Baker v Sheridan

[2005] NSWCA 408

CITATION:	BAKER v SHERIDAN & ANOR [2005] NSWCA 408
HEARING DATE(S):	14 November 2005
JUDGMENT DATE:	23 November 2005
JUDGMENT OF:	Mason P at 1
DECISION:	See pars 68-72 of judgment.

CATCHWORDS:	BANKRUPTCY – motion for substitution of appellant – where claimant is assignee of bankrupt appellant’s rights in proceedings – whether trustee’s right to prosecute an appeal is unassignable – where the appeal relates to a claim for money or property by the bankrupt that would be vested in the trustee – election by trustee to prosecute or discontinue appeal – where communication of assignment of right to appeal is tantamount to an election – no discontinuance or abandonment – inability of assignee to pay costs – security for costs – inability of assignee to provide security – whether special circumstances exist. (D)
LEGISLATION CITED:	Bankruptcy Act 1966 (Cth) s60 Supreme Court Rules, Pt 51 r9(2) and (3)
CASES CITED:	Baker v Sheridan [2005] NSWSC 89 Baker v Sheridan (No 2) [2005] NSWSC 121 Brien v P & E Phontos Pty Ltd [1999] FCA 1072, 91 FCR 209 Crotty v Anderson (1896) 22 VLR 120 Cummings v Clairmont Petroleum NL (1996) 185 CLR 124 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 Re Lofthouse [2001] FCA 25, 107 FCR 151 Winnote Pty Ltd v Page [2005] NSWCA 362
PARTIES:	Dawn Marie BAKER Paul SHERIDAN & Anor Cathy ALEXANDER (Claimant)
FILE NUMBER(S):	CA 40511/2005
COUNSEL:	Claimant: S G Campbell SC/ C Taylor First Respondent: G Curtin Second Respondent: T G R Parker SC
SOLICITORS:	Claimant: Paul Stubbs Law Office First Respondent: Colin Biggers Paisley Second Respondent: Maurice Blackburn Cashman

LOWER COURT JURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 20124/01
LOWER COURT JUDICIAL OFFICER:	James J

CA 40511/2005
SC 20124/2001

MASON P

Wednesday 23 November 2005

Dawn Marie BAKER v Paul SHERIDAN & Ors

JUDGMENT

1 MASON P: Three motions are before me.

2 Motions were filed by the first and second respondents, each seeking dismissal of the appeal against them for non-prosecution. The fate of these motions hangs on the outcome of the third motion.

3 The third motion is filed by Ms Cathy Alexander, the daughter of the now bankrupt appellant and the assignee from the Official Trustee in Bankruptcy of the appellant’s rights in the proceedings. She seeks to be substituted as appellant. Her application is supported by the third respondent, Mr Trevor Baker, the appellant’s son.

Facts

4 The appellant, Mrs Baker, is the widow of Mr Kenneth Baker who died suddenly in 1996. Mrs Baker was the executrix of his will (later obtaining a grant of probate) and the sole beneficiary of his estate.

5 The deceased owned a substantial farming property near Kempsey, including the homestead that had been the matrimonial residence for many years.

6 The deceased had farming and other business dealings with his nephew, Mr Rigg, the second respondent. There was a car repair business known as Kemsey Kar Kare in which the deceased was the silent partner and Mr Baker the active and managing partner.

7 Mr Rigg and the deceased owed money to the Commonwealth Bank at the time of the deceased’s death. It appears that Mr Rigg was under some pressure from the Bank to finalise loan security arrangements that were then incomplete.

8 In late 1996 Mrs Baker, Mr Rigg and Trevor Baker entered into an arrangement involving the transfer from the estate to the two men of the greater part of the deceased’s real estate, including the homestead. The transferees covenanted by deed to take over all of the associated debts and to permit Mrs Baker, her daughter and granddaughter to continue residing in the homestead free of rent and liability for outgoings.

9 The arrangement was documented on behalf of all parties with the assistance of Mr Paul Sheridan, solicitor. Mr Sheridan and his partners (hereafter, the solicitors) are the first respondents in this Court.

