George 218 Pty Ltd v Bank of Queensland Limited

[2016] WASCA 56

GEORGE 218 PTY LTD -v- BANK OF QUEENSLAND LIMITED [2016] WASCA 56

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2016] WASCA 56
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:169/2015	Heard:	10 MARCH 2016 & ON THE PAPERS
Coram:	MURPHY JA	Delivered:	5/04/16
No of pages:	19	Judgment Part:	1 of 1
Result:	Application for security allowed
Category:	B
PDF Version

Parties:	GEORGE 218 PTY LTD PRADA PTY LTD TINA MICHELLE BAZZO GUCCI HOLDINGS PTY LTD BANK OF QUEENSLAND LIMITED
Catchwords:	Practice and procedure Security for costs in appeal Relevant principles Corporate appellants and individual appellant Inferences as to appellants' inability to pay respondent's costs Whether any inference should be drawn from the Personal Property Securities Register that appellants had charged their real estate Inference not drawn Whether amount for security claimed by respondent reasonable Review of authorities on quantum
Legislation:	Corporations Act 2001 (Cth), s 1335(1) Personal Property Securities Act 2009 (Cth), s 10, s 12, s 117, s 147, s 153, s 332 Personal Property Securities Regulations 2010 (Cth), reg 1.6, sch 1 reg 2.3 Rules of the Supreme Court 1971 (WA), O 25 r 1 Supreme Court (Court of Appeal) Rules 2005 (WA), r 3(1), r 43(2)(h), r 44(1)
Case References:	Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279; (2006) 155 FCR 181 Ailakis v Olivero [2013] WASCA 91 Aus Asia Minerals Ltd v Ball [2015] WASCA 251 (S) Bank of Queensland Limited v Dodrill [2011] QCA 130; [2011] 2 QD R 541 Boambee Bay Pty Ltd (in liq) v Equus Financial Services (1991) 26 NSWLR 284 Boksmati v Girgis Nominees (WA) Pty Ltd [2014] WASCA 101 Brundza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171 Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173 Cowell v Taylor (1885) 31 Ch D 34 Dodds v Kennedy [2011] WASCA 32 Ebrard v Gassier (1884) 28 Ch D 232 Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564 Fletcher v Federal Commissioner of Taxation (1992) 37 FCR 288 Frigger v Clavey Legal Pty Ltd [2015] WASCA 217 Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258 Frigger v Clavey Legal Pty Ltd [No 3] [2015] WADC 21 George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 (S) Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880 Mann v Dabelstein [2006] WASCA 176 Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82 Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598 Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 2] [2014] WASCA 106 Professional Vending Services Pty Ltd v Christou [2010] FCA 580 Rainbow v Kittoe [1916] 1 Ch 313 Re Regis Towers Real Estate Pty Ltd [2006] NSWSC 852 Romeo v Wesley College [2015] WASCA 52 Sims v Suda Ltd [No 2] [2015] WASCA 180 Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 Thompson v Robinson [2005] QCA 253

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : GEORGE 218 PTY LTD -v- BANK OF QUEENSLAND LIMITED [2016] WASCA 56 CORAM : MURPHY JA HEARD : 10 MARCH 2016 & ON THE PAPERS DELIVERED : 5 APRIL 2016 FILE NO/S : CACV 169 of 2015 BETWEEN : GEORGE 218 PTY LTD

First Appellant

PRADA PTY LTD
Second Appellant

TINA MICHELLE BAZZO
Third Appellant

GUCCI HOLDINGS PTY LTD
Fourth Appellant

AND

BANK OF QUEENSLAND LIMITED
Respondent

ON APPEAL FROM:

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Coram : MITCHELL J

Citation : GEORGE 218 PTY LTD -v- BANK OF QUEENSLAND LTD [2015] WASC 434

File No : CIV 2841 of 2013

Catchwords:

Practice and procedure - Security for costs in appeal - Relevant principles - Corporate appellants and individual appellant - Inferences as to appellants' inability to pay respondent's costs - Whether any inference should be drawn from the Personal Property Securities Register that appellants had charged their real estate - Inference not drawn - Whether amount for security claimed by respondent reasonable - Review of authorities on quantum

Legislation:

Corporations Act 2001 (Cth), s 1335(1)

Personal Property Securities Act 2009 (Cth), s 10, s 12, s 117, s 147, s 153, s 332
Personal Property Securities Regulations 2010 (Cth), reg 1.6, sch 1 reg 2.3
Rules of the Supreme Court 1971 (WA), O 25 r 1
Supreme Court (Court of Appeal) Rules 2005 (WA), r 3(1), r 43(2)(h), r 44(1)

Result:

Application for security allowed

Category: B

Representation:

Counsel:

First Appellant : Mr P G Clifford
Second Appellant : Mr P G Clifford
Third Appellant : Mr P G Clifford
Fourth Appellant : Mr P G Clifford
Respondent : Mr J Abberton

Solicitors:

First Appellant : Alan Rumsley
Second Appellant : Alan Rumsley
Third Appellant : Alan Rumsley
Fourth Appellant : Alan Rumsley
Respondent : Lavan Legal

Case(s) referred to in judgment(s):

Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279; (2006) 155 FCR 181
Ailakis v Olivero [2013] WASCA 91
Aus Asia Minerals Ltd v Ball [2015] WASCA 251 (S)
Bank of Queensland Limited v Dodrill [2011] QCA 130; [2011] 2 QD R 541
Boambee Bay Pty Ltd (in liq) v Equus Financial Services (1991) 26 NSWLR 284
Boksmati v Girgis Nominees (WA) Pty Ltd [2014] WASCA 101
Brundza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171
Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173
Cowell v Taylor (1885) 31 Ch D 34
Dodds v Kennedy [2011] WASCA 32
Ebrard v Gassier (1884) 28 Ch D 232
Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564
Fletcher v Federal Commissioner of Taxation (1992) 37 FCR 288
Frigger v Clavey Legal Pty Ltd [2015] WASCA 217
Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258
Frigger v Clavey Legal Pty Ltd [No 3] [2015] WADC 21
George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434
George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 (S)
Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880
Mann v Dabelstein [2006] WASCA 176
Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82
Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598
Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 2] [2014] WASCA 106
Professional Vending Services Pty Ltd v Christou [2010] FCA 580
Rainbow v Kittoe [1916] 1 Ch 313
Re Regis Towers Real Estate Pty Ltd [2006] NSWSC 852
Romeo v Wesley College [2015] WASCA 52
Sims v Suda Ltd [No 2] [2015] WASCA 180
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19
Thompson v Robinson [2005] QCA 253

MURPHY JA:

Introduction

1 This is an interlocutory application for security for costs in an appeal against a decision of Mitchell J: George 218 Pty Ltd v Bank of Queensland Ltd1 (primary decision).

2 His Honour found that the appellants were liable as guarantors to the respondent. For convenience and ease of exposition, I will refer to the appellants collectively as the 'guarantors'; the first, second and fourth appellants as, respectively, the 'first', 'second' and 'fourth' 'corporate guarantors'; and the third appellant as 'Ms Bazzo'. I will refer to the respondent as the 'bank'.

3 The primary decision involved a determination of certain preliminary issues in proceedings in which the guarantors sought declarations to the effect that they were not liable under certain guarantees given to Statewest Credit Society Ltd (Statewest) to secure certain borrowings by Success Assets Pty Ltd (Success), a company controlled by Ms Bazzo.

4 The bank counterclaimed for the amounts allegedly owing to it under the guarantees, including in relation to certain amounts advanced by the bank to Success in July 2010.

5 The issues at first instance included questions as to the proper construction and application of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) (Transfer Act) in relation to the assets of Statewest.

