Davis Samuel Pty Ltd v Commonwealth of Australia
[2015] ACTCA 30
•14 July 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Davis Samuel Pty Ltd & Ors v Commonwealth of Australia & Anor |
Citation: | [2015] ACTCA 30 |
Hearing Date: | 2 June 2015 |
DecisionDate: | 14 July 2015 |
Before: | Burns J |
Decision: | See [16]-[19] |
Category: | Interlocutory application |
Catchwords: | COURT OF APPEAL – Interlocutory Application – application to remove the fifth appellant as an appellant – costs – application for security of costs against some appellants. |
Legislation Cited: | Legal Services Directions 2005 (Cth) Judiciary Act1903 (Cth) ss 55ZF, 55ZG (3) |
Cases Cited: | Barnes v Addy (1874) LR 9 Ch App 244 Davey v Herbst and others [No.2] [2012] ACTCA 19 |
Parties: | Davis Samuel Pty Ltd (First Appellant) CTC Resources NL (Second Appellant) Peter Michael Cain (Third Appellant) Bisoya Pty Ltd (Fourth Appellant) Winton Oil & Gas NL (Fifth Appellant) Tresmonay Pty Ltd (Sixth Appellant) Peter Clark (Seventh Appellant) Allan Paul Endresz (Eight Appellant) Jozsef Endresz (Ninth Appellant) William Arthur Forge (Tenth Appellant) Dawn Endresz (Eleventh Appellant) Joy Beverly Endresz (Twelfth Appellant) Commonwealth of Australia (First Respondent) TNG Limited (Second Respondent) |
Representation: | Counsel No appearance (First Appellant) Mr A Kuklik (Second and Third Appellants) No Appearance (Fourth Appellant) No appearance (Fifth Appellant) No appearance (Sixth Appellant) Self-represented (Eighth Appellant) Self-represented (Tenth Appellant) No appearance (Ninth Appellant) No appearance (Eleventh Appellant) No appearance (Twelfth Appellant) Mr J Hogan-Doran (First Respondent) No appearance (Second Respondent) |
| Solicitors Self-represented (Eight Appellant) Self-represented (Tenth Appellant) Australian Government Solicitors (First Respondent) No appearance (Second Respondent) | |
File Number: | ACTCA 67 of 2014 |
Decision under appeal: | Court/Tribunal: ACT Supreme Court Before: Refshauge J Date of Decision: 1 August 2013; 21 November 2014 Case Title: Commonwealth of Australia v Davis Samuel Pty Ltd and Ors (No 7); Commonwealth of Australia v Davis Samuel Pty Ltd and Ors (No 8) Citation: [2013] ACTSC 146; [2014] ACTSC 312 |
BURNS J:
Procedural history
The appellants have lodged appeals from orders made by Refshauge J holding them liable to repay large sums on money to the Commonwealth of Australia.
The Commonwealth has filed an application in these proceedings seeking orders that:
(a)the fifth appellant, Winston Oil & Gas NL be removed as an appellant;
(b)the costs of the application to remove the fifth appellant be paid by Irongroup Lawyers Pty Ltd and/or Peter Michael Cain (the third appellant);
(c)the first, second, third, fourth, sixth, eighth, ninth, tenth, eleventh and twelfth appellants provide security for costs of the appeal; and
(d)the costs of the application for security for costs be paid by the first, second, third, fourth, sixth, eighth, ninth, tenth, eleventh and twelfth appellants.
At the hearing of the applications, Mr Hogan-Doran appeared for the Commonwealth and Mr Kukulik appeared for the second and third appellants. Mr William Forge, the tenth appellant, represented himself. Mr Allan Endresz, the eighth appellant, also represented himself, but also sought leave to appear for the ninth appellant (his father), the eleventh appellant and the twelfth appellant (his wife). I gave no final ruling on the application of Mr Endresz to represent these other appellants, but, for reasons I will give, leave should be refused. The first, fourth and sixth appellants are currently in liquidation, and there was no appearance on their behalf. No appearance was entered on behalf of the fifth appellant.
A natural person may represent themself or instruct a legal practitioner to represent them in proceedings in this Court. Mr Allan Endresz provided no reason for a different approach to be adopted in these proceedings, other than the primary judge allowing him to appear for those other parties in the proceedings below. That is a relevant consideration, but, of course, these are different proceedings and neither Mr Allan Endresz, or those he wishes to represent, can have any legitimate expectation that the indulgence shown to them by the primary judge will be automatically extended in these proceedings. There are good reasons for ensuring that those appearing in this Court have the authority to make submissions and concessions on behalf of those whom they represent, particularly in such long running and significant proceedings as the present. I do not purport to speak for the Court of Appeal as to whether Mr Allan Endresz should be permitted to represent the other appellants on the hearing of the appeals, if such an application is made. The appellants should not, however, simply assume that Mr Allan Endresz will be granted leave to represent them.