10 The arrangement appears to have been performed for a time, until Mr Rigg defaulted in his obligations to the Commonwealth Bank. Judgment for possession was obtained on 5 August 2003. Mrs Baker intervened and obtained a stay on execution for a period. Ultimately this achieved nothing except increasing Mrs Baker’s liability in costs towards Mr Rigg. Possession was delivered up in early 2005. The mortgagee in possession sold most of the properties (including the homestead), completing the sale in July 2005. That sale foreclosed the capacity of Mrs Baker or anyone claiming through her to obtain relief in specie by way of recovery of that real estate in the proceedings about to be discussed.

11 In 2001 Mrs Baker commenced proceedings in the Common Law Division against three groups of defendants, being the solicitors, Mr Rigg and her son. She contended that the transfer arrangement was the product of undue influence and/or unconscionable dealing on the part of Mr Rigg. The solicitors were sued in negligence, in effect for failing to advise Mrs Baker not to enter into the transaction and for facilitating it through provision of legal services to all parties.

12 Mr Rigg brought a cross-claim against the solicitors and Trevor Baker. His main complaint was that the solicitors had failed to protect him from the stresses and costs involved in becoming embroiled in the main proceedings.

13 There was a lengthy trial before James J that culminated in verdicts for each defendant against the plaintiff, with costs (Baker v Sheridan [2005] NSWSC 89). Mr Rigg’s cross-claim against the solicitors also failed, culminating in a verdict for the cross-defendants, with costs (Baker v Sheridan (No 2) [2005] NSWSC 121).

14 James J found the solicitors not to have been in breach of professional duty, save in one minor respect (see at [421]). His Honour dismissed the claim in negligence because he concluded that Mrs Baker would not have acted differently had she received fuller advice.

15 The claim against Mr Rigg failed on several grounds. James J rejected Mrs Baker’s evidence as to the critical conversations between her and Mr Rigg and as to her allegations of special disadvantage. His Honour also found in Mr Rigg’s favour that he had not deliberately manufactured a false sense of crisis or otherwise exercised undue influence or acted unconscionably in 1996. Mrs Baker also failed to show that she would have acted differently had Mr Rigg acted differently.

16 Mr Rigg’s cross-claim against the solicitors failed because there was no conflict of interest as between Mr Rigg and Mrs Baker; and on causation grounds.

17 Two appeals were launched. Each is fixed for hearing on 31 January and 1 February 2006.

18 One appeal is brought by Mr Rigg against the solicitors, seeking the reversal of the verdict for the cross-defendants on the cross-claim. I am informed that this appeal will be ready for hearing on the appointed date and that it will be pressed regardless of the outcome of the motions before me.

19 The appeal that has given rise to the current three motions is that which was instituted by Mrs Baker, effectively against the solicitors and Mr Rigg. Mr Trevor Baker is a respondent, although he continues to support his mother’s position, as he did at trial.

20 Mrs Baker’s Notice of Appeal is very vague as to the relief sought in this Court. So too are the written submissions on behalf of Ms Alexander that were handed to me and the parties during the hearing of the motions. Her senior counsel Mr Campbell SC accepted, correctly, that the only relief conceivably open at this stage as regards the homestead (in light of the completed Bank sale) could be equitable compensation as against Mr Rigg and Mr Trevor Baker, and damages as against the solicitors. There are a couple of properties still in the joint names of Mr Rigg and Trevor Baker, but the greater part of the transferred assets have now gone.

21 Mr Rigg has filed a notice of cross-appeal in Mrs Baker’s appeal. The cross-respondents are the solicitors. This cross-appeal was designed to ensure that any compensation awarded to Mrs Baker in her appeal is added to the damages that Mr Rigg seeks to recover against the solicitors in the direct appeal involving those parties. If Mrs Baker’s appeal is dismissed this cross-appeal will fall with it, as Mr Rigg acknowledges.

22 Despite the Rules and directions made by Registrar Schell, Mrs Baker has not prosecuted her appeal. She has become bankrupt and she has not filed written submissions (due on 13 July 2005, later extended to 15 August 2005) or the requisite appeal books. Mrs Baker’s appeal ought to be dismissed for non-prosecution (see Pt 51 r24), subject only to the matters about to be addressed.

