Food and Beverage Australia Ltd v PJ Nash Pty Ltd (No 2) - [2020] SASC 82

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
FOOD AND BEVERAGE AUSTRALIA LIMITED v P J NASH PTY LTD & ANOR (NO 2)
[2020] SASC 82
Judgment of The Honourable Justice Doyle
15 May 2020
PROCEDURE - STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY - INHERENT AND GENERAL STATUTORY POWERS - TO STAY OR DISMISS ORDERS OR PROCEEDINGS GENERALLY
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
Application for stay of execution pending determination of appeal, and application for security for costs of that appeal.
Reasons for judgment were delivered on 6 December 2019, following trial of the claim in the proceedings. The judgment held that the plaintiff, Food and Beverage Australia Limited (FABAL), was entitled to judgment against the first defendant, PJ Nash Pty Ltd (PJN), in the amount of $156,456 (exclusive of interest). Ultimately, judgment was entered against PJN in the amount of $198,134 (inclusive of interest). PJN was ordered to pay 50 per cent of FABAL’s costs of the proceedings, including reserved costs, on a party/party basis.
On 7 January 2020, PJN filed a notice of appeal. Some steps were subsequently taken to advance the appeal, but it has not as yet been set down for hearing.
On 27 February 2020, FABAL served a statutory demand upon PJN, seeking payment of the $198,134 payable under the judgment.
On 8 April 2020, PJN filed its application for a stay of execution pending the determination of its appeal against the judgment. In support of its application, PJN has, through its sole director Mr Nash, indicated its preparedness to give undertakings in relation to two apparently significant assets.
The stay application was listed for argument on 13 May 2020. On 11 May 2020, FABAL filed an application for security for FABAL’s costs of the appeal.
Held, per Doyle J, granting both applications:
1.      PJN’s appeal has been brought in good faith, and raises serious issues for determination. In the event that a stay were refused, there is a real risk that PJN will have to cease trading and be placed into liquidation. Undertakings proffered by PJN and Mr Nash, while not offering complete protection to FABAL, would go a significant way to assuaging FABAL’s prejudice in the event a stay were to be ordered.
2.      Accordingly, it is appropriate to order a stay of execution pending determination of PJN’s appeal, on condition that the undertakings proffered by PJN and Mr Nash are provided.
3.      FABAL has legitimate reason to be concerned that in the event that PJN’s appeal fails, it may not be able to meet an adverse costs order.
4.      Accordingly, it is appropriate to order security for FABAL’s costs of the appeal. PJN is to provide $25,000 by way of security for costs.
Supreme Court Civil Rules 2006 (SA) rr 194, 295(1)(g), 300; Enforcement of Judgments Act 1991 (SA) s 17; Corporations Act 2001 (Cth) s 1335, referred to.
Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121; Diakos v Mason [2010] SASC 108; Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No 3) [2014] SASC 148; Fleming v Advertiser News Weekend Publishing Company Pty Ltd (No 3) [2016] SASC 81; Food and Beverage Australia Limited v PJ Nash Pty Ltd [2019] SASC 208; Kalifair Pty Ltd v Digi-tech (Aust) Ltd (2002) 55 NSWLR 737; Landmark Operations Ltd v J Tiver Nominees Pty Ltd [2009] SASC 14; Lesses v Maras [2016] SASC 117; Lesses v Maras (No 2) [2016] SASC 140; Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281; Rickard v Testel Australia Pty Ltd [2017] SASC 144; Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410; Sands v State of South Australia [2013] SASC 105; Schuller v SJ Webb Nominees Pty Ltd [2015] SASC 8; Technilock (Aust) Pty Ltd v Mondami Pty Ltd [1999] SASC 94, considered.

FOOD AND BEVERAGE AUSTRALIA LIMITED v P J NASH PTY LTD & ANOR (NO 2)
[2020] SASC 82
Civil.

DOYLE J: These reasons concern an application by the appellant (the first defendant below, PJ Nash Pty Ltd) (PJN) for a stay of execution pending appeal, and by the respondent (the plaintiff below, Food and Beverage Australia Limited) (FABAL) for security for its costs of the appeal.
