Express Gas Operations Pty Ltd v Axton Jones Pty Ltd
[2009] VSC 321
•4 August 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 5975 of 2009
| EXPRESS GAS OPERATIONS PTY LTD | Appellant |
| v | |
| AXTON JONES PTY LTD | Respondent |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 August 2009 | |
DATE OF JUDGMENT: | 4 August 2009 | |
CASE MAY BE CITED AS: | Express Gas Operations Pty Ltd v Axton Jones Pty Ltd | |
JUDGMENT APPEALED FROM: | Associate Justice Daly, 8 July 2009 | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 321 | |
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Practice and Procedure – Application for security for costs – Appeal from Magistrates’ Court – Appellant impecunious – Proper grounds of appeal not clearly identified – Other discretionary factors in favour of ordering security – Application made under Corporations Act 2001 s 1335 and/or court’s inherent jurisdiction – Security ordered
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Slonim | Mason Sier Turnbull |
| For the Respondent | Mr D McWilliams | McCracken & McCracken |
HER HONOUR:
In early 2007, the current respondent, Axton Jones Pty Ltd, issued proceedings against the current appellant, Express Gas Operations Pty Ltd, in the Magistrates' Court. In that proceeding, Axton sought payment of approximately $30,000 for accounting and taxation services, which it says it provided to Express Gas under a contract.
On 11 March 2009, Magistrate Lauritsen ordered Express Gas to pay Axton just over $20,000 under a contract, together with interest and costs.
By notice of appeal filed in this court on 15 April 2009, Express Gas appeals from the whole of the learned magistrate's order. The original notice of appeal was only drafted in the most general terms, because the transcript from the Magistrates' Court was not available at the time of commencement of the appeal.
By summons issued on 11 May 2009, Axton sought security for costs of the appeal.
At the first mention of that summons, Associate Justice Daly made orders for the filing of any further affidavits, and ordered Express Gas to file and serve a draft amended notice of appeal. Express Gas delivered such a notice, dated 3 July 2009.
At the hearing of the security for costs application, Axton relied upon the affidavits of its solicitor, George Morgan, sworn 11 May and 3 July 2009, respectively. Express Gas filed no affidavits referable to the question of security.
On 8 July 2009, Associate Justice Daly dismissed Axton's application for security for costs.
Her Honour also made directions for the further conduct of the appeal, including an order granting Express Gas leave to file and serve a further notice of appeal, elaborating on the questions of law to be determined on appeal. Express Gas did not avail itself of that leave, and the appeal before me was argued on the basis of its amended notice dated 3 July 2009.
By notice of appeal dated 14 July 2009, Axton appeals against the associate judge's order, insofar as her Honour dismissed the application for security for costs.
Axton sought special leave to rely before me upon a further affidavit of its solicitor, George Morgan, sworn 29 July 2009. Express Gas opposed the grant of any such special leave. In general terms, that further affidavit did no more than up‑date the court on clearly relevant matters, which had occurred since the matter had been before the associate judge. With the exception of the subject matter of paragraphs 10 and 11, there could be no suggestion that the further evidence had been impermissibly withheld from the associate judge, as part of some sort of "dry run". Insofar as Express Gas disagreed with the contents of the 29 July affidavit, it was adequately able to do so by swearing its own affidavit in reply.
Accordingly, I granted special leave to Axton to rely on the 29 July affidavit, except for paragraphs 10 and 11 thereof. I also granted Express Gas special leave to rely upon paragraphs 1 to 6 of the answering affidavit of its solicitor, David Boyall, sworn 3 August 2009.
Security is sought under s 1335 of the Corporations Act 2001, alternatively under the court's inherent jurisdiction.
Section 1335 permits a court to grant security:
where a corporation is plaintiff… if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence…
Express Gas concedes that the words "plaintiff" and "defendant" should be read broadly, and that s 1335 can apply to an application by a respondent against an appellant.
There is no dispute on the evidence before me that s 1335 is enlivened in the current case, because Express Gas:
(a) Has an issued share capital of $2;
(b) Owns no real property;
(c) Has no other substantial assets;
(d) Has no clients or current source of income; and
(e)Has had a writ of execution for the Magistrates' Court judgment sum (payment of which has not been stayed) returned wholly unsatisfied.
It is also clear that Express Gas has at least the following other liabilities, whatever the outcome of this proceeding:
(a)Express Gas is liable to pay the costs of Axton in another Supreme Court proceeding (No. 9608 of 2007). Axton seeks in excess of $40,000 for those costs, which are to be taxed later this year. Express Gas says it intends to object to an as yet unspecified portion of those costs; and
(b)Express Gas is also liable to pay the costs of another party, Gary Gordon, in that other Supreme Court proceeding. Mr Gordon seeks approximately $34,000, an amount which is also yet to be taxed.
Although the precise quantum in respect of the other Supreme Court proceeding will not be ascertained until after the completion of those two taxations, it is likely that Express Gas will be liable to pay substantial sums in respect of those costs.
In all of these circumstances, there is clearly reason to believe that Express Gas would be unable to pay Axton's costs of the appeal, if Axton was successful.
Once the court's power under s 1335 has been enlivened, the court has a broad, unfettered discretion whether or not to order security in any case.
