Canty v PaperlinX Australia Pty Ltd

[2014] NSWCA 18

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 18

Hearing dates:

10 February 2014

Decision date:

10 February 2014

Before:

Leeming JA

Decision:

(1) Dismiss the notice of motion filed 20 November 2013.

(2) Upon the undertaking of the appellants to the Court to prosecute their appeal with reasonable expedition, execution of the judgment orders made by the Court on 17 December 2013 in proceeding 2011/145590 be stayed pending the determination by the Court of Appeal of the appeal.

(3) The respondent PaperlinX to pay the appellants' costs of these two motions.

(4) Otherwise dismiss the amended notice of motion filed in court on 10 February 2014.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

PROCEDURE - application for security for costs of appeal - whether appellants had shown security would stultify appeal - whether respondents had shown appeal had no real prospects of success - no security ordered

PROCEDURE - application for stay of execution - common ground appellants unable to satisfy judgment debt - no relevant prejudice - stay of execution ordered

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56-59
Contracts Review Act 1980 (NSW), ss 7, 9

Cases Cited:

Hannaford v Commonwealth Bank of Australia [2013] NSWCA 472
Hastings v Hastings [2009] NSWCA 294
Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737
Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310
Neale v Anchor Mortlock and Woolley Pty Ltd [2013] NSWCA 209
Partington v Pacific Link Housing Ltd [2013] NSWCA 259
Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Limited [2007] NSWCA 344
Piras v Egan [2007] NSWCA 26
Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247
Starr v Diamond [2013] NSWCA 7
Swift v McLeary [2013] NSWCA 173

Category:

Interlocutory applications

Parties:

Paul Brian Canty (First Appellant)
Denise Irene Canty (Second Appellant)
PaperlinX Australia Pty Limited (Respondent)

Representation:

Counsel:
CJ Bevan (Appellants)
TM Faulkner (Respondent)
Solicitors:
Evangelos Patakas and Associates (Appellants)
K&L Gates (Respondent)

File Number(s):

2013/00306593

 Decision under appeal 

Citation:

PaperlinX Australia v Canty [2013] NSWSC 1407

Date of Decision:

2013-09-16 00:00:00

Before:

McDougall J

File Number(s):

2011/145590

Judgment

1. LEEMING JA: There are before me two notices of motion. The first, dated 26 November 2013, is the respondent's motion for security for costs. It is accompanied by submissions dated 4 and 18 December last year, and has been the substantial matter argued before me until shortly before 4 o'clock this afternoon. The second is an application made by amendment this morning, but I am told raised between the parties previously, for a stay of execution of the principal judgment debt the subject of challenge in this appeal. It is not accompanied by any written submissions. However, both parties have proceeded, if I may say so, constructively, on the basis that it can and therefore should be dealt with today, and in many respects the issues it involves are the converse of those on the application for security for costs.

1. The appellants appeal as of right from a judgment of the primary judge given on 16 September 2013, commendably promptly after a five day hearing the previous week: PaperlinX Australia v Canty [2013] NSWSC 1407. Their appeal extends also to certain interlocutory rulings made by the Commercial List judge, notably a "guillotine" order made prior to the matter being set down for hearing.

1. Without unnecessarily descending into detail, the appellants, Mr and Mrs Canty, are sued in relation to debts incurred by a company which purchased paper or paper products from the respondent over a period of time. The relevant period of time for the purposes of the appeal appears to be late 2008 until late April 2009, although earlier events impact upon that time period. It is common ground between the parties that the appeal can be approached in three parts. The first part comprises the challenges in the amended notice of appeal filed 20 December 2013 to rulings by the primary judge and also a guillotine order by the List Judge of the Commercial List in early May 2013, the effect of which has been to (a) prevent the appellants from relying upon testimonial evidence served after the expiration of the guillotine order, (b) prevent the appellants from relying upon proposed particulars served on the evening of the first day or the morning of the second day of the hearing, and (c) prevent cross-examination by counsel for the appellants, Mr Bevan, who appeared at trial, of at least one (I have been told two) of the plaintiff/respondent's witnesses. The rulings also, at least on one view, had the consequence of causing the primary judge to disregard such evidence relevant to those issues as had been tendered before his Honour. Grounds 1 to 8 challenge those rulings and that reasoning process.

