it raises the serious issue of whether the third plaintiff has a standing in these proceedings at all. I do not see any competing considerations or factors that can prevent this Court from ordering the plaintiffs to give security. See, Brinks Pty Ltd & Ors -v- Brinks Incorporated [1996] PNGLR 75; Driver -v- Swanson [1977] PNGRL 30.

The plaintiffs will therefore give security for the defendants’ costs.

This leads me to the next question which is the amount of security the plaintiffs should give. In this regard, the defendants have estimated their costs at K150,000.00. As noted, the estimated costs include K60,000.00 for overseas counsel’s fees. I cannot exercise my discretion infavour of the defendants/applicants because such fees are subject to certification by the trial judge. I cannot pre-empt what the trial judge might decide on the issue. Thus, I accept Mrs. Nonggorr’s argument on this point. I therefore disallow the K60,000.00 estimated for overseas counsel’s fees in full. The remaining amount in estimated costs for the defendants is K90,000.00.

What then is the appropriate amount which the plaintiffs should give in security for the defendants’ costs? Mrs. Nonggorr has submitted that an amount of K10,000.00 should be sufficient security for the defendants’ costs. But having considered the issues raised in the pleadings, I am of the opinion that K10,000.00 cannot provide sufficient security for the defendants’ costs. It would be unreasonably low in the circumstances of the case.

Mr. Molloy on the other hand submitted that if the amount sought by the defendants is rejected by the Court, then the plaintiffs should be ordered to give security in the sum of 80 % of their total estimated costs. This was the formulae applied in Osprey’s case.

The amount I have to work on here is K90,000.00. Therefore, if I was to allow 80% of the defendants’ estimated costs, the amount would be K72,000.00. I am of the opinion that this amount is unreasonably high in the circumstances of the case.

The cardinal rule is that the amount ordered must provide sufficient security for the defendants’ costs and in my opinion such amount should be based on costs already incurred by the defendants as well as reasonable estimates of their future costs.

In my opinion, by having evidence of incurred costs by the defendants as well as reasonable estimates of their future costs, the Court would be better able to determine the amount that is sufficient security for defendants’ costs based on those figures. See, Osprey Industries -v- Hallam (supra). However, in that case, the trial judge only had evidence of costs incurred by the applicants. Thus the trial judge used those incurred costs as guides in arriving at the amount for security for costs. In this case, I have also taken the view that reasonable estimates of future costs for the defendants/applicants should also be taken into account together with the incurred costs in determining the amount for security for costs.

In this case, the estimates of defendants’ costs given in Mr Frizzell’s affidavit are not helpful because they are not based on any incurred costs by the defendants and on reasonable estimates of their future costs. It is not difficult for the defendants to provide evidence of costs already incurred. But in regard to the reasonable estimates of their future costs, the defendants should have provided realistic estimates based on some credible evidence of how and why those costs would be incurred. For instance, evidence as to the types of issues to be tried viz; whether the issues would be complex and if so, how and why they would be so complex; the types of witnesses to be called viz; whether expert witnesses would be called; the number of witnesses to be called and why that number of witnesses would be required; whether affidavits will be filed and if so, how many; time required for conferences with witnesses; how long the trial is expected to last and so on. These factors would in my opinion assist in providing the basis of realistic estimates of the defendants’ future costs and would indeed better assist the Court in determining the appropriate amount for security for costs. 

The amounts given in Mr. Frizzell’s affidavit do not appear to have any real basis or justification as no material evidence is put forwarded as the basis for those estimates. On this point, I have noted the matters deposed in paragraphs 7, 8 and 9 of Mr. Frizzell’s affidavit but in my opinion they do not provide sufficient material upon which the defendants’ estimated costs could be based. As a general rule, the amounts given should not just be mere estimates as it appears to be the case here, but that they should be realistic estimates based on sufficient affidavit material deposed by a senior counsel with relevant experience.

Applying these principles, I am of the opinion that the fair and appropriate amount is two thirds of K90,000.00 estimated costs for the defendants which is K60,000.00. I therefore Order that the plaintiffs give K60,000.00 in security for defendants’ costs.

I have been asked by the defendants to give the plaintiffs twenty eight days from the date of the Order to give security and in the event that the plaintiffs fail to give security within that period, the proceedings should automatically stand dismissed.

However, I am of the firm opinion that, at this stage, I have no powers to make such self executing orders, because Order 14 r 25 (1) (a); pursuant to which this application is being made only empowers the Court to stay the proceedings "until the security is given". Thus, the Rule only gives the Court power to fix the time by which the security is to be given and to stay the proceedings for that purpose. It does not give the Court power to go a step further and make self executing orders. The underlying reason is that the power of the Court to determine this application derives solely from the Rule and the Rule is no meant to facilitate self executing orders at this stage.

Thus to apply the Rule in the way suggested by Mr. Molloy would not only amount to an abuse of process but that it would also render this application oppressive against the plaintiffs.

In my opinion, self-executing orders would be appropriate and necessary if the defendants were to make another application to enforce this Order, in the event of the failure by the plaintiffs to give security in the time given by the Court. At that stage the Court would be in the position to exercise both its inherent powers under s. 155 (4) of the Constitution and the powers given to it under Order 14 r 27 of the National Court Rules which is a relief provision, to grant self executing Orders. See, Mauga Logging Company Pty Ltd -v- South Pacific Oil Palm Development Pty Ltd (No. 2) [1977] PNGLR 467. 

The defendants/applicants can invoke Order 14 r 27 together with the inherent powers of the Court if the plaintiffs fail to give security within the time given by the Court under Order 14 r 25 (1).

Order 14 r 27 is in these terms:

27.	Failure to give security.

Where a plaintiff fails to comply with an order under this Division, the Court may on terms order that the proceedings on any claims by the plaintiff for relief in the proceedings be dismissed.

This Rule envisages inter alia; an application being made to the Court by the defendants for dismissal of the proceedings should the plaintiffs fail to comply with this Order. At this stage however, the Court is bound by strict terms of Order 14 r 25 (1) (a) and it cannot go behind it.

Thus it is plain that to invoke the inherent powers of the Court under s. 155 (4) of the Constitution at this stage to make self executing orders would be improper and it would conflict with the specific powers given to the Court under Order 14 r 25 (1) (a) of the National Court Rules in which case the Rule must prevail. See, Avia Aihi -v- The State [1981] PNGLR 81. It would also be an abuse of process as Order 14 r 27 would inevitably be invoked as part of the process. The exercise of the Court’s inherent powers at this stage is therefore unnecessary and inappropriate.

In the result, I Order that the plaintiffs give security in the sum of K60,000.00. I also Order that the plaintiffs give security in this amount within twenty eight days from today. I further Order that the proceedings be stayed until the security is given by the plaintiffs. 

In the event that the plaintiffs fail to give security within twenty eight days from today, the defendants will be at liberty to apply for the dismissal of the proceedings by invoking the Court’s inherent powers and Order 14 r 27.

The plaintiffs will pay the defendants’ costs of the application.

_____________________________________

Lawyer for the plaintiffs 	: Gadens Lawyers.
Lawyer for the defendants	: Warner Shand Lawyers.