Ailakis v Olivero
[2013] WASCA 91
•5 APRIL 2013
AILAKIS -v- OLIVERO [2013] WASCA 91
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASCA 91 | |
| THE COURT OF APPEAL (WA) | 05/04/2013 | ||
| Case No: | CACV:152/2012 | 19 & 20 MARCH 2013 | |
| Coram: | PULLIN JA | 20/03/13 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application granted | ||
| A | |||
| PDF Version |
| Parties: | ANTHONY AILAKIS RODNEY AILAKIS JUAN CARLOS OLIVERO |
Catchwords: | Practice and procedure Application for security for costs in an appeal Purpose of an order for security Relevance of O 25 r 1 of Rules of the Supreme Court 1971 (WA) Whether it applies in an appeal |
Legislation: | Rules of the Supreme Court 1971 (WA), O 25, r 1 Supreme Court (Court of Appeal) Rules 2005 (WA), r 44(1) |
Case References: | Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173 Cowell v Taylor (1885) 31 Ch D 34 Harlock v Ashberry (1881) 19 Ch D 84 Mann v Dabelstein [2006] WASCA 176 Pearson v Naydler [1977] 1 WLR 899 Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; (2004) 60 NSWLR 143 Willoughby v Clayton Utz [2008] WASCA 93 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : AILAKIS -v- OLIVERO [2013] WASCA 91 CORAM : PULLIN JA HEARD : 19 & 20 MARCH 2013 DELIVERED : 20 MARCH 2013 PUBLISHED : 5 APRIL 2013 FILE NO/S : CACV 152 of 2012 BETWEEN : ANTHONY AILAKIS
- First Appellant
RODNEY AILAKIS
Second Appellant
AND
JUAN CARLOS OLIVERO
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : SCHOOMBEE DCJ
Citation : OLIVERO -v- AILAKIS [2012] WADC 174
File No : CIV 3982 of 2010
(Page 2)
Catchwords:
Practice and procedure - Application for security for costs in an appeal - Purpose of an order for security - Relevance of O 25 r 1 of Rules of the Supreme Court 1971 (WA) - Whether it applies in an appeal
Legislation:
Rules of the Supreme Court 1971 (WA), O 25, r 1
Supreme Court (Court of Appeal) Rules 2005 (WA), r 44(1)
Result:
Application granted
Category: A
Representation:
Counsel:
First Appellant : Mr S Penglis
Second Appellant : Mr S Penglis
Respondent : Mr T R Thies
Solicitors:
First Appellant : Herbert Smith Freehills
Second Appellant : Herbert Smith Freehills
Respondent : Timothy R Thies
Case(s) referred to in judgment(s):
Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173
Cowell v Taylor (1885) 31 Ch D 34
Harlock v Ashberry (1881) 19 Ch D 84
Mann v Dabelstein [2006] WASCA 176
Pearson v Naydler [1977] 1 WLR 899
Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598
Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; (2004) 60 NSWLR 143
Willoughby v Clayton Utz [2008] WASCA 93
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1 PULLIN JA: The respondent applied for an order that the appellants pay security for costs of the appeal pursuant to r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (Court of Appeal Rules). Rule 43(2)(h) provides that a single judge has jurisdiction to make an interim order in an appeal. The expression 'interim order' is defined in r 1 and includes 'an order that an appellant provide security for a respondent's costs'. That is an unfettered discretion; Mann v Dabelstein [2006] WASCA 176 [16], but a discretion which must be exercised judicially.
2 The appellant referred to O 25 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC) which reads:
The Court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.
3 The appellants submitted that an order should not be made because of the poverty or the likely inability of the appellants to pay costs which may be awarded against them.
4 Rule 5(1) of the Court of Appeal Rules provides that the Court of Appeal Rules must be read with the RSC. However, that is only so where there is no conflict or inconsistency between the Court of Appeal Rules and the RSC. If there is any conflict or inconsistency, then the Court of Appeal Rules prevail: Court of Appeal Rules, r 5(3). There is a conflict or inconsistency between O 25 r 1 and the Court of Appeal Rules. Order 25 r 1 imposes a restriction which does not appear in the provision empowering the Court of Appeal to order security for costs.
The purpose of, and power to order, security for costs
5 The exercise of the power to order security is an order made to serve the interests of justice. Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598.
