Citicorp Australia Ltd v Cirillo

[2003] SASC 204

CITICORP V CIRILLO

[2003] SASC 204

Civil

1. SULAN J               This is an application pursuant to Rule 95.13 of the Supreme Court Rules 1987[1], by the respondents to an appeal that the appellant provide security for the costs of the appeal to the respondent in the sum of $30,000 to be paid within 14 days by payment into court or by provision of a bank guarantee in a form satisfactory to the Registrar of the Court.

   [1] Powers of the Court:

2. The respondents, whom I shall refer to as ‘Citicorp’ were the plaintiffs in the action.  The appellant, to whom I shall refer as ‘Cirillo’ was one of the defendants in the action.   Olsson AJ heard and determined a number of preliminary issues.  Citicorp and others sued a number of defendants including Cirillo seeking, inter alia, possession of certain earthmoving machinery referred to in the judgment of Olsson AJ as “the Poclain”.  Citicorp asserted that the Poclain was subject to a charge granted to Citicorp on 18 April 1983.  The litigation commenced on 3 May 1985 when Cox J granted an interim injunction to Citicorp restraining Cirillo and a co-defendant from selling, assigning, letting, encumbering, using, damaging, disposing of or dealing in any other manner with the Poclain without the written consent of Citicorp and the other plaintiffs.  That injunction was continued on 24 May 1985.  On that day the Court extended the injunction, subject to the plaintiffs by their solicitor continuing an undertaking to pay damages to Cirillo as a court or judge may determine.  Over a number of years, the plaintiffs did not take any further steps to prosecute the proceedings.  There were other proceedings between some of the parties in the Supreme Court of Queensland.  I do not need to go into the detail of those proceedings.

3. It is unclear why the proceedings in South Australia remained stagnant for a number of years.  Cirillo was declared bankrupt on 4 June 1992 on the petition of the Commissioner for Taxation.  The Official Trustee was appointed as trustee of his estate.

4. Some eighteen months prior to Cirillo having been declared bankrupt he had served a notice on Citicorp of his intention to proceed in the action.  That application was heard and adjourned on numerous occasions.  After Cirillo was declared bankrupt on 7 October 1992 a Master made the following order:

   “If by 31 January 1993 Mr Cirillo is still bankrupt and the action has been discontinued, then there will be no order as to the costs of that discontinuance and the plaintiff will automatically be released from the undertakings as to damages given earlier in these proceedings.  If however at that date the action having been discontinued Mr Cirillo has been discharged from bankruptcy then the question of costs of the discontinuance and the application for release from undertakings is reserved for further consideration upon the application of Mr Cirillo.”

5. No notice of discontinuance was filed on 31 January 1993, which turned out to be a Sunday.  The plaintiffs filed a notice of discontinuance of their claim against Cirillo on 4 February 1993.  

6. Cirillo was discharged from bankruptcy on 20 June 1995.   On 29 May 1996 the Official Trustee assigned to Cirillo every chose in action that the Official Trustee had, as trustee of Cirillo’s sequestrated estate, against Citicorp and another party.  Cirillo sought to enforce the undertaking originally given as a condition of the granting of the injunction in relation to the Poclain.  Cirillo contended before Olsson AJ that Citicorp was never entitled to obtain the injunction in the first place and that he, Cirillo, had sustained substantial damages as a result of his inability to use and maintain the equipment.  After a trial lasting 39 days the trial judge found in favour of Citicorp in respect of a number of preliminary issues.  The trial judge determined that Cirillo had no standing to seek relief, that he was not the owner and did not have rights of possession in respect of the Poclain and that he was estopped from asserting an interest in the Poclain. 

7. Cirillo has appealed the decision of Olsson AJ and the matter is to be heard by the Full Court.  There are some 15 grounds of appeal and it is anticipated that the length of the appeal hearing will be at least two days.  A number of the grounds of appeal seek to review factual findings made by Olsson AJ. 

