Dodds v Kennedy
[2011] WASCA 32
•14 FEBRUARY 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DODDS -v- KENNEDY [2011] WASCA 32
CORAM: MURPHY JA
MAZZA J
HEARD: 9 FEBRUARY 2011
DELIVERED : 14 FEBRUARY 2011
FILE NO/S: CACV 89 of 2010
BETWEEN: SUZANNE DODDS
First Appellant
TIMOTHY DODDS
Second AppellantAND
GILLIAN KENNEDY
First RespondentDONNCHA KENNEDY
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :NEWNES JA
Citation :DODDS -v- KENNEDY [2010] WASCA 201
File No :CACV 89 of 2010
Catchwords:
Practice and procedure - Application for security for costs - Discretionary decision - Court's discretion unfettered - Need to show error
Legislation:
Supreme Court (Court of Appeal) Rules 2005 (WA), r 44(1)
Result:
Application for review allowed
Application for security for costs dismissed
Category: A
Representation:
Counsel:
First Appellant : Mr B W Ashdown
Second Appellant : Mr B W Ashdown
First Respondent : Mr D H Solomon
Second Respondent : Mr D H Solomon
Solicitors:
First Appellant : Holborn Lenhoff Massey
Second Appellant : Holborn Lenhoff Massey
First Respondent : Solomon Brothers
Second Respondent : Solomon Brothers
Case(s) referred to in judgment(s):
33 South Pty Ltd v Fitzgerald [2008] FCA 1960
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170
Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Carey‑Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334
Clack v Collins (No 1) [2010] FCA 513
Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186
Dodds v Kennedy [2010] WASCA 201
Dranichnikov v Centrelink [2002] FCA 1622
Farrell v Royal King's Park Tennis Club (Inc) [2007] WASCA 173
Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513
In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318
J & M O'Brien Enterprises Pty Ltd v The Shell Co of Australia Ltd (No 2) (1983) 70 FLR 261
Keating v The State of Western Australia [2007] WASCA 98; (2007) 35 WAR 1
Kennedy v McGeechan [1978] 1 NSWLR 314
Lawrance v Commonwealth [2008] FCA 417
Lucas v Yorke (1983) 50 ALR 228
Mallett v Mallett [1984] HCA 21; (1984) 156 CLR 605
Mann v Dabelstein [2006] WASCA 176
Monteleone v Owners of the Old Soap Factory [2007] WASCA 79
SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309
Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201
Tait v Bindal People [2002] FCA 322
Westralian Gold Mines Ltd v Westralian Minerals & Drilling Pty Ltd (in liq) (1986) 4 ACLC 167
Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290
REASONS OF THE COURT:
Introduction
This is an application to review a decision by Newnes JA in which his Honour rejected an application by the respondents for security for costs of the appeal in this matter.
The review of a decision of a single judge of appeal pursuant to s 61(3) of the Supreme Court Act1935 (WA) and r 8 of the Supreme Court (Court of Appeal) Rules 2005 (WA) is an appeal by way of rehearing, which requires that error on the part of a single judge of appeal be shown: Keating v The State of Western Australia [2007] WASCA 98; (2007) 35 WAR 1 [21].
The decision under review (Dodds v Kennedy [2010] WASCA 201) is a discretionary decision in relation to practice and procedure. The application for security was brought under r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (read with the definition in subpar (f) of 'interim order' in r 3 of the rules).
The principles of appellate review in this case
The relevant principles were not in dispute in relation to an appeal from a discretionary decision of this kind. In Gronow v Gronow [1979] HCA 63; (1979) 144 CLR 513, 534 ‑ 535 Aickin J said:
Those principles have been stated in this court on many occasions and are not in doubt. It is sufficient to refer to such cases as House v The King, Evans v Bartlam, Storie v Storie and Lovell v Lovell. Two short passages make the position clear. In House v The King [(1936) 55 CLR 499 at 504 ‑ 505] Dixon, Evatt and McTiernan JJ said:
'The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.'