By way of background to the two applications, FABAL was the responsible entity of a registered managed investment scheme known as the Tasmanian Cherries Project (the Project). The Project was undertaken on land (the Land) owned by the second defendant below, Aussie Cherries Limited (ACL). ACL has since been placed into liquidation and took no part in the trial below.
Mr Nash, as the sole director of PJN, was a promoter of the Project. PJN is a fruit and vegetable wholesaler, operating out of Melbourne. Under an agreement with FABAL and ACL referred to as the Cherry Marketing Agreement (CMA), PJN was responsible for the marketing and sale of the cherries grown on the Land, which included those cherries grown as part of the Project but also included cherries grown by ACL as part of its own business.
FABAL brought proceedings in this Court seeking to recover the amount it claimed was payable to it by PJN under the CMA in relation to the marketing and sale of the cherries from the 2014/2015 harvest, being the net proceeds of that harvest of $1,125,581 (plus interest).
I heard the trial of this claim, and on 6 December 2019 delivered my reasons for judgment (Food and Beverage Australia Limited v PJ Nash Pty Ltd[1]) in which I held that FABAL was entitled to judgment against PJN in the amount of $156,456 (exclusive of interest). I ultimately entered judgment against PJN in the amount of $198,134 (inclusive of interest). I also ordered that PJN pay 50 per cent of FABAL’s costs of the proceedings, including reserved costs, on a party/party basis.
[1] Food and Beverage Australia Limited v PJ Nash Pty Ltd [2019] SASC 208.
The reason FABAL’s judgment was confined to the amount referred to above is that I held that FABAL was only entitled to the proceeds from the trees on the Land that remained Project trees at the relevant time, being 13.9 per cent of the total number of trees to which the claimed proceeds had related.
On 7 January 2020, PJN filed a notice of appeal. Some steps were subsequently taken to advance the appeal, but it has not as yet been set down for hearing.
On 27 February 2020, FABAL served a statutory demand upon PJN, seeking payment of the $198,134 payable under the judgment. On 18 March 2020, PJN applied in the Supreme Court of Victoria to have the statutory demand set aside. Argument on that application is yet to occur.
On 8 April 2020, PJN filed its application for a stay of execution pending the determination of its appeal against my judgment.
The stay application was listed for argument before me on 13 May 2020. Only two days prior to this date for argument, on 11 May 2020, FABAL filed an application for security for FABAL’s costs of the appeal.
PJN relied upon four affidavits, being affidavits from its solicitors Mr Mackay and Mr Chapman, and two affidavits from its sole director Mr Nash. FABAL relied upon two affidavits from its solicitor Mr Marshall.
While the applications for a stay and security for costs were argued together, and overlap to some extent, it is appropriate to address them separately.
Application for a stay of execution pending appeal
Under r 300 of the Supreme Court Civil Rules 2006 (SA), while an appeal does not operate to stay execution of a judgment pending appeal, the Court may grant a stay “for any proper reason”. An equivalent power exists under s 17 of the Enforcement of Judgments Act 1991 (SA).
The principles governing an application for a stay of execution pending appeal are well known, and are not in dispute. In Lesses v Maras (No 2)[2], I summarised them in the following terms:[3]
In short, the Court has a discretion to grant a stay, and if so, as to the terms of that stay. While it is not necessary to establish special or exceptional circumstances, the party seeking a stay must demonstrate a proper reason, or appropriate case, to warrant the exercise of the discretion to grant a stay in his or her favour. The mere filing of an appeal will not suffice. Rather, the Court generally proceeds from the starting point that the decision below was correct, and hence that the party who has been successful at trial is entitled to the benefit of their judgment. However, from this starting point, the Court exercises a broad discretion which entails consideration of the competing rights of the parties, any prejudice likely to be suffered by either party in the event that a stay is or is not granted, and the overall balance of convenience.[4]
[2]    Lesses v Maras (No 2) [2016] SASC 140.
