Florida Kitchens Pty Ltd v Number One Marble and Granite

1. [1]

   HER HONOUR: By notice of motion filed 20 February 2019, the defendant seeks firstly, an order pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the plaintiff provide security for costs of the defendant in these proceedings in the amount of $66,375 or such other amount as this Court deems appropriate in such manner and on such terms as the Court deems appropriate; secondly, if order (1) is made, then if security for costs is not provided by the plaintiff in accordance with order (1), the proceedings be stayed immediately until further order of the Court; and, if the order has not been complied with within 28 days of the staying of the proceedings, then the proceedings be dismissed with an order for costs made in favour of the defendant.

2. [2]

   The plaintiff is Florida Kitchens Pty Ltd (“Florida Kitchens”). The defendant is Number one Cutting Services Pty Ltd t/as Number One Marble and Granite (“Number One”). The parties relied upon a court book and a supplementary court book. For convenience, I shall refer to the parties by name.

3. [3]

   The original proceedings were commenced in the Local Court between Number One as plaintiff and Florida Kitchens as defendant. They concerned the supply by Number One of Caesarstone bench tops to the value of $20,130. Florida Kitchens denied ordering or receiving the bench tops.

4. [4]

   Florida Kitchens successfully applied to have the proceedings transferred to the New South Wales Civil and Administrative Tribunal (NCAT).

5. [5]

   On 5 December 2017, NCAT Senior Tribunal Member G Meadows (the “Tribunal Member”) handed down the principal decision in favour of Number One and ordered Florida Kitchens to pay Number One the sum of $20,130. It is common ground that Florida Kitchens has paid Number One the sum of $20,130. On 12 June 2018, the Tribunal Member handed down a decision on costs in favour of Number One.

6. [6]

   Florida Kitchens appealed to the internal Appeal Panel of NCAT comprising of Senior Members S Higgins and D A C Robertson (“the Appeal Panel”). On 27 November 2018, The Appeal Panel handed down its decision. The orders it made were as follows:

7. [7]

   To date there have been three costs orders made, one in favour of Florida Kitchens and two in favour of Number One. They are:

   1. (1)

      On the decision of the Local Court dated 27 July 2016, leave was granted for Number One to file an amended statement of claim. Number One was ordered to pay Florida Kitchens’ costs thrown away by the amendment as agreed or assessed. Mr George Elias of Cadmus Lawyers, solicitor acting for Florida Kitchens, sent an invoice to Number One in relation to those costs for the total sum of $29,527.50. Number One submitted that the claim is outrageous. The difficulty with this invoice is that it contains costs that do not relate to the costs thrown away by the amendments to the statement of claim. In any event, if Number One does not reach an agreement with Florida Kitchens, Florida Kitchens will be required to have its costs assessed.

   2. (2)

      In the decision of the Tribunal Member dated 5 December 2017 (CB 49), Florida Kitchens was ordered to pay Number One’s costs.

   3. (3)

      In the decision of the Tribunal Member dated 12 June 2018, Florida Kitchens was ordered to pay the costs of Number One on an indemnity basis.

8. [8]

   Florida Kitchens is awaiting the finalisation of proceedings before preparing its two bills of costs for assessment.

9. [9]

   The nub of the dispute that was before the Tribunal Member is set out in the decision of the Appeal Panel at [2] (CB 93). In summary, the sum of $20,130 was found to be due in respect of the manufacture and installation by Number One, at the request of Florida Kitchens, of Caesarstone bench tops and splash backs at three building sites. At the hearing, Florida Kitchens relied upon a witness statement, subject to objection. As the statement was admitted into evidence but was not available for cross examination, counsel for Number One submitted that it should be given no weight. Two witnesses for Number One gave evidence.

10. [10]

    On 20 December 2018, Florida Kitchens filed a summons in this Court seeking leave to appeal the decision of the Appeal Panel.

11. [11]

    After the application for security for costs is determined, the issue to be determined at the hearing is whether Florida Kitchens should be granted leave to appeal in this Court pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW) (“CAT Act”). Section 83(1) of CAT Act provides that the Florida Kitchens requires leave from the Supreme Court, and may only appeal on a question of law. It may be that both the application for leave and the appeal are dealt with together. That is a matter for directions.