Mrs Baker’s bankruptcy and the assignment to her daughter

23 On 5 September 2005 Mrs Baker became bankrupt. This was in consequence of a creditor’s petition filed by Mr Rigg although nothing, I think, turns on this.

24 Section 60 of the Bankruptcy Act 1966 (Cth) provides (relevantly):

(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

…

(5) In this section, action means any civil proceeding, whether at law or in equity.

25 It is common ground that the Baker appeal proceedings are an “action” within this section (see Cummings v Clairmont Petroleum NL (1996) 185 CLR 124 at 130-1).

26 Mrs Baker’s failure to obtain relief at first instance did not make her a judgment debtor, except in relation to the costs order. But her right to prosecute her appeal became stayed in consequence of her subsequent bankruptcy, pending the trustee’s election (s60(2)). The trustee’s capacity to elect to prosecute the appeal was property divisible amongst the creditors of the bankrupt because s116(1)(b) of the Act defined this to include:

(b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge;

27 That property is in the nature of a power wide enough to permit realisation of it by disposal (Cummings at 133). The Official Trustee’s assignment of it and of the fruits of any success to Ms Alexander, for consideration, represented a step in that realisation of property for the benefit of creditors (see deed of assignment, cll 1-2).

28 Invocation of Cummings does not support the respondents’ submission that the Official Receiver’s right to prosecute the appeal is unassignable (see also Brien v P & E Phontos Pty Ltd [1999] FCA 1072, 91 FCR 209 at [16], set out below). Cummings involved a claim by two bankrupts to have locus standi to institute an appeal against a money judgment entered against them after banktuptcy. The majority in the High Court (Brennan CJ, Gaudron J and McHugh J) held that the bankrupts’ right of appeal was not property divisible in the bankruptcy. But this turned on the fact that the appeal was being brought in relation to a money judgment entered in an action against the bankrupts (see at 133-4). Their Honours expressly distinguished the situation of an appeal relating to a claim by a bankrupt for money or property that would be vested on recovery in the trustee, holding that such a right to appeal was vested in the trustee (see at 134.7). The further holding in Cummings that the bankrupts themselves had no locus standi to institute an appeal has no bearing on the present case.

29 I see no reason why the assignment to Ms Alexander does not include the incidental right to challenge the adverse costs order at first instance as part and parcel of the attack on the decision of James J and as a step towards vindicating the chose in action propounded at first instance. The reasoning in Cummings might apply if all that were purportedly assigned was the Official Receiver’s right to challenge the costs order itself.

30 On 5 September 2005 Mr Rigg’s solicitor served on the Official Receiver a copy of the sequestration order made that day in the Federal Magistrates Court. The covering letter invoked s60 and required the Official Receiver to make an election as to prosecuting or discontinuing Mrs Baker’s appeal. The letter enclosed copy of Mrs Baker’s Notice of Appeal and confirmed that Mr Rigg would rely upon the deeming provision in s60(3) in the event that an election was not made by the Official Receiver within 28 days, ie by 4 October 2005.

31 A solicitor representing the Official Receiver acknowledged receipt. The letter stated that the trustee was currently making enquiries and would endeavour to make an election within the timeframe set out in s60(3).

32 On 4 October 2005 the Official Receiver faxed to Mr Rigg’s solicitor and posted to Mr Rigg personally a Notice of Assignment. The covering letter referred to the letter of 5 September 2005. The Notice stated:

NOTICE OF ASSIGNMENT UNDER S12 OF THE CONVEYANCING ACT, NSW 1919

Paul Sheridan, Chris Cooney & Phillip Harvey
T/as Howard Sheridan Cooney Harvey Solicitors

Trevor William Baker
Take notice the Official Trustee in Bankruptcy has today assigned to Cathy Marie Alexander of 71 Tabrett Street, West Kempsey, NSW, 2440, the Chose in Action of Dawn Marie Baker referred to in Supreme Court of New South Wales proceedings No-20124 of 2001 (now the subject of an appeal No – CA40511 of 2005 to the Court of Appeal of New South Wales).
(signature)
Giulia Inga
Official Receiver
For and on Behalf of the
Official Trustee in Bankruptcy

33 No other notice as to election was sent to Mr Rigg on behalf of the Official Receiver.

34 The claimant Ms Alexander submits that this communication was tantamount to an election by the Official Receiver to prosecute the appeal by the claimant as assignee. I agree. I also agree that this prima facie entitles the claimant to be substituted as the appellant pursuant to Pt 51 r9(2) of the Supreme Court Rules.