1. The second challenge is more confined. Ground 9 raises a point of construction of a "Deed of Guarantee" dated 16 July 2008. The primary judge, although expressing a view as to its construction, did not need to express a concluded view. On appeal, the appellants say that on its proper construction the deed was merely a deed of guarantee. The respondent says it also contained an obligation to indemnify the principal obligor.

1. Mr Faulkner, who appears for the respondent to the appeal and applicant for security for costs, makes the point that success on the question of construction is necessary in order for the appellants to succeed in relation to the first suite of challenges in Grounds 1-8. There seems to have been no dispute about the accuracy of that observation.

1. The third challenge is separate from the foregoing and confined to the second appellant, Mrs Canty. It is a challenge to the rejection of her defence and cross-claim that the enforcement of her obligations under the Deed of Guarantee would be unjust in the circumstances within the meaning of ss 7 and 9 of the Contracts Review Act1980 (NSW).

Applicable principles

1. The principles applicable to the application for security for costs were in large measure (but not wholly) the subject of agreement before me. A convenient starting point is the reasons of Basten JA, with whom Ipp JA and Hoeben J agreed, in Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 at [18] that:

(1) no order for security should be made in the absence of "special circumstances";

(2) consideration of what may constitute special circumstances should not be fettered by some general rule of practice;

(3) impecuniosity, without more, will usually be insufficient;

(4) an order may be appropriate if the appeal is shown to be hopeless, unreasonable or of an harassing nature;

(5) where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should usually not be made, and

(6) the subject matter of the appeal, including an issue as to the liberty of the individual, or a public interest may provide a reason for not imposing a security order which would stifle the continuation of the appeal.

1. The proposition that impecuniosity without more will usually be insufficient to constitute the requisite "special circumstances" for the purposes of the rule reflects what was said more recently that "an impecunious appellant with a bona fide and reasonably arguable appeal should ordinarily not be required to provide security": Neale v Anchor Mortlock and Woolley Pty Ltd [2013] NSWCA 209 at 25.

1. To that general proposition there is an exception, namely, if the appeal is shown to be harassing or vexatious. Three examples of that may be seen in Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310, Starr v Diamond [2013] NSWCA 7 at [30]-[35] and Partington v Pacific Link Housing Ltd [2013] NSWCA 259 especially at [70]-[75]. Although Mr Faulkner, not inaccurately, commenced his submissions saying that this was a wide-ranging appeal, his attack did not extend (if I may say so quite properly) to a complaint that this appeal fell within that rather rare category.

1. The authorities draw a distinction between impecuniosity and stultification. It is this distinction which has been the forefront of the legal dispute before me. Mr Faulkner relies upon Pioneer Park Pty Ltd (in liq)v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344 where Basten JA observed that:

"The likelihood that an order for security would stifle or stultify the proceedings, if established, is a factor which will tend against an order for security. However, that factor is not made out merely by reference to the company's impecuniosity, but requires proof ... As noted by Austin J in Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at [74], referring to the judgment of Clarke J in Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 at 545, 'the mere fact that the corporate plaintiff is financially unable to provide security does not lead inevitably to the conclusion that the making of an order for security will stultify the plaintiff's claim. It may be that there is someone else who will satisfy the order on the plaintiff's behalf'".

1. His Honour continued at [60]:

"The second proposition put by the Bank is that the Appellants have failed to prove that an appropriate order for security would stifle the appeal. Subject to any consideration of what might be an appropriate amount, for reasons referred to above in considering the Registrar's decision, the Bank is correct in contending that stultification was not established. In resisting this contention, the Appellants did no more than refer to the impecuniosity of the companies and the bankruptcy proceedings against Mr Carpenter, as establishing his impecuniosity. However, as already noted, that did not establish on the balance of probabilities that the appeal would not proceed if security for costs were required. It is of course possible that the lengthy trial exhausted the resources of those who were prepared to back the proceedings. Nevertheless, an appeal having been filed, it may be inferred that the companies have some resources at their disposal. It would be a matter of speculation to say that those resources extend only to the funding of a three day appeal, and not to an order for security."

1. The principle has been applied more recently by Gleeson JA in Swift v McLeary [2013] NSWCA 173 at [60]-[61] and Hannaford v Commonwealth Bank of Australia [2013] NSWCA 472 at [34]. Further, it has also regularly been observed that the Court can rely upon the fact that a claimant or appellant has seemingly resources available to him, her or it which would enable the conducting of the litigation to continue: see for example Hastings v Hastings [2009] NSWCA 294 at [14], Piras v Egan [2007] NSWCA 26 at [27] and Hannaford at [34].

