Briggs v Lunt [No 2] - [2010] WASCA 195

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: BRIGGS -v- LUNT [No 2] [2010] WASCA 195

CORAM: PULLIN JA

HEARD: 20 AUGUST 2010

DELIVERED : 20 AUGUST 2010

FILE NO/S: CACV 60 of 2009

BETWEEN: PETER BRIGGS
First Appellant
NEW RESOURCE HOLDINGS PTY LTD
Second Appellant
AND
WILLIAM TREVOR LUNT
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :EM HEENAN J
Citation  :LUNT -v- BRIGGS [2009] WASC 134
File No  :CIV 1501 of 2001, CIV 1974 of 2001

Catchwords:

Practice and procedure - Late application for security for costs - Effect of delay - Two appellants - One unaffected by the application for the stay - Same grounds of appeal

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Appellant               :     Mr P G McGowan
Second Appellant          :     Mr P G McGowan
Respondent:     Mr B W Duckham

Solicitors:

First Appellant               :     Vincent Partners
Second Appellant          :     Vincent Partners
Respondent:     B W Duckham & Co

Case(s) referred to in judgment(s):

Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [2009] WASC 299
Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241
FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 147
Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114

PULLIN JA: This is the respondent's application that New Resource Holdings Pty Ltd, the second appellant, provide security for costs. That would usually go hand-in-hand with an application that the appeal be stayed pending the provision of such security. In the proceedings resulting in the judgments the subject of this appeal, there were originally two actions, CIV 1501 of 2001 in which the respondent sued Mr Briggs, the first appellant, and CIV 1974 of 2001 in which the respondent sued New Resource Holdings Pty Ltd. The actions were ordered to be consolidated and heard together by Heenan J. They were heard together but despite the consolidation order, it appears that judgment was entered after the trial in favour of the respondent against Mr Briggs in CIV 1501 of 2001 in a sum exceeding $900,000 and judgment was entered in favour of the respondent against New Resource Holdings Pty Ltd in CIV 1974 of 200l in a sum exceeding $800,000.
The two judgment debtors then appealed and instead of two appeals, one appeal has been instituted with one set of grounds. All grounds allege errors of fact affecting both judgments, save for one point covered in the grounds concerning an alleged limitation defence which was also relevant to both judgments.
The applicant, in seeking security for costs, seeks to invoke the jurisdiction of the court under r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA), together with par (f) of the definition of 'interim order' in r 3(1) and under s 1335(1) of the Corporations Act 2001 (Cth) which reads:
Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
The first question is the threshold question as to whether there is credible testimony by which it appears to the court that there is reason to believe that the corporation will be unable to pay the costs of the respondent if successful in its defence: see FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241, 247 ‑ 248. In ascertaining whether there is credible testimony, the court does no more than judge the quality of the evidence to see if it objectively gives rise to the court having a reason to believe that the corporation has an inability to pay costs if the respondent succeeds. If the jurisdictional requirement is met, then the court's discretion is enlivened and there are a number of discretionary factors which have to be considered.
As to the jurisdictional requirement, the respondent has prepared a pro forma bill of costs showing $57,000 as the estimated cost of the appeal calculated under the appropriate scale. Added to that is the following evidence. There is background in Mr Lunt's affidavit dated 10 August 2010 in which he deposes that he was 'at all material times' a 13.16% shareholder in New Resource Holdings Pty Ltd. He then deposes some facts by way of background in pars 6, 7 the 8 of the affidavit which read:
DIVERSION OF ENTITLEMENT OF SHARES IN MAX RESOURCES LTD
6.Further, I say as follows:
(a)As a result of my exertions on behalf of the Second Appellant the Second Appellant had significant assets which were the subject of sale to publicly listed company Max Resources Ltd pursuant to a Sale Agreement dated 7^th May 1998 and in respect of which the Second Appellant was entitled to receive 5 million free ordinary fully paid shares in Max Resources Limited. Annexed hereto and marked 'WTL-2' is relevant extract from such Sale Agreement.
(b)Such shares were available for issue to the Second Appellant on or about the 20th day of June 1997 when I was not a director of the Second Appellant.
(c)As a result of my derivative interest in the Second Appellant my entitlement to these shares in Max Resources Limited was one million shares in Max Resources Limited.
(d)By communication being a draft letter dated 24^th April 1997 I suggested to the First Appellant that such shares should be distributed direct by way of benefit to the shareholders. Annexed hereto and marked 'WTL-3' is a copy of such communication.
(e)Upon receiving this communication the First Appellant on behalf of the Second Appellant acknowledged and agreed the same pursuant to a communication, dated 24^th April 1997 a copy of which is marked 'WTL-4'
(f)By letter dated 12 May 1997 I wrote to the First Appellant confirming our agreement and attached is a copy of my letter marked 'WTL-5'. I was at all times concerned to follow up the arrangement entered into and wrote to WRS Pacific Limited by communication dated 13 August 1997 to which the First Appellant indicated the Max shares to which I claim the said entitlement had not yet been made available to the Respondent. Annexed hereto and marked 'WTL-6' is a copy of such communication.
(g)Behind my back and without notice to me or any other shareholder this agreement was breached insofar as the share entitlement of myself as a derivative shareholder and to other shareholders was diverted by the Second Appellant through the First Appellant by communication to the share registrar of Max Resources Limited dated the 27^th May 1998, a copy of which is annexed hereto and marked 'WTL-7'