6 The primary judge noted that the guarantors claimed that they were not liable under the guarantees on two bases. First, it was alleged that the guarantees did not apply to secure the bank's loans to Success in 2010. Secondly, they alleged that they were not liable because of breaches of duties owed to them in relation to the appointment of a receiver and the sale of Success' mortgaged properties. His Honour noted that the 'second basis of the action [was] defensive, and the [guarantors did] not seek damages for breach of the pleaded duties'.2

7 His Honour summarised his findings as follows:3

Clause 4 and cl 5 of the Guarantees, as modified under s 22 of the Transfer Act, operate to secure money owed by Success to the Bank under the 2010 loan agreements. Even if the Guarantees did not secure that money, a conventional estoppel would preclude the [guarantors] from denying that state of facts. Following the Bank's Notice of Demand, George 218, Prada and Ms Bazzo became liable to pay the amount owing by Success to the Bank under cl 4 of the Guarantees. All of the [guarantors] are liable to pay Success's outstanding debt to the Bank under cl 5 of the Guarantees.

The Guarantees require the [guarantors] to pay the amount they owe the Bank without set off. The claimed breaches of duty in relation to the appointment of the receiver and sale of the mortgaged properties do not affect the [guarantors'] obligation to make that payment.

Given these conclusions, the [guarantors'] claim for declaratory relief must be dismissed and judgment should be entered for the Bank on its counterclaim.

8 His Honour entered judgment following a further hearing in relation to the formulation of final orders on 27 November 2015.4 Amongst other things, his Honour ordered that the guarantors jointly and severally pay the bank the sum of (approximately) $2.555 million.

The appellants' case

9 The guarantors have filed an amended appellants' case dated 19 February 2016. The grounds of appeal allege, in effect, that the primary judge:

1. erred insofar as he misconstrued a deed of consent executed on 3 June 2010 in connection with the operation of the guarantees;

2. erred in finding an estoppel by convention;

3. misapplied the Transfer Act;

4. misconstrued and misapplied a provision in the guarantees concerning payments to be made without set off or counterclaim;

5. misconstrued an 'indemnity' clause in the guarantees;

6. erred in accepting a 'Dobbs Certificate' relied on by the bank; and

7. erred in construing certain loan agreements between Home Building Society Ltd and Success in 2007 and 2008.

The application for security

10 The application is brought pursuant to pt 5 r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (Court of Appeal Rules) and, in relation to the corporate guarantors, under s 1335(1) of the Corporations Act 2001 (Cth) (Corporations Act).

11 The application for security is supported by affidavits of Mr Abberton and Ms Petersen, each sworn 11 February 2016.

12 Mr Abberton is the solicitor with responsibility for the conduct of this matter on behalf of the bank. His affidavit includes evidence to the following effect.

13 By letter from the guarantors' solicitor dated 11 December 2015, the guarantors, in effect, offered to pay the judgment debt by paying $500,000 in December 2015, $100,000 per month from January to May 2016, and the balance in June 2016.

14 On 16 December 2015, the bank issued a statutory demand against the fourth corporate guarantor. The fourth corporate guarantor applied to the Federal Court on 29 December 2015 to set aside the statutory demand.

15 On 17 December 2015, a bankruptcy notice was issued by the official receiver on behalf of the bank to Ms Bazzo. On 29 December 2015, Ms Bazzo applied to the Federal Court to set aside the bankruptcy notice.

16 The first corporate guarantor is not the registered proprietor of any land in Western Australia. It has paid-up capital of $2 and is under external administration.

17 The second corporate guarantor is the registered proprietor of one parcel of land, which is mortgaged and is subject to two caveats. A search in relation to that company indicates that Macquarie Bank Ltd has a registered security interest in '[a]ll [its] present and after-acquired property - No exceptions'.

