Davey v Herbst (No 2)
[2012] ACTCA 19
•26 April 2012
JOHN PATRICK DAVEY v VALERIE HERBST, ADAM RICHARD HERBST AND ERIC MALCOLM BRAY [NO 2]
[2012] ACTCA 19 (26 April 2012)
PROCEDURE – costs – security for costs – on appeal – relevant factors – impecuniosity – prospects of success on appeal – order for security for costs – refused.
PROCEDURE – summary judgment – principles – onus on defendant to raise matters of defence.
DEEDS – delivery – effect of deed – construction.
PROCEDURE – inferior courts – parties – deceased persons – capacity of beneficiary to conduct litigation.
Magistrates Court Act 1930 (ACT), s 274
Supreme Court Act 1933 (ACT), s 37J(1)(k)
Civil Law (Property) Act 2006 (ACT), s 210
Court Procedures Rules 2006 (ACT), rr 6, 425, 512, 1147, 5302, 5473, 6251, 6256
Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 64.24(2)
Uniform Civil Procedure Rules 2005 (NSW), r 50.8
Supreme Court Rules 2006 (SA), r 194(1)
Stephen Colbran, Security for Costs (Longman Professional, 1993)
R F Norton, A Treatise on Deeds (Sweet & Maxwell, 1st ed, 1906)
Davey and Anor v Herbst and Anor [2011] ACTSC 112
Hughes v Janrule Pty Ltd (2011) 252 FLR 397
Bethune v Porteous (1892) 18 VLR 493
Benjamin v GB Franchising Australia Pty Ltd (2008) 1 ACTLR 287
Smail v Burton [1975] VR 776
Hood Barrs v Heriot [1898] 2 QB 375
Australasian Compressed Fodder Co v Westwood (1903) IX Arg LR 113
de Groot v Nominal Defendant [2004] NSWCA 88
Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241
Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143
PS Chellaram & Co v China Ocean Shipping Co (1991) 65 ALJR 642
Banks v Copas Newham Pty Ltd [2001] QCA 526
Ivory v Telstra Corp Ltd [2001] QCA 490
Jackson v Coal Resources of Queensland Ltd [2000] QCA 413
Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1
Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306
Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972
Maher v Commonwealth Bank of Australia [2008] VSCA 122
Davey v Herbst and Ors [2011] ACTCA 27
Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Singh v Varinder Kaur (1985) 61 ALR 720
ANZ Banking Group Ltd v Barry [1992] 2 Qd R 12
Brisbane City Council v Southern Electric Authority of Queensland (1968) 42 ALJR 78
Bank Für Gemeinswirtschaft AG v City of London Garages Ltd [1971] 1 All ER 541
Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705
Lazard Brothers and Co v Midland Bank Ltd [1933] AC 289
Fielding v Rigby [1993] 4 All ER 294
Kamouh v British Aircraft Corporation (Operating) Ltd, The Times, 17 July 1982
Clay v Oxford (1866) LR 2 Exch 54
Tetlow v Orela Ltd [1920] 2 Ch 24
Woolworths Ltd v Crotty (1942) 66 CLR 603
Smith v London and North Western Railway Co (1853) 118 ER 694
McLeish v Faure (1979) 40 FLR 462
White v Glass, The Times, 18 February 1989
Ramage v Waclaw (1988) 12 NSWLR 84
Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109
Lidden v Composite Buyers Ltd (1996) 67 FCR 560
Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432
Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450
Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204
Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361
Xenos v Wickham (1867) LR 2 HL 296
Eljon Pty Ltd v Chat Commissioner of State Revenue [1999] NSWSC 266
Beasly v Hallwood Estates Ltd [1961] 1 Ch 105
Alan Estates Ltd v W G Stores Ltd [1982] Ch 511
National Provincial Bank of England v Jackson (1886) 33 Ch D 1
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
Olsson v Dyson (1969) 120 CLR 365
Bath and Montague’s Case (1693) 22 ER 963
Coles v Wood [1981] 1 NSWLR 723
Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (No 2) (1990) 21 NSWLR 200
Re Bernadette (2011) 249 FLR 294
Muldoon v Church of England Children’s Homes Burwood [2011] NSWCA 46
Underdown (estate of the late Samantha) v Secretary, Department of Education, Employment and Workplace Relations (2009) 50 AAR 54
R v Steffan (1993) 30 NSWLR 633
McIlvar v Szwarcbord (2008) 186 A Crim R 106
Burrell v The Queen (2008) 238 CLR 218
Tait v Bindal People [2002] FCA 322
Pettitt v Dunkley [1971] 1 NSWLR 376
Public Service Board of New South Wales v Osmond (1986) 159 CLR 656
Carlson v King (1947) 64 WN (NSW) 65
Roche & Ors v Kronheimer and Anor (1921) 29 CLR 329
Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735
Mackay v The Queen (1977) 136 CLR 465
R v Winneke (1982) 152 CLR 211
North Ganalanja Aboriginal Corporation v State of Queensland (1996) 185 CLR 595
Pape v Federal Commissioner of Taxation (2009) 238 CLR 1
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
ACTCA No. 44 of 2011
SCA No. 34 of 2010
Judge: Refshauge J
Court of Appeal of the Australian Capital Territory
Date: 26 April 2012
IN THE SUPREME COURT OF THE ) ACTCA No. 44 of 2011
) SCA No. 34 of 2010
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:JOHN PATRICK DAVEY
Appellant
AND:VALERIE HERBST
First Respondent
AND:ADAM RICHARD HERBST
Second Respondent
AND:ERIC MALCOLM BRAY
Third Respondent
ORDER
Judges: Refshauge J
Date: 16 April 2012
Place: Canberra
THE COURT ORDERS THAT:
The application for security for costs be dismissed.
The parties be heard as to the costs of the application.
The appellant file and serve any written submissions as to costs on or before 7 May 2012.
The first and second respondents file and serve any written submissions as to costs on or before 2 May 2012.
Compliance with Court Procedures Rules 2006 (ACT) rr 5439, 5440 is dispensed with, on the condition that the parties comply with r 5857.
The appellant have leave to file any supplementary submissions directed toward compliance with Court Procedures Rules r 5857(1)(h) on or before 23 April 2012.
The first and second respondents file and serve their written cases under Court Procedures Rules r 5857 on or before 29 April 2012.
The appellant file any response to those written cases on or before 4 May 2012.
IN THE SUPREME COURT OF THE ) ACTCA No. 44 of 2011
) SCA No. 34 of 2010
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:JOHN PATRICK DAVEY
Appellant
AND:VALERIE HERBST
First Respondent
AND:ADAM RICHARD HERBST
Second Respondent
AND:ERIC MALCOLM BRAY
Third Respondent
Judge: Refshauge J
Date: 26 April 2012
Place: Canberra
REASONS FOR JUDGMENT
REFSHAUGE J:
These proceedings are the result of a breakdown in a commercial relationship between the appellant and the third respondent on the one hand and the second respondent on the other.
The parents of the second respondent, the mother being the first respondent, had advanced money to the commercial enterprise and, as a result of the breakdown in the relationship, sought the return of the advance.