It is not necessary for me to discuss the various cases to which I was referred, which concerned applications for security for the costs of appeals to the Court of Appeal. Such applications are governed by rule 64.24(2), a rule which does not apply to appeals from lower courts to the trial division.
Nor do those cases apply by analogy. Rule 64.24(2) permits the Court of Appeal to order security “in special circumstances.” Given that the rules do not impose an equivalent requirement of “special circumstances” in respect of appeals from lower courts, there is no reason in principle to apply such a high test in the case of appeals from lower courts.
Express Gas argues that, in the case of an appeal to the Supreme Court from a lower court, the court's discretion under s 1335 should somehow be fettered or restricted by reference to the decision of O'Bryan J of this court in ACN 055 999 847 Pty Ltd v Karamountzis [1999] VSC 194. That case involved an application for security against a firm, which was brought under the court's inherent jurisdiction (as there was no other possible source of power in that case). His Honour considered the nature of an appeal from the Magistrates’ Court, and noted that there appeared to be no case in which the court’s inherent jurisdiction had been invoked to order security for costs in such an appeal. O’Bryan J held that the inherent jurisdiction to order security for costs against a party who is able to demonstrate a prima facie case for relief should be sparingly used.[1] His Honour said, by way of example, that it would be just to invoke that inherent jurisdiction to prevent an abuse of process.[2]
[1]At [23].
[2]At [25].
It is not surprising that O’Bryan J held that the firm’s poverty was insufficient to justify ordering security for costs.[3] The relevant party was not a corporation, so there was no question of s 1335 applying. The law in relation to security for costs has long drawn a distinction between the impecuniosity of individuals (even those in partnerships or firms) and corporations. I do not doubt the correctness of his Honour’s decision in respect of an application for security under the inherent jurisdiction. But, it does not follow that the Karamountzis decision ought to govern an application made under a specific statutory provision, under which impecuniosity is the very foundation for the court’s jurisdiction. The court’s broad discretion under s 1335 should not be fettered in such a way.
[3]At [24].
It is, nevertheless, appropriate to have regard to the nature of an appeal from the Magistrates’ Court, as a possible discretionary matter to consider on an application made under s 1335. In exercising its supervisory jurisdiction over the Magistrates’ Court, there is some screening process undertaken by associate judges, by means of rule 58.10(8). That rule allows an associate judge to dismiss an appeal if satisfied of any of the following: the notice of appeal does not sufficiently identify a question of law; there is no arguable case; or the appeal is frivolous, vexatious or an abuse of process. Certainly, that procedure enables the court to filter out cases which are absolutely hopeless. But, it does not follow that there should be any sort of presumption against the ordering of security for costs, merely because an appeal has not been filtered out.
A matter which is very important in my decision to award security relates to the merits of the appeal. Unfortunately, many of the grounds alleged on the current notice of appeal are essentially alleged errors of fact, incorrectly described as errors of law. Others are simply difficult to comprehend, as currently drafted. That is not to say that there may not be some valid criticisms made of the learned magistrate's reasons, particularly as to the adequacy of his reasons in relation to the identification of the contract and the question of authority. But the 3 July notice of appeal does not clearly and adequately raise proper errors of law.
The learned associate judge apparently raised similar criticisms and gave Express Gas an opportunity to further amend its notice of appeal, an opportunity which it chose not to take up. Express Gas' attitude in this regard has undoubtedly added to the complexity of the current application for security, and will add to the complexity of the appeal, as Axton and the court are either going to have to grapple with the current notice, with all its defects, or deal with further applications to amend, with all the incidental costs thereof.
Not only does Express Gas’ impecuniosity enliven the jurisdiction, but it is also a relevant factor in favour of ordering security. On the evidence, there is simply no prospect of Axton recovering anything by way of costs if it is successful on the appeal. This is not a case in which a successful applicant for security would be likely to make even a partial recovery of its costs.
Given that Express Gas is not operating a business, has no assets and is not seeking to recover any money from Axton, it seems likely that this appeal is really being brought for the benefit of some other person or entity. There is no suggestion that ordering security would stultify the appeal. In particular, there is no suggestion that those persons who stand to benefit from Express Gas' success in this appeal could not provide security for costs.
There is also no suggestion that Express Gas' financial position has in any way been caused by Axton's conduct.
Axton urged me to make various adverse findings as to Express Gas' conduct in the Magistrates' Court, and in the other Supreme Court, proceedings. It is neither possible on the current material, nor necessary, for me to do so. I propose to order security for costs without regard to such submissions.
I turn to the question of quantum. Axton seeks security up to and including the hearing of the appeal in the sum of $53,460.90, including disbursements of $22,800.90.
I agree with Express Gas that, insofar as that sum includes the costs of the current application, they should be excluded.
I also agree that the proposed amount of $7,500 for general skill, care and attention is excessive, particularly having regard to the amounts sought for specific items of work by the solicitors, some of which are themselves too generous, in my opinion. However, I will allow amounts in respect of general work done since the application for security for costs was filed.
Finally, in considering quantum, I bear in mind the nature of the proceeding and the relatively small amount in dispute.
The calculation of quantum in such a case can never be more than a best estimate by the court, given the range of possible contingencies. In the exercise in my discretion, I propose to order Express Gas to provide security in the sum of $40,000. The proceeding should be stayed until the security is provided.
I will hear from the parties as to the precise form of orders and as to costs.
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