35 The letter of 4 October 2005 was the Official Receiver’s considered and timely response to the letter from Mr Rigg’s solicitor that had called upon the trustee to elect between prosecuting or discontinuing the appeal. It was certainly not a notice of discontinuance. The enclosed Notice of Assignment was formal notification of the assignment of the chose in action asserted by Mrs Baker in the court below and “now the subject of” the appeal to this Court. Read fairly, the communication indicated that the right claimed in the proceedings under appeal would be asserted by the assignee.

36 On 18 October 2005 the claimant’s solicitor wrote to the solicitors for each of the respondents seeking their consent to the claimant being substituted as appellant. Copy of the deed of assignment was enclosed. No reply has been received except for a consent on behalf of Mr Trevor Baker.

37 The claimant relies principally upon the reasoning of Madgwick J in Brien. His Honour said:

11 The Act appears at least to contemplate that, upon a bankruptcy occurring, persons who have been sued should not be further troubled by the suit unless the independent trustee has formed the opinion that the action is worth pursuing. The mere act of election will not necessarily and does not of its own force expose the trustee to personal liability for costs. It seems that the "preferable opinion" is that the trustee should be substituted as the plaintiff in the action: Ryan v Hopkinson (1993) 16 FAMLR 659 per Priestley JA. If the trustee cannot procure sufficient indemnities from creditors as to costs, he or she will presumably be unwilling to make the election. Actual further prosecution of the action will, generally, at least be made conditional upon the defendants having an undertaking from someone who is not a bankrupt to meet their costs if the plaintiff should prove unsuccessful, but that is a matter for the court which provides the forum for the action. At best, for the defendant(s) in the action, the Act might therefore be said to contemplate that, by the election, the trustee will present himself or herself to the defendant(s), as a presently non-bankrupt individual, to meet the costs if the action is ultimately unsuccessful.
12 However, there is nothing to stop a trustee, after an election to prosecute the action, from assigning the rights of the bankrupt estate in the action to a third party. The third party may then be substituted as the plaintiff. On such an assignment and substitution, the trustee would have no continuing power to influence the course of the proceedings, except by agreement with the assignee. Thus, the purpose of the Bankruptcy Act is not to assure the defendants in an action begun by a bankrupt that, if the trustee elects to prosecute the action, then he or she will necessarily remain personally available to meet costs or to direct the manner of further prosecution of the action.
13 These considerations affect the meaning to be accorded to the expression "to prosecute" in s 60(2). The phrase cannot mean "to prosecute personally" or "to prosecute under the trustee's direction". Once it is appreciated that the phrase, on the contrary, may include the meaning, "to prosecute or to arrange the prosecution of the action by any assignee who is not a bankrupt", the nature of the election is illuminated. The ability so to elect is obviously not retroactively vitiated by the subsequent assignment of the right to conduct the action in question.
14 Neither, in my opinion, is there any warrant to constrict the notion of an "election" in s 60(2) so as to make it impossible for an assignment which pre-dates the election to take effect. To interpret the notion of the trustee's "election" as the respondents contend is apt to have a number of unfortunate effects. One is to give an unwarranted benefit to the defendants in the action. Another is to disappoint the assignee. A third may be to prevent the bankrupt's estate from retaining either the consideration for the assignment or the rights in the action. Further, it is not the case that upon an assignment of the right to the benefit of a particular action, the trustee is irrevocably disconnected from the action: the trustee might buy back such a right. Had the trustee done so here, then, as I apprehend it, the objection taken could not be sustained. The applicant might, indeed, still do so. It would be odd if the ability to elect could be extinguished and then resurrected in that way.
15 It is apparent, from the trustee's having assigned the right to conduct the action, that it was the trustee's intention that the action should continue. It would be the trustee's implied obligation to the assignee not to fail, except for reasonable cause, to take available steps to make the assignment effective. The Act expressly requires no formality of an election except that it be in writing and implicitly it only requires that such election be communicated to the defendant(s) in the action and to the forum court within a reasonable period or periods. The written assignment in this case may therefore have amounted to an election contemplated by the Act. However, it is unnecessary to decide that question.
16 These considerations lead me to think that the expression "to prosecute" in s 60(2) should be interpreted as including the meaning "to arrange the prosecution of the action by an assignee, who is not a bankrupt, whether or not the assignment occurs before or after the trustee's election to prosecute".