18 Ms Bazzo is the registered proprietor of seven parcels of land. Two properties are in Landgren Road, Casuarina. One of the properties in Casuarina is subject to two mortgages and a land tax memorial pursuant to s 76 of the Taxation Administration Act 2003 (WA). The other property in Casuarina is subject to one mortgage and a land tax memorial. Three properties are in Hocking in the City of Wanneroo. The three properties in Hocking are subject to a mortgage and to a land tax memorial. One property is in Anketell in the City of Kwinana and one is in Wandi in the City of Kwinana. The property in Anketell is subject to two mortgages and a memorial pursuant to the Environmental Protection Act 1986 (WA). The property in Wandi is subject to a mortgage and a land tax memorial.

19 The fourth corporate guarantor is the registered proprietor of 20 parcels of real property in Western Australia. One, at 13 Shepherd Crescent, Harrisdale, is not, according to the title search, encumbered (Harrisdale property). One, at 44 Wickham Street, East Perth, is the subject of a caveat. Five are encumbered by a registered mortgage. Eleven are encumbered by two registered mortgages. Two are encumbered by a registered mortgage and are the subject of a caveat. There is no evidence of the value of the properties. Mr Abberton also stated in par 21 of his affidavit:

The ASIC extract for the [fourth corporate guarantor] at [annexure] 'G' records the existence of 42 registrations on the PPSR [Personal Property Securities Register] of which 35 are recorded as 'All Pap - no exceptions' security interests on the PPSR.

20 It is convenient to note here that this statement by Mr Abberton in his affidavit was incorrect, and remained uncorrected until, in effect, midway through the hearing of his submissions in-chief. At the hearing of the application, Mr Abberton, who also appeared as counsel for the bank as well as giving evidence by affidavit, ultimately conceded the incorrectness of his statement in his affidavit. With a view to overcoming the error, he tendered at the hearing a document (exhibit A), being a report by an entity called 'Veda', said to contain information 'sourced from the Australian Securities and Investment Commission's database under section 1274A of the Corporations Act 2001'. It purports to be a report containing information concerning security interests in the fourth corporate guarantor, as disclosed on the Personal Property Securities Register (PPSR) under s 147 of the Personal Property Securities Act 2009 (Cth) (PPS Act).

21 Given that exhibit A was tendered late and without any prior warning to counsel for the guarantors, I directed that the bank file and serve written submissions in relation to exhibit A, and gave the guarantors the opportunity to file and serve written submissions in reply by a specified date. The supplementary submissions provided by Mr Abberton are discussed in [28] - [38] below. The guarantors did not file responsive submissions by the specified date and no application to extend the time for compliance was sought.

22 Mr Abberton in his affidavit also deposed that, under the relevant scale items, he would expect the costs of the bank to be $54,747 plus GST. Included in that amount was an allowance for the costs of an interlocutory application (perhaps this one - it is not clear). His estimate also included a fee for senior counsel of $20,130 based on two days preparation and a one day hearing.

23 In opposition to the application for security, the guarantors rely on an affidavit of Ms Bazzo sworn 2 March 2016. In that affidavit Ms Bazzo annexed a copy of an email dated 28 November 2015 making, in effect (without prejudice), a payment proposal in terms of, or substantially similar to, the proposal referred to in [13] above. Ms Bazzo deposes that the bank has not accepted the proposal and that:

I have arranged for the payments of $500,000 to be made in December 2015, in January 2016 of $100,000 and in February 2016 of $100,000.

24 There is no evidence from the guarantors as to their assets and liabilities.

25 The bank contended that it has brought the application promptly; that the application is not oppressive in any relevant sense; and that it is unlikely that the guarantors would succeed in the appeal and that on the evidence, the prospect of payment of its costs if the bank were successful, is low. The bank also contended that the evidence of Mr Abberton discloses that the threshold requirement under s 1335(1) of the Corporations Act has been satisfied. In this regard, the bank referred to the evidence concerning the ownership of real property as deposed in Mr Abberton's affidavit. It also referred to the facts that the judgment debt, and its costs, have not been paid, and there has been no stay application.