Evidence of impecuniosity and stultification

1. It is convenient immediately to turn to the evidence of impecuniosity and stultification. The respondent to the appeal ("PaperlinX") adduced evidence that the appellants claimed they were unable to pay the judgment debt, were in receipt of Commonwealth government pensions, and had no real property in New South Wales in their names. The appellants' instructing solicitor deposed on information and a belief that both appellants were pensioners and did not have moneys or assets to pay the judgment sum (which, including interest, was said to be $1,500,858.92) or the costs of the trial. The solicitor was also instructed by his clients that they did not have the financial resources to pay either the security for costs sought by PaperlinX (which was $73,500), or alternatively the amount of security which in his opinion was appropriate (which was some $25,700).

1. There was no direct evidence before me as to the inability of other persons (family relatives or friends, or companies or trustees of trusts associated with the appellants) being able to provide security for the costs of this appeal, nor was there evidence of the terms upon which counsel and solicitor had appeared at first instance and were appearing on the appeal. On the other hand, this is not a case where a corporate appellant puts forward evidence that it has no funds but there is silence from the directors and shareholders, nor is it a case where on the face of the record a trustee is suing and there is no evidence as to the attitude of the beneficiaries of the trust to the litigation or of the assets of the trust.

1. Putting to one side the details of the evidence, which as may be seen above is slender in so far as it goes to stultification of the appeal, the practical reality appears to have been that, as Mr Bevan observed during submissions and in his written submissions (and to those written submissions no response was made orally by Mr Faulkner), the application for security for costs had originally been framed by the respondent on the basis that impecuniosity was sufficient, and there has been a change of stance more recently when the application was argued.

1. It is common ground that in order to determine the application for security for costs I need to look at the merits of the appeal.

The timing of the application

1. I first deal with two preliminary and severable submissions advanced by the appellants. The first reflects the timing of this application. The fact of the matter is that after preparation and receipt of PaperlinX's motion and submissions in support of security, two things have happened. First, the notice of appeal has been amended pursuant to an order of the Registrar. Secondly, the appellants have filed their final twenty page submissions in support of the appeal. It follows that in terms of the assessment of the merits of the appeal, I have the benefit of the appellants' written submissions on the basis of which the appeal will be propounded. The respondent sought and obtained as I understand it a direction from the Registrar that its submissions not be filed before the determination of this application. I can see why that course was taken.

1. The appellants originally said that PaperlinX's approach of moving on its application for security for costs without first filing its submissions amounted to a waiver of the right to assert a lack of merit in the appeal. Quite properly in oral address, Mr Bevan withdrew from that submission. He accepted that Mr Faulkner was entitled to grapple with the merits of the appeal as articulated in the written submissions. It will always, or almost always, be a difficult thing for an applicant for security for costs which asserts, as PaperlinX did, that the appeal had "no real prospects of success" as an integer in the evaluation of whether security for costs should be ordered, to make good that submission where, as here, (a) the appellant has served detailed written submissions, and (b) the Court determining the motion has either no access, or limited access, to the primary documents which were in evidence before the primary judge. I will return to this further below.

The respondent's insurance

1. The second preliminary point, as to which I indicated in argument I was against Mr Bevan, was that there is in evidence before me that PaperlinX and/or a related company has obtained "trade debtor's insurance" from QBE that extends to this judgment debt. A term of the contract of insurance was that:

"No liability whatsoever shall attach under the Policy until QBE Trade Credit is satisfied that the Insured has exhausted all available action (including legal proceedings and insolvency proceedings) for recovery of the debt from the guarantor(s)."

1. It was put on behalf of Mr and Mrs Canty that the fact that there was an insurer standing behind PaperlinX was a relevant consideration to the exercise of discretion in ordering or declining to order security for costs of the appeal. The argument essentially was that security is ordered in order to ameliorate the prejudice to the respondent to an appeal and, in this case, the respondent to the appeal had the benefit of an indemnity from QBE. There was debate as to the exact operation of the clause in the policy. It is not necessary for me to express a view one way or the other as to that (indeed, on the material before me, I do not think I am able to do so).

1. I respectfully disagree with that submission. There are many appeals in this Court where either transparently to the Court, or unknown to the Court, insurers stand behind either or both of the appellant or respondent. I do not think that that consideration has any impact, at least in an ordinary case, for the purposes of security for costs. I put to one side the considerations that can arise where a matter is of general importance from the point of view of an insurer, but only individualised importance from the point of view of the insured. That can be a circumstance where the public interest elements of litigation do impact upon security for costs, but there is no suggestion that that is this case here.