In Lovell v Lovell [(1950) 81 CLR 513 at 519] Latham CJ said:
'But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion (as to which see Sharpe v Wakefield [[1891] AC 173 at 179]) unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court. The words used by their Lordships in the House of Lords in this connection are not always easy to apply, but they ought not to be read as denying the long established principle (which, indeed, is expressly recognized in the cases in the House of Lords) that on an appeal from an order founded upon the exercise of a discretion the appellate tribunal has no right to substitute its discretion for the discretion entrusted to the primary tribunal.' (citations omitted)
See also Gronow v Gronow per Stephen J (519 ‑ 520) and Mason & Wilson JJ (525); Mallett v Mallett [1984] HCA 21; (1984) 156 CLR 605, 614; Monteleone v Owners of the Old Soap Factory [2007] WASCA 79 [36].
Moreover, special restraint must be exercised when the interlocutory order under appeal is one concerning practice and procedure: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290 [27]; In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318, 323; Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201, 212 ‑ 213.
The grounds of review
The grounds of the review are in the following terms:
1.The Honourable Justice Newnes erred in law and fact in holding that it was not appropriate to exercise his discretion to order security for the respondents' costs of the appeal against the appellants in that his Honour:
1.1should have held that the appeal does not have reasonable prospects of success;
1.2erred in holding in effect that the fact an order for security would stifle the appeal was a sufficient reason in all the circumstances not to order security, when the correct principle is that stifling of the appeal should only warrant refusing to order security if the respondent were the alleged cause of the impecuniosity (which is not the present case);
1.3erred in holding that the appellants' solicitors were not acting on the appeal in a position analogous to a litigation funder and were not a party interested in the outcome of the appeal having regard to the following:
1.3.1the appellants' solicitors did not act for the appellants on a pro bono basis in the proceedings below before the primary Court;
1.3.2the appellants' solicitors have outstanding fees of approximately $19,000.00 arising out of the trial of the proceedings below before the District Court which are not recoverable from the appellants by virtue of their impecuniosity;
1.3.3by reason of their outstanding costs in relation to the proceedings below before the primary Court, the appellants' solicitors will receive a greater benefit from the appeal if it is successful then [sic than] their costs of the appeal;
1.4should have held that the appellants had provided no evidence that the appeal would be stifled if an order for security was made because the appellants' solicitors, a party interested in the outcome of the appeal, did not provide any evidence of inability on their part to provide the security;
1.5failed to have regard to the fact that the appellants had already had their 'day in Court' in the proceedings below before the primary Court at a time when they were already impecunious, and that principle does not extend to an appeal;
1.6should have held that the appellants' impecuniosity was in all the circumstances a good reason to make an order for security.
Principles relevant to provision of security
It is convenient to address, at this point, the principles relevant to the provision of security in connexion with an appeal, pursuant to an application under r 44(1). Under that provision, the court's discretion is unfettered: Mann v Dabelstein [2006] WASCA 176 [16]. Each case will turn on its own circumstances and it is not possible to set out an exhaustive list of the relevant considerations.
In Farrell v Royal King's Park Tennis Club (Inc) [2007] WASCA 173, Buss JA said [32]:
The factors which are relevant on an application by a respondent for security for the costs of an appeal include:
(a)The appellant's prospects of success on the appeal.
(b)The appellant's financial position. As a general rule, a court will not order security against an individual appellant solely on the ground of impecuniosity. Compare O 25 r 1 of the Rules of the Supreme Court; Fletcher v Commissioner of Taxation (1992) 37 FCR 288 at 290, 293.
(c)The bankruptcy of an individual appellant is sufficient to enliven the discretion to order security, but, as a general rule, a Court will not order security in that circumstance if the appellant is not a nominal appellant (that is, if the appellant is suing solely for his or her own benefit) and is unable to provide the security requested of him or her. Compare Coyne v West Australian Newspapers Ltd (No 1) (1996) 15 WAR 51 per Steytler J (as his Honour then was) at 71; Bride v The Australian Bank Ltd [1999] WASCA 88 per Miller J (with whom Wallwork J agreed) at [11], [17]; Shenton v Commonwealth of Australia [2005] WASCA 96 per Pullin JA (with whom Wheeler JA agreed) at [21].
(d)A respondent to an appeal who applies for security is in a stronger position than a defendant at first instance, to the extent that the respondent has a judgment in his or her favour, which is presumed to be correct until displaced. See Kennedy v McGeechan [1978] 1 NSWLR 314 at 315; Fletcher at 292; Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241 at [9].