26 The guarantors contended, in effect, that the appeal is reasonably arguable. The guarantors also submitted that Mr Abberton's affidavit failed to contain cogent evidence that the guarantors could not pay the bank's costs if the bank were successful in the appeal. They also referred to the primary judge's finding to the effect that on or about 6 May 2010, a bank officer, in a commercial lending submission, noted that the 'Bazzo group' assets 'were assessed as exceeding the value of the proposed loan'.5 They also pointed to Ms Bazzo's evidence which they said indicated that the bank had been paid $500,000 in December 2015, and $100,000 in each of January and February 2016. On this point, I note that at the hearing of the application, the bank accepted that it had been paid $700,000, which it had applied in reduction of the judgment debt.

27 The guarantors observed that the costs of the primary proceedings had not been taxed. The guarantors also challenged the quantum of the amount sought by the bank as security. Amongst other things, they alleged that the appeal will not take a full day; that the matters to be determined are not 'at the top of the range of complexity, but near the middle of the scale'; and that the amount claimed for attending on the reserved judgment relates to a period of time that exceeds the likely duration of the period of the appeal itself.

Exhibit A and the PPSR

28 Counsel for the bank provided supplementary submissions in relation to exhibit A. Mr Abberton's submissions were to the effect that it could be inferred that exhibit A recorded charges granted by the fourth corporate guarantor over all the real property in which it had an interest. The arguments for this proposition were as follows.

29 Exhibit A shows a summary of the results of the searches of the PPSR. It indicates that there are 38 security interests registered on the PPSR with respect to the fourth corporate guarantor. Of those 38 security interests:

(a) 31 are 'All Pap' security interests;

(b) 23 of those security interests are 'migrated security interests' in that the data relating to those security interests was migrated from the (former) Australian Register of Company Charges to the PPSR; and

(c) of the 23 'migrated security interests', 13 were described as 'fixed and floating' over collateral described as 'All Pap No Except'.

30 In contrasting the position under the PPS Act with the previous regulatory regime under the Corporations Act in relation to charges, counsel for the bank referred to four cases. One was Re Regis Towers Real Estate Pty Ltd,6 in which Young CJ in Eq was required to determine whether an obscurely worded security was, or included, a floating charge within the meaning of s 262(1)(a) of the Corporations Act. His Honour found that the instrument was a fixed and floating charge. His Honour considered the effect of s 262(7) of the Corporations Act which provided, relevantly, that 'a charge is taken to be a charge on property of a kind to which a particular paragraph of subsection (1) applies even though the instrument of charge also charges other property of the company including other property that is of a kind to which none of the paragraphs of that subsection applies'. His Honour found that although the instrument in question contained within it a fixed charge to which the paragraphs in s 262(1) of the Corporations Act otherwise did not apply, insofar as it was a floating charge within s 262(1)(a), the effect of s 262(7) was that it was necessary for the charge to be registered.7 The case was not concerned with a charge over real property.

31 The second case to which counsel for the bank referred was Boambee Bay Pty Ltd (in liq) v Equus Financial Services.8 That was a decision of the New South Wales Court of Appeal where there was found to be a floating charge over both land and other assets within the meaning of the statutory predecessor of s 262(1)(a) of the Corporations Act. The court also considered the statutory predecessor of s 262(8) of the Corporations Actwhich provided, in effect, that the predecessor of s 262(1) did not apply in relation to a charge on land. The court upheld the decision of the primary judge (Bryson J) to the effect that whilst the instrument contained a floating charge which would otherwise fall within the predecessor to s 262(1)(a) and require registration, the charge nevertheless did not require registration because the statutory predecessor of s 262(8) (like s 262(8) itself) exempted charges on land.