The application for security for costs
The Commonwealth read affidavits of Zita Maree Rowling sworn 9 April 2015 and 27 May 2015. In her affidavits Ms Rowling deposed to the following matters:
(a)the appellants remain indebted to the Commonwealth pursuant to the orders of Refshauge J in the following amounts:
(i)First appellant: $3,114,062.26
(ii)Second appellant: $11,908,285.45
(iii)Third appellant: $9,262,807.01
(iv)Fourth appellant: $1,047,493.06
(v)Winton Oil & Gas NL: $809,100.97
(vi)Sixth appellant: $121,087.92
(vii)Eighth appellant: $13,161,315,23
(viii)Ninth appellant: $13,161,315.23
(ix)Tenth appellant: $11,908,285.45
(x)Eleventh appellant: $11,908,285.45
(xi)Twelfth appellant: No judgment debt;
(b)the appellants have declined to respond to a request by the Commonwealth that they provide evidence of their capacity to pay any costs orders that may be made against them in these proceedings;
(c)the first appellant is in liquidation, although the third appellant has filed applications in the Federal Court seeking review of the winding up orders. Those proceedings are still pending in the Federal Court, but costs orders have been made against the third appellant in favour of the Commonwealth in these proceedings;
(d)the second appellant is subject to a statutory demand served on it by the Commonwealth. An application to set aside the statutory demand was refused by the Federal Court on 29 May 2015. No evidence of solvency was adduced by the second appellant in those proceedings;
(e)a bankruptcy notice issued on 15 January 2015 to the third appellant in respect of the judgment debt in the proceedings below remains unpaid, and that, in proceedings in the Federal Court on 22 May 2015, the third appellant advised Jagot J that he was not in a position to provide any security for the costs of the applications he filed on behalf of the first and sixth appellants;
(f)the fourth appellant is in liquidation;
(g)there is no registered entity Winton Oil & Gas NL (the fifth appellant). Winton Oil NL ACN 001 863 878, which was the 15th defendant in the proceedings below, was deregistered on 14 March 2004;
(h)the sixth appellant is in liquidation;
(i)the eighth appellant is subject to a creditor’s petition issued by the Australian Securities Investments Commission (ASIC), which has been adjourned sine die awaiting the outcome of the present appeal. In proceedings VID 486 of 2014 in the Federal Court, the eighth appellant deposed that his only significant asset is his interest is the property situated at “Havenhill” in Albury NSW, held as a joint tenant with the twelfth appellant (his wife), valued at $1,100,000.00 and subject to a registered mortgage to the Commonwealth Bank of Australia Ltd covering loans totalling $339,792.08;
(j)the ninth appellant is also subject to a creditor’s petition by ASIC, which has been adjourned sine die in the Federal Court awaiting the outcome of the present appeal. In proceedings VID 484 of 2014 in the Federal Court, the ninth appellant deposed that he is a trustee of the Dawn and Jozsef Endresz Property Trust, a discretionary trust of which he is a beneficiary with no present beneficial interest, which owns a property in Albury NSW, and that he otherwise has no significant assets;
(k)the tenth appellant is also subject to a creditor’s petition by ASIC, which has been adjourned sine die in the Federal Court to await the outcome of the present appeal. In Federal Court proceedings VID 485 of 2014, the tenth appellant deposed that his only significant assets were an interest in a property in Albury NSW and $100,000.00 held in this Court for his wife. He receives an annuity from ComSuper, and has no other significant assets. The property in Albury was declared by Refshauge J to have been acquired on trust of the Commonwealth and ordered to be transferred to the Commonwealth;
(l)the eleventh appellant is also subject to a creditor’s petition by ASIC, which has been adjourned sine die in the Federal Court to await the outcome of the present appeal. In Federal Court proceedings VID 485 of 2014, the eleventh appellant deposed that her only significant asset is her interest in a property at 11 John Court, Albury NSW, and that she is a trustee of the Dawn and Jozsef Endresz Property Trust of which she is a beneficiary with no present beneficial interest, which owns a property at 53 Warren Lee Drive, West Albury NSW. The property at 11 John Court was declared to have been acquired on trust of the Commonwealth and ordered to be transferred to the Commonwealth by Refshauge J; and
(m)the twelfth appellant did not personally participate in the proceedings below and was represented by her husband, the eighth appellant. She has not personally responded to any written communication addressed to her by the Commonwealth.