(e)An impecunious appellant should not be ordered to provide greater security than is absolutely necessary. See Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1 at 3 - 4; Natcraft at [9].
(f)Any delay in the respondent filing the application for security.
In the context of security with respect to an appeal, the observations of Brennan J (as his Honour then was) in Lucas v Yorke (1983) 50 ALR 228 are also, in our view, apposite. Although his Honour's remarks were directed to the exercise of discretion in the High Court, the court's discretion there (as in this case) was unfettered. Brennan J said (228 ‑ 229):
Mr Lucas seeks an order for security for the costs of the appeal on the grounds that the appellants will be unable to meet the costs of the appeal if their appeal should fail. The inability of an appellant to meet the costs of an unsuccessful appeal is a relevant factor in exercising the discretion conferred by O 70, r 10, of the Rules of this Court, but it is no more than a factor to be weighed in all the circumstances (DJE Constructions Pty Ltd v Maddocks (1981) 38 ALR 185). The discretion is not fettered by a rule, such as the rule adopted by the Court of Appeal in Hall v Snowdon, Hubbard & Co [1899] 1 QB 593, that security for costs is ordinarily ordered when a respondent shows that the appellant, if unsuccessful, will be unable through poverty to pay the costs of the appeal. The discretion under O 70, r 10, is absolute, like the discretion under the High Court Procedure Act 1903 (Cth) considered by Rich J in King v Commercial Bank of Australia Ltd (1920) 28 CLR 289. I would respectfully adopt what Rich J said (at 292), mutatis mutandis, to the discretion now to be exercised: 'The Legislature, however, has left absolute discretion to the court, and has done so without prescribing any rules for its exercise. In these circumstances no rules can be formulated in advance by any judge as to how the discretion shall be exercised. It depends entirely on the circumstances of each particular case. The discretion must, of course, be exercised judicially, which means that in each case the judge has to inquire how, on the whole, justice will be best served, whether by altering the amount and, if so, to what extent, or by letting it stand unaltered.'
A factor which ought not be left out of account is the course of the litigation, particularly if the appellant has failed at first instance and again on appeal to an intermediate appellate court. A second appeal upon substantially the same grounds is indulging in a luxury, as Rich J said in King's case (at 294). That factor tells against the appellants in this case.
See also J & M O'Brien Enterprises Pty Ltd v The Shell Co of Australia Ltd (No 2) (1983) 70 FLR 261, 264 ‑ 265 (Bowen CJ) and Kennedy v McGeechan [1978] 1 NSWLR 314(n), 315.
Disposition of the application for review
Ground for review 1.1
The appellants contend that the appeal has no reasonable prospects, or at best low prospects, of success. It is inappropriate to go into the merits, which are to be heard shortly in this court, other than to say that, in our opinion, the appellants have a bona fide and genuine interest in the issues in the appeal, the questions raised in the appeal are arguable, and they include substantial questions of law in relation to the construction and operation of a 'subject to finance' provision in the standard form REIWA contract for the sale of land.
In our respectful view, Newnes JA made no error in this regard.
Grounds for review 1.2, 1.5 and 1.6
In relation to these grounds, the respondents originally contended, in effect, that the exercise of the relevant discretion is fettered to an extent, in that there is a principle that the court should only withhold making an order for security against an impecunious appellant if the respondent was the alleged cause of the appellant's impecuniosity.
The respondents said that this principle arises out of a consideration of the difference between the appellant who has lost at trial, but who 'has had his day in court', and a plaintiff prior to trial. The respondents, in this regard, referred principally to Tait v Bindal People [2002] FCA 322 [2] ‑ [4], although reference is also made to Dranichnikov v Centrelink [2002] FCA 1622 [8] ‑ [9] and [25]; Carey‑Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334 [29] ‑ [35]; Lawrance v Commonwealth [2008] FCA 417 [41] ‑ [48]; 33 South Pty Ltd v Fitzgerald [2008] FCA 1960 [5] ‑ [7]; and Clack v Collins (No 1) [2010] FCA 513 [8] ‑ [12] and [28] ‑ [31]. The respondents also referred, in support of their proposition, to cases involving applications for security for costs at first instance under the relevant corporations legislation: Westralian Gold Mines Ltd v Westralian Minerals & Drilling Pty Ltd (in liq) (1986) 4 ACLC 167; and SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309 [52] ‑ [55].
