Campbell-Smith v Lean - [2017] WASCA 89

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: DONALD CAMPBELL-SMITH as executor of the estate of MARTIN BANNING -v- GRAEME TREVOR LEAN (in his capacity as Receiver) [2017] WASCA 89

CORAM: MURPHY JA

HEARD: 13 APRIL 2017

DELIVERED : 13 APRIL 2017

PUBLISHED : 9 MAY 2017

FILE NO/S: CACV 2 of 2017

BETWEEN: DONALD CAMPBELL-SMITH as executor of the estate of MARTIN BANNING
First Appellant
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
Second Appellant
AND
GRAEME TREVOR LEAN (in his capacity as Receiver)
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MASTER SANDERSON
Citation  :COMPUTER ACCOUNTING AND TAX PTY LTD (in liq) -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 11] [2016] WASC 365
File No  :CIV 2265 of 2006

Catchwords:

Practice and procedure - Application for security for costs - Turns on own facts

Legislation:

Nil

Result:

Application granted

Category: B

Representation:

Counsel:

First Appellant               :     Mr T Stephenson
Second Appellant          :     Mr T Stephenson
Respondent:     Mr C Stokes

Solicitors:

First Appellant               :     Eastwood Sweeney Law
Second Appellant          :     Eastwood Sweeney Law
Respondent:     Chris Stokes & Associates

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

Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11] [2016] WASC 365
Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 2] [2010] WASC 318
Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133
Frigger v Lean [No 2] [2016] WASCA 212
George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56
TSDack Pty Ltd v Australian Water Holdings [2015] FCA 931
Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96
Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245

MURPHY JA:

Introduction

On 13 April 2017, I heard an application for security for costs in this appeal. The appellants are Mr Campbell‑Smith as executor of the estate of Mr Martin Banning, and a company associated with Mr Banning before his death, Professional Services of Australia Pty Ltd (PSA). The application for security was brought by the respondent, Mr Lean, in his capacity as receiver (Mr Lean). The appeal is against orders of Master Sanderson dated 8 December 2016 in relation to Mr Lean's costs in acting as receiver. The master's reasons were delivered on 11 November 2016: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11][1] (primary decision).
[1] Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 11] [2016] WASC 365.
I ordered security in the sum of $35,000 and said that I would provide written reasons later. These are my reasons.