(h)I subsequently ascertained in the month of December 2002 or thereabouts that the shares had been diverted and that the information previously made available by the Second Appellant through the First Appellant was incorrect and false.
(i)On the 23rd day of December 2002 I caused proceedings CIV 2762 of 2002 to be issued to claim my entitlement. Annexed hereto marked 'WTL-8' is a copy of a version of the amended writ of summons in such proceedings.
(j)The action of the First Appellant in this matter is currently the subject of Major Fraud Squad investigation.
PURPORTED REMOVAL OF APPELLANT AS SHAREHOLDER IN RESPONDENT
7.Further, I say that:
(a)My derivative shareholding in the Second Appellant was the subject of a purported attempt to remove the same by the Second Appellant by causing an ASIC Form 484 to be signed by Briggs indicating my share holding had been transferred/withdrawn from the share register of the Second Appellant. There is annexed hereto and marked 'WTL-9' a copy of the said Form 484.
(b)I became aware of this purported transaction about December 2002.
(c)In respect to such purported transaction I say as follows:
(i)No such transfer was effected by myself, Australian Capital Technologies Pty Ltd or Waste Recovery Systems Limited.
(ii)No transfer document in order to change the Register of Shareholders in the Respondent was made available to the Respondent
(iii)No stamped document to effect such purported transfer was produced. Annexed hereto and marked 'WTL-10' are copies of communications received from the Department of Treasury and Finance referring to the above and the purported entry of transfer of shares in the Share Register of the Respondent was in breach of the Stamp Act.
(iv)As demonstrated in the said Form 484 the purported recipient of the shares to which I claim an entitlement was York Heritage Pty Ltd, a company in which the First Appellant’s daughters are or have been directors.
(d)I issued court action number COR 9 of 2007 to rectify the above. Annexed hereto and marked 'WTL-11' is a copy of the Initiating Process which is the subject of conversion to proceedings.
(e)I respectfully observe that the result of this transaction is to attempt to remove myself and my companies as shareholders in the Second Appellant, not only without justification, or documentation but also illegally and such illegal action is now the subject of Police investigation.
8.The loss or non payment of my entitlements as deposed to above took place prior to Briggs giving evidence as above deposed to on the 9th day of April 2008 in the proceedings 1489 of 2001.
An affidavit of Mr Duckham sworn 14 July 2010 exhibits an affidavit which he made and which was filed in action CIV 1501 of 200l in which he refers to the Corporations Act proceedings, COR 9 of 2007, referred to in passages in the affidavit of Mr Lunt which I referred to above.
In that affidavit, Mr Duckham says he had cause to discuss the proceedings COR 9 of 2007 with Mr Paonni who was the solicitor acting for the appellants in this appeal. Mr Duckham's affidavit reads in par 7:
My recollection is that in October 2009 or thereabouts I spoke to Mr S Paonni. He asked me the point of pursuing my client's claim in such proceedings in view of the fact that shares in New Resource Holdings Pty Ltd were of little, or no, value as the company had no available assets to provide value to any shares in that company.
Mr Duckham has exhibited correspondence with the solicitors for the appellants, inviting them to demonstrate that New Resource Holdings Pty Ltd had an ability to meet a costs order and inviting the company to provide an up-to-date balance sheet. These requests were made in October and November 2009.
The solicitor for the appellants responded by asking for a draft bill of costs which was provided by Mr Duckham. It appears that an offer of $10,000 was made by way of security at one stage. Mr Lunt in an affidavit of 14 July 2010 said in par 5:
Since this Appeal and the concurrent Appeal No. 78 of 2008 has been instituted my solicitor and I have been concentrating on matters relevant to such Appeals and have as a result not actively pursued the matter for security for costs.
Earlier this year in May, Heenan J was asked to make an order that Mr Briggs be examined as to his means to pay the judgment entered against him. This was listed for 8 July 2010 but vacated at the request of one of the appellants and relisted for 8 October 2010. Notwithstanding that New Resource Holdings Pty Ltd is the beneficiary of a judgment against Mr Lunt in proceedings that were conducted before Templeman J, my opinion is that what is revealed above provides credible testimony giving me reason to believe that the second appellant corporation will be unable to pay the costs of the respondent if the respondent is successful in the appeal. That means that the jurisdiction of the court is therefore enlivened.
I now turn to the factors relevant to the exercise of the discretion. The first consideration which is usually taken into account is the prospect of success or the merits of the appeal. Insofar as the appeal grounds attempt to upset a judgment based on the trial judge's assessment of witnesses in making findings of fact, the prospects of such an appeal are always likely to be fraught with difficulty. However, I will assume that the appellants' appeal is not hopeless and, in the language relevant to such an assessment, has reasonable prospects of success. In addition, I note that there is a legal point being advanced by the appellants concerning the Limitation Act 1935 (WA).
Secondly, questions about whether the appellants' impecuniosity is attributable to the respondent's conduct is a relevant consideration but it is not submitted that there is any evidence of conduct by the respondent which has contributed to the second appellant's financial predicament.