Negotiations resulted in a Deed being signed by all the parties to these proceedings and the second respondent’s father (husband of the first respondent). It is alleged that instalment payments were made under the Deed but discontinued after some time.
The first and second respondents and the second respondent’s father as plaintiffs then commenced proceedings in the Magistrates Court against the appellant and the third respondent as defendants for recovery of the balance of the moneys said to be due to the plaintiffs under the Deed.
Regrettably, the proceedings in the Magistrates Court were conducted in what can only be described as a messy manner with little attention being paid to procedural issues that, admittedly, were of some complexity. Some of this resulted from the terms of the Deed which was hardly a paragon of the drafter’s art and which used not only inapt expressions but some that might be construed as inconsistent with the relevant law.
Nevertheless, the Deed appeared to evidence a debt to the first respondent and her husband, payable by the appellant and the third respondent.
After commencement of the Magistrates Court proceedings, the first respondent’s husband was dismissed from the proceedings as he had died before they had been commenced. The second respondent was also dismissed from the proceedings as, though a party to the Deed, he was not owed any money under it at the time the proceedings were commenced. The first respondent remained as the plaintiff. A third party notice was, however, issued by the defendants against the second respondent.
On 14 December 2009, the proceedings came before the Magistrates Court constituted by the Registrar, (as permitted by r 6251(2)(a) of the Court Procedures Rules 2006 (ACT)) despite the procedural difficulties, some of which I will have to mention below. This was described by Gray J in Davey and Anor v Herbst and Anor [2011] ACTSC 112 at [18] as “essentially cross-applications for summary judgment.” The Registrar entered judgment for the plaintiff, dismissed the claims of the defendants and also dismissed third party notices by the defendants against the second defendant in these proceedings.
The defendants appealed under r 6256 of the Court Procedures Rules to a Magistrate who heard the applications anew (a hearing de novo) under r 6256(4), and who effectively dismissed the appeal on 4 May 2010 by confirming the orders made by the Registrar. The Learned Magistrate also permitted the plaintiff to amend her Statement of Claim at the hearing.
The defendants then appealed to the Supreme Court under s 274 of the Magistrates Court Act 1930 (ACT) against these orders. The hearing came before Gray J who, on 20 July 2011, dismissed the appeal: Davey and Anor v Herbst v Anor.
The appellant, one of the defendants before the Magistrates Court and the first appellant in the Supreme Court proceedings, has now appealed to this Court from his Honour’s order. He has joined as respondents the remaining plaintiff, the first respondent, for whose benefit the Magistrates Court orders were made, as well as the third party in those proceedings, the second respondent, and the other defendant, who was the second appellant in the Supreme Court proceedings, namely the third respondent.
The first and second respondents have now sought security for costs against the appellant. On 16 April 2012, I dismissed the application. I said that I would provide my reasons later. These are those reasons.
Security for costs on appeal
The Court Procedures Rules provide in r 5302- for the Court of Appeal to make an order for security for costs. It is in the following terms:
Appeals to Court of Appeal – security for costs
(1)Security for costs of an appeal is not required, unless the Court of Appeal otherwise orders.
(2)This rule does not limit division 2.17.8.
In Hughes v Janrule Pty Ltd (2011) 252 FLR 397 at 409; [61], Penfold J held that a single judge of the Court of Appeal may, under s 37J(1)(k) of the Supreme Court Act 1933 (ACT), exercise this jurisdiction of the Court.
Stephen Colbran, in Security for Costs (Longman Professional, 1993) at 1; [1.3], addressed the questions of what the purpose of such orders as follows:
The purpose of security for costs is two-fold:
(a)to provide protection for a defendant by ensuring an available fund to defray costs incurred by the defendant in defending a frivolous claim; and
(b)to discourage the filing of unmeritorious and frivolous claims which may amount to vexatious harassment. (footnotes omitted)
As Hood J said in Bethune v Porteous (1892) 18 VLR 493 at 494,
the reason underlying the numerous and varying cases in which appellants have been ordered to give security will be found in the injustice to a successful litigant that may be caused if he be compelled to contest the matter for a second time without a probability of obtaining his costs if ultimately successful.
In Benjamin v GB Franchising Australia Pty Ltd (2008) 1 ACTLR 287, I discussed the principles relating to the discretion to order security for costs in appellate matters. These may be summarised as follows:
(a) the default position in this jurisdiction is that no security is payable and therefore the applicant has to make out a satisfactory case for security being ordered;
(b) there is not in this jurisdiction, as in some other jurisdictions (see, eg, Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 64.24(2); Uniform Civil Procedure Rules 2005 (NSW) r 50.8; Supreme Court Rules 2006 (SA) r 194(1)), a requirement that the applicant show special circumstances; decisions from such other jurisdictions must, therefore, be treated with some caution;
(c) there are differences between the principles governing the discretion to order a moving party to provide security for costs at trial and on appeal; thus, impecuniosity is not a significant consideration in respect of trials but is more important in respect of appeals;
(d) unlike the position in England, impecuniosity, while important, is not decisive and there are other relevant considerations such as the public importance of the issues in the appeal (Smail v Burton [1975] VR 776 at 779), the liberty of the subject (Hood Barrs v Heriot [1896] 2 QB 375 at 376), or where the only property of the appellant is the subject matter of the appeal (Australasian Compressed Fodder Co v Westwood (1903) IX Arg LR 113);
(e) the prospects of success on appeal is a relevant consideration and, despite the difficulty of assessing that (de Groot v Nominal Defendant [2004] NSWCA 88 at [25]), it sometimes simply has to be undertaken (Hughes v Janrule Pty Ltd at [84]).
The considerations that the court may take into account have been identified by courts over time. I am conscious that, as Davies JA said in Natcraft Pty Ltd (deregistered) v Det Norske Veritas [2002] QCA 241 at [2], “[i]t is impossible to state comprehensively the factors that are relevant to assessment of an application [for security for costs]”. As the NSW Court of Appeal noted in Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143 at 151; [33], though perhaps rather in relation to the notion of “special circumstances”, frequently recurring circumstances or outcomes should not be developed into a “general rule” of practice and the Court must have regard to all relevant factors in each case.
As McHugh J said in PS Chellaram & Co v China Ocean Shipping Co (1991) 65 ALJR 642 at 643,
[t]o make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed.
His Honour did then note, however, that certain factors, such as, in that case, the party bringing proceedings being resident out of the jurisdiction and having no assets in the jurisdiction, had been seen by the courts over time as a circumstance of great weight in determining whether an order for security should be made.
Nevertheless, I did identify in Benjamin v GB Franchising Australia Pty Ltd at 296; [48], some matters commonly regarded as relevant factors
include where the impecuniosity of the appellant has been caused by the misconduct of the respondent (Farrer v Lacey, Hartland & Co (1885) 28 Ch D 482 at 485), where the liberty of the subject is involved (Hood Barrs v Heriot [1896] 2 QB 375), where the appeal is an abuse of process (Weldon v Maples, Teesdale & Company (1887) 20 QBD 331), where the appeal is manifestly groundless (Lall v 53-55 Hall Street Pty Ltd [[1978] 1 NSWLR 310]) where there has been great delay in prosecuting the appeal (PG Gabel Pty Ltd (in liq) v Katherine Enterprises Pty Ltd (1977) 29 FLR 108 at 113) and where the matter in issue raises a matter of public importance or a significant matter (Kennedy v McGeechan [1978] 1 NSWLR 314).