The overall litigious context

The decision under appeal is one of a vast number of decisions which have been generated in relation to proceedings commenced by Computer Accounting and Tax Pty Ltd (CAT) against PSA and Mr Banning in 2006. For present purposes, the following summary provides the relevant context to the decision under appeal. It is taken largely from Frigger v Lean [No 2].[2]
[2] Frigger v Lean [No 2] [2016] WASCA 212.
On 17 September 2003, CAT, a company effectively then controlled by Mr and Ms Frigger, commenced proceedings No 17065 of 2003 in the Local Court against PSA and Mr Banning for 'loss incurred in the purchase of [an Armadale property] as a result of misleading or deceptive conduct'.On 14 November 2005, the proceedings were transferred into the District Court. The District Court proceedings were initially CIV 332 of 2004, but later became CIV 2797 of 2005.On 17 November 2006, following an unsuccessful attempt to have the proceedings transferred into the Federal Court, the District Court proceedings were transferred into the Supreme Court and became CIV 2265 of 2006.
On 2 November 2007, the matter in CIV 2265 of 2006 went to trial. CAT's claims included claims for misleading or deceptive conduct in relation to alleged misrepresentations made by Mr Banning in relation to the sale.
Justice Simmonds delivered reasons for judgment in favour of CAT: Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd[3] (original judgment). His Honour awarded CAT damages in the sum of $967,202.50.
[3] Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133.
On 25 July 2008, PSA and Mr Banning appealed the assessment of damages awarded against them. Mr Banning died in September 2008. Mr Campbell‑Smith was the executor of his estate. At this point, one of Mr Banning's assets was a share in Banning Holdings Pty Ltd (Banning Holdings).[4]
[4] Affidavit of Mr Lean sworn 2 February 2017, pages 21, 23.
On 21 November 2008, CAT obtained orders pursuant to s 86(1) of the Civil Judgments Enforcement Act 2004 (WA) (Enforcement Act) in respect of the original judgment. By these orders (Receivership orders), Mr Lean was appointed as receiver over the share owned by Mr Banning in Banning Holdings (the Banning Share) in order to 'appropriate and realise [the Banning Share] so as to satisfy the [original] judgment debt' in favour of CAT.The only other shareholder in Banning Holdings was Ms Sandra Banning.
On 16 December 2008, a transfer of the Banning Share to Mr Lean was registered in the register of members of Banning Holdings.Mr Lean then undertook steps to sell the Banning Share.
On or about 10 February 2009, Mr Lean advertised the Banning Share for sale in The West Australian newspaper and invited expressions of interest. On or about 27 February 2009, Mr Lean held a meeting for interested parties.There were several offers to purchase the Banning Share, including an offer from Mr and Ms Frigger to purchase the Banning Share for $730,000.
On 10 March 2009, Mr Lean entered into an agreement with Mr and Ms Frigger for the sale of the Banning Share to Mr and Ms Frigger. A deposit of $20,000 was paid on that date and the balance of $710,000 was paid on 25 March 2009.
At all material times, the constitution of Banning Holdings contained provisions to the effect that the directors may decline to register any transfer without giving any reason therefor (Article 22), and that no shares in the capital of the company could be sold or transferred unless and until specified rights of pre‑emption had been followed (Article 22A).
On 25 March 2009, Mr and Ms Frigger received a letter from Banning Holdings' solicitors informing them that the directors of Banning Holdings would not approve registration of the transfer of the Banning Share.
On or about 20 April 2009, Mr and Ms Frigger commenced proceedings to compel, in effect, the registration of the transfer of the Banning Share. The proceedings were CIV 1727 of 2009. The defendants initially comprised Mr Campbell‑Smith, who had replaced Mr Banning as a director of Banning Holdings on 14 July 2008, Ms Sandra Banning and Banning Holdings (collectively referred to as the 'Banning defendants').
In proceedings CIV 1727 of 2009, Mr and Ms Frigger sought relief under s 1071F of the Corporations Act 2001 (Cth) or, alternatively, mandatory final injunctive orders to the same end under the general law. Mr Lean was initially joined as a second plaintiff, but was subsequently removed and added as a fourth defendant, and a declaratory order and a form of mandatory injunction were sought by Mr and Ms Frigger against Mr Lean. The Banning defendants counterclaimed against Mr Lean and also against Mr and Ms Frigger. In Kenneth Martin J's reasons for judgment dated 2 December 2010 in that matter, his Honour referred to the counter‑claim of the Banning defendants against Mr Lean in the following terms:[5]
By counterclaim against the Receiver [Mr Lean] the Banning defendants (see pars 20 - 29 of the counterclaim) also pursue claims in alleged negligence, as well as asserted unconscionable conduct, and a compensation claim under terms of a written undertaking said to have been given in the Primary Action.
[5] Frigger v Campbell‑Smith [2010] WASC 353 [68].