32 The third case to which counsel for the bank referred was Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd.9 In that case, there were caveats over certain land. The landowners applied to withdraw the caveats on two different bases. Relevantly, for present purposes, the first basis alleged that the caveatable interest arose in respect of a floating charge over land and, it was submitted, the floating charge over land did not, and could not, create a caveatable interest. His Honour found that on their proper construction, the charges were fixed charges over the freehold property, and it was unnecessary to determine whether a floating charge over land created a caveatable interest.10

33 The final case to which counsel for the bank referred was Bank of Queensland Limited v Dodrill.11 That was a case in which it was found that on the proper construction of the instrument in question, there was an express fixed charge over real property and a fixed charge over the benefits and interests arising from future contracts, including the surplus from the sale of specified real property.12

34 In the present case, counsel for the bank pointed out that s 262 of the Corporations Act, within chapter 2K of the Corporations Act, had been repealed with effect from 31 January 2012 by the PPS Act. In relation to the PPS Act, counsel for the bank referred to the definition of 'security interest' which, by s 12(1) of the PPS Act, means an interest in 'personal property' and includes, by s 12(2), an interest in personal property by a fixed charge and a floating charge. Counsel also referred to s 332 of the PPS Act concerning 'migrated security interest[s]', which are defined by reference to an interest in 'personal property'. He also referred to the definition of 'personal property' in s 10 of the PPS Act, which excludes an interest in land.

35 Counsel for the bank also referred to s 153 of the PPS Act, which refers to a financing statement with respect to a 'security interest' consisting of certain data, including 'collateral', which is defined in s 10 by reference to 'personal property'. Item 4 of the table in s 153(1) refers to 'collateral' being described in terms of either 'commercial property' or 'consumer property'. Those terms are defined in s 10 of the PPS Act as follows:

commercial property means personal property other than consumer property.

consumer property means personal property held by an individual, other than personal property held in the course or furtherance, to any degree, of carrying on an enterprise to which an ABN has been allocated.

36 Reference was also made by counsel for the bank to the Personal Property Securities Regulations 2010 (Cth) (Regulations). Schedule 1 reg 2.3 provides that for the purposes of par (c) of item 4 of the table in s 153(1) of the PPS Act, the prescribed classes of 'collateral' include '(c) all present and after-acquired property' and '(d) all present and after-acquired property, except'. Counsel also referred to reg 1.6 containing the following definitions:

all present and after-acquired property means:

(a) personal property over which the grantor has an interest at the registration time for the financing statement for a security interest or prescribed property; and

(b) personal property acquired after the registration time for the financing statement for the security interest or prescribed property.

all present and after-acquired property, except means all present and after-acquired property, except for an item or class of personal property stated in the financing statement for the interest.

37 Counsel for the bank also referred to s 117 of the PPS Act, which applies if the same obligation is secured by a 'security interest in personal property' and an interest in land, and either the 'security interest' in the personal property has the highest priority, or every other secured party with a security interest in the personal property that does have a higher priority has agreed in writing to the secured party making a decision under s 117(2).

38 In light of the foregoing, counsel for the bank invited the court to infer that exhibit A recorded the existence of instruments by the fourth corporate guarantor by which it charged all its real property, including, most relevantly, the Harrisdale property, in favour of the persons mentioned in exhibit A. As noted earlier, there was no evidence from the title search that any of those persons had registered a mortgage or lodged a caveat over the Harrisdale property.

Principles

39 In relation to the application brought against the corporate guarantors, s 1335(1) of the Corporations Act provides:

Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, 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, require sufficient security to be given for those costs and stay all proceedings until the security is given.