[3]    Lesses v Maras (No 2) [2016] SASC 140 at [6].
[4]    Philip Morris (Australia) Ltd v Nixon [1999] FCA 1281 at [17]; Technilock (Aust) Pty Ltd v Mondami Pty Ltd [1999] SASC 94; Landmark Operations Ltd v J Tiver Nominees Pty Ltd [2009] SASC 14; Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410 at [17]-[18]; Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No 3) [2014] SASC 148 at [6]-[8].
In Ryan v Urban Construct (SA) Pty Ltd (No 2)[5], Nicholson J said that the task of the Court is to do what is just in the circumstances of the case; that a stay will be warranted where the justice of the case so requires. His Honour explained that the Court must balance the interests of the parties, and have ultimate regard to the balance of convenience. His Honour added that typically an applicant for a stay will need to show that the appeal raises serious issues for determination, and that there is a real risk that the applicant will suffer prejudice of some significance if a stay were not to be granted, which prejudice could not be redressed by a successful appeal.
[5] Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410 at [17]-[18].
Merits of the appeal
An applicant for a stay will generally need to establish that the appeal raises serious issues for determination; that the appeal is brought in good faith, and is not merely an attempt to delay payment of the judgment debt.[6] It follows that some consideration of the merits of the appeal is appropriate. However, given the nature and timing of the stay application, it is neither possible nor appropriate to undertake a detailed assessment of the merits.
[6] Lesses v Maras (No 2) [2016] SASC 140 at [7]; Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410 at [18]; Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No 3) [2014] SASC 148 at [7]-[8].
PJN’s appeal raises 11 grounds of appeal. However, Mr Mackay summarised those grounds as focussing upon three broad contentions, namely that I, as the trial judge, erred:
(i)in holding that FABAL was entitled to recover on the basis of a contractual debt, as opposed to a claim for damages;
(ii)in holding that irrespective of whether certain Licence Agreements had been terminated, FABAL was nevertheless entitled to the proceeds in respect of the relevant trees as they remained Project trees; and
(iii)in holding that it was not necessary to take account of any liability on the part of FABAL to account to growers for the proceeds, and of the fact that ACL had already accounted to certain of those growers from the monies paid to it by PJN.
FABAL contends that I should not be satisfied that there is even arguable merit in the appeal. There is some force in the matters raised by FABAL. Several of PJN’s submissions in support of the merits of its appeal seem to be reliant upon the case being presented in a different manner to how it was conducted below. While counsel for the appellant accepted that this was so, he was not presently in a position to say whether PJN would be required to apply to adduce fresh evidence in support of any of its grounds. He accepted that if a stay were granted, and it were to be made upon condition that the appeal be prosecuted with all due expedition, then his client would be able to indicate its position in relation to any application to adduce fresh evidence within seven days.
It is also significant that success on the second ground would seem only to lead to a reduced judgment sum (from 13.9 per cent to 5.9 per cent of the net proceeds), rather than judgment in PJN’s favour.
However, despite the matters raised by FABAL in response to the appeal, as should be apparent from my reasons for judgment at trial, I accept that the interaction between the contractual arrangements governing the Project proceeds, and the significance of PJN’s payment of the net proceeds to ACL in circumstances where certain Licence Agreements had been terminated, are not straightforward matters. I am satisfied that PJN’s appeal has been brought in good faith, and raises serious issues for determination. I am not satisfied that it has been brought merely to delay payment of an inevitable judgment debt against it.
Prejudice to PJN if a stay were refused
PJN contends that it will suffer significant prejudice if no stay is ordered. It contends that it will be forced out of business, and potentially into liquidation; and that it will thus lose the ability to pursue its appeal.
The essence of PJN’s evidence in support of this contention is that PJN operates with narrow margins that are typical in the high-volume and cash-intensive fruit and vegetable industry; that there is currently significant uncertainty and volatility in the industry which has been exacerbated by the pandemic that has been affecting Australia over recent months; and that these matters have detrimentally affected both the supply and demand sides of PJN’s business operations.