12. [12]

    Section 83 of the CAT Act reads:

13. [13]

    Florida Kitchens’ summons seeking leave to appeal states that the Appeal Panel erred in law in not finding that Tribunal Member G Meadows erred in law and/or in the exercise of his discretion. It then sets out 106 grounds of appeal, which understandably I have not reproduced here. Counsel for Florida Kitchens submitted that the application for leave to appeal involves matters including errors in law, jurisdictional issues, questions of public interest, denial of procedural fairness, failures to apply and comply with the terms of the applicable legislation, in particular the Home Building Act 1989 (NSW), lack of evidence in supporting findings, failure to take into account mandatory relevant considerations and statutory sanctions, taking into account irrelevant considerations, failure to give proper and/or adequate reasons, making findings and conclusions amounting to jurisdictional error and making speculations and conclusions not supported by evidence and/or contrary to the evidence.

14. [14]

    It should be borne in mind that the onus is on Florida Kitchens to articulate its summons with precision and with a view to identifying the real questions of law. The summons seeks only leave to appeal. It does not seek a judicial review under s 69 of the Supreme Court Act 1970 (NSW). Some of these matters raised in the summons seem to be grounds of judicial review and some are neither questions of law nor grounds of judicial review.

15. [15]

    The Appeal Panel grouped the grounds of appeal before it into Groups A to J. They are:

Security for costs

1. [16]

   Number One relies upon UCPR 42.21 and the court’s inherent power to order security for costs. Florida Kitchens opposes the orders sought.

2. [17]

   UCPR 42.21 reads:

3. [18]

   Counsel for Florida Kitchens submitted that an appeal from NCAT is a judicial review of the decision made by NCAT, and that these appeal proceedings are governed by ss 65 and 69 of the Supreme Court Act and UCPR 59.11.

4. [19]

   According to Florida Kitchens, the issue of security for costs is governed by UCPR 59.11. It submitted that the application for security for costs was initiated by Number One pursuant to UCPR 42.21, and that UCPR 42.21 does not apply to these proceedings. Therefore, Number One’s application for security for costs is misconceived and should be dismissed with costs.

5. [20]

   UCPR 59.11 reads:

6. [21]

   Florida Kitchens’ application for leave to appeal is not a judicial review of the decision of NCAT, nor does Number One rely solely upon UCPR 42.21. It also relies upon the inherent power of the Court. As I have explained earlier, the summons is framed in terms of leave to appeal and not judicial review. It is my view that UCPR 59.11 does not apply to a summons seeking leave to appeal. This argument fails.

7. [22]

   Pursuant to UCPR 42.21(1)(d), the Court must be satisfied that there are reasons to believe that Florida Kitchens will be unable to pay Number One’s costs if ordered to do so (“the threshold issue”); and that the Court should exercise its discretion to order security for costs having regard to a range of factors, a summarised by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 (“Meltglow”).

8. [23]

   Florida Kitchens submitted that the onus is on Number One to identify the basis of its concerns and establish its allegations, and that it has failed to do so.

9. [24]

   On 27 December 2018, Number One’s solicitor, Mr David Simons, wrote by email to Florida Kitchens’ solicitor, Mr George Elias. The email stated (CB 40):

10. [25]

    On 22 January 2019, the solicitor for Number One emailed the solicitor for Florida Kitchens to serve its appearance, and seek a response to its earlier correspondence as a matter of urgency (CB 41).

11. [26]

    On 5 February 2019, the solicitor for Florida Kitchens emailed Number One’s solicitor, stating (CB 42):

12. [27]

    On 7 February 2019, the solicitor for Number One responded (CB 43):

13. [28]

    On 12 February 2019, Florida Kitchens’ solicitor responded:

14. [29]

    Number One’s solicitor, David Simons, deposed that he has found no evidence that the plaintiff has any assets or is trading profitably. A copy of an ASIC search of Florida Kitchens Pty Ltd dated 13 February 2019 reveals that the director and secretary is Andre Elias. Despite numerous letters to Florida Kitchens’ solicitor, no profit and loss reports or balance sheets for the financial years ending 30 June 2017 and 2018, or bank statements from the period of 1 July 2018 to date for any bank accounts operated on behalf of Florida Kitchens, have been provided to Number One.

15. [30]

    The final step taken by the solicitor for Number One was to serve a subpoena on Florida Kitchens and its solicitor seeking the profit and loss reports and balance sheet for financial year ending in 30 June 2018, and bank statements for the period from 1 July 2018 to 20 February 2019 (CB 304).