40 The relevant principles are discussed in cases such as Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 2]13 and Wise Energy Group Company Ltd v Rocke.14 Also, for the purposes of determining whether there is a reason to believe that a corporation 'will be unable to pay' the costs of the respondent, regard is had both to the assets which may be immediately realised for that purpose, together with those which could be realised in sufficient time to enable the applicant to comply with a costs order in the usual terms: Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd;15Professional Vending Services Pty Ltd v Christou16 and Acohs Pty Ltd v Ucorp Pty Ltd.17

41 In relation to the application against Ms Bazzo, the application may be dealt with under pt 5 r 44(1) of the Court of Appeal Rules. Rule 44(1) provides that a party may apply for an 'interim order'. An 'interim order' is defined in pt 1 r 3(1) to include an order that an appellant provide security for a respondent's costs. Under pt 5 r 43(2)(h), a single judge has jurisdiction to make an interim order in an appeal.

42 An order made in the exercise of the power to order security is an order made to serve the interests of justice: Ailakis v Olivero;18Philips Electronics Australia Pty Ltd v Matthews.19

43 In relation to the power of this court under r 44(1) to order security against an appellant, the discretion is unfettered but must be exercised judicially: Mann v Dabelstein;20Ailakis.21 'Special circumstances' do not have to be shown before an order for security for costs is made against an appellant: Ailakis.22

44 Also, the exercise of discretion in this court is not subject to O 25 r 1 of the Rules of the Supreme Court 1971 (WA): Ailakis.23 That rule, which applies to applications for security for costs at first instance, provides, in effect, that no order shall be made merely on account of the poverty of the plaintiff, or the likely inability of the plaintiff to pay the costs which may be ordered against him. Further, the old common law rule that a natural person, however poor they were, would not be ordered to provide security, historically had no application in the case of appeals, given that the appellant had already had the benefit of a decision by a court of justice: Cowell v Taylor;24Rainbow v Kittoe;25Melville v Craig Nowlan & Associates Pty Ltd;26 Ailakis;27Fletcher v Federal Commissioner of Taxation.28

45 As Keane JA (as his Honour then was) said in Thompson v Robinson29 (de Jersey CJ & Williams JA agreeing):

While the appellant's apparent lack of funds would have weighed strongly against ordering security at first instance, as such an order might have effectively closed the door of the court to him, it is of much less importance on appeal. (footnote omitted)

46 Accordingly, in relation to security for costs in an appeal in this court, the appellant's inability to satisfy a costs order should the appeal fail will generally in itself be a significant factor to be taken into account in favour of an order for the grant of security: Dodds.30 As Pullin JA observed in Ailakis, the inability of the appellant to pay the respondent's costs will 'usually be the factor prompting the application in the first place'.31 On the other hand, if the respondent has caused the appellant's impecuniosity, that may be a relevant countervailing factor: Dodds.32 Further, whilst there is no rule of court or rule of law precluding this court from ordering security merely on account of the appellant's impecuniosity, and whilst the inability of the appellant to pay the respondent's costs is generally a significant factor in favour of the grant of security, in the exercise of the court's discretion impecuniosity is not in itself generally the sole ground for the making of an order for security. Even where the appellant is impecunious, in all the circumstances, the interests of justice may properly be served by not making such an order. See Dodds33 and Mann.34

47 Where security is ordered against an impecunious appellant, the amount ordered should not be greater than is absolutely necessary: Dodds.35

48 Ultimately, each case will turn on its own circumstances, and it is not possible to set out an exhaustive list of the relevant considerations: Dodds.36 Nevertheless, in addition to the consideration of whether the appellant will be unlikely to satisfy an order for the respondent's costs if the appeal is unsuccessful, other factors generally include the appellant's prospects of success, whether (as noted earlier) the appellant would be shut out of the appeal if security for costs were ordered, and whether there has been any delay in the respondent filing the application for security for costs.37