Similarly, in Natcraft Pty Ltd v Det Norske Veritas at [9], Jerrard JA reviewed “decided cases” which had “established matters which are relevant on such applications”, including:
· The appellants’ prospects of success on the appeal (see Banks v Copas Newham Pty Ltd [2001] QCA 526).
· The financial position of the appellants. Where an appellant is without funds or assets this factor is important, and provides what this court has described as a “persuasive” reason for ordering security for costs. This is because that appellant would be unable to satisfy any order for costs made against the appellant should the appeal be unsuccessful (see Banks (supra) and Ivory v Telstra Corp Ltd [2001] QCA 490).
· The fact an impecunious appellant, impecunious at trial, has already had a “day in court” and lost on the merits. That circumstance increases rather than reduces the likelihood of the exercise of a discretion in favour of an order for security for costs (see Ivory (supra)).
· The fact that the appellant blames impecuniosity on a respondent who asks for orders for security for costs. This matter has a diminished significance at appellant level, by contrast with its significance at trial level (see see de Jersey CJ Jackson v Coal Resources of Queensland Ltd [2000] QCA 413).
· That it is inappropriate to order an impecunious appellant to provide a greater security than is absolutely necessary (see Young CJ in Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1 at 4).
· That the giving of a personal undertaking by one who stands behind a company does not preclude an order for security for costs (see Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306 at 316).
· Whether there has been any delay in bringing the application for security for costs.
Jerrard JA continued (at [10]):
The central issue where there has not been delay is well summarised in the judgment of Malcolm CJ in Intercraft (supra), wherein His Honour said at p316 that the application has to be looked at in the light of all relevant considerations, including the merits of the action and whether the ordering of security will stifle an action which has some apparent merit.
Davies and Williams JJA agreed, subject to the comment referred to above (at [18]). See also Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972.
There is no doubt that, in the terms in which McHugh J (above at [19]) referred to matters which have for long been accepted as having great weight in such applications, the impecuniosity of an appellant and the prospects of success on appeal have always had a very great significance in applications for security for costs in appellate proceedings.
The application
The respondents brought the application on two bases – that the appellant would not be able to pay any order for costs made by the Court of Appeal and that the appeal had no prospects of success.
The material before me consisted of:
(a) affidavit of John Wilson sworn 5 October 2011;
(b) affidavit of Nathan Moy affirmed 5 October 2011;
(c) affidavit of service of Jade de Flay-Schrooder sworn 13 October 2011;
(d) further affidavit of Mr Moy affirmed 17 October 2011;
(e) a title search of a certain property at Weston;
(f) a folder of submissions by the appellant with statutes and authorities;
(g) a copy of an application and supporting affidavit to challenge a costs assessment in the Magistrates Court; and
(h) an amended Statement of Enforcement Debtor’s Financial Position of the appellant.
Of the deponents of the affidavits only the appellant was cross-examined. The second respondent, however, did give oral evidence and was cross-examined.
I shall, on the basis of this material and the submissions of the parties, deal with each of these grounds of the application.
The means of the appellant
Mr P Walker, who appeared for the first and second respondents to the appeal, the applicants for security for costs, submitted that the appellant did not have sufficient means to meet any order for costs should he be ordered to pay them on the appeal.
The affidavit of Mr Wilson estimated that the costs of the appeal would be between $25,238 and $26,538. Mr Wilson is an experienced solicitor who has long practiced in litigation, including having to estimate legal costs. It is not clear whether the estimate was on the basis of solicitor-client costs or party and party costs, but for the purposes of the application, I am prepared to accept the estimate as the costs that may be payable to the first and second respondents if the appeal is dismissed.
It appears from Mr Moy’s affidavit of 5 October 2011 (Mr Moy’s first affidavit), that there were a number of outstanding costs orders already made in earlier proceedings. These included orders made in the Magistrates Court on 22 January, 4 May and 9 November 2010, in the Supreme Court on 20 July 2011 and in the Federal Magistrates Court on 27 July 2011. Mr Moy estimated that the solicitor-client costs of the proceedings to date would amount to $225,000.
A bill of costs has been assessed in respect of the orders made in the Magistrates Court on 22 January and 4 May 2010 in the sum of $124,313.13. This, of course, must be the vast majority of the costs in that court because the costs order of the summary judgment and the orders made by the Registrar on 14 December 2009 was made that on 22 January 2010, confirmed by the Magistrate on 4 May 2010 with an additional costs order. The costs of the appeal to the Supreme Court were ordered to be paid by the appellant on 20 July 2011. While I am not in a position to estimate those costs, I note that they were not, as were the cost ordered in the Magistrates Court, payable on an indemnity basis and the hearing on the appeal occupied two days.
Annexed to Mr Moy’s first affidavit is a copy of a “Statement of Assets and Liabilities” of the appellant filed in accordance with an order of Master Harper made on 1 July 2010. I had regard also to the amended Statement of Enforcement Debtor’s Finance Position (see [26](h) above) of the appellant.
Under the Master’s order, the appellant was also required to provide a bank guarantee in the sum of $46,574.49 and to grant an unregistered mortgage over land at Barton to secure costs orders referred to above (at [30]).
The bank guarantee was provided and a copy annexed to Mr Moy’s first affidavit. A copy of the unregistered mortgage over the Barton land and of the caveat lodged to protect the mortgage interest were also annexed to that affidavit.
The Statement of Assets and Liabilities of the appellant disclosed assets including equity in his business, interests in real property, a superannuation balance, a life insurance policy with a substantial redemption value and a motor vehicle and household effects. Liabilities included a loan secured by a mortgage, body corporate fees, credit card and personal loans, a debt to ACT Revenue and accounting fees. The statement notes that some balances are approximations. It adds, rather curiously, that it “does not include assets and liabilities for corporations and businesses that I am associated with”. It is not clear whether he may have access to any such assets or be at risk of having to meet any such liabilities. The implication is that he may, otherwise it is not clear why the comment would have been made.
Nevertheless, that was not challenged.
The statement disclosed a net asset value of approximately $600,000. Mr Moy expressed the opinion, and his right to do so was not challenged, that it showed “few realisable assets available to satisfy any further costs orders”. I have not listed the assets and their values. In the circumstances, it is not necessary to do so; this would expose the financial affairs of the appellant widely and need not be done unless required in the interests of justice.
Although not challenged, however, I cannot merely accept Mr Moy’s opinion without some analysis. In the first place, I am not satisfied that it is a principle that the assets must necessarily be readily realisable. In the first place, that depends on the circumstances. For example, real estate might be considered not readily realisable, yet provide security for which a loan may be obtained to pay costs. Again, in a buoyant property market, residential property might well be more easily realisable than in a flat market.