6 At common law and in the common law courts, there was a well-established rule that a natural person who sued would not be ordered to give security for costs, however poor he was: Pearson v Naydler [1977] 1 WLR 899, 902 (Megarry VC); Cowell v Taylor (1885) 31 Ch D 34; Harlock v Ashberry (1881) 19 Ch D 84, 85 (Lush LJ). However, Bowen LJ said in Cowell that (38):
There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty's Courts, and so an
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- insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another …
7 Whether the common law rule applies or not depends very much upon statutory provisions or rules empowering courts to order security for costs.
8 The rules in various jurisdictions vary markedly. As a result, care must be taken when considering cases from other jurisdictions. An example of a different provision was found in New South Wales in 2004. There, Pt 51, r 16 of the Supreme Court Rules 1970 (NSW) read:
(1) Where a notice of appeal … has been filed … the Court of Appeal may, in special circumstances, order that such security as the Court of Appeal thinks fit to be given for the costs of the appeal.
(2) Subject to subrule (1), no security for costs of an appeal to the Court of Appeal shall be required.
9 Thus, the exception referred to by Bowen LJ in Cowell does not apply in the New South Wales Court of Appeal, and indeed the converse applies: Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; (2004) 60 NSWLR 143 [13] - [14].
10 In Western Australia, even O 25 r 1, which applies in the General Division, does not fully reflect the common law rule. It provides in effect that security may be ordered against an impecunious plaintiff, but not 'merely' because of such poverty or the likely inability of the plaintiff to pay any costs which may be awarded against him. Before the Court of Appeal was created in this State, the now repealed O 63 r 10(5) of the RSC provided that:
The Full Court may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.
11 Special circumstances do not have to be shown under the Court of Appeal Rules. Now, as shown above, the provision applying in the Court of Appeal does not require special circumstances and there is no prohibition on making an order for security 'merely' on account of the poverty of the plaintiff, or the likely inability of the plaintiff to pay any costs which may be awarded against him.
12 Thus, under the Court of Appeal Rules, a decision regarding an application for security for costs will be made after assembling all of the relevant factors and giving such weight as is appropriate to those factors
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- before coming to a decision. The factors which are often considered are set out in Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173 [32], and summarised by Newnes AJA in Willoughby v Clayton Utz [2008] WASCA 93 [14] as follows:
It is, of course, impossible to state exhaustively the factors which are relevant to the exercise of the discretion but some of the relevant factors are:
(a) the appellant's prospects of success on the appeal;
(b) the appellant's capacity to pay any costs ordered against him or her, that being an important consideration but not a conclusive one; a court will not order security against an individual appellant solely on the grounds of impecuniosity;
(c) whether an order for security would frustrate a possibly genuine appeal;
(d) whether some other person stands to benefit from the appeal if the appellant is successful, where that person has not offered to provide security or to indemnify the appellant in respect of any costs for which the appellant may become liable to the respondent;
(e) any delay by the respondent in bringing the application for security.
Evidence of the impoverishment of the appellant
14 Often, it will not be clear whether an appellant is impoverished or unable to pay costs ordered against him. Proof that an appellant owns no land and has no assets which can be identified by reference to public registers does not prove that an appellant is impoverished. Such an appellant may have access to other assets which are invisible to the respondent. Proof that the respondent cannot, after enquiry, find evidence that the appellants owned land or assets provides only some evidence that the appellant may be unable or may fail to pay costs ordered against him.
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15 In this case, the evidence is that the appellants have no land in their names and the interest that they have as shareholders in Redstone Resources Limited (Redstone) (a minerals exploration company at the centre of the dispute) is an indirect interest via trusts controlled by relations. However, the appellants instructed their solicitors that they would pay the judgment sum of $750,000 into court or into an interest bearing account pending the hearing of the appeal. They have not done so (counsel for the appellants stating from the bar table that this was because the respondent asked for interest to be added to the judgment sum). From this it may be inferred that the appellants had available the means to come up with $750,000. That evidence is not a sign of poverty.
Background to the application
16 With those opening observations, attention can now be turned to a more detailed background to the application. The respondent was awarded a judgment for damages against the appellants as the result of the repudiation of a contract in which the appellants promised to transfer one million shares in Redstone to the respondent. Redstone was involved in mineral exploration in Western Australia. It had a tenement known as the Tollu tenement. Redstone risked losing the Tollu tenement because it omitted to lodge a renewal application and another company made an application for it. The first appellant, who was a director of Redstone, and the second appellant, who was an employee, asked the respondent, who was also a director, to help recover Tollu and promised the respondent one million shares to ensure that Redstone regained the tenement.