1. It is convenient to deal with the three parts of the notice of appeal in the order that I have identified.

1. The principal way in which Mr Bevan sought to advance the challenge in Grounds 1-8 of the notice of appeal was by reference to evidence that was before the primary judge relevant to paras 12(b), (c) and (d) of the Commercial List response. Paragraph 12 is relevantly in these terms:

"12. In late 2008 and up until late April 2009 Paperlinx repudiated its obligations under the second credit agreement, as varied on 16 July 2008 by the provision of the guarantees, by its conduct in:

...

(b) invoicing Quality Group for paper delivered to Paperlinx by its overseas manufacturers long before the paper was sold and delivered to Quality Group;

(c) invoicing Quality Group was over $250,000 in charges to store paper not yet sold and delivered to Quality Group at Paperlinx's premises;

(d) applying payments made by Quality Group for paper legitimately invoiced to it for paper sold and delivered instead to the payment of invalid charges for storage of paper invalidly invoiced to it;

..."

1. Contrary, he said, to the primary judge's finding that there was "no evidence to support these defences" at [39], the written submissions pointed to documentary and testimonial evidence before the primary judge that, he said, were capable of making out those propositions. The references to that evidence may be found in [21]-[23] of the appellant's written submissions, read with [47] and [48]. None of that evidence is before me on this application. It is not possible for me to say, and I do not express a view one way or the other, whether those documents and that testimonial evidence is capable of supporting positive findings as alleged in those paragraphs of the defence.

1. Against this, Mr Faulkner's point was that the primary judge was right to say (as he did at [40] of the primary judgment) that the interlocutory rulings (the guillotine order and the orders made by him during the course of the trial) precluded Mr and Mrs Canty from relying upon that evidence. That may or may not be right. It is in my view an argument which, on the material before me, is not one that can be said to have no real prospects of success. It amounts to saying that material otherwise tendered before the primary judge, consistent with the rejected particulars, could not fairly to PaperlinX be deployed in order to make out those defences. The reason I am not able to express a view one way or the other, but do express the view that the contention does not satisfy the description of "no real prospects of success", is that one would need, in order to assess fairness to PaperlinX, to know more about the nature of the material, and the prejudice that would be suffered by PaperlinX if the material was used that way in the course of the trial. That is material that I do not presently know.

1. The primary way in which Mr Faulkner sought to persuade me of the weakness of the first part of the appeal was that followed by the primary judge at [39]-[43] of the reasons. What has occurred in the interlocutory history and the course of the trial may or may not give rise to appellable error on the part of the primary judge and the List Judge of the Commercial List. Mr Faulkner emphasised, entirely appropriately, the deference that is to be given to the primary judge in the course of running the trial and the reluctance to interfere with rulings as to admissibility, as to cross-examination and as to pleadings during the course of the trial.

1. However, there are to my mind two unusual features of this litigation. The first is the combination of procedural rulings both before the trial and during the trial, all of which in combination have led to the complaint by Mr and Mrs Canty that they were not allowed to rely upon material which, although they admitted at the time had only been served belatedly, was nevertheless served. It is the combination of (a) the refusal to grant leave to tender evidence contrary to the List Judge's guillotine order, (b) the refusal to cross-examine witnesses of the plaintiff/respondent, and (c) the refusal to permit further particulars of Grounds 12(b), (c) and (d), which together need to be evaluated with a view to determining whether there has been a fair determination of the issues between the parties consistently with ss 56-59 of the Civil Procedure Act 2005 (NSW).

1. In making that statement I am not expressing a view one way or the other as to whether that has occurred. I am merely expressing the view that I am not satisfied that Mr Bevan's contention, articulated at some length in his written and oral submissions, is so weak that it has no real prospects of success.

1. To give one example, I am not fully apprised of the terms in which PaperlinX requested particulars. One of the requests is reproduced in the judgment and in the written submissions, but another is only summarised in the submissions. It is as follows (emphasis added):

"On 3 July 2013, PaperlinX's solicitors requested particulars of the dates and amounts of all invoices and allocation of payments which supported the allegation of wrongful allocation of payments for storage and detention charges in [12(d)]."

It is not self-apparent that all aspects of that request, especially the request by PaperlinX as to particulars of the allocation of payments, were a proper request for particulars.