In the second place, the test seems to me to require that the moving party, in an appeal usually the appellant, must be reasonably able to pay any costs order in a reasonable time period. That requires an assessment not only of assets, but also of income, both as a resource in itself but also as a means whereby liabilities will be reduced over time thus increasing the beneficial interest in assets, especially those over which any liabilities are secured. In this case, the appellant has disclosed a weekly income of a reasonably substantial sum, about twice his weekly liabilities, which included the various loans, including those secured over real estate interests.
As to the assets, the appellant has an interest in his home and there did not seem to be any immediate reason why that could not be used to secure a further loan if necessary. There was a regrettable paucity of detail about the equity that the appellant had in the home, but even were the least favourable suggestion, of $80,000, to have been the case, it is not unrealistic to suppose, given the appellant’s income, that this would secure a further loan of $26,538 to meet the upper end of the costs estimate made by the solicitor for the first and second respondents.
The appellant also disclosed a substantial interest in his business, but that is, perhaps, less relevant since the possibility of its sale and the amount such a sale would realise must be less certain and, therefore, not only is its availability as a source of funds directly, on sale, but also as security for a loan from a bank or other commercial lender, more problematic.
On the other hand, he has two insurance policies with a very significant aggregate surrender value which would be readily available to meet any costs order. These would well meet the estimated costs many times over.
What, however, has not been disclosed by the appellant as a liability either in the Statement of Assets and Liabilities (see [33] above) or the Statement of Enforcement Debtor’s Financial Position (see [26](h) above), was the amount of the costs already ordered to be paid. Of these, $124,313.13 had been quantified. Mr Moy estimated the total costs on a solicitor-client basis as $225,000 to date. I note that a number of the costs orders were made on an indemnity costs basis. A history of the failure to satisfy such orders is relevant to the discretion as to ordering security for costs: Maher v Commonwealth Bank of Australia [2008] VSCA 122 at [109]. In this case, however, since hearing the application, I note that a stay of enforcement of the order for payment of the costs that have been assessed, sought because of the issuing of a bankruptcy notice, has been refused: Davey v Herbst and Ors [2011] ACTCA 27. I can, I consider, conclude from those proceedings that either those costs have now been paid or compromised, or that the appellant will shortly be declared bankrupt. I note, too, from that decision, that the judgment sum has also been paid. Those facts dilute substantially the effect of this factor, if not nullifying it.
Even taking these into account, however, it does seem to me that the appellant cannot be regarded as having no reasonable ability to pay the costs of the appeal.
The application for a stay of the costs order was made after the hearing of this application. I note that in that application the appellant did not say directly that he was unable to pay the amount claimed (see Davey v Herbst and Ors at [6]), though there must be an implication that this was so, at least prior to the commission of any act of bankruptcy that may follow from service of the bankruptcy notice (referred to at [5] in that decision) and failure to pay the debt. I note that the appellant also gave some evidence in the hearing of the application of his unsuccessful attempts to obtain finance (see [16] in that decision). His Honour considered, however, that the appellant had “on paper” assets sufficient to meet the debt in the bankruptcy notice (see [38] in that decision). That confirms the finding I have come to above (at [45]).
Accordingly, it does not seem to me that the appellant is impecunious such as to require me to make an order for payment of security for costs on this ground alone.
Prospects of success on the appeal
Whilst it would appear that impecuniosity is a very significant factor among those to be considered in determining an application for security for costs on appeal, it does not appear to me to be necessarily decisive one way or the other and so it is necessary for me to consider the other ground, namely the prospect of success on the appeal. I have already mentioned (at [17](e)) the circumspection with which this ground must be approached.
In Bresam Investments Pty Ltd v Shmee Pty Ltd [2008] VSCA 251 at [34] Dodds-Streeton JA, with whom Kellam JA agreed, said “[t]he prospects of success on appeal should not, on an application for a stay be considered extensively, although the applicant for a stay must establish an arguable ground of appeal.” That, it seems to me, applies equally to an application for security for costs.
The appellant pleads the following six grounds of appeal. They are set out in an Amended Notice of Appeal as follows:
A.LATE AMENDMENT
i.His Honour erred in finding no application for the principles in Aon v the Australian National University (2009) 239 CLR 175.
Particulars
(a)Whether the court rightly determined to exercise its discretion to allow the amendment, the Defendants had a right pursuant to regulation 512 Court Procedures Rules 2006 to re-plead to the amendment. That right was denied by the learned Magistrate who allowed the amendment and entered Judgment immediately following the exercise of her discretion. His Honour erred in not finding that the Appellants were entitled to re-plead following the amendment.
In the alternative:
(b)The exercise of discretion was in error and inconsistent with the principles in Aon v the Australian National University.
B.DURESS GROUND
His Honour erred in finding that the participation of solicitors in the negotiations and execution of the Deed precluded a claim for duress, coercion or some other vitiating circumstances impugning the enforceability of the Deed.
Particulars
(a)There is no rule that lawful threats cannot constitute improper pressure leading to duress. The matter was properly one for evidence at trial.
(b)The demand to pay monies on the evidence was made before any funds were due. It constituted an act of duress by a third party in the form of the Plaintiff.
(c)The assault by the 2nd Respondent against the Appellant in conjunction with the illegitimate claim for funds from the company Herm Fine Frames Pty Ltd constituted illegitimacy leading to the proper conclusion that the Deed was entered into under duress. The matter was properly one for the testing of all evidence at trial and unsuitable for summary judgment.
(d)The absence of consideration is a matter relevant to a determination concerning duress.
(e)The court erred in not properly considering the established tests for duress pursuant to Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 and Barton v Armstrong [1973] 2 NSWLR 598.
C.CAPACITY OF THE PLAINTIFF TO SUE FOR THE DEBT & QUANTAUM OF THE DEBT
His Honour erred in finding that the concession that the Plaintiff was a beneficiary entitled her to sue on behalf of the estate in the late Peter Herbst.
Particulars
(a)A beneficiary cannot sue on behalf of the estate
. InIt was conceded in evidence that the personal legal representative of the deceased Peter Herbst (that being the public trustee) was invited to participate in the litigation and declined.(b)The debt as a chose in action in the name of Valerie Herbst was properly characterised as a tenancy in common due to the operation of section 210 Civil Law (Property) Act 2006. Valerie Herbst was properly only entitled to 50% of the debt claimed as she lacked capacity to sue for a debt that remains not administered in the estate of the late Peter Herbst.
(c)By her Application in Proceedings (“the Amendment Application”) dated 9 July 2009 the Plaintiff claimed:
Grounds:
Paragraph 3 – The Plaintiff amended her claim only to correct the names of plaintiffs to the proceedings but otherwise maintains her claim forr [sic] a debt owed to the Plaintiff by the defendants.
Paragraph 4 – The defendants are justly and truly indebted to the plaintiff in the sum claimed and were at the commencement of the plaintiff’s action so indebted.