In June 2009, CAT was paid the original judgment sum of $1,165,661.59.That sum was then paid by CAT to Mr and Ms Frigger.
The appeal by PSA and Mr Banning against the assessment of damages in the original judgment was heard on 22 July 2009. Mr Campbell‑Smith, who had been appointed executor of Mr Banning's estate, became the second appellant in the appeal.
The Court of Appeal upheld the appeal on damages. Reasons were published on 23 October 2009.The damages awarded to CAT against PSA and Mr Banning were substantially reduced to $424,449. As CAT had already been paid under the original judgment, the Court of Appeal ordered CAT to, in effect, repay PSA and Mr Banning's estate amounts which came to (approximately) $800,000.
CAT did not repay that debt and was subsequently served with a statutory demand. On 6 May 2010, following non-compliance with a statutory demand and no application having been made to set it aside, Master Sanderson made an order that CAT be wound-up in insolvency.
In August 2009, PSA and Mr Campbell‑Smith applied to have Mr Lean discharged from his receivership. That matter was ultimately determined by Simmonds J in reasons published on 10 November 2010: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 2].[6] His Honour decided, amongst other things, that the receivership orders should be cancelled.[7]
[6] Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia Pty Ltd [No 2] [2010] WASC 318 (CAT v PSA No 2).
[7] CAT v PSA No 2 [100].
On 2 December 2010, Kenneth Martin J delivered reasons in CIV 1727 of 2009, and granted a permanent stay of those proceedings: Frigger v Campbell‑Smith.[8]Amongst other things, his Honour had regard to the following matters that he found had occurred since the commencement of those proceedings:
(a)the Court of Appeal heard and allowed the appeal by PSA and Mr Banning, thereby reducing the judgment debt in CIV 2265 of 2006 in favour of CAT;
(b)payments made before the Court of Appeal's decision to CAT meant that the judgment debt in CIV 2265 of 2006 had been effectively extinguished, and CAT had been left with an overpayment representing the difference between the amount paid and the amount to which the judgment debt was reduced on appeal;
(c)CAT went into liquidation without having paid to PSA and Mr Banning the amount of the 'overpayment'; and
(d)on 10 November 2010, Mr Lean had been removed as receiver over the Banning Share.
[8] Frigger v Campbell‑Smith [2010] WASC 353.
In his reasons, his Honour said:
The Receiver's sale of [the Banning Share] in March 2009 to the Friggers, was conceived in a very different underlying factual environment. There was then a subsisting judgment debt to CAT. That is no longer so. The Receiver was removed on 10 November 2010.
…
The pointlessness scenario provides, prima facie, a basis for [Banning Holdings'] directors to continue to decline to process the Receiver's transfer of [the Banning Share] to the Friggers - based upon power in the directors to reject a transfer under Article 22. … Absent a subsisting judgment debt to be recovered by a Receiver (who is now removed), there is no sufficient underlying rationale in principle to support enforcement orders against the directors of [Banning Holdings] compelling the registration of a share transfer to the Friggers. More particularly, that is so when the sale is not a disposition to an arms length third party, but rather to parties inseparably associated with the (former) judgment creditor, CAT.
Had I not ordered a permanent stay of proceedings I would, in any event, still have required the Friggers to provide a bank guarantee to the Receiver for the outstanding purchase price in the amount of $710,000 - before considering allowing the action to proceed further, were it not permanently stayed on the basis of the considerations which I have discussed.
With respect to the counter‑claim by the Banning defendants against Mr Lean (and Mr and Ms Frigger), his Honour observed:[9]
The [Banning] defendants' expressed position also would appear to be that upon a stay, they are willing to dismiss or discontinue their present counterclaims - brought against the Friggers, as well as against the Receiver (see defence and counterclaim of the first, second and third defendants, filed 1 July 2009).
[9] Frigger v Campbell‑Smith [2010] WASC 353 [65].
On 9 February 2011, Kenneth Martin J made orders permanently staying the proceedings in CIV 1727 of 2009 and ordered that Mr and Ms Frigger pay certain costs of the Banning defendants and Mr Lean. It is not clear to me what orders, if any, were ultimately made with respect to the Banning defendants' counterclaim against Mr Lean.
On 27 March 2012, the Court of Appeal refused Mr and Ms Frigger's application for leave to appeal against the costs orders made against them by Kenneth Martin J on 9 February 2011.
Some time later, in about 2014, Mr Lean made a claim in CIV 2265 of 2006 for fees in relation to his work as a court‑appointed receiver over the Banning Share. The claim was resisted by PSA and Mr Campbell‑Smith as executor of Mr Banning's estate. The primary decision, the subject of the appeal herein, involved the resolution of that claim for fees by Mr Lean.