17 This view is at odds with remarks expressed by Wheeler J in Temsign v Biscen (1998) 157 ALR 83 at 93. However, that was a case of purported assignment by a trustee to the bankrupt himself. The assignment was held to be contrary to the policy and purposes of the Bankruptcy Act . It was not necessary to decide whether an assignment of the rights in the action might be made to a non-bankrupt assignee. The case should not be read as so deciding and it is, accordingly, distinguishable. In any event, there is no sign that the sorts of considerations that weigh with me were urged before Wheeler J. If that case should be read as supporting a conclusion contrary to my own, then, despite the special importance of seeking uniform interpretation of a much-litigated Commonwealth statute, I would respectfully decline to follow it, believing that aspect of the decision, to be wrong. It will be apparent from my general approach to the present case that I respectfully consider the principal basis for the decision in Temsign to be correct and that I have assumed its correctness in what I have said above.

38 I respectfully agree with this reasoning.

39 Here, the Official Receiver effectively notified the three addressees of the Notice (the respondents to the appeal) that the appeal will be prosecuted, by and through the assignee. The election was clear and unconditional (Re Lofthouse [2001] FCA 25, 107 FCR 151), albeit implicit. Any other interpretation of the correspondence would suggest the absurdity of the Official Receiver in the one breath discontinuing or abandoning the appeal, while at the same time indicating that an assignee claiming through the trustee would be prosecuting the appeal.

40 The respondents argued that the trustee elected to discontinue the appeal. They relied upon previously uncommunicated documents obtained by subpoena that disclosed (to a degree) what the Official Receiver may have been hoping to achieve on 4 October (Exhibit B).

41 These documents included the negotiations between solicitors representing Ms Alexander and Insolvency and Trustee Service Australia (ITSA) respectively that culminated in the deed of assignment of 4 October 2005. ITSA sought and obtained from its own lawyers urgent legal advice on 29 September 2005. Its solicitor drew attention to Crotty v Anderson (1896) 22 VLR 120, a Victorian Full Court decision that, according to the headnote in the Victorian Law Reports decided that:

Where an assignee of an insolvent estate exercises his election under sec.80 of Act No 1102, and intervenes in proceedings commenced by the insolvent before insolvency, he becomes liable, personally, for all the costs incurred before such intervention, notwithstanding that an order has been previously made therein directing the insolvent to bear such costs.

42 On 30 September 2005 the ITSA legal officer tendered advice to the Official Trustee that the solicitor consulted had:

… advised that the OT should not elect to proceed then enter into a deed to assign its right to Ms Alexander. He is concerned that there is no guarantee that the Deed will be effected. He referred to an old case whereas [sic] the Assignee was ordered to pay all costs in the proceeding, including those prior to its interference.

43 The Official Trustee’s emailed response to the legal officer (on the 4 October deadline) was:

Hello, noted and thanks.

It is interesting – I raised that exact point with Ray last week ie could we assign immediately prior to making any election. In any event I prefer this outcome so that there is no possibility of costs against the OT.
I am available all day to sign the Deed.

44 The deed of assignment that was executed later that day by the Official Receiver and Ms Alexander included the following terms:

1. Subject to clause 2 of the Deed, the Assignee covenants with the Official Trustee that she will pay to the Official Trustee by way of consideration for the assignment referred to in clause 2 of this Deed, free of any deduction, from any sum recovered by the Assignee, the lesser of fifty thousand dollars ($50,000.00)

2. In consideration of the payment to be made by the Assignee pursuant to clause 1 of this Deed the Official Trustee assigns to the Assignee the Chose in Action (and all right, title and interest thereto) which the Official Trustee as the trustee of the bankrupt’s estate may have in the proceedings.