8. Citicorp’s application for security for costs is supported by an affidavit of Ann Louise McCartney, sworn on 13 May 2003. She is a solicitor employed by the solicitors for Citicorp. No answering affidavit has been filed by Cirillo. Ms McCartney asserts that on 4 June 1992 Cirillo was made bankrupt. On 20 June 1995, when he was discharged from bankruptcy, he could not have had any assets. She further asserts that inquiries have been made by Citicorp’s solicitors, and at the date of the swearing of her affidavit Cirillo was not registered as the proprietor of any land, nor did he appear to be a director or shareholder of any company or the proprietor of any business name. Cirillo was not listed in any telephone listing. Further, in all affidavits filed since his discharge from bankruptcy, Cirillo has not deposed to having any gainful occupation. Pursuant to the Supreme Court Rules (Rule 83.01(c)) an affidavit shall be expressed in the first person and show the name, address and occupation of the deponent.

9. Further, it is alleged by Ms McCartney that Cirillo said in his evidence at trial on 16 September 2003 that he was not involved in conducting a business out of premises at Hanson Road, Wingfield, but he simply attends there to pass on his knowledge to other people and he receives no remuneration.  She further alleges that Cirillo must have incurred substantial liabilities in conducting the trial at first instance.  It is asserted on behalf of Citicorp that I should infer from those facts that Cirillo is impecunious. 

10. Mr McNamara QC who appeared for Citicorp submitted that on the unchallenged material contained in Ms McCartney’s affidavit, I should infer that Cirillo has no assets in his own name and no income against which Citicorp could execute if it obtained an order for costs.  He submitted that I should find that Cirillo is impecunious and will be unable to pay Citicorp’s costs of the appeal.  Mr McNamara QC argued that I can more readily draw such inferences as Cirillo has filed no answering affidavit and, despite a number of requests, has declined to provide any information about his financial circumstances or position.

11. Mr Stevens who appeared for Cirillo submitted that it was not open to me to draw the inferences sought by Citicorp.   Mr Stevens further submitted that Cirillo is not required nor bound to provide evidence of his financial circumstances.  He submitted that the failure of Cirillo to provide any evidence of his financial circumstances or to respond to the various requests of Citicorp that he provide details of his financial circumstances cannot be used as evidence of Cirillo’s impecuniosity.  I agree with Mr Stevens’ submission.  However, that does not conclude the matter, because if there are facts established from which it is open to a court to infer that Mr Cirillo is impecunious, then his failure to provide evidence of his financial circumstances can lead a court to more readily draw the inference and conclude that he is impecunious. Cirillo’s financial position is something peculiarly within his own knowledge and he could, if he so desired, refute the inference that Citicorp seeks to have the court draw. 

12. I conclude, upon the unchallenged facts contained in Ms McCartney’s affidavit referred to earlier in these reasons, that Cirillo is impecunious and will be unable to pay Citicorp’s costs of the appeal.  When I speak of impecuniosity, I mean that Cirillo has no assets in his own name and no discernable income against which Citicorp could execute in respect of any judgment or costs order it may obtain.  I am more readily able to draw the inference, having regard to the fact that Cirillo has chosen not to provide any evidence or material contradicting the evidence of Ms McCartney as to his financial position.[2]

    [2] See Jones v Dunkel (1959) 101 CLR 298; Second Lenbourne Pty Ltd v Beagle Management Pty Ltd (21 April 1999 BC9901891, FCA per Goldberg J para.91)

13. The question then arises whether special circumstances exist. Mr McNamara QC submitted that the jurisdiction pursuant to Rule 95.13 is enlivened if the court is satisfied that the appellant to an appeal is impecunious.

14. Prior to the introduction of Rule 95.13 in 1987, there was no rule governing applications for security for costs pending an appeal. Applications for security for costs on appeal were made pursuant to the inherent jurisdiction of the Court. Such an application was considered in O’Callaghan v Duhst and Anor[3].   In that case Angas Parsons and Richards JJ determined that the Court in its inherent jurisdiction had power to make an order for security for costs on an appeal.  The Court considered whether poverty alone was sufficient to enliven the jurisdiction in respect of an application for security for costs on an appeal.  The Court referred to the decision of Bowen LJ in Cowell v Taylor[4] with approval.  Bowen LJ said at page 38:

    “The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also I believe, in equity.  There is an exception in the case of appeals but there the appellant has had the benefit of a decision by one of Her Majesty’s courts, and so an insolvent party is not excluded from the courts, but only prevented, if he cannot find security, from dragging his opponent from one court to another.”