The primary decision

The master made the following findings in relation to Mr Lean's claim for fees.
Mr Lean was appointed on 21 November 2008 by order of Simmonds J for a limited purpose of appropriating and realising one share in Banning Holdings owned by the deceased estate of Mr Banning. At the time the order of appointment was made, CAT was not in liquidation.
The appointment of Mr Lean was made expressly for the payment of a judgment debt as an enforcement order pursuant to s 86(1)(b) or (e) of the Enforcement Act. The practice to be applied in regard to the appointment is therefore that pursuant to O 51 of the Rules of the Supreme Court 1971 (WA) with necessary changes.[10]
[10] Primary decision [3].
CAT was in liquidation at the time the receiver's appointment was cancelled. After May 2010 when CAT was in liquidation, the receiver could not continue to act in that capacity.[11] The appointment of the receiver was cancelled on 10 November 2010 by Simmonds J.
[11] Primary decision [5].
On 10 November 2010, Simmonds J granted the receiver an 'equitable lien' over the one share in Banning Holdings, and required the receiver to submit his accounts for passing under reg 57 of the Civil Judgments Enforcement Regulations 2005 (WA). Although Mr Lean delayed (until about 2014) in bringing his remuneration claim without explanation, it did not follow that Mr Lean was disqualified from making an application.[12]
[12] Primary decision [6].
As the appointment of Mr Lean in 2008 was made pursuant to the Enforcement Act, it is a fundamental proposition that Mr Lean was appointed by the court and is an officer of the court. Accordingly, he is under a duty to act impartially and in accordance with the directions of the court in administering the property the subject of the receivership. Furthermore the property of which the receiver takes possession does not vest in him and it would follow that the property is not that of the receiver to deal with as he likes. The receiver is not an agent of the parties and is not subject to their control or direction. However, the receiver does owe duties of a fiduciary character to all persons with an interest in the property seized by him.[13]
[13] Primary decision [7].
The master also said that a receiver owes a duty to use his powers of sale 'in good faith' and not to recklessly sacrifice the asset. The master rejected the submissions by PSA and Mr Campbell‑Smith that the 'higher United Kingdom standard' ought to apply to court‑appointed receivers.[14]
[14] Primary decision [8].
The master also said that there was no doubt that a receiver appointed by the court is subject to the inherent powers and discipline of the court and that, accordingly, the court has the power, when dealing with the question of the receiver's remuneration, to prevent exorbitant demands for remuneration and to ensure that the remuneration appropriately reflects the work done.[15]
[15] Primary decision [9].
The master referred to the Full Court's decision in Venetian Nominees Pty Ltd v Conlan[16] and held, in effect, that the principles enunciated in that case apply to court‑appointed receivers, and that he was required to assess the costs accordingly.[17]
[16] Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96.
[17] Primary decision [10].
The master also accepted that the relevant principles to be applied were as follows:[18]
(a)The Receiver should be allowed his or her costs in so far as they have been incurred in activities reasonably undertaken incidentally to performing the function created by his or her appointment - see Wayland v Nidamon Pty Ltd (1986) 11 ACLR 209 @ 222. It would not be reasonable to claim for costs of duplicated work, or, work completed after cessation of the role of the Claimant - Venetian supra @ p 19 - 20 or if work was completed outside of the scope of his powers Venetian supra @ p 23 - 24.
(b)It is necessary for the receiver to justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought, and, failure to discharge the burden of establishing that the remuneration claimed is reasonable by failure to provide adequate evidentiary material may lead to no order for remuneration being made. Should the receiver fail to provide sufficient material to enable the Court to conclude the costs were fair and reasonable no Order should be made - see Re Solfire Pty Ltd (in liq) (No 2) (1998) 16 ACLC 1156 approved in Venetian Nominees Pty Ltd & Ors v Conlan unreported lib No 980576 del 2 October 1998 @ p 15. The mere listing of persons who performed the work, the hours worked by each, and the amounts claimed may well be insufficient material for the Court to come to a proper conclusion - Venetian supra @ p 15. It is implicit that detailed diary notes and time sheets should be kept so these may be inspected - Venetian supra @ p 15 - 16 quoting Re Solfire supra @ p 1164.
(c)The expenses incurred by the receiver must be itemised and vouched if necessary. It would follow by analogy from (a) that there must be some proof offered as to how the expenses incurred related to the activities reasonably undertaken incidentally to performing the function created by his or her appointment. When disbursements are claimed the affidavit should verify that they were incurred and if necessary why they were incurred - Venetian supra @ p 15.
(d)The evidence adduced must enable the Court to reach a conclusion as to what is a fair compensation for what the receiver has actually done. The Court will usually work off timesheets created in the receiver's office provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff. The evidence adduced must satisfy the Court as to the time actually taken for doing the work.
(e)The Court's objective is to award a sum, or, devise a formula which will reasonably compensate the Receiver for the time and trouble expended in the execution of his or her duties and, to some extent, the responsibility he or she has assumed. It must follow therefore that the Receiver bears the burden of establishing that the work for which a claim is made reasonably relates to the duties for which the Receiver was appointed.
(f)The procedure to be followed is a matter for the Court to determine and may include cross-examination of the Receiver/claimant on notice - Venetian supra @ p 16 - 17. (original emphasis)
[18] Primary decision [16].

