Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd

By an interlocutory application, the respondent sought security for its costs of and incidental to the proceeding brought by the plaintiff against it. While the parties agreed that security for costs should be provided, they disagreed as to the form the security should take. The appellant had proposed that it be provided by way of a deed of indemnity from an after-the-event insurer based in England. The respondent sought that security be provided by way of payment into Court or unconditional bank guarantee. The primary judge decided in favour of the respondent. On appeal, Bond JA (with whom Fraser JA and Wilson J agreed) helpfully distilled the principles which govern the exercise of the discretion to order security for costs, in particular so far as it relates to the form of any security which is ordered.

Fraser and Bond JJA and Wilson J

17 September 2021

The appellant, Adeva Home Solutions Pty Ltd, is the plaintiff in a proceeding in the trial division against Queensland Motorways Management Pty Ltd. [2]. The claim against the defendant is the subject of a litigation funding agreement. [4]. The proceedings are brought by the appellant in its own right as a representative party, as well as on behalf of “group members”, essentially being defined as a group of defaulting toll road users who have paid excessive administrative charges. [3].

By an interlocutory application, the respondent sought security for its costs of the proceeding. [5]. The respondent and the appellant reached agreement that security for costs should be provided. The principal issue in contest at the hearing was the form in which that security should be provided: whether by way of an irrevocable bank guarantee or money paid into Court (as the respondent contended); or in the form of a deed of indemnity from an after-the-event insurer based in England (as the appellant contended). [6].

The primary judge decided in favour of the respondent. [7].

The appellant appeals against that order on the basis that ([9]):

1. the exercise of discretion by the primary judge was affected by specific error; and, further

2. the order worked a substantial injustice because payment in the manner ordered would adversely affect the group members’ share in any recovery that may be obtained from the proceeding.

Bond JA (with whom Fraser JA and Wilson J agreed) dismissed the appeal with costs.

Principles governing appeals from an exercise of judicial discretion in an interlocutory decision concerning question of practice and procedure.

This appeal was one from an exercise of judicial discretion in an interlocutory decision concerning questions of practice and procedure. It followed that it called for “an even greater exercise of appellate restraint”, than the usual principles set down in House v The King (1936) 55 CLR 499 at 504–505. [11].

Indeed, Bond JA observed that in appeals of this kind (at [13]):

“generally an appellate court will not interfere unless, in addition to error of principle, the appellant demonstrates that the order will work a substantial injustice to one of the parties.”

Principles governing the choice of the form by which security for costs should be provided

While Bond J listed the many sources of the Court’s jurisdiction to make an order for security for costs (at [15]), it was not contended that the principles varied depending on their source. As a result, his Honour focussed upon r 670(1) Uniform Civil Procedure Rules 1999 (“UCPR”). [16].

A pithy summary of his Honour’s detailed observations (set out at [18]–[23]) of the scope and purpose of the Court’s power to award security for costs is contained at [24] of Bond JA’s reasons. It reads as follows: 

(a)  first, the purpose of the power to order security for costs is to ensure that a successful defendant will have a fund available within the jurisdiction against which it can readily enforce an order for costs;

(b)  second, like all powers conferred by the UCPR, the exercise of power should also be applied in accordance with the UCPR r 5;

(c)  third, the exercise of power requires the formation of a discretionary judgment, which in turn requires the Court to weigh all relevant circumstances (as to which, see UCPR r 672) in the manner referred to in PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 65 ALJR 642;

(d)  fourth, consistently with the protective purpose of the power, a Court would ordinarily prefer to require security for costs in a form that enables funds to be accessed within the jurisdiction with a minimum of risk, including risk of cost and delay;

(e)  fifth, there may be countervailing considerations in a particular case which make it appropriate to require security to be provided in a different way (which could include by the provision of a right exercisable in a foreign jurisdiction, or by the provision of a form of security which carries with it some degree of risk of cost and delay); and

(f)  sixth, the form of the order should be that which best serves the interests of justice in the circumstances of the particular case in which the discretion is to be exercised.

His Honour’s additional observations addressing the appellant’s summary of the law are worth noting. They are found at [27]–[31], and are paraphrased below:

(a)  first, of course a plaintiff can propose a form of security in whatever way it chooses. But, a plaintiff has no free-standing “right” or “entitlement” to provide security in a form least disadvantageous to it. That disadvantage, though, is relevant to the exercise of discretion. [29].

(b)  second, it is not correct that in the context of class actions, security should be provided in a way that is the least disadvantageous to group members. (In this respect his Honour disagreed with Lee J’s remarks in Perera v Getswift Ltd (2018) 263 FCR 1). There is no justification in principle to confer a special rule for representative proceedings, as a matter of assumption. But again, if evidence demonstrated a particular disadvantage which might accrue, this could be relevant to a proper exercise of discretion. [30].

(c)  finally, the observations made by Gleeson JA in Tiaro Coal [2018] NSWSC 746 at [22] may be accepted. (That is, that “[i]t would be an error to approach the issue of the form of security by undertaking a comparison exercise of the relative attributes of the security offered by the plaintiff and the ‘conventional’ or ‘familiar’ forms of security by cash deposit or bank guarantee with a view to determining which form of security was superior…”.) Such an approach would invariably lead to ordering security in the form of payment into Court on each occasion security was ordered, because that is by far the superior form of security. [31].

Z Brereton of Counsel