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Aerolink Air Services Pty Ltd v Sunflower Aviation Ltd [2014] FJHC 817; HBC013.2011 (12 November 2014)

IN THE HIGH COURT OF FIJI
(WESTERN DIVISION) AT LAUTOKA
Civil Action No. HBC 013 of 2011

BETWEEN:

AEROLINK AIR SERVICES PTY LIMITED
an Australian Corporation having its offices at C/- Downes Barrington (St George), Suite 16, Level 3, 4 Cross Street, Hurtsville, New South Wales A2220, Australia.
FIRST PLAINTIFF

AND:

DANIEL PATRICK RYAN
of 268 Cicada Glen Road, Ingleside, new South Wales 2101, Australia, Company
SECOND PLAINTIFF

AND:

SUNFLOWER AVIATION LIMITED
a limited liability company having its registered office at Sunflower Hanger, London Avenue, Nadi Airport, Fiji Islands.
FIRST DEFENDANT

AND:

ROSHAN ALI of Nadi and SYLVIA GUKULA BALE aka SYLVIA COLLINGWOOD of Fasa Subdivision, Nadi in the Republic of Fiji, Managing Director and Sales & Marketing Officer respectively as the Executor and Executrix and Trustees of the Estate of DONALD IAN COLLINGWOOD late of Fasa Subdivision, Nadi Retired Person Testate
SECOND DEFENDANT

Appearances: Mr M Dawai for Plaintiffs
Mr Hari Ram for Defendants

Interlocutory Judgement

Introduction

1. The Defendants by way of Notice of Motion dated 30 May 2014 applied for the following orders:

i. AN ORDER that the Plaintiff's give security for the Defendant's costs in this action to the satisfaction of the Defendant or to this Honourable Court.

ii. AN ORDER that the Plaintiff's action be stayed until the Plaintiff provides security for the Defendant's costs in accordance with the order referred to in 1 above.

iii. AN ORDER that the Defendant have leave to apply on 3 days' notice for an order for dismissal in the event that the Plaintiff does not comply with order 1 above.

iv. AN ORDER the Defendant have leave to apply on 7 days' notice for an increase in the amount of such security.

v. AN ORDER that the Plaintiffs pay for the cost of this application.

vi. Such further or other orders as to the Court seem fit.

2. The Defendants Notice of Motion is supported Affidavit sworn on 30th May 2014 by its Managing Director Roshan Ali.

3. This application is made pursuant to Order 23 rule 1 of the High Court Rules 1988 and the Inherent Jurisdiction of this court.

4. In the said affidavit Roshan Ali has deposed inter alia that;

i) He is the Managing Director of the 1st Defendant company and the Executive and trustee of the estate of the 2nd Defendant.

ii) To his knowledge and information the Plaintiff are residents of New South Wales, Australia.

iii) If the Plaintiffs fails in their claim against the Defendants, and the court orders the Plaintiffs to pay substantial costs it will be difficult to recover its substantial costs incurred in defending these proceedings against the Plaintiffs as:-

a) The Plaintiffs are not residents of Fiji.

b) The Plaintiffs does not own any property in Fiji

iv) The Plaintiffs have failed to provide security for costs either despite several requests from the Defendants Solicitors.

v) To the best of his knowledge the Plaintiffs do not have any assets in Fiji except an aircraft that is of no commercial value and which does not have any certificate of airworthiness and its propellers and engine have been removed from the aircraft and taken to Australia.

5. Plaintiffs filed an affidavit in opposition of security for costs sworn by the 2nd Plaintiff.

6. In his affidavit in opposition 2nd Plaintiff deposed inter alia that:

i) Writ of summons and statement of claim was filed back in 2011 and it was clear from the face of the writ that the Plaintiffs residents was overseas.

ii) He has a strong case against the Defendant and further annex as DPR-1 a personal guarantee that was executed by the late Donald Collingwood.

iii) He offered a bank guarantee of $20,000.00 which the Defendant refused to accept and continued demanding that he pay $25,000.00.

iv) On or about 28 March 2012 his previous solicitors had written to the Defendants previous solicitors to explain the basis as to why the Defendant refuses to accept the Bank guarantee.

v) To his knowledge the Defendant later decreased its security for costs to $23,000.00 and since 2012 has been threatening to make an application for security for costs due to the Defendants plaintiffs being an overseas resident.

vi) The aircraft is of commercial value and had it not, the insurance would not have insured the same.

vii) The Defendant had always known even before the action began, back in 2005 that the Plaintiffs resides in Australia.

viii) He verily believe that an order for security for costs in the amount claimed will be oppressive and unjust on the Plaintiffs.

xv) He prays the court to strike out the Defendants security for costs application with costs.