16. [31]

    A copy of the subpoena issued to Florida Kitchens and a one-page document were produced to the Court. The documents reads:

17. [32]

    The subpoena was served upon (or at least came to the attention of) Florida Kitchens, because it forwarded documents to the Court.

18. [33]

    As can be seen, there is a dispute concerning the requirement to supply conduct money. Counsel for Number One submitted that no conduct money is required for documents to be produced. Counsel for Florida Kitchens says that conduct money is required. While this issue is not germane to whether or not security for costs should be provided, I shall briefly mention it as there is an ambiguity contained on the New South Wales Government Justice Law Access website.

19. [34]

    Counsel for Florida Kitchens referred to the section on the website titled “Subpoenas – Step by step guide”. Under the heading “Step 2: Fill out the subpoena form”, it states:

20. [35]

    In Hall v Donlon [2011] NSWSC 1088, in relation to the issue of a subpoena for production, Brereton J stated at [5]:

21. [36]

    As is set out above, conduct money is not required to be tendered on the service of a subpoena to produce documents pursuant to UCPR 33.11. Ordinarily that question will be determined after compliance with the subpoena, when the addressee has incurred expenses. The step by step guide to issuing subpoenas in relation to the obligation to pay conduct money does not differentiate between a subpoena to give evidence and one to produce documents. So the failure to tender conduct money when the subpoena was served is not a valid objection. That leaves the answer to the subpoena as “NO DOCUMENTS”.

22. [37]

    Despite letters addressed to Florida Kitchens’ solicitor and a subpoena addressed to Florida Kitchens served upon it and its solicitor, Florida Kitchens failed to produce the profit and loss reports or balance sheets for the financial years ending 30 June 2017 and 2018 and bank statements the period from 1 July 2018 to date for any bank accounts operated on its behalf.

23. [38]

    Florida Kitchens further submitted that it had no difficulty in paying the sum of $ 20,130.00 to Number One under protest and while reserving its rights, and which Florida Kitchens is seeking back as part of its orders on appeal. It attempted to settle the proceedings on a commercial basis, and offered to make payment to Number One on a without prejudice basis, which Number One rejected. It also rendered an invoice to Number One seeking payment of a costs order in its favour in the sum of $29,000. If Florida Kitchens had the bill of costs assessed it would be markedly reduced. The bill had not been prepared in accordance with the costs order actually made. However, against that, Number One has two costs orders in its favour. Its costs of the hearing before the Tribunal Member are to be paid by Florida Kitchens on an indemnity basis.

24. [39]

    Florida Kitchens also submitted that the solicitor for Number One failed to produce, apart from an ASIC company search, any of the public searches records which he carried out or could have carried out in relation to the assets of Florida Kitchens. Therefore, the solicitor’s statement in p 14 of his affidavit dated 20 February 2019 is inaccurate in stating that he “found no evidence that the plaintiff has any assets”. It is not sufficient to prove simply that Florida Kitchens is a corporation.

25. [40]

    I agree that the onus is on Number One to establish that there is reason to believe that Florida Kitchens will be unable to pay costs of Number One if ordered to do so. In this case, despite numerous letters, Florida Kitchens and/or its solicitor have refused to provide any of the financial records requested, and have not offered any security for costs. In these circumstances, the solicitor for Number One, Mr Simons, believes that Florida Kitchens has no assets to satisfy any costs order, or at least does not reveal any assets. It is his concern that Florida Kitchens will not be able to pay Number One’s costs of defending these proceedings.

26. [41]

    Florida Kitchens’ failure to provide any evidence of its financial position, despite being served with a subpoena, leads me to believe, on the balance of probabilities, that there is reason to believe that Florida Kitchens will be unable to meet the costs of Number One if ordered to do so.

27. [42]

    The threshold issue has therefore been satisfied. I will now turn to consider all the circumstances of the case.

28. [43]

    In Meltglow, Beazley J stated:

29. [44]

    I will not consider the application of these principles to the present case.

30. [45]

    There is no dispute that the application for security for costs was brought promptly.

31. [46]

    I have reviewed Florida Kitchens’ submissions on appeal to the Appeal Panel and the 106 grounds seeking leave to appeal in this court. They are much the same, only they contain more grounds than were raised before the Appeal Panel. Florida Kitchens submitted that the appeal has merits and good prospects of success, and refers to the summons. I disagree. I have carefully read the decision of the Appeal Panel and considered its decision. I have earlier set out the issues canvassed by the Appeal Panel. It is my view that the application for leave to appeal has poor prospects of success.