Mr Mackay said, on information and belief from Mr Nash, that if PJN were required to pay the judgment sum of $198,134, “its cashflow would collapse and it would have to cease trading”. More importantly, given his direct knowledge of PJN’s operations, Mr Nash said in his first affidavit that, given the effect of the above matters on PJN’s overall financial position, if it were required to pay the judgment sum “it would not be able to meet its essential expenses”. While he did not quite say so in terms, I understand the practical effect of the evidence of Mr Nash to be that PJN would have to cease trading.
It is true that the evidence adduced in support of the ultimate conclusion that PJN would have to cease trading was relatively general and largely assertive or conclusionary in nature. As counsel for FABAL pointed out in his submissions, to the extent Mr Nash sought to rely upon figures extracted from PJN’s general ledger (in particular, its trial balance) there were some difficulties, or at least ambiguities, in the use sought to be made of those figures.
That said, I accept the general effect of Mr Nash’s evidence, namely that PJN’s business operates under relatively tight margins, and that the risks and difficulties associated with this have been exacerbated by the pandemic. I do not think the evidence is sufficiently detailed or precise to enable me to find that payment of the judgment sum will result in PJN having to cease to trade. Not only did the general nature of the evidence relied upon by PJN leave open the possibility that it may be able to fund the judgment sum itself, but it also included no consideration of what steps, if any, the company has made to ascertain whether it might receive financial support, including from those who stand behind it (such as Mr Nash).[7] However, I do accept that a requirement that it pay the judgment sum would give rise to material prejudice to PJN in that it would exacerbate the financial distress which PJN is currently experiencing, and expose PJN to a real risk that it will be forced to cease trading.
[7] See Ryan v Urban Construct (SA) Pty Ltd (No 2) (2012) 114 SASR 410 at [33]-[42], including the discussion of Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121.
I do not think the fact of the Victorian Supreme Court proceedings adds anything to the above. It provides a basis for inferring that, in the absence of a stay, FABAL will seek to enforce its judgment, but that is already implicit in the finding of prejudice I have made. In particular, I do not think it is necessary or appropriate for me to attempt to forecast what might happen in those Victorian proceedings depending upon the outcome of the application for a stay in this Court. In my view, it is sufficient for present purposes that I have found that in the event that I were to refuse a stay, there is a real risk that PJN will have to cease trading and be placed into liquidation.
In my view, the risk of cessation of a business, particularly through the intervention of liquidation, is relevant and significant prejudice.[8] If PJN were to cease its business, particularly if that were to occur by reason of it being placed into liquidation, then it is difficult to envisage it being restored to its former position even if its appeal were to succeed. I do not think it adds much to say that if placed into liquidation, PJN might lose control of its right of appeal. The right to appeal will not be lost. Whilst there may be a delay, and a different commercial decision about the utility of the appeal might be taken, the liquidator would be entitled to pursue the appeal. To my mind, the real prejudice lies more in the risk to PJN’s business than to its appeal.
[8] Rickard v Testel Australia Pty Ltd [2017] SASC 144 at [46]; Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd (No 3) [2014] SASC 148 at [13]-[14]; Kalifair Pty Ltd v Digi-tech (Aust) Ltd (2002) 55 NSWLR 737 at [21]-[26].
PJN’s counsel also made a submission that, even if it were able to pay the judgment sum, there is a risk that its appeal might be rendered nugatory in that there was a risk that, in the event that PJN’s appeal succeeded, FABAL would not be in a position to repay, or disgorge, the monies paid over by PJN.
The only evidence in support of this contended risk was the evidence from Mr Chapman to the effect that during 2019 FABAL both notified ASIC of the winding up of the Project and had its Australian Financial Services Licence cancelled; and that in FABAL’s 2019 Annual Report it disclosed a deficiency in current assets over current liabilities. On the other hand, in his first affidavit, Mr Marshall stated on information and belief from Mr Dundon (the company secretary of FABAL), that FABAL was in a financial position to repay the judgment sum if the appeal were successful. In the alternative, he indicated an ability, and I infer a preparedness, on the part of FABAL to secure the judgment pending determination of the appeal.
