Background
Michael Nathan Kerry sued Morgan Evan Williams, Giuseppe Palumbo, Zax Pty Ltd and Zax Pty Ltd as trustee for the Mojo Superannuation Fund. He sought just over $1 million, described as disgorgement of amounts allegedly extracted above the principal advanced under loan arrangements. His 43-page statement of claim alleged, among other things, misleading or deceptive conduct and unconscionability. The loan was secured by a mortgage over his Maroubra property, which was sold; Kerry received about $1 million from the sale, but did not disclose what became of those proceeds.
The defendants sought $150,000 security for costs under r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW), relying on Kerry’s residence outside Australia. Kerry had lived in the United States since 2019, returned to Australia only twice, had no home here, and was engaged in ongoing California family-law litigation concerning his child. He said he was impecunious, but did not comply with a notice to produce financial material, including tax returns and documents concerning US litigation costs and a US$30,000 bond.
The Court’s Holding
Hammerschlag CJ in Eq held that Kerry was not ordinarily resident in Australia and that security should be ordered. The Court accepted that his claims could not presently be treated as unarguable or bound to fail, despite their complexity and possible weaknesses. But it was not satisfied that requiring security would stultify the proceeding, given Kerry’s non-disclosure concerning the sale proceeds and other financial information, his capacity to work in the United States, and the evidence about his financial arrangements.
The Court ordered Kerry to pay $30,000 into court within 28 days as security for the defendants’ costs through the filing of a defence and any cross-claim, and service of Kerry’s evidence in chief. The proceeding will be stayed if he does not comply. The defendants may seek an uplift after that stage, while Kerry may seek a variation if he establishes that enforcing a costs order in the United States would be significantly less costly than litigating in New South Wales. The balance of the defendants’ application was dismissed.
Key Takeaways
- A plaintiff living overseas may be ordered to provide security under UCPR r 42.21 where they are not ordinarily resident in Australia.
- A claim need not be bound to fail before security is ordered; the Court weighs the merits alongside practical matters including enforcement risk and financial disclosure.
- Non-disclosure of assets and financial records may undermine a plaintiff’s assertion that security would stultify the litigation.
Why It Matters
The decision illustrates the discretionary nature of security-for-costs applications involving overseas plaintiffs. Even where a claim remains arguable, the difficulty and expense of recovering an Australian costs order abroad can justify security.
The staged $30,000 order also shows a proportionate approach: rather than require the full amount sought at the outset, the Court confined initial security to an early phase and left open a later uplift based on the progress and cost of the litigation.