D.CONSTRUCTIONS OF THE DEED & JURISDICTION OF THIS COURT TO MAKE THE ORDERS MADE
His Honour erred in finding that the Deed was enforceable against the Appellant by way of contractual obligation.
Particulars
(a)Following admissions by the Plaintiffs that no funds were lent to the defendants, the proper constructions of the deed was whether it imported a third party obligation of the defendants to the plaintiffs. This was a proper matter for trial.
(b)Law and equity recognise three mechanisms to which 3rd parties (the defendants) may be obliged to pay for another (the company). Those mechanisms are novation, assignment or guarantees. The deed fails the test for all three legal and equitable requirements as a third party obligation. The matter was properly one for pleading and trial given the various tests for novation, assignment and guarantees. The Plaintiff’s amendment pleaded an assignment.
(c)The Plaintiff sued on the basis that the obligations of the Defendants was by way of assignment. Equity does not recognise the assignment of a detriment.
E.APPLICATION OF THE RULES FOR SUMMARY JUDGMENT
His Honour erred in finding that the pre-requisites for entering summary judgment were met.
Particulars
(a)Pursuant to Regulation 1146(2)(b) the defendants were entitled to avoid summary judgment if sufficient facts were disclosed to entitle the defendants to defend the claim for relief. Those facts disclosed were:
i.Admission by the Plaintiff that no funds were lent to the defendants.
ii.Admissions by the Plaintiff that no funds were repaid by the defendants.
iii.Admission by the 2nd Respondent that an “incident” took place between he and the appellant.
iv.Pursuant to the admissions of the Plaintiff, the Defendants were entitled to test at trial the evidence extraneous to the Deed at trial.
v.Unlawful detention of company property making the return of the property a condition of the execution of the Deed.
F.COSTS
His Honour erred in finding that the order for indemnity costs was properly made by the Magistrate.
Particulars
(a)The Order for indemnity costs made by the learned Magistrate was not consistent with the principles articulated in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
(b)Pursuant to regulation 1726(2) Court Procedures Rules 2006, a party who amends a document must pay the costs of and caused by the amendment, unless the Court otherwise orders. No application pursuant to Pt 6.2 was made for an order of the Court “otherwise ordering”. The exercise of the Court’s discretion was not reasonable given the conduct of the Plaintiff in the litigation.
(c)The proper order of the Registrar in dismissing a Plaintiff without a cause of action (Adam Herbst) and Peter Herbst (deceased) was an order for indemnity costs against Adam Herbst who instructed his solicitors that he had a cause of action and that his father had capacity. It is not an answer that a “mistake” was made by solicitors acting. The conduct of the solicitors was properly a matter for trial. In dismissing the counterclaims the learned Magistrate deprived the defendants of the capacity to adduce evidence that could have impacted on a submission for costs and the exercise of the courts discretion.
(d)At the conclusion of the Supreme Court appeal, the Respondents made application for an order for indemnity costs. His Honour Justice Gray denied that application. No order for costs was made concerning that application. The Appellants are entitled to an order for costs in opposing the application for indemnity costs in the Supreme Court.
Burns J, in Davey v Herbst and Ors, has considered each of these grounds of appeal. I generally agree with his Honour’s approach to each of them. I therefore need only make such comment as are necessary to show my own view of them.
Late Amendment
As Burns J noted (at [19]), there are two complaints referred to here. The first was that the appellant (and, presumably, the third respondent) was not permitted to plead to the amended Statement of Claim when the amendment was allowed. This was said to be a “right” under Court Procedures Rules r 512 (not, as stated in the particulars, a “regulation”). The second was that the learned Magistrate failed to exercise her discretion in allowing the amendment in accordance with the principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (the Aon Case).
In respect of the first complaint, the appellant fails to identify what defence would be pleaded that was not clear to her Honour when she was considering the application. It was, after all, an application for summary judgment. In such an application, the test for the exercise of such a power is clear, namely, that it should not be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.
While the plaintiff bears an onus of showing that there is no real question to be tried (Singh v Varinder Kaur (1985) 61 ALR 720 at 722), if that burden is discharged then the evidentiary onus shifts to the defendant to show that there is some ground of defence: ANZ Banking Group Ltd v Barry [1992] 2 Qd R 12 at 19.
Thus, if there were a matter of defence to the amended Statement of Claim, the defendants were bound to draw that to the Court’s attention and, except where the need for delay before pleading such a matter could be explained (such as where subsequent events are likely to give a defence: Brisbane City Council v Southern Electric Authority of Queensland (1968) 42 ALJR 78, or where a material witness has not been able to be contacted: Bank Für Gemeinswirtschaft AG v City of London Garages Ltd [1971] 1 All ER 541), the defendants are required to show the defence at the hearing.
A defendant is required to use reasonable diligence to put before the Court, albeit in summary form, all the material on which he, she or it will rely to show that there is a defence: Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288 at [64]).
As to the amended Statement of Claim, Gray J, in rejecting the appeal in Davey and Anor v Herbst and Anor, found (at [39]) that the amendment did not amount to an abandonment of the originally pleaded claim or alter the existing cause of action. It was made, his Honour said “for the purpose of deciding the real issues in the proceedings”. This was appropriate in the context of a summary judgment application: Hausman v Abigroup Contractors Pty Ltd at [62].
The complaint that, following amendment, the defendants have a right to plead fails to recognise the fact that what was being considered was an application for summary judgment which, if successful, would overtake the entitlement of a defendant to plead (r 102) or replead (r 512).
The characterisation of the amendment by Gray J referred to above (at [57]), also answers the second complaint. This was not a late amendment in the context of the principles enunciated in the Aon Case and there were no case management principles that have been identified by the appellant which would have denied the second respondent (the plaintiff in the Magistrates Court) an entitlement to amend.
There is little likely prospect of this ground of appeal succeeding.
Duress
The question of whether there has been duress rendering the Deed voidable is a question of fact to be determined by the trial judge having considered all the evidence. As McHugh JA, with whom Samuels and Mahoney JJA agreed, said in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46, as to the approach to a challenge to a contract because of duress,
[t]he proper approach ... is to ask whether any applied pressure induced the victim to enter into the contact and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.
Both the learned Magistrate and Gray J had the opportunity to review the evidence and both concluded that there had been no form of duress. While a finding of fact may be able to be disturbed on appeal, there must be a relatively low prospect of that where two judicial officers have reviewed the facts and arrived at the same view.
In assessing this, the factual background found by the learned Magistrate, and which Gray J found (at [23]) was not challenged by the appellant or the third respondent (the appellants on the appeal before his Honour), showed:
(a) the loan was not in writing but “repayable within 2 years” and so, presumably, repayable on demand;
(b) the second respondent was, until the execution of the Deed, a director of the company with rights, for example, to access to the company’s property, which the appellant and the third respondent appeared to have denied him;
(c) there were protracted negotiations conducted through solicitors to compromise the dispute between the parties;
(d) the appellant and the third respondent entered into the Deed which, while making them personally liable for the debt to the company, extended repayment well beyond the original 2 year maximum period of the loan; and
(e) the appellant and the third respondent made payments for a period of more than 3 years before raising the question of duress, at a time when they may well have been considered to have waived any right to avoid the Deed because of affirmation: North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705.