…


6. The Assignee shall bear any costs, including those of the Official Trustee, arising out of the preparation of this Deed and shall bear any stamp duty or other impost payable upon this Deed or arising out of the execution of this Deed and will indemnify and keep the Official Trustee indemnified from any liability in respect thereto.

45 In my opinion, the internal musings of the Official Receiver and her legal advisers do not evince an intention to elect to discontinue the appeal, let alone an election in writing. At most, the Official Trustee was concerned not to elect before having the guarantee of the assignment with its cost indemnities. Nor do the private communications counteract the intention published to Mr Rigg to keep the appeal alive for prosecution by the claimant as assignee that emerges from the correspondence with Mr Rigg’s solicitor as I have analysed it.

46 I would further observe that the reasoning in Crotty appears to turn upon the fact that the assignee in bankruptcy intervened (ie became a party) to appeal proceedings that were subsequently dismissed. In the present case the Official Receiver has not done this nor sought to do so. The Rules preclude the Official Receiver from being joined as an appellant without her consent. It is unnecessary to decide whether there is any other basis for ordering any costs against the Official Receiver. The matter has not yet arisen and the Official Receiver is not a party to the motions before me.

47 Mr Rigg also submitted that the assignment was effective in equity only, because the whole of the relevant chose in action was not involved (Normanv Federal Commissioner of Taxation (1963) 109 CLR 9 at 29-30). An equitable assignment is still a good assignment, but one asserted consequence of the argument was that the Official Receiver remained a necessary party for enforcement purposes.

48 Exactly where this proposition led was not explored at any depth, there being no motion to add the Official Receiver (against her will) to the instant proceedings. The basic proposition is flawed, in my opinion. The causes of action asserted by Mrs Baker at first instance were free-standing, none the less so because it was on the cards that the equitable claims would fail if Mrs Baker or those claiming through her became unable to offer counter-restitution or restitutio in integrum as the price of relief against Mr Rigg and Mr Trevor Baker. This (disputed) aspect of the equitable chose in action did not render the Official Receiver’s assignment one that did not involve a “whole debt” in the sense discussed in Norman.

Consequences of election by Official Receiver

49 The Official Receiver’s written election to prosecute the appeal means that there was no discontinuance or abandonment within s60(3) of the Bankruptcy Act.

50 Nevertheless, the stance adopted by the trustee in bankruptcy evinces clearly to this Court and to the parties to the appeal that the trustee does not intend to take any steps in prosecution of the appeal. If they are to be taken, the moving party will be the assignee, Ms Alexander. It is she and she alone who seeks and consents to be substituted as appellant (cf Supreme Court Rules, Pt 51 r9(2) and (3)).

51 The Official Receiver has been notified as to Mr Rigg’s intention to move for dismissal of the appeal. The trustee neither consents to nor opposes that application (see affidavit of Mr Geisker sworn 19 October 2005). Its position is that its interest has been assigned to the claimant (letter from ITSA dated 10 November 2005). The Official Receiver does not want to become an appellant and cannot be made an appellant without consent (Pt 51 r9(3)).

52 Nothing indicates that Mrs Baker intends or has the capacity to stay or annul the bankruptcy. The Bank obtained against her a substantial judgment for costs which has been assigned to Mr Rigg. Additional costs orders have been made against her and they too will be provable debts in the bankruptcy. Mrs Baker’s costs payable to Mr Rigg in the judgment under appeal appear to be in the hundreds of thousands of dollars.

53 Mr Rigg’s costs in connection with the current appeal are already substantial and they will grow significantly between now and the beginning of the new term if the appeal remains on foot (see Mr Geisker’s affidavit of 14 November 2005, pars 31-37).

54 Ms Alexander was born in 1968. She lived in the homestead until 2000 and at various times thereafter, prior to her mother’s eviction by the Bank.

55 Ms Alexander has sworn an affidavit stating implicitly that she wishes to enforce whatever rights were available to her mother, acting in her status as assignee from the Official Receiver. As indicated, written submissions as on an appeal have been prepared on behalf of Ms Alexander. A final draft of those submissions was provided to the Court and to the respondents during the hearing of the motions.