In our view, the Federal Court cases referred to by the respondents do not establish or reflect any difference in principle from the principles discussed in the authorities referred to in [7] ‑ [10] of these reasons. Tait v Bindal and the other Federal Court cases referred to by the respondents emphasise, within the context of the court's assessment of what is just in all the circumstances, the difference between the plaintiff facing an application for security for costs at first instance and an appellant whose rights have been determined at trial and who appeals an adverse decision against him or her. They do not, in our view, however, involve, as a matter of principle, a fetter on the exercise of discretion of the kind contended for by the respondents. As French J (as his Honour then was) in Carey‑Hazel v Getz Bros observed [31] ‑ [32]:
Security may not be ordered when an appeal is brought in good faith and raises a substantial question of law ‑ J & M O’Brien Enterprises Pty Ltd v The Shell Company of Australia Ltd (No 2) (1983) 70 FLR 261 at 264 (Bowen CJ); Lucas v Yorke (1983) 50 ALR 228 at 229 (Brennan J). But where the appeal turns largely on questions of fact and gives rise to no important question of law, the position may be different ‑ Cummings, JB v Lewis, MT & Ors [1991] FCA 772.
There is no set of clear rules to resolve the question whether security should be ordered in a particular case. The Court is required to have regard to all the circumstances of the case in exercising what is undeniably a broad discretionary judgment.
The cases with respect to security at first instance under the corporations legislation also do not support the principle for which the respondents contended. Those cases indicate that if the defendant caused the plaintiff's impecuniosity, that is a factor to be taken into account in the exercise of discretion. As French J (as his Honour then was) observed in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, 514 'if the impecuniosity of the plaintiff be attributable to the defendant, that factor may weigh against an order for security ... '. In the same case, French J said at 513:
The effect of the authorities is, in my opinion, that the probability or certainty that an order for security for costs will frustrate the plaintiff's claim will not automatically lead to such order being withheld. It is however a factor relevant to the granting of an order and will weigh against it where there is no party standing behind the company who is in a position to provide the necessary security.
None of the cases referred to by the respondents in this application indicate that there is a fetter on the court's discretion under r 44(1).
Nevertheless, in the course of argument, the respondents retreated somewhat from their original contention that there was a principle to the effect that security will be ordered once it is shown that an appellant is impecunious and the impecuniosity was not caused by the respondent. Instead, the respondents' counsel developed an alternative argument (without objection from the appellants) along the following lines:
(a)the discretion is unfettered;
(b)the prospect that a genuine appeal will be stifled if an order is made is a relevant consideration, but it is one which must not be considered in isolation from other relevant considerations;
(c)an appellant's inability to satisfy a costs order should the appeal fail is itself a significant factor to be taken into account;
(d)other important considerations relevant to whether an order for security will have the effect of stifling an appeal by reason of an appellant's impecuniosity include:
(i)that unlike a plaintiff at first instance, an appellant has had his or her 'day in court' and is bound by a judgment which is presumed to be correct unless overturned on appeal; and
(ii)whether the respondent has caused the appellant's impecuniosity;
(e)in this matter, the learned judge's discretion miscarried because he declined the application for security solely on the basis that an order for security would stifle the appeal, without regard to the other considerations referred to in subpars (c) and (d) above and that, in relation to the second of the matters in subpar (d), it was common ground that the respondents had not caused the appellants' impecuniosity.
For the reasons given earlier, the original way in which the respondents put their application cannot be accepted. Nevertheless, it does appear to us, with respect, that the learned judge failed to take into account the considerations referred to in subpars (c) and (d) in [18] above, and, in that regard, considered the question of whether the appeal would be stifled in isolation from other relevant considerations.
For this reason, we would accept that the respondents have established, with respect to their alternative argument, error in the decision under review.
Grounds for review 1.3 and 1.4
By these grounds, the respondents contend, in effect, that his Honour erred in failing to find that the appellants' solicitors were, relevantly, an interested third party for whose benefit the appeal is being run. The argument was summarised in the respondents' written submissions in these terms:
23.The appellants' solicitors are such an interested third party. Newnes JA refused to infer that the appeal is being run substantially for the benefit of the appellants' solicitors and accordingly did not hold that the lack of evidence by the appellants of their solicitors' capacity to provide security or provide an indemnity for the respondents' costs is a factor weighing in favour of the exercise of the discretion to order security: Dodds v Kennedy [2010] WASCA 201 at [18], [20]‑[22].