On these facts, there does not seem to be a significant prospect of success in the appeal on this ground.
It is fair to say, however, that, as a matter of fact, the ground cannot be dismissed as hopeless, but the challenge is by no means strong or likely to succeed.
Capacity of the First Respondent to sue for the Debt
The proceedings in the Magistrates Court were commenced by the first respondent and her then deceased husband and the second respondent.
At some stage, the first respondent’s husband and the second respondent were dismissed from the proceedings, but for different reasons. As to the former, this was because he was deceased. As to the latter, this was because it was found that there was no cause of action against him. That latter decision, the appellant has asserted, was because, so far as the second respondent was concerned, the claim was a nullity. That is not correct; just because there is no cause of action pleaded, the claim is not a nullity, but will, almost inevitably, be struck out, usually under rr 425 or 1147 of the Court Procedures Rules.
As to the commencement of proceedings in the name of a person who is deceased, it seems clear that this renders the Originating Process a nullity. This must follow as a matter of principle for, as Lord Wright said in Lazard Brothers and Co v Midland Bank Ltd [1933] AC 289 at 296, though of a corporation,
a judgment must be set aside and declared a nullity by the Court in the exercise of its inherent jurisdiction if and as soon as it appears to the Court that the person named as the judgment debtor was at all material times at the date of writ and subsequently non-existent.
It is necessary at the date of the Originating Process for the person named as the plaintiff in whom the cause of action is vested to be a living and existing party: Fielding v Rigby [1993] 4 All ER 294 at 298.
If the person named as the plaintiff is then deceased, the proceedings are a nullity: Kamouh v British Aircraft Corporation (Operating) Ltd, The Times, 17 July 1982 at 2. In these circumstances, there is no power to substitute another plaintiff such as the deceased’s legal personal representatives: Clay v Oxford (1866) LR 2 Exch 54 at 55–6; Tetlow v Orela Ltd [1920] 2 Ch 24 at 27.
On a person’s death, a cause of action, if it survives the death of the person, is then vested in the legal personal representative just as on bankruptcy it is, in certain circumstances, vested in the trustee in bankruptcy. This applies in the case of contract: Woolworths Ltd v Crotty (1942) 66 CLR 603 at 613–5.
Thus, the first respondent’s husband could not have been a party to the proceedings in the Magistrates Court but the cause of action survives for the benefit of his estate. It appears from the materials that the Public Trustee of the ACT was, in fact, the executor.
Applying this to these facts it is clear, as Burns J has shown in Davey v Herbst and Ors, that if the Deed is subject to s 210 of the Civil Law (Property) Act 2006 (ACT), then the first respondent was not a joint party to the benefit of the debt under the Deed and so, unless the executor of her husband’s estate, could not claim the one half undivided share of the debt that was due to him.
That the Public Trustee was not a party does not, however, defeat the suit. In these circumstances, the first respondent could still sue for her half share of the debt: Smith v London and North Western Railway Co (1853) 118 ER 694.
Gray J held in Davey and Anor v Herbst and Anor (at [44]) that the appellant disavowed the lack of capacity of the first respondent to proceed in the action because, when the learned Magistrate sought clarification of this issue, he and counsel for the third respondent advised that “inheritance was not a live issue”. The exchange was as follows, where Ms Harley appeared for the third respondent and Mr Walker appeared for the first respondent:
MR WALKER: The relevance of that being that Mrs Herbst having obviously survived the thirty days got the lot, so to speak, including [any chose] in action but that’s not to the prejudice of my argument saying a joint debt survivorship applies to the will would not even have been necessary. If it is still a live issue, and I am not sure about it but forty-six.
MAGISTRATE DOOGAN Can we clarify it please, is that sort of, is that a live issue
MR DAVEY what the estate
MAGISTRATE DOOGAN of Mrs Herbst inherited
MR DAVEY not at all
MAGISTRATE DOOGAN inheritance of, likewise Miss Harley from your clients perspective it’s not a live issue either
MISS HARLEY no your honour, it’s not a live issue at all
MAGISTRATE DOOGAN thank you
MR WALKER thank you I think. As to Mrs Herbst capacity you see paragraph forty-six and forty-seven, also forty-eight.
Gray J considered that this should be construed to mean that the first respondent’s capacity to sue for the whole debt was not an issue in the proceedings and that the appellant and third respondent were effectively estopped from taking the point on appeal, at least without leave.
The appellant says that the admission was only directed to the fact that the first respondent inherited the interest of her deceased husband and not to concede capacity to sue. I did, however, see no express challenge to capacity by the appellant or the third respondent in the transcript, which would have been highly desirable to ensure the issue was before her Honour. Her Honour clearly considered the capacity issue had been resolved.
Whether that is so or not, the parties cannot confer jurisdiction by consent: McLeish v Faure (1979) 40 FLR 462 at 467. Whether the defendant’s acceptance, if it was that, of the first respondent’s capacity to sue for the benefit of the debt that passed to her through the will, as acknowledged by the exchange, is more problematic. In particular, it may well be that the proceedings, so far as the interest of the first respondent’s deceased husband was concerned, were not a nullity but merely ineffective: White v Glass, The Times, 18 February 1989, and so able to be regularised by, for example, action under Court Procedures Rules r 6. This is reinforced by the fact that in special circumstances a beneficiary may sue in her own name where a legal personal representative refuses to institute proceedings against a debtor: Ramage v Waclaw (1988) 12 NSWLR 84 at 91–3. That approach was approved in Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109 at 129; [55].
It has to be noted that in those decisions it was held that the relief that such a beneficiary can claim as limited to equitable relief. That, however, has not necessarily been the limit of such proceedings. In Lidden v Composite Buyers Ltd (1996) 67 FCR 560, Finn J said (at 563–4):
The longstanding rule in equity has been, as stated in Jacobs’ Law of Trusts in Australia (5th ed, 1986), par 2303, that:
‘... where a trustee refuses to institute proceedings against a debtor or to recover trust property, the beneficiary may wish to institute proceedings himself, either in his own name or in the name of the trustee. The rule here is that a beneficiary may sue in his own name only where the relief sought is in the equitable jurisdiction of the court and even then only where the circumstances are exceptional. If they are not exceptional or if the proposed action is to be commenced in the common law jurisdiction, the beneficiary’s remedy is to sue the trustee for the execution of the trust and then apply for the appointment of a receiver and for leave to sue in the name of the trustee or of the receiver.’
The learned authors, though, go on to add the rider in the same numbered paragraph that ‘[t]hese rules would be modified by judicature procedure’.
There is recent Australian authority – of which the decision in Ramage v Waclaw (1988) 12 NSWLR 84 is a notable example – which applies the rule stated in Jacobs in circumstances where the relief sought was equitable. In the present case the relief sought is, variously, under statute, at common law and in equity.
The question posed in light of the relief sought is whether the Liddens at best could have instituted proceedings only in respect of those claims which gave rise to equitable relief or whether in Judicature Act 1873 (UK) system it was competent for them to claim other relief as well.