32. [47]

    There are no submissions made by Florida Kitchens on this topic. Hence there is no evidence that the plaintiff’s impecuniosity was caused by Number One’s conduct.

33. [48]

    Florida Kitchens made no submissions on this topic. Hence there is no evidence that the application is oppressive. Neither does the application stifle Florida Kitchens’ right to litigate.

34. [49]

    While there is no evidence of Florida Kitchens’ assets, it has paid the verdict moneys and the filing fee in this Court. However, it appears that they were not paid by Florida Kitchens but by an unidentified third party.

35. [50]

    There has been no personal undertaking from any person standing behind Florida Kitchens.

36. [51]

    It is Florida Kitchens, the plaintiff, who is seeking leave to appeal. For the purposes of this application, I am prepared to accept that it is the party who is, in substance, the plaintiff.

37. [52]

    In the exercise of my discretion, taking all the above factors into account, they are overwhelmingly in favour of granting an order for security for costs.

38. [53]

    I now turn to the final issue to consider, and that is to determine the appropriate amount of security that should be provided.

39. [54]

    Number One’s solicitor, David Simons, was admitted to practice as a solicitor in the Supreme Court of New South Wales in February 1998. Since his admission, he has specialised in debt recovery and commercial litigation. He started SR Law in 2005 and has been the legal practitioner director since that time (Aff 20 February 2019, paras [16]-[17]).

40. [55]

    Mr Simons has been involved in a substantial number of proceedings in the Local, District and Supreme Courts of New South Wales, NCAT, the NSW Court of Appeal, the Federal Circuit Court, Federal Court and a case in the High Court of Australia ([18]).

41. [56]

    He has acted for clients by:

42. [57]

    Mr Simons has read the summons seeking leave to appeal and noted there are over 70 grounds of appeal, with ground 1 containing 36 sub grounds of appeal. The sheer number of grounds of appeal will mean that a substantial amount of work will have to be undertaken to deal with the summons.

43. [58]

    Mr Simons will be undertaking all the solicitor work personally in this matter. His charge-out rate is $500 per hour ex GST. Counsel’s fees are $500 per hour and $5,000 per day ex GST.

44. [59]

    Mr Simons’ estimate of Number One’s costs of the proceedings are as follows:

45. [60]

    Mr Simons estimates that on assessment, Florida Kitchens would be awarded 75% of the DS costs, 90% of counsel’s costs and all the other disbursements. That being the case, the costs for which Number One seeks security total $66,375.00, which consists of DS costs in the amount of $27,000, and counsel’s costs in the amount of $39,375.

46. [61]

    Counsel for Florida Kitchens does not agree with the Number One’s estimate of costs, as the costs estimated appear amongst other things to be excessive, unreasonable, duplicated and involve works already done in the NCAT Appeal and which Number One sought its costs for, with Number One’s application for the costs of the appeal being refused by the NCAT Appeal Panel. However, it has not put on any evidence as to the amount of the costs it thinks is appropriate. Nor did it make any submissions in relation to the actual form of the orders sought. There are two costs orders outstanding, one in favour of each party. The costs order in favour of Florida Kitchens relates to an amendment to the statement of claim. The costs order in favour of Number One is for the costs before the Tribunal Member. The costs are payable on an indemnity basis. The amount of those costs (once both parties’ bills are assessed) will far outweigh the amount of costs that Number One will be obliged to pay.

47. [62]

    I take into account that Florida Kitchens has raised excessive grounds of appeal, for which leave still needs to be granted. For Number One to prepare to answer Florida Kitchens’ case, it will require extensive time and cost for the modest amount in dispute of $20,130. Number One’s solicitor’s estimate of costs does not seem to be excessive and unreasonable. My view is that an appropriate amount for security for costs is $40,000.

48. [63]

    I make the following orders. Florida Kitchens is to provide security for costs to Number One in the sum of $40,000. While Number One sought that Florida Kitchens pay this sum in 28 days, in my view should be permitted two months to do so. If security for costs is not provided by Florida Kitchens the proceedings are stayed until further order of the Court. If Florida Kitchens has not complied with order (1) within two months of the staying of the proceedings, then the proceedings are dismissed and the plaintiff is to pay the defendant’s costs of the proceedings.

49. [64]

    Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the costs of the defendant’s notice of motion on an ordinary basis.