The master observed that PSA and Mr Campbell‑Smith's prime submission was to the effect that Mr Lean should only be allowed his costs insofar as the activities were reasonably undertaken and incidental to performing the function created by his appointment, that is to say valuing and selling the share in Banning Holdings and reporting to the court and/or the judgment creditor from time to time. The master said that the real difficulty was in establishing what aspects of the receiver's activities fell within the rubric of 'activities reasonably undertaken and incidental' to performing the function. The master noted that Mr Lean's claim for remuneration was originally (approximately) $160,000 and that was subsequently reduced to (approximately) $124,000.[19] The master noted that up to and including the sale of the share in Banning Holdings on or about 10 March 2009, and Mr Lean's report to the court lodged on 10 March 2009, the total fees claimed were (approximately) $29,000 with disbursements of (approximately) $15,000, giving a total amount, inclusive of GST, of (approximately) $48,000. The master said that counsel for PSA and Mr Campbell‑Smith had pointed out that this means that an amount of (approximately) $76,000 was said to have been incurred after the sale of the Banning Share.[20]
[19] Primary decision [17].
[20] Primary decision [18].
The master then addressed a number of the complaints made by PSA and Mr Campbell‑Smith in relation to Mr Lean's activities. First, he referred to, and dismissed, the complaint that Mr Lean had no specialised expertise in the process of valuing the share. The master noted that Mr Lean had sought sworn valuations of the real estate assets and vintage motor vehicles held by Banning Holdings, but had valued the share himself. The master considered that it was open to him to at least put an indicative value on the share in the way that he did.[21] The master also said that there was no substance to the claim that Mr Lean fundamentally misunderstood his obligations.[22] The master also rejected a complaint concerning an evaluation of goodwill.[23]
[21] Primary decision [19].
[22] Primary decision [20].
[23] Primary decision [21].
The master also rejected criticism of the way that Mr Lean approached the valuation process, and found that Mr Lean approached it in an 'entirely reasonable manner'.[24]
[24] Primary decision [23].
The master also addressed the contention that Mr Lean should have known, at the outset of the sale process, that the memorandum and articles of association of Banning Holdings were likely to contain a standard 'pre‑emptive rights' clause. The master said that this aspect of Mr Lean's conduct is open to criticism. The master noted that Mr Lean admitted that he did not follow the process laid out in the memorandum and articles of association of Banning Holdings, and therefore there was a risk that the sale would be in breach of the company's constitution.[25] The master also observed that PSA and Mr Campbell‑Smith criticised Mr Lean's conduct on the basis that he was aware that PSA was proposing to enter into a deed of company arrangement (DOCA) with the expressed intention of paying the whole of the judgment debt and legal costs, using the same assets of Banning Holdings which formed the value of the share he was selling. The proposal for the DOCA for PSA in 2009 was expressly subject to the Banning Share not being sold, and Mr Lean was aware that, were the DOCA to be entered into, he would have to comply with it. The master said it must be acknowledged that 'Mr Lean's conduct with respect to the DOCA proposal is difficult to reconcile without accepting as was submitted by [PSA and Mr Campbell‑Smith], [that] he was acting at the behest of what counsel described as the "Frigger parties"'.[26]
[25] Primary decision [24] - [25].
[26] Primary decision [26].
The master then referred to Mr Lean's conduct after the sale of the share. The master said that he accepted that actions taken by Mr Lean after the sale of the share were not appropriate and any amount charged by him should not be the subject of an order for remuneration.[27]
[27] Primary decision [27].
The master said:[28]
There are other detailed criticisms of Mr Lean's conduct in counsel's submissions. These were explored in excruciating detail during cross examination. But in the end it comes down to this. First, I am satisfied that the valuation process undertaken by Mr Lean was both proper and appropriate. Second, there is no doubt that the sale process was flawed. Mr Lean ignored the memorandum and articles of association without justification and the mayhem which followed was directly attributable to his not handling the sale process in a proper and appropriate fashion. While other criticisms can be made of Mr Lean's conduct it seems to me these two points lie at the heart of assessing what remuneration Mr Lean ought be paid.
…
Of course as I have been at pains to explain above the regime mandated by Venetian Nominees is the regime which is to be applied in this case. Nonetheless it is true that a line by line assessment of the costs charged by Mr Lean is not appropriate. That being so I have come to the conclusion Mr Lean's costs should be allowed in an amount of $75,000. In broad terms I accept that up until the sale of the shares the amount claimed of $47,951.50 is reasonable. It may also be the case that Mr Lean was required thereafter to undertake some further work consequent upon the sale of the share. I am not satisfied it would be appropriate to allow him the full amount he claimed because the work undertaken after the sale of the share does not seem to have been strictly necessary. I am satisfied on balance an award of $75,000 would in all the circumstances be reasonable.
[28] Primary decision [28], [30].

The master's orders

The master, on 8 December 2016, made orders to the following effect:
1.Mr Lean's costs and disbursements be and hereby [sic] allowed in the sum of $75,000 together with interest at $12.32 per day accruing from 5 January 2017.
2.PSA and Mr Campbell‑Smith pay Mr Lean's costs of the application, including reserved costs, fixed in the sum of $30,000.
3.Payment pursuant to orders 1 and 2 above be stayed until 5 January 2017.

