Michael Wilson & Partners Ltd v Emmott (No 2)

HIS HONOUR: On 6 August 2019, the respondent Mr Emmott having filed a motion for security for costs, the Registrar by consent made orders as follows:

The form of guarantee referred to in order 2 as being annexed and marked ‘A’ was relevantly as follows:

A guarantee in conformity with annexure ‘A’ was provided by the appellant Michael Wilson & Partners Ltd (“MWP”), on 4 September 2019. On 25 November 2019, the appellant having applied to vacate the date then fixed for hearing of the appeal, the Court made orders relevantly as follows:

Orders 5 and 6 were not complied with by the appellant within the time limited by order 7. Subsequently, on 2 October 2020, the Court made the following further orders:

Insofar as those orders extended time for provision of the further security referred to in order 6 of 25 November 2019 “in a form acceptable to the registrar,” further security in the form of a bank guarantee identical to that referred to in the order of 6 August 2019 was ultimately provided on 14 October 2020.

The appeal was ultimately heard on 20 July 2021. Following the appeal, the appellant filed a motion which was disposed of by orders made on 6 September 2021, which included an order that the appellant pay the respondent’s costs of that motion. The appellant filed a further motion on 14 September 2021. That motion was dealt with in the reasons for judgment of the Court on the appeal delivered on 17 December 2021; see Michael Wilson & Partners Ltd v Emmott [2021] NSWCA 315, when this Court made orders relevantly dismissing the motion of 14 September 2021 with costs, granting leave to appeal and allowing the appeal, setting aside the orders made in the Equity Division and making orders favourable to MWP in lieu thereof and:

On 17 December 2021, the day on which that judgment was delivered, MWP sent an email to the solicitor for Mr Emmott requesting return of the two bank guarantees. A further request was made on 20 December 2021. On 21 December, Mr Emmott’s solicitor responded, pointing out the exception in order 5 of 17 December 2021 for interlocutory costs orders, foreshadowing that applications for assessment of the interlocutory costs orders were being made and asserting that the bank guarantees were security for them. On 24 December 2021, Mr Emmott’s solicitor sent a letter to MWP asserting that the total interlocutory costs were $79,263.

Before the Court today is a motion filed on 13 January 2022 by MWP seeking the following relief:

The issue raised by claims 1 and 2 is ultimately a question of construction of the order for security for costs, and is essentially whether the security ordered and given covers the interlocutory costs orders to which reference has been made. The orders of 6 August 2019 were consensual and fall to be construed on that basis. In other words, the question involves ascertaining objectively the common intent of the parties reflected in those orders. Primarily, that is a textual exercise.

Order 1 of 6 August 2019 quantifies the amount of security to be given “in respect of the respondent’s costs of the application for leave to appeal and the appeal.” Order 2 defines the scope of that security, by specifying that it is to be provided by a bank guarantee in a particular form. I do not accept the respondent’s submission that order 2 is subsidiary to order 1, or that order 1 has primacy. As it seems to me, order 2 defines and particularises the security required by order 1. In that way, it incorporates, in the form of security required by order 1, the terms of the bank guarantee in the form annexed and marked A.

When one turns to the terms of the bank guarantee, the important aspects are, first, that it recites the nature of the proceeding for which security is provided. It recites, first, that MWP has filed the appeal proceedings in this Court and, secondly, that the appellant has agreed to procure the issue of a guarantee in support of its potential obligation to pay costs to the respondent (defined as “the security”), “in the event that its appeal is unsuccessful and it is required to do so by court order” (defined as “a costs order”). The terms of the guarantee provide, in cl 1, that the bank undertakes to pay (emphasis added):

Thus the scope of the guarantee is defined by reference to a costs order, which relates back to the defined term to which I have referred. That defined term encompasses the event that the appeal is unsuccessful and a requirement to pay costs to the respondent by court order. In my view, what that contemplated was a costs order adverse to the appellant upon the appeal failing.

The condition is plainly not satisfied. It cannot be said that the appeal was unsuccessful. To the contrary, although it was far from wholly successful, it succeeded in procuring the setting aside of the orders made at first instance and their substitution with orders more favourable to the appellant. As it cannot be said that the appeal was unsuccessful, the event contemplated by the defined term in the guarantee, “a costs order,” has not eventuated and the guarantee is not engaged.

For those reasons, the security must be released.

The motion also claims, in order 3, the costs ancillary to the provision of the bank guarantee. Traditionally and conceptually, security for costs is provided by the party giving security paying the amount required into court. It may be permitted to provide security in an alternative form such as a bank guarantee. Such alternatives are provided for the convenience of the party providing the security. If it incurs costs in doing so, they are the costs of the indulgence of being able to provide security in an alternative form. I do not see why the respondent should be responsible for the appellant having that indulgence, particularly given that the costs of maintaining the security over a protracted period are largely a result of the appellant not being ready to proceed with the appeal at an earlier time.

Order 4 seeks the costs of the present motion on an indemnity basis. I must say that when the motion and the fact that it was opposed first came to my attention, it seemed to me that the appellant might well be entitled to its costs on the indemnity basis. However, the motion has been conducted by the appellant in such a way, with such excessive and unnecessary evidence and material, as to disqualify the appellant from being entitled to the costs on the indemnity basis. The appropriate costs order is, as Mr Baird submitted, on the ordinary basis.

The Court therefore orders that:

After those orders were pronounced, Mr Wilson applied for an interim payment of $15,000 on account of the costs order. In the absence of affidavit evidence, I was not prepared to make such an order, all the moreso because MWP had countervailing liabilities to Mr Emmott under the interlocutory costs orders which the evidence suggested might amount to as much as $79,000.