1. That brings me to the second unusual feature. It is an unusual case because the claimed procedural unfairness in the primary judge denying Mr and Mrs Canty the right to run the whole of the substantive case they wished to run has not solely been derived from a late amendment to the pleading. Indeed, as I understand the position, in a strict sense there was no proposed amendment to the Commercial List Response, although it must be said that Mr and Mrs Canty took the view that the new particulars might conveniently be inserted within the same document rather than being contained in a free-standing letter. It seems on the material before me that at all times since at least May, four months before the hearing, the allegations in [12(b)]-[12(d)] have been there for PaperlinX to see on the face of the pleadings (although unparticularised). Indeed, PaperlinX served a reply and denied that paragraph. I say that not to express a view one way or the other as to whether Mr Bevan's ultimate submission is to be accepted, but to highlight what to my mind is the difficulty Mr Faulkner's client faces in order to establish no real prospects of success.

1. I hesitate on the material before me to express a view as to the strength of the appeal. It is clear to me that this is not one of the typical sort of cases where, as was said in Preston at [21], it is sufficient merely to read the judgment below and the notice of appeal in order to form a view as to whether it is reasonably argued. The foregoing should suffice to indicate that I have found it necessary (a) to read the detailed submissions by the appellant, and (b) to have some regard to the procedural history of the litigation, in order to assess the merits of what in substance may be regarded as a claim of procedural unfairness behind Grounds 1-8 of the notice of appeal. It is not said by PaperlinX that these grounds are put forward in a way that is other than bona fide, and I am not persuaded that they enjoy no real prospects of success.

1. I can be more concise in relation to the remaining two grounds. Mr Faulkner, concisely and with characteristic effectiveness, said that the question of construction of the Deed of Guarantee sought to be raised in Ground 9 is a pure question of construction. There is no doubt that that is true. The difficulty I have is that I do not have before me in evidence the whole of the Deed of Guarantee. In order to construe what (I have been told) describes itself as a "Deed of Guarantee" (rather than a "Deed of Guarantee and Indemnity"), it is (a) necessary to consider the document as a whole, and (b), and more importantly, to adopt the approach relied upon in Mr and Mrs Canty's written submissions in the appeal: the fact that some of the clauses refer to the verb "indemnify" is not sufficient to characterise its legal effect as an indemnity, as opposed to a guarantee.

1. The argument on Ground 9 typified the difficulties which, in my opinion, PaperlinX were subject to on the hearing of this application. Understandably, PaperlinX sought merely to identify extracts of the deed, and invited me to form a final view as to its legal meaning. Because its written submissions predated the written submissions of Mr and Mrs Canty on the appeal, they did not engage with two single-spaced, closely-reasoned pages of argument directed to construction. I am not intending any disrespect to Mr Faulkner when I say that his oral submissions did not descend to the detail of responding to the argument articulated in [73]-[82] of the written submissions.

1. For the purposes of this application, I am unassisted by the reasoning of the primary judge, who at [96]-[97] accurately stated that the issue was academic on the factual findings that he had made, although expressing the tentative view that the clause did create obligations of indemnity. Again, on the material before me, even though this is a pure question of construction, I do not consider that I am able, having regard to the obligation to construe the document as a whole, and in its context, to form the view that the construction tentatively favoured by the primary judge is necessarily correct.

1. In relation to Ground 10, the reasoning of the primary judge is confined to [102]-[113]. The reasoning there is confined to the three pleaded matters that support Mrs Canty's defence and cross-claim that ss 7 and 9 of the Contracts Review Act were engaged. My reasoning here is similar to that in relation to the previous grounds. For the reasons already indicated, the written submissions of PaperlinX did not (because they pre-dated them) grapple with two single-spaced pages of submissions of the appellants ([83]-[87]). Those submissions include the following:

"84. Mrs Canty's evidence in her affidavit sworn 29 May 2013 was relevantly as follows:

...