7. The Defendants filed an affidavit in reply sworn by its Accountable Manager on 21st August 2014.

8. In the said affidavit in reply Roshan Ali has deposed inter alia that;

i) Their former solicitors by their letter dated 16 January 2013 wrote to the Plaintiffs solicitors and requested the Plaintiffs to deposit into Lautoka High Court the sum of $25,000.00 being security for costs before filing their statement of defence.

ii) There were various correspondences between the Plaintiffs solicitors and the Defendants solicitors for the Plaintiffs to provide security for costs but the Plaintiffs have failed and/or refused to provide the security for costs.

iii) The Defendants former Solicitor died on 12 May 2013 and thereafter the Defendant engaged the services of the present solicitor in September 2013. The present solicitors communicated with the Chief Registrar's office and messrs A K Lawyers for the release of the Defendants files for the Defendants Solicitors perusal. The 2nd Defendant died on the 14th September 2013 and thereafter the Defendants solicitors carried out probate proceedings for the 2nd Defendant's Estate. Upon the grant of probate the Defendants solicitors made application and obtained orders for the substitution of the 2 Defendant in this matter. Due to the above delays the Defendants could not file the present application for security for costs in court before.

iv) The purported Guarantee was executed on the 9th December 2004 and it was for the operation of two accounts for a period of 12 months. It has no relevance to this motion.

v) The Defendants despite incurring a lot of legal fees till to date and expects further legal costs approximately in the sum of $30,000.00.

vi) The Plaintiffs aircraft was insured while it was in good and operational condition. The aircraft was badly damaged in the year 2012 or 2013 cyclone and the Plaintiffs have sent its engine and propeller to Australia and it currently does not have those essential components in it. The aircraft did not have any certificate of airworthiness for many years and which did not even have the propeller nor the engine and thus is of no commercial value.

vii) In any event any insurance claim it may have would be payable in Australia not in Fiji and the Plaintiffs have failed to disclose the current status of the insurance on the aircraft.

viii) It was very difficult to recover costs ordered by Court on 4th June 2014 from the Plaintiffs and it would not only de difficult but impossible to recover costs from the Plaintiffs if the Plaintiffs fails in their claim against the Defendants as the Plaintiffs are resident out of the Jurisdiction of this court.

Applicable Law

9 This application is made pursuant to Order 23 Rule 1 of the High Court Rules of 1988 which provides:

1 (1) Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court-

(a) That the Plaintiff is ordinarily resident out of the jurisdiction or

(b) ...........................................................................................

(c) ...........................................................................................

(d) ...........................................................................................

Then if, having regard to all circumstance of the case, the Court thinks, it just to do so, it may order the Plaintiff to give such security for the Defendants costs of the action or other proceeding as it thinks just.

10 In paragraph 5 of the affidavit sworn by the 2 Plaintiff on 8th August 2014 it is admitted that their residents was overseas. It is also evident from the caption of the Writ of Summons that they are residents of New South Wales, Australia. Therefore, the Defendant is entitle to make this application under Order 23 Rule 1 as the Plaintiff's are ordinarily residents out of the jurisdiction.

11 It is clear from Order 23 Rule 1 itself that Ordering Security for costs is a matter of discretion to be exercised by Court. Therefore, it is relevant at this point to consider the guidelines applicable in exercising this discretion.

12 Rich. J in Roff Courtney King V Commercial Bank of Australia Ltd (1920) CLR 289 at 292 stated;

"The discretion must, of course, be exercised judicially, which means that in each case the judge has to inquire how, on the whole, Justice will be best served,................................."