The history of the appeal

An appeal notice against the primary decision was filed on 10 January 2017. Mr Lean filed a notice of intention on 16 January 2017. On 8 February 2017, Mr Lean filed an application for security for costs. The application was supported by an affidavit by Mr Lean sworn 2 February 2017. Programming orders for the hearing of the application were made by the registrar on 10 February 2017. By those orders, the appellants were required to file and serve affidavits in response by 27 January 2017. That order was not complied with. The appellants filed the following affidavits in response - an affidavit by Ms Banning sworn 16 March 2017 and an affidavit by Mr Eastwood, solicitor, sworn 17 March 2017.
Mr Lean also sought to rely on an affidavit dated 4 April 2017, dealing with Ms Banning's affidavit of 16 March 2017. The appellants, at the hearing of this application, contended that Mr Lean's affidavit of 4 April 2017 was inadmissible on the grounds of relevance. As it was, in my view, clearly relevant (no objection to its receipt was taken as to its lateness), the affidavit was received on the application, as were the late affidavits filed by the appellants.
By 13 April 2017 (the date of the hearing of this application), the appellants' case, despite being well overdue, had still not been filed and served.
Nor had there been any application by the appellants for a stay of the master's orders, beyond 5 January 2017. They remained unsatisfied.

The application for security

Evidence

Mr Lean's affidavit of 2 February 2017 indicates that in relation to PSA (the second appellant):
(a)PSA was subject to a DOCA in the period 20 March 2009 to 6 November 2012;
(b)by the end of the period of the DOCA, receipts equalled payments and there was no money retained, other than a sum of $246,500 which was '[h]eld in trust pending resolution of recipients';
(c)Mr Banning's widow, Ms Banning, is the sole director and shareholder of PSA, holding two shares in that company.
Mr Lean's affidavit of 2 February 2017 also indicates that Ms Banning is the sole director of Banning Holdings and holds beneficially one of the two shares in that company.
Mr Lean's affidavit of 2 February 2017 also indicates, by reference to a copy of an affidavit sworn by Ms Banning on 17 November 2008, the following. The value of Mr Banning's estate (of which the first appellant is executor) as at 17 November 2008 derived primarily from his share in Banning Holdings. PSA was insolvent and Banning Holdings had net assets of approximately $4.478 million. Its assets included (1) a property in Lacey Street, Perth, valued at $700,000; (2) a property in Darling Downs valued at $1.8 million; (3) a one half share of a property in Swan View valued at $1 million; and (4) a collection of vintage cars valued at $1 million.
Mr Lean also stated, in effect, that the judgment sum ordered by Master Sanderson remains unpaid.
Ms Banning's affidavit of 16 March 2017 indicates, in relation to Mr Banning's estate, that Mr Campbell‑Smith has been retired for some years, his health has deteriorated, and he has not been actively engaged in the affairs of the deceased's estate for several years other than from giving instructions in relation to litigation from time to time. Ms Banning also deposed:[29]
Additionally, I was informed by [Mr Campbell‑Smith] and verily believe that prior to the date when he retired, all of the available assets in the deceased estate had been used to pay debts of the estate. For example, to the lawyers engaged in the various legal actions and appeals involving [Mr and Ms Frigger] and/or their company [CAT] of which CIV 2265 of 2006 is but one of the legal actions.
[29] Affidavit of Ms Banning sworn 16 March 2017, par 4.
Ms Banning also deposed, in effect, that whilst the estate has certain claims against CAT and Mr and Ms Frigger, the estate at present, and at least for the presently foreseeable future, has no available funds to pay the judgment sum ordered by Master Sanderson or to provide security for costs.
Ms Banning also deposed that her own financial position is that:
(a)her sole income is a Commonwealth pension of approximately $800 per fortnight;
(b)she has no assets of any significant value other than her home in Haynes, and her interest as the sole residuary beneficiary of Mr Banning's estate;
(c)her home in Haynes is charged to secure legal fees in ongoing litigation, and she has no capacity to make a payment into court by way of security for costs;
(d)she holds one of the two issued shares in Banning Holdings, and that the other is held by Mr Lean pursuant to a lien to secure payment of his fees and disbursements;
(e)Banning Holdings has not traded since 2015; its most recent financial statements are for the year ended 2015; its only current asset is cash at bank of approximately $500; and it has certain claims in connection with the litigation involving CAT.
Ms Banning did not annex any financial statements of Banning Holdings.
In relation to the position of PSA, Ms Banning deposed to the effect that PSA has certain claims against CAT and Mr and Ms Frigger, and she believes that PSA may also have funds held or recoverable by the former DOCA administrator of PSA which should be assigned to PSA. Other than if and when it receives money from those sources, PSA has no funds available to pay security.
Ms Banning also deposed that:[30]