(f) when she was asked historically over that 40 year period by Mr Canty to read and sign documents requiring a solicitor's certificate of independent advice, she always implicitly relied on the solicitor to read and explain the documents to her over that 40 year period;

(g) she did not show the deed of guarantee to a solicitor or an accountant or obtain any advice or explanation from a solicitor or accountant about its effect on her;

(h) had she known that PaperlinX would be claiming over $1.0m from her and that she would become liable to it for over $1.0m if TQG failed to pay it to PaperlinX at the time she signed the guarantee then she would never had signed it;

(i) at no time did Mr Canty inform her about the trading arrangements between TQG and PaperlinX before she signed the guarantee;

(j) she has never been a director of, or ever been involved in the management of, TQG;

(k) she had no knowledge of the financial position of any company named in the deed of guarantee before she signed it;

(l) so far as she is aware she personally received no benefit from the guarantee;

(m) she received no legal or financial advice about the deed of guarantee before she signed."

The challenge to the finding, which seems central to if not dispositive of the reasoning of the primary judge, that there was an opportunity and an acknowledgement by the parties that there was an opportunity to seek legal independent advice, is in these terms:

"86. The primary judge found by way of conclusion on this defensive cross-claim as follows, and his conclusions were made in error for the following reasons addressing each finding made:

...

(h) Mrs Canty takes issue with this last finding on the grounds that:

(i) she had only ever previously signed legal documents at her husband's request after they were explained to her by a solicitor over a 40 year period;

(ii) there was no evidence that she ever read or understood the warnings about legal advice on p. 1 or cl. 3.1.8 because it was never put to her in cross-examination;

(iii) PaperlinX made Mr Canty its agent to procure Mrs Canty's execution of the deed of guarantee and did not resile from doing so at trial;

(iv) Mrs Canty's evidence is that she signed the deed of guarantee in the presence of her adult daughter when Mr Canty presented it to her without explanation; her daughter has no legal or financial qualifications on the available evidence;

(v) Mrs Canty gave no evidence of being given an opportunity to adopt the course of conduct she had adopted on all previous occasions over a 40 year period by taking to a solicitor of her choosing to have it fully explained to her;

(vi) much of what his Honour found about there being no lack of opportunity is pure speculation about what Mrs Canty might have said had she been cross-examined on that topic; his Honour had made these findings without supporting evidence;

(j) his Honour found that Mrs Canty hoped that with the guarantees the business of TQG would survive and prosper: at [112] - that too was pure speculation because Mrs Canty gave no such evidence; indeed it is antithetical to her uncontradicted evidence that, had she been aware of the amount of TQG's indebtedness to PaperlinX at the time she signed the deed of guarantee or that she would be making herself liable to PaperlinX for over $1.0m by granting a personal guarantee, she would never have signed the deed;

..."

1. I was invited to find that there can be no unjustness for the purposes of the Contracts Review Act in circumstances where, as here, at least as the primary judge found, there was an opportunity to obtain independent legal advice before entering into the transaction. It will be seen from the way in which the case was put by Mrs Canty below that the particular circumstances here remove this case, or at least reasonably arguably remove this case, from the ordinary case where a spouse not involved in the running of the business signs a guarantee. It would also appear, as I read the submissions (I have not been taken to the evidence of Mrs Canty, and it is common ground that Mrs Canty was not required to attend for cross-examination), that at least arguably some of the matters relied upon in Mrs Canty's evidence may have gone beyond the three "pleaded" matters upon which the primary judge relied and to which his Honour confined his attention.

1. I was not provided with any decision that held that a person in the position of Mrs Canty necessarily, in the circumstances here, was unable to satisfy the provisions of Pt 2 of the Contracts Review Act. I note, without placing any reliance upon this for present purposes, that there does not seem to have been adherence to the requirement in s 9(2) for the Court to have regard to the matters reproduced in paras (a)-(l). That obligation is qualified to the extent that those matters are relevant to the circumstances, and it may well be that it was common ground before the primary judge that the pleaded matters were the only ones relevant to the circumstances. Once again that demonstrates the difficulty the respondent/applicant faces in an application of this nature.

Conclusion on security for costs

1. This application has in my opinion been capably argued on both sides. I have found it a difficult one. On the one hand, for the reasons I have given, I conclude that PaperlinX has failed to persuade me that Mr and Mrs Canty enjoy no real prospects of success in the appeal. On the other hand there is, as I said at the outset, scant evidence put forward by Mr and Mrs Canty as to the stultification of their appeal if any significant amount of security for costs be ordered. That evidence is, as the authorities make plain, something which is peculiarly within their ability to adduce. However, in the particular circumstances of this case, where PaperlinX has gone to some trouble to itself to demonstrate the impecuniosity of Mr and Mrs Canty, and until very recently did not challenge their claim that an order for security would stultify the appeal, I would not conclude that Mr and Mrs Canty have failed to establish likely stultification.