    [3] [1931] SASR 369

    [4] (1885) 31 Ch D 34

15. Angas Parsons J, with whom Richards J agreed, referred to the decision of A.L. Smith LJ in Hall v Snowden, Hubbard & Co[5] and approved the dicta of the Lord Justice in which his Lordship said:

    “The ordinary rule of this court is that, except in applications for new trials, when the respondents can shew that the appellant, if unsuccessful, would be unable through poverty, to pay the costs of the appeal, an order for security for costs is made.”

    [5] (1899) 1 QB 593

16. Mr McNamara QC submitted that Rule 95.13 was approved by the judges of this Court having regard to the position as stated in O’Callaghan v Duhst. He contrasted the position under Rule 100.01 which provides that the court may order security for costs to be furnished where, for special circumstances, the justice of the case so requires. Mr McNamara QC submitted that special circumstances in Rule 100.01 are to be distinguished from special circumstances in Rule 95.13 as orders made pursuant to Rule 100.01 relate to trials at first instance.

17. The Full Court in Collins v Emacord Autos Pty Ltd[6] in dealing with the special circumstances pursuant to Rule 100.01 said that the fact that the plaintiff is impecunious would not of itself give rise to the making of an order.  The Court relied on the decision of Cowell v Taylor[7] and Fletcher v The Federal Commissioner of Taxation.[8]  In Cowell v Taylor Bowen LJ referred to one of the exceptions to the general rule being that of an appeal.  In Archer v Woodhead Australia Pty Ltd[9] Lander J dealt with the distinction between “special circumstances” in an application for security for costs at first instance pursuant to Rule 100.01 and an application in respect of an appeal pursuant to Rule 95.13. His Honour said:

    “An application for security for costs on appeal involves a consideration of different principles than the principles that bear on an application for security for costs in a trial. That follows because of the Rules of Court. Rule 100 of the Rules of Court provide circumstances where a party may obtain security for costs in a trial. There are four specific circumstances, and one general circumstance. The circumstances envisaged in Rule 100 are quite different from those that relate to an application for security for costs on an appeal which, as I have said, is governed by Rule 95.13. Indeed, in an application for security for costs at trial, no special circumstance necessarily needs be made out, but a party must bring itself within the four specific matters or the one general matter contained in Rule 100.

    In an application for security for costs on an appeal, some special circumstance must be made out.”

    [6] (unreported decision, 3 November 1997, BC9705906)

    [7] Ibid

    [8] (1992) 110 ALR 233

    [9] (29 March 1995, unreported BC9503154, judgment of Lander J)

18. His Honour considered the decision of Cowell v Taylor and Fletcher v The Federal Commissioner of Taxation.  In Fletcher’s case, Hill J in the Federal Court dealt with a rule in similar but not identical terms to Rule 95.13. He concluded that mere impecuniosity of itself will not generally result in an order being made for security for costs. Mr McNamara QC submitted that the decision in that case can be distinguished from the position of an appellant in South Australia seeking to invoke the jurisdiction pursuant to Rule 95.13. He submitted that on an analysis of Fletcher’s case Hill J was not dealing with an appeal from a decision of a court but rather with an appeal from the Administrative Appeals Tribunal.  The Federal Court was the first occasion upon which the litigants were able to obtain a decision of a court on a question of law.  He submitted that in that regard it was more apposite to apply the rule and interpret the Federal Court rule as if an application for security for costs were being made at first instance rather than on appeal.  

19. Mr McNamara QC relied on the decision of Kennedy v McGeechan[10] in which the Court of Appeal in New South Wales determined that the impecuniosity of an appellant may constitute special circumstances leading the court to order security. The relevant rule in New South Wales is in similar terms to Rule 95.13. However, the rule specifically provides that unless special circumstances are made out, no security for costs of an appeal to the Court of Appeal shall be required.[11]

    [10] (1978) 1 NSWLR 314

    [11] Security for Costs

20. Lander J in Archer’s case adopted the position as stated in Kennedy’s case.  He referred to Kennedy’s case in which the court said: 

    “The impecuniosity of an appellant may constitute a special circumstance leading the court towards ordering security, in that it is a circumstance which may deprive or delay a respondent receiving his costs of the appeal, if the appeal fails, which costs a successful respondent can usually expect he will actually receive.  In an appellate situation, a respondent seeking security is in a stronger position than a defendant at first instance, to the extent that he has a decision in his favour, which is presumed to be right until displaced.  However, impecuniosity may not conclude the matter.  Considerations of possible frustration of an apparently genuine appeal or concerning the subject matter of the appeal, such as appeals involving matters of great moment or the liberty of the subject, may provide reasons to refuse an order.  The foregoing observations are made not to circumscribe the discretion, but in order to indicate its width.”