I am informed by Mr Stephenson and verily believe that he considers the appeal has legal merit and that based on both the findings of the learned Master and on the uncontradicted evidence given by the Respondent in the Court below the Respondent should have been held to have either misconducted himself either deliberately or recklessly, or in the alternative, been guilty of gross negligence, or in the further alternative, wilfully sacrificed my interests as beneficial owner of the one share in Banning Holdings Pty Ltd belonging to the deceased estate. I am further informed that, had those findings been made, there should also have been findings that the Respondent's remuneration ought to have been reduced substantially as a result of this disentitling conduct, and, as was sought by the Appellants in the Court below the Respondent ought to have been held liable for the losses sustained as a result of his conduct.
[30] Affidavit of Ms Banning sworn 16 March 2017, par 21.
In the affidavit of Mr Eastwood (the appellants' solicitor) dated 17 March 2017, he deposed to the effect that:
(a)he has been informed by Mr Campbell‑Smith's wife, who holds an enduring power of attorney in relation to his affairs, and believes that Mr Campbell‑Smith is unwilling and financially unable to provide security;
(b)his firm has taken certain steps to recover the sum of $246,500 from PSA's former deed administrators, but there is no reasonable prospect of any recovery in time to provide security for costs;
(c)there have been delays in finalising the appellants' case 'because the transcript of the Second day of cross‑examination of the Respondent has only recently been made available'[31] to counsel, counsel has been engaged in other matters, and counsel has more recently been overseas; and
(d)counsel for the appellants expects that there will be a completed Appellants' Case by 13 April 2017.[32]
[31] Mr Eastwood's affidavit sworn 17 March 2017, par 6.
[32] It should be observed that that expectation was not met.
Mr Lean's affidavit of 4 April 2017 includes evidence to the effect that:
(a)a valuation report dated 31 March 2017 indicates that Ms Banning's home in Haynes is worth approximately $350,000 and that the deed of charge over the property secures legal fees of $242,537.05 and further legal services to be provided;
(b)as at 31 August 2009, a statement of assets and liabilities of Banning Holdings provided by Mr Campbell‑Smith indicated that Banning Holdings had assets of $2.39 million comprising (1) a property in Lacey Street, Perth, worth $640,000, (2) a property in Darling Downs worth $1.315 million and (3) vintage cars worth $435,000. It also had liabilities totalling $1,403,486, comprising a secured debt to Ms Banning of $550,000, and a debt to 'S & M Banning' of $853,486;
(c)the Lacey Street property was transferred on 7 October 2009 for consideration of $632,000;
(d)the Darling Downs property was split into two lots, one of which was transferred in October 2013 for $500,000 and the other which was transferred in March 2014 for $900,000; and
(e)his solicitors have written to Ms Banning and the appellants' solicitors seeking a copy of the accounts of Banning Holdings for the financial years 2010 ‑ 2016, but have received no response.
Mr Lean applied for security effectively on the bases that the appellants are unlikely to pay any costs ordered against them if the appeal fails; there is no basis for inferring that the appellants have reasonable prospects of success in the appeal because they have not filed an appellant's case; there is, or is no satisfactory, evidence that an order for security would stifle the appeal; Ms Banning, who effectively stands to benefit from the appeal, has not offered to give security or an indemnity for costs; and there has been no relevant delay in making the application.
In their written submissions, the appellants resisted the application for security on the following bases:
(a)the appellants have no present ability to provide security;
(b)Ms Banning, who is a person 'standing behind' PSA, and who is the residuary beneficiary of the late Mr Banning's estate, is unable to provide security;
(c)an order for security would therefore stifle the appeal;
(d)Mr Campbell‑Smith is an appellant in his capacity only as a representative of the estate of the late Mr Banning and, in any event, he has no financial capacity to give security;
(e)Mr Lean must be taken to have known that the financial position of the appellants would, in effect, deteriorate in the period of his delay between the termination of the receivership on 10 November 2010 until 29 October 2014;
(f)although Mr Lean has not caused the entirety of the appellants' lack of means, he has, in effect, contributed to it because 'the inappropriate manner in which the [Banning Share] was sold … led to substantial loss in the form of the legal costs incurred in those unauthorised and unwarranted proceedings' in CIV 1727 of 2009 and in CIV 2265 of 2006, 'none of which have been recouped';
(g)in the appeal the appellants:
(i)will allege that a receiver's duties under the Enforcement Act are 'akin to the common law "negligence test"' and, in effect, that Mr Lean was negligent in the sale of the Banning Share which led to the appellants incurring losses in the form of legal costs in CIV 1727 of 2009, as well as costs in CIV 2265 of 2006;
(ii)will contend for 'alternate findings' effectively based on the master's findings of primary fact or uncontested evidence and, in effect, will not allege error in the findings of primary fact;
(iii)will invite the court to make 'findings of actual misconduct, and alternatively negligence and breach of fiduciary duty' on the part of Mr Lean.
Although the appellants' case was well overdue and the appellants remained in default in relation to the filing of an appellants' case, counsel for the appellants nevertheless handed up at the hearing (without objection) a document headed 'Appellant's Case'. This document is not in form or in substance an appellants' case within the meaning of the Supreme Court (Court of Appeal) Rules 2005 (WA), but it contained four proposed grounds of appeal. No submissions in support of the proposed grounds were annexed.