1. Mr Faulkner submitted, in my view correctly, that ultimately in a case like this there has to be an overall assessment having regard to a combination of factors. The two important factors here are the apparent strength or otherwise of the appeal, and the likely prejudice to Mr and Mrs Canty that would be caused if security for PaperlinX's costs were ordered. I would be concerned if I had formed the view that Mr and Mrs Canty were running a weak appeal in an attempt to delay bankruptcy and, especially given the limited evidence as to the assets which might be available to them, they merely asserted stultification as an answer to PaperlinX's application. There is no question but that their exercise of their statutory right of appeal in this Court will inevitably cause costs, including irrecoverable costs, to PaperlinX. However, in the perhaps unusual circumstances of this case where I have had what must surely be fuller argument than is usual, and I have enjoyed the benefit of reading the careful written submissions already served by the appellants, it is sufficient for me to conclude that although aspects of the appeal appear to be difficult, I do consider that it is reasonably arguable. There is no suggestion that it is not an appeal which is made bona fide.

1. I have considered whether in those circumstances, and particularly in light of the absence of detail as to financial evidence of Mr and Mrs Canty, I ought to make an order for some more limited form of security, say $5,000 or $10,000. There are precedents for that approach, including in Lall and Partington referred to above (see Partington at [36] and [70]). However, three considerations militate against that course. The first is that the parties have not been heard as to it, and it might well be the case that both would wish to make further submissions and indeed adduce evidence in relation to that. The second is that the cases where that has occurred have tended to be cases where impecunious appellants have maintained an appeal or a series of appeals which are described as harassing or oppressive or vexatious, and that is not this case. The third is that the appellants are natural persons. They have said, and it is not disputed, that their status in terms of bankruptcy is at stake and will indeed be determined by the outcome of this appeal. Conversely, the provision of a limited amount of security will in the scheme of (a) the judgment debt of $1.5 million, (b) PaperlinX's costs to date which exceed $400,000, and (c) the future costs of the appeal, be small if not minuscule. In those circumstances I do not think it would be an appropriate exercise of discretion to impose a small amount of security as the price for the appellants continuing this appeal.

1. For those reasons it is not necessary for me to address the question of quantum. I will dismiss PaperlinX's motion for security for costs.

Stay of execution

1. I turn to the stay. The application before me has proceeded on the basis that, in the circumstances of this case, the stay of execution which Mr and Mrs Canty seek is in substance the converse in terms of application for discretionary factors of the application for security for costs. In a sense, that may involve some element of simplification, for the legal tests are not identical, but in my opinion the parties are to be congratulated for adopting that efficient course. It is a course which is driven by the fact that it is common ground that the appellants are unable to pay the in excess of $1.5 million judgment debt which the respondent to the appeal has obtained, so that the reasoning in Kalifair Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; 55 NSWLR 737 at [25] applies.

1. PaperlinX makes the point, which is sound, that Mr and Mrs Canty have provided scanty evidence of the resources available to them, and have not proffered anything by way of security for the judgment debt. Nevertheless, for essentially the reasons I have given in relation to the application for security for costs, to which is to be added the much more substantial quantum of the judgment debt coupled with the absence of any relevant prejudice to PaperlinX, in my view this is an appropriate case for a stay of execution upon terms that Mr and Mrs Canty undertake to the Court to prosecute the appeal with reasonable expedition. It will have been evident from what I have already said that more than reasonable expedition has already been seen in the prosecution of the appeal.

1. I should add that, and perhaps it is a consequence of the way in which the application for a stay emerged late in the day, that there is no evidence of any material prejudice to PaperlinX, and indeed the evidence before me as to the thread of execution is confined to an exchange of letters on 14 October 2013 and 13 November 2013, concluding with the statement that PaperlinX was not agreeable to a stay on the enforcement of the judgment.

[Discussion as to orders, undertakings and costs]

1. I make these orders:

(1) Dismiss the notice of motion filed 20 November 2013.

(2) Upon the undertaking of the appellants to the Court to prosecute their appeal with reasonable expedition, execution of the judgment orders made by the Court on 17 December 2013 in proceeding 2011/145590 be stayed pending the determination by the Court of Appeal of the appeal.

(3) The respondent PaperlinX to pay the appellants' costs of these two motions.

(4) Otherwise dismiss the amended notice of motion filed in court on 10 February 2014.

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Decision last updated: 14 February 2014