...
27.Newnes JA should have held that:
27.1the appellants had provided no evidence that the appeal would be stifled if an order for security was made because the appellants' solicitors, a party interested in the outcome of the appeal, did not provide any evidence of inability on their part to provide the security;
27.2accordingly, that there was no basis for refusing to order security even if the submissions in paras 15‑21 above are rejected.
In our view, his Honour did not err in 'refusing' to draw the inference contended for. The appellants' solicitor deposed, in effect, that his firm had unpaid costs of $19,000 from the proceedings below and that, having considered the merits, the firm was doing the appeal on a pro bono basis. The respondents did not seek to cross‑examine the solicitor on his affidavit. In relation to this, his Honour said [25]:
However, solicitors who are acting pro bono for altruistic reasons are a long way removed from those situations and I do not accept that the same or analogous considerations apply simply because, if the litigation is successful, the solicitors will recover fees for that work and any preceding legal work for which they might otherwise remain unpaid. No authority was cited by the respondents in support of their contention and my own research has revealed only one case where the question of pro bono representation has arisen in the context of an application for security for costs. That case does not assist the respondents. In Turner v Leda Commercial Properties Pty Ltd [2002] ACTSC 5, Master Connolly concluded that the fact the appellant had pro bono representation did not support the exercise of the discretion to order security for costs. The master considered that to find otherwise would be contrary to public policy as it would tend to stifle the development of pro bono schemes.
We see no error in his Honour's reasoning in this regard.
In Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186, 204, the High Court said:
In charging a jury in Ladd v London Road Car Co, the Lord Chief Justice (Lord Russell of Killowen) said: 'In reference to the subject of speculative actions generally, I think it right to say, on the part of the profession and the class of persons who were litigants in such cases, that it was perfectly consistent with the highest honour to take up a speculative action in this sense - viz, that if a solicitor heard of an injury to a client and honestly took pains to inform himself whether there was a bona fide cause of action, it was consistent with the honour of the profession that the solicitor should take up the action.' After observing that if it were not so, the wrongs of the 'humbler classes' might go unvindicated, he said: 'Justice would very often not be done if there were no professional men to take up their cases and take the chance of ultimate payment; but this was on the supposition that the solicitor had honestly satisfied himself by careful inquiry that an honest case existed.'
The fact that the appellants' solicitors have unpaid fees of $19,000 in respect of the proceedings below, does not give them a relevant interest in the appeal for present purposes. The consideration that security is appropriate where the litigation is, in substance, being brought for the benefit of another party standing behind the impecunious litigant where that other party 'has the privilege of suing on its own initiative and responsibility, for its benefit, on terms that if it loses it has no responsibility for costs' (Sent v Jet Corporation of Australia Pty Ltd (214)), has no application here. It cannot properly be said that the appeal is being pursued for the benefit of the appellants' solicitors.
Re‑exercise of discretion
Having found that there was an error in the learned judge's disposition of the respondents' application, it is necessary for this court to exercise the discretion afresh.
The exercise of discretion is not an easy one in this case. On the one hand, the appellants are impecunious and have not paid the respondents' costs of the trial below, the respondents did not cause the appellants' impecuniosity, and if the appeal fails, the respondents will not be able to recover their costs of the appeal. It is also significant that the appellants have failed at first instance and had their day in court. On the other hand, there is a statutory right of appeal (s 79 of the District Court of Western Australia Act 1969 (WA)). Also, we are satisfied that this is a genuine appeal, that the questions raised in the appeal are arguable and include substantial questions of law, and that they are of some significance in relation to the construction and operation of a 'subject to finance' provision in the standard form REIWA contract for the sale of land in Western Australia. Although we accept the respondents' submission that the REIWA form itself has been amended over the years and is capable of amendment from time to time, it nevertheless seems to us that there is a real degree of public significance in the determination of the issues raised in this appeal.
Overall, and on balance, we are inclined to the view, in the re‑exercise of discretion, that security should not be ordered.
Conclusion
It follows from the above reasons that we would allow the application for review, but dismiss the application for security.
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