21. In Fletcher’s case, Hill J was dealing with the application of the rule in respect of an appeal.  I do not accept that he was drawing any distinction in the case of an appeal from an administrative tribunal rather than a court.  However,  Hill J did not suggest that impecuniosity alone could never found a basis  for making an order.  Rather, he was inclined to the view that it would be a rare case where impecuniosity would be a sufficient reason to make an order.  Insofar as the decision in Fletcher v The Federal Commissioner of Taxation is in conflict with the decision in Kennedy v McGeechan, I prefer the approach of the Court of Appeal in New South Wales in Kennedy’s case. 

22. Mr Stevens submitted that the development of the law relating to security for costs is such that impecuniosity alone is now insufficient to enliven the jurisdiction pursuant to Rule 95.13. He submitted that special circumstances in Rule 100 and special circumstances in Rule 95.13 are the same and the jurisdiction is not enlivened if a plaintiff is only able to establish impecuniosity. Mr Stevens relied upon Lall v 53-55 Hall Street Pty Ltd (1978) 1 NSWLR 310. In that case, the New South Wales Court of Appeal considered circumstances in addition to impecuniosity. The Court had regard to the nature of the appeal and the proceedings at first instance. The Court determined that the proceedings at first instance were misconceived and the appeal was, therefore, hopeless. Security for costs was ordered. The decision in Lall’s case approved the dicta in Kennedy’s case.    In Lall’s case, although the Court relied on a number of factors to support the making of the order, the Court did not determine that additional factors over and above impecuniosity were required to be established before an order can be made.

23. Mr Stevens also referred to the decision of Abdurahman v Field[12] a decision in which the Court of Appeal (Kirby P, Glass and Samuels JJ) refused an application for security for costs.  In that case security was refused because the court concluded that the applicant had failed to establish that the appellant was impecunious.  Although the court expressed the view that impecuniosity alone would not normally be sufficient to justify the making of an order, the court did not determine that impecuniosity could never justify the making of an order for security.

    [12] Unreported decision of the Court of Appeal (NSW) BC 8601205, 4 March 1986

24. In my view, the position in South Australia is as expressed by Lander J in Archer v Woodhead Pty Ltd.  I conclude that impecuniosity alone can amount to special circumstances pursuant to Rule 95.13.

25. The question then arises whether in the exercise of my discretion I should order security.  The practice of the court is that usually a successful party to an appeal will obtain an order for costs.  The litigation in this instance is complex and occupied the trial court for 39 days.  There are some 15 grounds of appeal.  It is not possible for me to draw any conclusions as to the merits of the appeal.  If the appellant succeeds he will be likely to obtain an order for costs against Citicorp.  If Citicorp succeeds then in addition to the trial costs it will have incurred the costs of the appeal.  At the instance of Cirillo it has been required to defend a judgment it has obtained at first instance.  Cirillo has not provided evidence that the making of an order will stifle his appeal.  He has not sought to establish any other factors to support the exercise of my discretion to refuse the application.  The appeal relates to commercial arrangements between parties and the enforcement of an undertaking as to damages.  There are, in my view, no matters of great moment or matters which make this litigation exceptional from the ordinary commercial causes heard by this court.

26. I conclude that special circumstances have been made out.  There are no other relevant circumstances established upon which I should exercise my discretion not to make an order for security for costs.   I so order. 

27. I shall hear the parties as to the amount of security to be provided and the terms of the order.

Without restricting the generality of the jurisdiction powers and authority conferred on the Full Court by the Act or by any other enactment the Court when dealing with proceedings under this Rule:
(a)…..
(b) Security for Costs may if there are special circumstances order that such security as the Court thinks fit be given for the costs of the appeal;
(c) ….

51AA.11. (1) Where a notice of appeal with appointment has been filed under rule 5, the Court of Appeal may, in special circumstances, order that such security as the Court of Appeal thinks fit be given for the costs of the appeal.

cf. R.S.C. (Rev.) 1965, 0. 59, r. 10 (5).
(2) Subject to subrule (1), no security for the costs of an appeal to the Court of Appeal shall be required.
(3) Subrules (1) and (2) do not affect the powers of the Court under Division 1 (which relates to security for costs).