While this evidence from Mr Marshall was general and conclusionary in nature, that is understandable given that his affidavit was filed at a time when there was no evidence or even submission that FABAL would not be able to repay the judgment sum. Mr Marshall’s evidence was given merely in anticipation of any such suggestion. And when the submission ultimately came, supported by the evidence of Mr Chapman referred to above, it was essentially speculative in nature. While it is true, as Mr Chapman pointed out, that FABAL’s balance sheet as at 30 June 2019 recorded a deficiency in current assets over current liabilities, I do not think much can be made of this when the same balance sheet records significant non-current assets, and overall net assets in excess of $4 million. Further, in the event that there was real cause for concern about FABAL’s ability to repay the judgment sum, FABAL has indicated its ability and preparedness to have this sum secured pending determination of the appeal.

In the circumstances, I do not attach any significant weight to the submission that there is a risk that FABAL would not be able to repay the judgment sum.
Prejudice to FABAL if a stay were granted
It is of course necessary to also take account of any prejudice to be suffered by FABAL in the event I were to order a stay.
The effect of a stay will be to delay FABAL’s ability to recover its judgment for a number of months. While delay is, of itself, relevant prejudice, the extent of the delay here is not a very significant matter in the scheme of things. That is particularly so in circumstances where it will be a condition of any stay that the appeal be prosecuted with all due expedition.
FABAL points also to the potential deterioration in PJN’s financial position in the interim, and hence the risk that there might be some reduction in the amount it is ultimately able to recover if the appeal is dismissed. I accept that there is some risk that FABAL’s ultimate recovery might be reduced by reason of a stay. However, there are two considerations which mitigate that risk. The first is that while the evidence suggests that PJN’s business is operating on very tight margins, and may well have been running at a loss, it does not go quite as far as to establish that there will be a reduction in any recovery by FABAL. Further, and in any event, PJN has, through Mr Nash, indicated its preparedness to give undertakings in relation to two apparently significant assets.
The assets in question are a truck owned by PJN and a boat owned by Mr Nash. The particulars of these assets are set out in Mr Nash’s second affidavit. In that affidavit Mr Nash also set out his basis for ascribing values of between about $130,000 and $145,000 to the truck, and between about $125,000 and $140,000 to the boat. On this basis, PJN contends that there is some evidence to support a combined value of these assets that exceeds the sum likely payable on account of the judgment (and any costs order on the appeal) in the event PJN’s appeal is unsuccessful. The terms of the undertaking in respect of each of these assets was essentially not to deal with either of them other than in the ordinary course of business.
FABAL quite rightly challenged the utility and value of the proposed undertakings on several grounds, including the fact that the boat is owned by Mr Nash rather than PJN, and the limited weight that should be attached to the valuation evidence given by Mr Nash. At the time of argument there was also a concern that PJN’s assets, including the truck, were the subject of a general security interest granted by PJN to a third party. However, shortly after the conclusion of argument, I was informed that this interest has been discharged, and so can be ignored.
I accept that the proposed undertakings have their limitations. In order to partially address those limitations, counsel for PJN indicated during the course of argument that his client (and Mr Nash) would be prepared to amend the proposed undertakings (i) to extend the undertakings to not only prevent dealings with the boat and truck other than in the ordinary course of business, but to also make those assets available to meet any judgment sum and adverse costs orders in favour of FABAL, and (ii) to remove any suggestion that disposition of those assets in order to raise funds to settle other legal proceedings[9] would be a dealing in the ordinary course of business and hence outside of the scope of the undertakings.
[9] Which the evidence reveals do exist.
While not offering complete protection to FABAL, in my view the revised form of the proposed undertakings would go a significant way to assuaging FABAL’s prejudice in the event a stay were to be ordered.
Conclusion
Having considered and weighed the above matters, and the parties’ submissions more generally, I am satisfied that it is appropriate to order a stay of execution pending determination of PJN’s appeal. However, I would only do so on condition that PJN and Mr Nash provide the undertakings I have mentioned; namely, to prosecute the appeal with all due expedition, and in relation to the boat and truck, to not deal with them other than in the ordinary course of business and to make them available in satisfaction of any judgment sum or costs orders ultimately payable by PJN to FABAL.