13 In Furuuchi Suisan Company Ltd V Tokuhisa [2009] FJAC 194 Civil Action 95, 2009 (9 September 2009) Byrne J said;

"31.0. The first case I mention is Porzelack K G V Porzelack (UK) Ltd, (1987), 1 All ER 1074 where Sir Nicolas Browne Wilkinson V.C. said at P. 1076: "The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this court against which it can endorse the judgement for costs. It is not, in the ordinary case, in any sense designed to provide a defendant with security for costs against a plaintiff who lacks funds. The risk of defending a case brought by a penurious plaintiff is as applicable to plaintiffs coming from outside the jurisdiction as it is to plaintiff's residents within the jurisdiction."

"Under Order 23, r1(1)(a) it seems to me that I have an entirely general discretion either to award or refuse security, having regard to all the circumstances of the case. However, it is clear on the authorities that, if other matters are equal, it is normally just to exercise that discretion by ordering security against a non-resident plaintiff. The question is what, in all the circumstances of the case, is the just answer."

14 In considering the above authorities, I am of the view that the discretion to order Security for costs is an unfettered discretion which should be exercised in a judicial manner having regard to all the circumstance of each case.

Application of Law to the Facts;

Plaintiffs Assets in Fiji

15 As determined in paragraph 7 hereof, Plaintiff's are not ordinary residents of Fiji. They have admitted in their affidavit opposing this application that their only asset located in Fiji is the first aircraft. 2nd Plaintiff has asserted that the aircraft is of commercial value and has an insurance on it. They have admitted that the aircraft was damaged in a recent cyclone and its insurance is in Australia. In the Defendant's affidavit in reply it is stated that the Plaintiffs have sent the aircraft engine and propeller to Australia and it currently does not have the essential components in it. It is also stated in the said affidavit that the aircraft does not have the certificate of airworthiness for many years and that it was insured while it was in good and operational condition and in any event any insurance claim it may have would be payable in Australia not in Fiji.

16 Though the Plaintiff's states that the aircraft is insured there is no evidence produced to prove that there is an insurance after the aircraft was damaged and also the Plaintiffs does not disclose insured value of it. Furthermore, even if a insurance claim is paid for the aircraft it would not be paid in Fiji but in Australia. An aircraft without its essential components and certificate of airworthiness in my view cannot be considered as an aircraft with a commercial value. The evidence adduced by the Plaintiffs is not sufficient to prove that the said aircraft has a commercial value. Therefore, I cannot accept the assertion of the Plaintiffs that they have assets in Fiji to satisfy a judgement entered against them.

Good Prospect of Success
17 Next issue to be considered is whether the Plaintiffs have a strong case against the defendants or to see whether there is a likelihood of Plaintiffs succeeding.

18 Paragraph 23/1 – 3/3 (1999 Edition) of the white book states in regards to prospects of success;

"A major matter for consideration is the likelihood of the plaintiff succeeding. This is not to say that every application for security for costs should be made the occasion for a detailed examination of the merits of the case. Parties should not attempt to go into the merits of the case unless it can be clearly demonstrated one way or another that there is a high degree of probability of success or failure (Porzelack KG v Porzelack (UK) Ltd [1987] 1All ER 1074). In the cases which follow, investigation of the merits was justified only because of the plaintiffs demonstrated a very high probability of success. If there is a strong prima facie presumption that the defendant will fail in his defence to the action, the Court may refuse him any security will fail in his defence to the action, the Court may refuse him any security for costs (see per Collins J in Crozat v Brogden [1894] UKLawRpKQB 57; [1894] 2 QB 30 at 33."

15. It further states –

In considering an application for security for costs the Court must take account of the plaintiff's prospect of success, admissions by the defendant, open offers and payment into Court, but a defendant should not be adversely affected in seeking security merely because he has attempted to reach a settlement. Evidence of negotiations conducted "without prejudice" should not be admitted without his consent (Simaan Contracting Co. V Pikington Glass Ltd [1987] 1 WLR 516; [1987] 1 All ER 345."

19 In this matter the Plaintiffs have instituted this action based on a Memorandum of Understanding (MOU) dated 31st January 2005 entered between the Plaintiff's and Defendant's. The MOU was only a preliminary arrangement for the first Plaintiff and the first Defendant to work together till they enter into an agreement.