Were there no authority in the matter from which guidance could be had, I would in any event have been inclined to the view that such claims could properly be made. I can see no compelling reason of principle or policy which should preclude this. And it is not at all apparent to me why, today, we should insist on a multiplicity of sits – as the older equity rule, unmodified, would require – for the purpose of resolving a matter which gives rise to claims for other, as well as equitable, relief: cf Federal Court of Australia Act 1976 (Cth), s 22.
The distinction between claims for equitable and for other relief has not commended itself to United States courts or text writers. Likewise it seems to have been ignored in observations made in Privy Council cases. So, for example, it is said in Scott and Fratcher, The Law of Trusts (4th ed), Vol 4, par 282.1:
‘If the trustee improperly refuses to bring an action against a third person who commits a tort with respect to the trust property, the beneficiaries can maintain a suit in equity against the trustee to compel him to do his duty and to bring the proper action against the third person. In the earlier law this was all that the beneficiaries could do. It was later held, however, that the whole controversy can be settled in a single suit, and in order to avoid multiplicity of suits the beneficiaries were permitted to join the third person as a co-defendant with the trustee, thus avoiding the necessity of two suits, one in equity by the beneficiaries against the trustee and another at law by the trustee against the third person. In such a proceeding the trustee is a necessary party defendant if he can be subjected to the jurisdiction of the court.’
To illustrate this approach, this time n a contractual setting, the authors refer to observations of Lord Wright in the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 at 79:
‘a party to a contract can constitute himself a trustee for a third party of a right under the contract and thus confer such rights enforceable in equity on the third party. The trustee then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if, however, he refuses to sue, the beneficiary can sue, joining the trustee as a defendant.’
I should add that to like effect in my view are the comments of the Privy Council in Hayim v Citibank NA [1987] AC 730 at 748, though the relief there sought was equitable. See also G G Bogert, G T Bogert and W K Stevens, The Law of Trusts and Trustees (Revised 2nd ed, 1977), par 869 where the subject is considered at length.
In the absence of any compelling reason in a Judicature Act system to limit the right of a beneficiary to claim equitable relief alone, in light of the approach taken in the authorities I have referred to, and given the undesirability of adhering to an approach which promotes multiplicity of suits, I am prepared to hold that, provided the other – the ‘exceptional’ or ‘special’ circumstances – requirement of the rule is met, it is not necessary in a Judicature Act system that the relief be equitable or equitable alone that is sought by the beneficiary instituting proceedings for a trust.
This approach has been followed more recently where Cohen J in Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 at 436–7 and Perram J in Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450 at 474; [105]–[106] both held that the principle extends to common law claims vested in a trustee so that a beneficiary can, in special circumstances, sue.
That the first respondent is the sole beneficiary of her husband’s estate may be a special circumstance where the trustee has taken the view, contrary to what may be the actual position, that the whole debt became hers by a right of survivorship in any event.
Here, it appears, the executor declined to be a party and the Court may well find there were special circumstances justifying the first respondent proceeding in her own name. It may, thus, be a justified exception to the “proper plaintiff” rule which was identified in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 at 210.
It is a great pity that more careful attention was not paid in the Magistrates Court to the procedural problems that this raised. In the context, the transcript quoted from above (at [75]) would, unless the appellant and third respondent were dissembling, have to mean that they did not dispute not merely that the first respondent inherited the benefit of the debt, but also that it was a joint survivorship. Not to dispute capacity in a full and frank manner in that exchange, if that is not what was meant, has the appearance of a lack of candour on the part of counsel and the appellant, who is also a legal practitioner. I make no finding on this point.
Thus, while there is some prospect that the proceedings were regular or could be regularised, such as by adding the executor of the estate as a defendant, that does not mean that the appellant enjoys no prospects of success on this ground.
The construction of the Deed
The first and second respondents relied heavily on the fact that the Deed itself gave an unambiguous claim to the first respondent and her late husband. The appellant’s argument was that it did not represent the true position, because, despite what was stated in the Deed, funds were never lent to the appellant and the third respondent and there could be no assignment of the burden of the loan (made to the company) to the appellant and the third respondent.
These claims can be disposed of relatively easily. A deed is the most solemn form of document that a person can execute with respect to a particular property or contract: Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 367–8. In his classic A Treatise on Deeds (Sweet & Maxwell, 1st ed, 1906) at P.3, R F Norton has said that
[a] deed is a writing (i) on paper, vellum or parchment, (ii) sealed and (iii) delivered, whereby an interest, right, or property passes, or an obligation binding on some person is created, or which is in affirmance of some act whereby an interest, right, or property has passed.
A deed is delivered by the doing of any act or the saying of any words that show that the party executing the deed is presently bound: Xenos v Wickham (1867) LR 2 HL 296 at 312; Eljon Pty Ltd v Chief Commissioner of State Revenue [1999] NSWSC 266 at [31]–[32].
Once a deed is delivered, it is effective to create rights and liabilities and, so far as is necessary to pass title to property, the parties cannot resile from it: Beasly v Hallwood Estates Ltd [1961] 1 Ch 105 at 116–17, 120–1; Alan Estates Ltd v W G Stores Ltd [1982] Ch 511 at 520.
The only way that the appellant could then seek to have the Deed avoided is if it were set aside as non est factum. On the facts as found by the learned Magistrate, there is no basis on which that plea could be sustained: see National Provincial Bank of England v Jackson (1886) 33 Ch D 1 at 10. That is, of course, subject to any finding on the question of whether the appellant entered into the Deed under duress.
In any event, while the use of the term “assignment” for the burden of the debt from the company to the appellant and the third respondent is inapt (because the burden of a contract cannot be assigned: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 103), the contract could be, and most likely was in fact, novated, creating thereby a new contract: Olsson v Dyson (1969) 120 CLR 365 at 388. This, Burns J effectively suggested, had happened not by the Deed (as the Deed said nothing about it and the recital E implied a prior dealing) but before the Deed was executed: Davey v Herbst and Ors at [35]. If the legal effect of what was done was a novation then there was, in fact, an advance by virtue of the new contract which the appellant and the third respondent were bound under the Deed to repay.
In any event, so far as the alleged assignment was referred to in the recitals, it was not an operative part of the Deed. As Holt CJ said as long ago as 1693, in Bath and Montague’s Case (1693) 22 ER 963 at 991, “[t]he reciting part of a deed is not at all a necessary part either in law or equity. It may be made use of to explain a doubt of the intention and meaning of the parties, but it hath no effect on operation.” His Lordship was clear that mistakes or misdescriptions in the recitals to a deed do not provide a ground in equity to set aside the deed.
As to the question, also agitated by the appellant, as to whether in fact the Deed constituted the first respondent and her deceased husband as joint tenants of the debt or as tenants in common, Burns J in Davey v Herbst and Ors considered that carefully in the light of s 210 of the Civil Law (Property) Act 2006 (ACT) (at [27]–[33]). His Honour’s careful analysis is persuasive and helpful.