Application for security for the respondent’s costs of an appeal
The application for security for FABAL’s costs of the appeal was expressed as brought under r 194 of the Supreme Court Civil Rules and s 1335 of the Corporations Act 2001 (Cth). However, it was ultimately argued as though it were an application under r 295(1)(g), being the rule providing a discretion to order security for the costs of an appeal.
The Court’s jurisdiction to order security for the costs of an appeal under r 295(1)(g) is unfettered. While it must be exercised judicially, and hence in accordance with established principles, the exercise of the discretion is not conditioned upon any finding of special or exceptional circumstances.[10]
[10] Lesses v Maras [2016] SASC 117 at [5]; Fleming v Advertiser News Weekend Publishing Company Pty Ltd (No 3) [2016] SASC 81 at [13]-[14].
The first matter to take into account is that the application is for security for the costs of an appeal rather than a trial. Courts will more readily order security in the former category of case because the appellant has already had the opportunity to have the matter litigated, and has had the “benefit” of a judicial determination of the underlying controversy.[11] On the other hand, it is also a relevant factor, and to some extent weighs against an order for security, that the appellant was the defendant below and not the plaintiff.[12]
[11] Lesses v Maras [2016] SASC 117 at [7]; Diakos v Mason [2010] SASC 108 at [10]; Sands v State of South Australia [2013] SASC 105 at [32].
[12] Lesses v Maras [2016] SASC 117 at [7].
Next, it is relevant to have regard to the merits of the appeal. Much like on the stay application, it is not ordinarily appropriate to embark upon any detailed consideration of the merits of the appeal for the purposes of determining an application for security for costs. In a case where the appeal is particularly weak, this may weigh in favour of an order for security. Conversely, where the merits are obviously strong, this may weigh against an order. However, in circumstances such as the present, where I have concluded that the appeal raises serious issues for determination, but am not in a position to say anything more definitive without inappropriately delving into a detailed consideration of the merits, I consider the merits of the appeal to be a neutral consideration.
Next, I turn to the financial position of PJN. It follows from the unfettered nature of the discretion under r 295(1)(g) that the exercise of the discretion is not conditioned upon any particular finding as to the appellant’s financial position, or capacity to meet an adverse costs order. There is no necessary requirement that the Court be satisfied of the requirement under s 1335 of the Corporations Act that there be “credible testimony that there is reason to believe that the corporation will be unable” to pay any adverse costs order on the appeal. That said, the financial position of the appellant, and in particular its likely capacity to meet any adverse costs order, remains a relevant consideration, and indeed, in this case, is the primary matter relied upon by the applicant for security.
In my view, FABAL has legitimate reason to be concerned that in the event that PJN’s appeal fails, it may not be able to meet an adverse costs order. FABAL relies in this respect upon PJN’s own evidence advanced by it as to its relatively marginal financial position in support of its application for a stay.
I acknowledge that PJN’s evidence was focussed upon both its inability to meet the judgment sum (which at the amount of $198,134 will significantly exceed any adverse costs order on the appeal), and its apparently temporary inability to do so during the difficult business conditions resulting from the pandemic.
Taking these in reverse order, while the focus of PJN’s evidence was its short term financial difficulties, there is significant uncertainty as to how long those difficulties will continue. There seems to me to be a real risk they will continue for a number of months yet. And relatedly, while PJN’s evidence was directed to its inability to pay the judgment sum, in the event that PJN’s appeal fails, it will be required to pay an adverse costs sum in addition to the underlying judgment sum. Given that any adverse costs order will likely be significant (on the evidence, at least some tens of thousands of dollars), I am satisfied that there is a real risk PJN will not be able to pay that sum without some erosion of FABAL’s likely recovery in respect of the judgment sum. Put another way, it seems to me that in circumstances such as the present, the issue is whether there is a risk that in the event its appeal is unsuccessful, PJN will not be able to meet any adverse costs order in addition to the judgment sum. I am satisfied that there is a real risk of that in this case.