20 At this point I will re-produce paragraphs 24 and 25 of the Interlocutory Judgement dated 4 June 2014 by which I made Orders to set aside and dissolve the interim Injunction Orders granted against the Defendants.

24. "From the plain reading of the MoU it is clear that is was only a preliminary step towards entering into an agreement. It only reflects an "understanding" between the parties prior to entering into lease agreement. However, it is evident from the sequence of events that had occurred subsequent to signing it the parties have failed to act upon the "understanding" which prevented them from entering into a lease agreement for the purpose of hiring the Aircrafts.

25. Without the lease agreement between the parties the terms on which the aircrafts were leased by the plaintiffs to the defendants cannot be ascertained. In my view this has lead to the disputes between the parties as there was no agreement between them. Though the plaintiffs are alleging that the defendants have failed to fulfil their obligations prior to signing a lease agreement there is no evidence to prove that the defendants were bound by such obligations. Therefore, I am of the view the plaintiffs have failed to submit adequate evidence to prove that their legal rights were violated by the defendants or otherwise that the defendants are in breach of any conditions of an agreement. As such I hold that the plaintiffs have not adduced evidence to the prove that there is a serious question to be tried in this matter."

21 It is clear from the above paragraphs of my interlocutory judgement that the plaintiffs in this case does not show a likelihood of success against the Defendants. The MOU the Plaintiffs are relying on is not a lease agreement and without such a lease agreement the terms on which the aircrafts were leased to the Defendants by the Plaintiffs cannot be assertained.

22 In the Plaintiffs affidavit opposing this application a personal guarantee is adduced in evidence marked DPR1 signed by the 2nd Plaintiff and the 2nd Defendant. But it does not clearly spell out the obligations of each party in operating the aircrafts. Therefore, it cannot be accepted as a document to prove that the Plaintiffs have a strong case against the Defendants.

Time for Application

23 Paragraph 23/1 – 3/38 of the white book states that an application for security may be made at any time but the delay in making such an application may be relevant to the exercise of the courts discretion to order security for costs.
paragraphs 23/1 – 3/38;

"Delay in making an application for security for costs, however may be relevant to the exercise of the Court's discretion to order security. Although in most cases, delay is not a decisive factor, it may be treated as important especially where it has led or may have led the plaintiff to act to his detriment or may cause him hardship in the future conduct of the action."

24 In this matter, before the Defendant's filed their Statement of Defence they have requested the Plaintiffs to provide their security for costs by their letter dated 16 January 2012. It is evidentialy proved that there has been communications between the solicitors of both parties to provide security for costs from the initial stages of these proceedings. It is also evident that the Plaintiff's have offered to provide security for costs by a bank guarantee in the sum of $20,000.00. In considering the negotiations between the parties over a long period of time in respect of security for costs I am of the view that the delay in making this application is not a decisive factor in exercising my discretion to order security for costs.

Quantum

25 It is evident from the communication between the solicitors of both parties that the Plaintiff's were offering $20,000.00 as security for costs by a bank guarantee and the Defendants were demanding $23,000.00 to be deposited in court. It is also evident from the communication that the Defendants were earlier demanding $25,000.00 to be deposited in Court. However, by their written submissions the Defendants are now demanding from the Plaintiff's to deposit in court $30,000.00 as security for costs.

Conclusion

26 In considering the costs involved in the legal proceeding up to now and the nature of the matter I hold that the appropriate amount to be paid into court at this stage is $25,000.00. I also hold that the Defendants are at liberty to make further applications to increase in the amount of such security when the matter proceeds.

Final Orders

27 (a) The Plaintiff's to pay into court by way of cash deposit $25,000.00 as security for costs within 21 days of the date of this Interlocutory Judgement.

(b) The case to be mentioned after 21 days to consider compliance of the Order by the Plaintiff's.

(c) Grant the Defendants leave to apply on 3 days notice for an order for dismissal in the event the Plaintiffs does not comply with the order to deposit security for costs.

(d) The costs of this application will be costs in the cause.

Lal S. Abeygunaratne
Judge
12/11/2014