The only issue then is whether the Deed when so construed actually does create the first respondent and her deceased husband as tenants in common. The section requires, for a joint tenancy, that the instrument, here the Deed, “expressly provides that they are to take as joint tenants.” The Deed does not use the word “joint” or the word “jointly” nor does it express that “the Advance was jointly made” by them or similar. It does, however, refer to them by the singular “Lender”. Whether that is sufficient to satisfy the section is not an easy matter.
Thus, like Burns J, I consider that the appellant may succeed on this ground. That will, of course, only mean that the appellant is liable to the first respondent for one half of the judgment sum, but will still be liable for that one half. This may, too, be subject to what the appellate court decides on the capacity of the first respondent to sue for her husband’s interest.
Costs
What Burns J had to say about costs seems to me to dispose of that matter. His Honour said (at [37]):
The appellant makes various complaints concerning the costs orders in the Magistrates Court and in the proceedings before Gray J. The complaint concerning the costs orders made in the Magistrates Court was apparently not ventilated before Gray J, and the appellant will need to convince this Court that he should be allowed to ventilate it now. The remaining complaint, concerning the costs orders of Gray J, is not likely to have a great bearing on the level of any indebtedness of the appellant to the first respondent if his other grounds of appeal are unsuccessful.
I respectfully agree.
The appellant’s challenge
Apart from disputing the grounds asserted by the first and second respondents in support of the application, the appellant submitted that the application was an attempt to circumvent r 5473 of the Court Procedures Rules. That rule provides:
(1)This rule applies if a respondent to the appeal does not make an application under rule 5472(1) and the appeal is struck out by the Court of Appeal as incompetent.
(2)The respondent must not receive any costs of the appeal, unless the Court of Appeal otherwise orders.
(3)The Court of Appeal may order that the respondent pay the appellant any costs of the appeal wasted because of the respondent’s failure to make an application under rule 5472(1).
(4)The Court of Appeal may make an order under this rule on application by a party to the appeal or on its own initiative.
The appellant completely misconceives the position. None of the submissions made by Mr Walker challenged the competency of the appeal. To assert, as did Mr Walker, that the appeal has no prospects of success is quite different from asserting that it is incompetent.
An appeal is incompetent if, for example, leave is required and the appellant does not seek such leave: Coles v Wood [1981] 1 NSWLR 723 at 727; cf Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (No 2) (1990) 21 NSWLR 200 at 210, 214, 218. Similarly, where the court on appeal does not have power to make the orders sought, the appeal is incompetent: Re Bernadette (2011) 249 FLR 294 at 310; [91]–[92]. An appeal will also be incompetent when no appeal lies to the court from the court or tribunal from which the appeal is sought to be taken: Muldoon v Church of England Children’s Homes Burwood [2011] NSWCA 46 at [42]–[43], [65]–[66]. An appeal will be incompetent if brought by a person who was not a party to the proceedings in the court or tribunal from whose decision the appeal is sought to be brought: Underdown (estate of the late Samantha) v Secretary, Department of Education, Employment and Workplace Relations (2009) 50 AAR 54 at 63–5;
[25]–[35], 70; [64]. An appeal will also be incompetent if the decision in the court or tribunal from which it is sought to bring the appeal is not the kind of decision (e.g. a judgment or order) from which an appeal lies: R v Steffan (1993) 30 NSWLR 633 at 639–40; McIlvar v Szwarcbord (2008) 186 A Crim R 106 at 112; [23]–[24]. A second appeal where the first has been heard and determined is also incompetent: Burrell v The Queen (2008) 238 CLR 218.
These are not exhaustive of the grounds on which an appeal may be held to be incompetent. They do, however, show the kind of situations to which r 5473 applies. This is not the application being made by the first and second respondents, nor is it any part of the ground for it. The point raised by the appellant has no substance.
Disposition
Whilst the appellant cannot be said to have good prospects of success on the appeal, at least not in having the summary judgment completely set aside, I consider that there are certainly arguable grounds of appeal, even though on my assessment, he may at best have the judgment as to half the judgment sum set aside.
The appeal cannot be said, therefore, to be frivolous or vexatious. I do not, however, rate the appeal as more than arguable. It is almost certain, it seems to me, that some part of the judgment will not be upset.
In those circumstances, I gave careful consideration to making an order for nominal security, as Spender J did in Tait v BindalPeople [2002] FCA 322.
Given that I have not found the appellant impecunious and unable to meet any costs order, that he has some prospects of success on the appeal and that he has not had a stay of the judgment sum, which has now been paid, or of the assessed costs ordered in the Magistrates Court, which I think I am entitled to accept must now have been paid, I do not consider that security should be ordered.
I note that if the appellant is successful on the argument that he is only liable for half the judgment sum, he may well still be liable for the full costs incurred in the courts below. He may also not obtain the full costs of the appeal. Indeed, any portion of the judgment that would have to be refunded could be offset against any costs he has to pay.
I cannot forbear making one other important comment. These proceedings must trouble all those concerned with the administration of justice. They have occupied the time of three courts over a number of days and are to be heard by a fourth. The assessed costs, which are by no means all the costs payable in the proceedings, have exceeded the amount originally claimed by more than three times. There is no reasonable proportion between these two amounts and that is very concerning. Whatever the fate of the appeal, it is of very great concern.
Accordingly, I dismissed the application for security for costs and gave the parties an opportunity after receiving these reasons to be heard as to the costs of this application. I also gave directions for the further prosecution of the appeal.
There is one final point. For reasons explained to the parties, these reasons were not able to be delivered at the same time as the decision. The appellant submitted that were I to proceed in this way, I would be in error. He relied on principles in the line of authority that require judicial officers to give reasons. The leading authority is Pettitt v Dunkley [1971] 1 NSWLR 376, approved by the High Court in Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 666.
While those authorities are clear that judicial officers have a duty to deliver reasons, which include a summary of relevant evidence, the decision arrived at and the reasons for arriving at that decision, nothing there said, particularly in the passage from what Jordan CJ said in Carlson v King (1947) 64 WN (NSW) 65 at 66, cited by Moffitt JA in Pettitt v Dunkley, or in what Moffitt JA went on to say (at 387), prohibits in an appropriate case proceedings in the way in which I did in that case.
If any further authority is needed, it is a procedure that has been followed from time to time by the High Court in cases over much of its existence, namely Roche & Ors v Kronheimer and Anor (1921) 29 CLR 329 at 336; Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 at 752; Mackay v The Queen (1977) 136 CLR 465 at 467; R v Winneke (1982) 152 CLR 211 at 214; North Ganalanja Aboriginal Corporation v State of Queensland (1996) 185 CLR 595; Pape v Federal Commissioner of Taxation (2009) 238 CLR 1 at 21.
I do not consider there is any error in the procedure I have adopted.
I certify that the preceding one-hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 2012
Counsel for the Appellant: In Person
Solicitor for the Appellant: Herm Legal
Counsel for the Respondent: Mr P Walker
Solicitor for the Respondent: Williams Love Nicol
Date of hearing: 19 October, 13 December 2011, 16 April 2012
Date of judgment: 26 April 2012
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