In some circumstances, undertakings offered by the appellant (or those standing behind the appellant and likely to benefit from a successful appeal) may reduce or eliminate the risk of an inability to meet an adverse costs order. PJN relies in this respect upon the undertakings that it and Mr Nash have proffered, and which I have concluded will be conditions of the stay of execution I propose to order. While the fact of these undertakings is a material consideration, I have mentioned the matters that limit their effectiveness and in my view mean that they are not ultimately decisive in the present case. In my view, they provide barely adequate protection for the judgment sum, and are not an adequate substitute for an order for security for costs.
Finally, I mention that there was no submission or evidence from PJN to support a finding that an order for security for costs would, or would likely, stultify the appeal. To the extent that some general risk of this may be inferred from PJN’s tight financial position, a mere risk of stultification, as opposed to a proven likelihood or inevitability of stultification, does not weigh heavily against an order for security.[13]
[13] Lesses v Maras [2016] SASC 117 at [12]; Schuller v SJ Webb Nominees Pty Ltd [2015] SASC 8 at [14], [17], [20].
The highest the evidence from PJN rose on this issue was a statement by its solicitor, Mr Chapman, on information and belief, that in the event there is no stay ordered and an order for security is made, then PJN’s conduct of the appeal will be “substantially affected”. In circumstances where I do intend ordering a stay (and hence the judgment sum will not be payable ahead of the appeal) the factual premise for this evidence falls away. Further and in any event, the evidence only suggests that the appeal would be “substantially affected”; not that it will not proceed. I would not be prepared to infer that the appeal is likely to be stultified without further evidence as to the capacity of PJN or those standing behind it to fund the appeal, and what steps have been taken to explore PJN’s options in that regard.
PJN relies upon the late timing of FABAL’s application for security for costs. Delay in the making of an application will often be significant, particularly in the context of an application for security for costs incurred up to and including the trial. Here, FABAL could have brought its application earlier. But in circumstances where the application seeks security for the costs of an appeal, and that appeal has not yet been set down for hearing, I do not think the delay is of much moment.
In all of the circumstances, I am satisfied that it is appropriate to make an order for security for costs.
As for the amount of security to be provided, FABAL seeks an amount of $40,000. In support of this, FABAL relies upon Mr Marshall’s estimate that FABAL’s costs of the appeal will be in the order of $60,000. Applying “a two thirds rule of thumb” to allow for party/party costs, and rounding down slightly, Mr Marshall arrived at the claimed amount of $40,000.
PJN contends that this estimate and claim are excessive. It challenges in particular the reasonableness of FABAL’s decision to retain very experienced senior counsel given the modest amount of the judgment sum involved. I do not accept that there is force in this challenge. FABAL was represented by senior counsel at trial (who has since been appointed to the District Court of South Australia), and in my view, given some of the complexities raised by the appeal, it was reasonable for it to choose the counsel it has chosen.
That said, I consider it appropriate to take a relatively conservative approach to the amount of security to be ordered. Amounts in the range of $15,000 to $25,000 are common for applications of this nature. While PJN’s appeal appears to be a fairly typical appeal in terms of its likely preparation, length and complexity, having regard to what seems to be the ever-increasing cost of litigation, I propose to make an order at the top of this range; that is, in the amount of $25,000.
Orders
For the reasons set out, I propose to order a stay but on the condition that PJN and Mr Nash give undertakings to the effect foreshadowed; namely, to prosecute its appeal with all due expedition (including by bringing any application to adduce fresh evidence within seven days), and in relation to the boat and truck to not deal with them other than in the ordinary course of business and to make them available in satisfaction of any judgment sum or costs orders ultimately payable by PJN to FABAL.
I also propose to order that PJN provide $25,000 by way of security for costs.
I invite the parties to confer as to the precise terms of these undertakings and orders, and the issue of costs. To the extent necessary I will then hear further submissions from the parties in relation to these matters.