Mr Kukulik, on behalf of the second and third appellants, relied on an affidavit sworn by the third appellant on 29 May 2015. This was not in compliance with my orders of 15 April 2015, which required the appellants to file and serve any evidence on which they sought to rely by 20 May 2015, but no objection to the late provision of this affidavit was taken by the Commonwealth. The salient potions of the affidavit appear to be:
Funding
7. I will have sufficient funds to prepare for the appeal to the stage of the hearing.
8. In relation to the hearing, I have been told by Mr Endresz, the Eighth Appellant, and believe, that:
(a) he is currently in the process of arranging funding for the hearing of the appeal through the sale of property and a project which involves intellectual property;
(b) he proposes to provide the balance of funds for the hearing of the appeal on behalf of all appellants; and
(c) he estimates that by the time the appeal is heard and determined, assuming the appeal is not determined before December 2015, that he will have access to sufficient funds to pay for the hearing and sufficient funds to meet a costs order in favour of the First Respondent, if that becomes necessary. Mr Endresz has told me that he is aware that Ms Zita Rowlings estimates that the First Respondent’s costs of this appeal to be approximately $270,000.
Bankruptcy proceedings
9.On 21 February 2014, the Australian Securities and Investments Commission (ASIC) presented creditors’ petitions against Mr Endresz and the ninth tenth (sic) and eleventh appellants, in the Federal Court of Australia (Federal Court).
10.The creditor’s petitions were heard by Pagone J on 30 June 2014 and 16 July 2014.
11.On 19 February 2015, the Full Court of the Federal Court:
(a) Held that the hearing of the creditor’s petitions should have been adjourned by his Honour pending the final determination of the ACT Proceedings, including any appeal.
(b) Ordered that the sequestration orders be set aside and that the further hearing of ASIC’s creditor’s petitions be adjourned sine die.
First and Sixth Appellants – Davis Samuel Pty Ltd and Tresmonay Pty Ltd
12.Davis Samuel and Tresmonay have no creditors aside from the First Respondent. The only debt that either of them owes is that to the respondent as a result of the ACT Proceedings.
Winding up
13.On 27 February 2015 the respondent filed applications to wind up each of Davis Samuel and Tresmonay.
14.On 27 March 2015, Registrar Wall made orders winding up each of the Davis Samuel and Tresmonay (sic).
15.On 17 April 2015 I filed an application on behalf of Davis Samuel and Tresmonay for review of the Registrar Walls’ (sic) orders in relation to each of the Companies (sic).
16.On 29 April 2015 I filed an application for approval, pursuant to s 471A(1A)(d) of the Corporations Act 2001 (Cth) to, (sic) cause Davis Samuel and Tresmonay to seek a review of the Registrar Wall’s orders in relation to each of the Companies (sic).
17.On 22 May 2015, Jagot J adjourned those applications for further directions on 27 July 2015, on the basis that I was seeking funding to secure the costs of the Commonwealth or the liquidators of Davis Samuel and Tresmonay, in relation to the review of the winding up of those companies, and also for the conduct of this appeal. I will have sufficient funds to pay the costs of the Commonwealth in relation and also to prepare for the appeal to the stage of the hearing.
18.I will have sufficient funds to provide funding to secure the costs of the Commonwealth or the liquidators of Davis Samuel and Tresmonay, in relation to the review of the winding up of those companies.
Neither the eighth or tenth appellants gave any evidence or called any evidence on this application.
Consideration
The legal principles governing this application are not in dispute, and were conveniently set out by Refshauge J in Davey v Herbst and others [No.2] [2012] ACTCA 19:
13. The Court Procedures Rules provide in r 5302- (sic) 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.
14. 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(l)(k) of the Supreme Court Act 1933 (ACT), exercise this jurisdiction of the Court.
15. 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 (sic):
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)
16. As Hood J said in Bethune v Porteous (1892) 18 VLR 493 at 494,
the reason underlying 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.
17. In Benjamin v GB Franchising Australia Pty Ltd (2008) 1 ACTLR 287, I discussed the principles 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 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]).
18. The considerations that the court may take into account have been identified by courts over time. I am conscious that, as Davis 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.