Thirdly, the question is whether the order for security for costs would be oppressive or would stifle proceedings. There is no claim that an order for security would stifle the proceedings. It is also relevant that there has been an offer of security for costs albeit of an inadequate amount.
The main point bearing upon the exercise of discretion is delay. The appeal notice was filed on 28 May 2009. On 7 August 2009, the appellants' case was filed and, on 15 September 2009, the respondent's answer was filed. There was an amended appeal notice and the appellants' case was also amended in October 2009 and 27 November 2009. In the meantime, in October and November 2009, the issue of security for costs was debated between the parties. Six months later, on 25 May 2010, the respondent filed an amended answer. On 2 June, there was some more skirmishing when an application was made by the appellants to remit a hearing pending before Heenan J seeking to bring that application into this court. That was dealt with and dismissed by me on 11 June 2010.
The parties have been before me on many occasions while I have been trying to shepherd them towards a hearing date. I have determined that this appeal and the other appeal concerning Templeman J's judgment in which Templeman J gave judgment for New Resource Holdings Pty Ltd against Mr Lunt should be heard at the same time or immediately after this appeal and by the same coram.
In that case - that is, the case tried by Templeman J - based on some evidence which corresponds with evidence in the case before Heenan J, Templeman J believed Mr Briggs and found Mr Lunt lacking in credibility, whereas Heenan J hearing some of the same evidence and determining the case before him believed Mr Lunt and found Mr Briggs lacking in credibility. This shows the danger of separating off these related matters and that the danger of separation produces the possibility of different judges dealing with the same or similar evidence which can give rise to the possibility of different outcomes in relation to similar issues.
In my view, there would have been a strong case for an order for security if the application had been made in 2009 but at this point the appeal book indexes have been settled and appeal books prepared and filed. All that now remains is to have the appeal heard.
In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 147 [7], Handley JA said:
Delay is an important discretionary ground for refusing an order for security. This is because in the meantime the appellant will have incurred costs in prosecuting and preparing its appeal and in all probability paid substantial amounts to its own solicitors for that purpose. If the appellant and those associated with it are unable to provide security for costs, and the appeal does not proceed, the amounts so paid and the liabilities so incurred will have been thrown away and the appellant and those associated with it will have been prejudiced.
In Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [2009] WASC 299, Kenneth Martin J, in referring to an extremely late application for security for costs, less than a month before the trial was due to commence, after referring to the fact that proceedings in preparation for the trial were in full swing, said:
To inject today into a scenario of intensive trial preparation for the looming trial commencing on 12 October, any prospect at all of the trial even possibly being interrupted by a stay is, in my assessment, unacceptable - indeed wholly repugnant to modern principles of case-flow management [12].
His Honour was not persuaded by an argument in that case that the application was late but that the application had been foreshadowed for some time and that there had been conferral about security. I also refer to the case of Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301, 308 where Street CJ said:
It is an accepted principle in the ordering of security for costs that such an application should be made promptly. There may, of course, be cases where the impecuniosity of the company may only be discoverable or provable at a later stage of the proceedings. Similarly, there may be cases in which the length of the proceedings was not foreseen when they commenced. Other situations could occur in which a late application could, without procedural prejudice, be brought forward during the currency of the disputed proceedings. But ordinarily, I reiterate, the application ought to be made promptly in order to avoid the very situation which has developed in this case.
In that case, it was a very late application, an application made after eight days of the hearing of an arbitration. See also Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114, 123 (Waddell J).
There is no doubt that the appellants in this case would have incurred substantial costs in the conduct of the appeals to date. In addition, and coupled with this delay, is the highly unsatisfactory situation which could develop if an order for security were made and the corporation's appeal was stayed. That would not prevent Mr Briggs continuing with his appeal and arguing the very grounds that the corporation wishes to advance in its appeal. It would be quite unsatisfactory to have a situation develop where, if security were ordered, the corporation did not provide security. The result would be that its appeal would be stayed, but the Briggs appeal would proceed. If it succeeded and the judgment was set aside, then the reasons for doing so would logically equally apply and justify the setting aside of the judgment against the corporation. It would be highly unsatisfactory if a different coram adopted a different view and produced a different result in relation to the corporation's appeal. In theory, that could occur if the corporation found money and was able to provide security for costs.
The potential for the two appeals being separated would create problems, in the same way that problems have developed in the separation of the actions the subject of this appeal and the action instituted by Mr Lunt and heard by a different judge. Thus the lateness of the application and the associated potentially unsatisfactory consequences which might flow lead me to the conclusion that I should dismiss the application. That will be the order of the court.