17 At trial, the appellants did not give evidence. However, through counsel, the appellants admitted that they did agree to give one million shares to the respondent but contended that it was merely a promise of a gift and that there was no intention to create contractual relations. That argument failed. The trial judge held that there was a contract. The respondent sued to recover the one million shares, but then accepted the appellants' failure to transfer the shares and sought damages and succeeded. Judgment was entered on 14 December 2012 for $750,000 plus interest and costs.
18 The respondent's solicitor asked for payment by 20 December 2012. On 20 December 2012 the appellants filed their appeal notice. On 21 December 2012, the appellants' solicitors sent an email to the respondent's solicitor attaching the notice of appeal and stating that as there was a risk that the respondent would be unable to repay the money, they were instructed that their clients were content to pay the judgment
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- sum into a joint interest bearing account, or alternatively into court to be held pending the outcome of the appeal. That did not happen.
19 On 6 February 2013, the solicitor for the respondent said that he would proceed to issue a bankruptcy notice against the appellants unless the judgment sum was paid by the following day, or an alternative arrangement suitable to the respondent was proposed. The only response from the appellants' solicitors was that instructions were being sought. The bankruptcy notice was issued and the appellants then instructed other solicitors to handle that aspect of the case.
20 A Landgate search by the respondent's solicitor showed that the appellants had no land registered in their names. The respondent's solicitor asked the appellants' solicitors for a statement of assets, liabilities, income and expenses, along with an undertaking not to transfer assets. No such information or undertaking was provided. The respondent's solicitor attempted to confer about the quantum of security. The offer was not taken up and the application for security for costs was filed.
The appellants' grounds of appeal
21 The appellants' case was filed on 20 February 2013. There are five grounds of appeal. The first ground will not alter the outcome. The trial judge admitted some similar fact evidence led by the respondent to support the claim that a contract had been entered into. The first ground challenges this decision. However, on one reading of the reasons, the trial judge did not take that evidence into account in determining whether there was an agreement between the parties. As to the other grounds, it is difficult to assess them without an indepth consideration of the evidence and the submissions. I will assume therefore that they may have some merit, although it is necessary to observe that the trial judge published detailed reasons for the judgment which will have to be overcome if the appeal is to succeed. In addition, a defence that there was no intention to create contractual relations when there was an admitted promise made in commercial circumstances will always be difficult to make out.
The factors to be weighed
22 The discretion the court has to order security must be exercised judicially taking into account all relevant factors. It is for the court to give appropriate weight to those factors.
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23 In this case, the relevant factors are that the respondent has judgment in his favour. The appellants offered to pay $750,000 into an account pending the hearing of the appeal, but have not done so. The appellants have no real estate assets or disclosed means of paying costs if they lose the appeal. There has been no delay in bringing the application. There is evidence that an order for security will frustrate the appeal. Although some of the grounds of appeal may have some merit, all other factors support the respondent's application. An order for security should be made.
The amount of security
24 The amount of the security should be such as the court thinks just in all the circumstances.
25 The respondent has filed a draft bill of costs. The draft bill of costs shows the maximum amount which might be ordered in relation to each item on the scale. The appellants estimate one day for the hearing of the appeal, and that is the more realistic estimate. The respondent sought an order for security in the sum of $65,000. The draft bill of costs totals $69,535, but that assumes a two day hearing and the maximum amount to be awarded under each item on the scale. The respondent informed the court that senior counsel had been retained to conduct the appeal.
26 A reasonable amount which the appellants should pay by way of security for costs is $40,000 and for those reasons orders were made on 20 March 2013 in the following terms:
1. The appeal be stayed until the appellants pay $40,000 into court as security for costs.
2. The appellants provide the respondent with notice of the payment of security into court pursuant to order 1.
3. The time for the respondent to file and serve the respondent's answer to the appellants' case be extended until 21 days after the payment and notice referred to in orders 1 and 2.
4. The appellants pay the respondent's costs of the application for security for costs dated 6 March 2013 fixed at $3,500.
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