19. 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 other circumstances 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.
20. 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.
21. 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 Herior [1896] 2 QB 375), where the appeal is an abuse of process (Weldon v Maples, Tessdale & Company (1887) 20 QBD 331), where the appeal is manifestly groundless (Lall v 53-55 Hall Street Pty Ltd [[1978] 1 NSWLR 310]) (sic) 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).
22. 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 impecunisoity 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 (sic) de Jersey CJ [in] 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 Elise (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.
23.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 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.
24.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 Notice of Appeal lodged by the appellants, filed by the third appellant’s law firm, contains 88 separate grounds of appeal. It appears that virtually every finding of the primary judge adverse to the appellants has been challenged in the Notice of Appeal. Mr Kukulik acknowledged that the number of grounds of appeal is problematic and that they may need to be refined and possibly reduced. Mr Kukulik concentrated his submissions on the appellant’s prospects for success on the appeal, focussing on:
(a)delay;
(b)the finding by the primary judge that there existed a fiduciary relationship between Mr Muir and/or his company Callform Pty Ltd, and the Commonwealth; and
(c)the question of whether the appellants had the requisite knowledge of Mr Muir’s breach of fiduciary duty to bring them within the second limb of Barnes v Addy (1874) LR 9 Ch App 244.
The submissions made by Mr Allan Endresz were disjointed and difficult to follow, but I understand the points he raised as:
(a)these proceedings should be adjourned until “other proceedings” have been completed; and
(b)security for costs should not be ordered because the only issue of solvency for himself and the other appellants he sought leave to represent arose from the proceedings the subject of this appeal.
The application for an adjournment of this application made by Mr Allan Endresz should be refused. The only “other proceedings” Mr Endresz referred to in his adjournment application was a possible appeal against the orders of Efthim J in CTC Resources NL (ACN 009 061 036) v The Commonwealth of Australia [2015] VSC 238, which was an application by the plaintiff in those proceedings to set aside a statutory demand made on it by the Commonwealth. Having read the reasons of Efthim J for refusing to set aside the statutory demand, I cannot see how the outcome of any putative appeal from his decision will impact on the present application.
Mr Forge sought to call in aid of his opposition to an order for security for costs the terms of Legal Services Directions 2005 (Cth), issued by the Attorney-General pursuant to s 55ZF of the Judiciary Act1903 (Cth). This submission may be dealt with shortly. By virtue of s 55ZG (3) of the Judiciary Act, “The issue of non-compliance with a Legal Services Direction may not be raised in any proceeding (whether in a court, tribunal or other body) except by, or on behalf of, the Commonwealth”.
I place little weight on the hearsay assertions attributed to Mr Allan Endresz in the third appellant’s affidavit of 29 May 2015. No details of the supposed “sale of property and a project which involves intellectual property” were provided, so it is impossible to evaluate the prospect of funds becoming available to Mr Endresz, and through him to the other appellants, by virtue of these transactions. As Mr Allan Endresz participated personally in this application and opted not to give evidence himself, it seems to me to be the inevitable inference that he was not willing to face cross-examination on this issue.
Conclusion
On the evidence before me, I find:
(a)that the appellants are impecunious to the extent that they will be unable to meet the judgment debts arising from the decision of the primary judge;
(b)their impecuniousness arises principally, if not entirely, from the circumstances which formed the basis of the proceedings before the primary judge;
(c)if they are unsuccessful in their appeals, the appellants will not be able to meet any award of costs made in favour of the Commonwealth; and
(d)there must be a real prospect of the appellants being unable to pursue the appeal if an order for security for costs is made.
I have weighed up all of the considerations relevant to the application for security for costs, many of which favour the making of the order, but I am ultimately persuaded that I should not make the order. The deciding factors are:
(a)the fact that the appellants’ impecuniosity arises from the orders under appeal;
(b)the appellants’ right to proceed with their appeal should not be effectively denied to them by reason of an order for security for costs; and
(c)at least some of the appeal grounds are arguable.
Orders
The application for security for costs is refused.
The appellants did not object to an order that the fifth appellant be removed as a party to the appeal, and I so order. The costs of the application to remove the fifth appellant are to be paid by Irongroup Lawyers Pty Ltd and Peter Cain, the third appellant.
I confirm that leave is refused for Mr Endresz to appear on behalf of the ninth, eleventh and twelfth appellants.
Costs will be reserved to the hearing of the appeal.
| I certify that the preceding nineteen [19] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: 15 July 2015 |