56 I am satisfied that Ms Alexander wishes to prosecute the appeal. Nothing turns on whether she wishes to do this in her own right or for the benefit of her mother. If the appeal succeeded, then in certain events money would be payable to the bankrupt’s estate by reason of cl 1 of the deed of assignment (par 44 above).

57 Ms Alexander’s desire to prosecute the appeal is patent. Equally patent is her incapacity to meet any costs orders that would inevitably flow were the appeal to be dismissed. For the purpose of the proceedings before me the parties were agreed (Ex A) that:

The claimant Cathy Lee Alexander would be unable, if ordered to do so, to pay Rigg’s [sic] costs:
(a) of these proceedings from now to completion;
(b) of these proceedings to date;
(c) of the proceedings at first instance.

58 The same goes for any costs that might be ordered in favour of the respondent solicitors, on my understanding.

59 The respondents represented before me submitted that, even if the assignment is valid, the Court ought not to join Ms Alexander as an appellant because this would be an exercise in futility. The appeal should notionally be stayed unless and until substantial security for the appeal costs are provided. In fact, it should be dismissed because of Ms Alexander’s proven inability to provide such security and because no one else stands ready to prosecute it.

60 Mr S C Campbell SC, representing Ms Alexander, did not suggest that his client could or would provide security for costs. He properly accepted that an order staying proceedings pending provision of security by his client would be an exercise in futility. His contention was that special circumstances had not arisen sufficient to generate an order for provision of security for appeal costs (cf Pt 51 r16).

61 In Winnote Pty Ltd v Page [2005] NSWCA 362 I said (at [21]):

The requirement to establish “special circumstances” appears designed to negate the common law in which appeals are exceptions to the general rule that impecuniosity is not a bar in itself ( Melville v Craig Nowlan & Associates Pty Ltd (2001) 54 NSWLR 82 at 108[100], Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143 at 147[13]).

62 I am firmly of the view that this would be a proper case to order security. The circumstances are special. Indeed, it would be most unfair to permit the litigation to go on without fully protecting the respondents from the risk of further wasted costs (see Cummings at 130-1).

63 I am prepared to assume that the appeal is arguable. But nothing that I have seen indicates that it is a strong one. The first instance judgment contains significant credit-based findings both adverse to Mrs Baker and in favour of Mr Rigg and the solicitors.

64 In the eye of the law, Ms Alexander is a stranger to the litigation. She appears in this Court as an assignee who has purchased from the Official Trustee the right to continue the appeal for her own benefit.

65 The respondents have incurred very considerable costs to date that appear to be irrecoverable. They are threatened with substantial further costs even if Ms Alexander had the appeal books prepared in time to enable the appeal to proceed at the beginning of the law term.

66 This is not a case where it could be suggested that the proposed appellant’s incapacity to meet a costs order is the direct consequence of the wrong complained of in the proceedings.

67 In these circumstances, the joinder of Ms Alexander as the (sole) appellant would be a futility. Such joinder would be subject to an order that the proceedings be stayed pending the provision of security which cannot be provided. Lest I be wrong about this I propose to allow a little over a week to elapse between publishing these reasons and making the orders about to be foreshadowed.

68 The formal order is that the motions before me stand adjourned to 9.30am on 2 December 2005.

69 At that time I propose to dismiss Ms Alexander’s application with no order as to costs; and to make orders dismissing the appeal and cross-appeal.

70 I propose making no order as to costs against Ms Alexander because she succeeded in most of the arguments before me, only stumbling in the late, notionally-added application for security that the parties agreed would be treated as before me.

71 I will reserve liberty to the moving respondents to seek an order that Mrs Baker pay the costs of the appeal (excluding the cross-appeal). There may be no point in doing so. The respondents will need to satisfy themselves and me that appropriate notice has been given to Mrs Baker and/or the Official Receiver in that regard.

72 Given the continuing neutrality and absence of the third respondent, Trevor Baker, I am presently minded to make no order as to his costs in the motions or the appeal. The proposed order to dismiss the appeal in its entirety proceeds on the basis that there is simply no point in leaving it hanging by a thread against Trevor Baker alone.

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