Disposition

The power of the court and the general principles to be applied in relation to an application for security for costs were outlined in George 218 Pty Ltd v Bank of Queensland Limited.[33]
[33] George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56 [39] - [48].
Also, where the appellants contend that an order for security would stultify the appeal, they have at least an evidential onus to show that to be the case, and that those who stand to benefit from the litigation are without means: TSDack Pty Ltd v Australian Water Holdings.[34]
[34] TSDack Pty Ltd v Australian Water Holdings [2015] FCA 931 [52] ‑ [53].
Further, where the appellants contend that their adverse financial circumstances are the result of the respondent's alleged wrongful conduct the subject matter of the appeal, they have at least an evidential onus of establishing the adequacy of their financial position prior to the respondent's alleged wrongful conduct, and that the respondent's conduct caused, or at least materially contributed to, their inability to meet a costs order: Wollongong City Council v Legal Business Centre Pty Ltd.[35]
[35] Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245 [33].
In all the circumstances, it appeared to me to be appropriate to order security for costs in this case. In particular, I had regard to the following considerations.
First, in the absence of a proper appellants' case, I assumed in favour of the appellants, without deciding, that the appellants have a reasonably arguable case.
Secondly, the effect of the appellants' evidence is that there is no real prospect that by the time the appeal is heard and determined, the appellants will have sufficient assets to enable them to comply with an adverse costs order.

Thirdly, I was not persuaded that Mr Lean had materially contributed to the present financial circumstances of the appellants. PSA, on the evidence, appears to have been insolvent since at least 17 November 2008, prior to Mr Lean's appointment as receiver on 21 November 2008. In relation to Mr Banning's estate, the principal asset of any value has, on the evidence, been the one share in Banning Holdings. The evidence is that Banning Holdings had substantial net assets in 2008 (see [50] above) and in August 2009 (see [59] above). The evidence referred to in [59(b)] above would tend to indicate that Banning Holdings was jointly indebted to Ms Banning and Mr Banning's estate in the sum of $853,486 as at August 2009. However, there are no accounts of the estate in evidence, or even sworn statements by the executor (or proper hearsay statements) setting out the assets and liabilities of the estate covering the period August 2009 to date. Ms Banning's statement referred to in [52] above lacks any real particularity or cogency and provides an insufficient basis upon which to find that the appellants' complaints about Mr Lean's conduct, which, as I have said, have not yet been formulated in an appellants' case, caused or materially contributed to the estate's inability to provide security as deposed to by Ms Banning.
Even if I were wrong in that conclusion, on the appellants' evidence, Ms Banning stands to benefit from the success of this appeal. There is evidence that she was a joint creditor of Banning Holdings in the sum of $853,486, as well as being a creditor in the sum of $550,000 in her own right. She is the sole director of Banning Holdings, but has not put in evidence the accounts of that company. Also, the evidence referred to in [59(a)] above would indicate that she has equity in her home of at least $100,000. Ms Banning's affidavit of 16 March 2017 was so lacking in particularity in all the circumstances that I was not able to accept her contention that she did not have or would be unable to raise $35,000 for security for costs.
Next, there was no delay in making the application.
Finally, the appellants did not challenge the quantum claimed by the respondent.
For these reasons, I ordered security in the sum of $35,000.