Disposition

49 There has been no application for a stay of the primary judge's orders. I would infer from the evidence as a whole, including the guarantors' offers to pay, in effect, by instalments and from the instalments paid over the preceding three months, that the guarantors, neither collectively nor individually, presently have sufficient net assets capable of being realised or utilised to pay the judgment debt in full. That inference is properly open, in my view, even without details of the level of encumbrances on individual pieces of property and notwithstanding that the Harrisdale property has no registered mortgage against it. An alternative inference, which I would decline to draw and which was not advanced by the guarantors in their submissions, is that the guarantors are in a position to pay the judgment debt, but have deliberately chosen not to comply with the primary court's orders. The lending submission of several years ago, relied on by the guarantors and referred to in [26] above, is of no material assistance to the guarantors on the question to be decided in this application. Further, the affidavit of Ms Bazzo was evidently 'carefully framed' (adopting the language of Bowen LJ in Ebrard v Gassier)38 and does not disclose the source of the instalment payments.

50 It follows that if the appeal were, hypothetically, heard and determined tomorrow, and the guarantors failed in the appeal, and there was an order in favour of the bank for the costs of the appeal, on top of the judgment debt and the costs of the primary proceedings, there would be good reason to believe that the corporate guarantors would be unable to comply with such a costs order.

51 The question then is whether matters may be materially different if the appeal were heard and determined in the ordinary course, for example later this year. Bearing in mind that there is no binding obligation which requires the payment of the judgment debt by instalments, I could not infer from the mere fact that $700,000 has been paid since judgment has been entered, that the remaining sum of approximately $1.855 million plus interest (plus the costs of the primary proceedings if they were taxed by then) would be paid by the time the appeal is heard and determined. There is nothing in the evidence which would allow me to infer that the financial constraints impairing payment of the judgment debt in full would be alleviated by the time the appeal was heard and determined.

52 Accordingly, I am satisfied that it appears, by credible testimony, that there is reason to believe that the corporate guarantors will be unable to pay the costs of the bank if it is successful in the appeal, and that the statutory threshold of s 1335(1) of the Corporations Act has been met. I should add that, contrary to the bank's submission, I would not infer from exhibit A that the fourth corporate guarantor has charged all of its interests in land in favour of the persons recorded on the PPSR. Indeed, all of the submissions advanced by counsel for the bank, referred to earlier, would seem to me to be inconsistent with the drawing of such an inference. I would, however, accept that the fourth corporate guarantor's personal property had been charged in accordance with the security interests disclosed on the PPSR according to exhibit A.

53 The conclusion that the statutory threshold has been met is, in itself, an important consideration in favour of the grant of security against the corporate guarantors.

54 In relation to Ms Bazzo, I would infer that there is a substantial risk that she would not meet an adverse costs order made in the appeal against her. The inference arises essentially from her failure to pay the judgment debt when no stay has been ordered, and her evident failure to pay land taxes. I also take into account that it is not suggested by her counsel that an order for security would stifle the appeal, and it would appear from her affidavit that she has access to some funds (including, it would seem, for her solicitors and counsel - there being no suggestion that they are not engaged on an ordinary commercial basis), even if not necessarily from her own assets.

55 Whilst I accept that the appeal is arguable, having considered the submissions in the appellants' case, my preliminary impression is that the prospects could be put no higher than that. Of course, that is entirely a preliminary and provisional assessment circumscribed by the time and other constraints of the current application.

56 The parties did not suggest that considerations of the kind involving co-plaintiffs referred to in cases such as Fiduciary Ltd v Morningstar Research Pty Ltd39 had any relevance or application. There is no issue as to delay.

57 In all the circumstances of this case, I am satisfied that it is in the interests of justice to order that the appellants provide security for the respondent's costs.

58 The question then is as to the amount of security. The parties referred to various cases in relation to amounts ordered for security for costs, including, most recently in this court, the following:

• Aus Asia Minerals Ltd v Ball40

• Sims

• Boksmati v Girgis Nominees (WA) Pty Ltd41

• Wise Energy Group

• Frigger v Clavey Legal Pty Ltd [No 2]42 (Frigger No 2)

59 In Aus Asia, the issues were not complex and no findings of fact were in dispute in the appeal. The amount sought was $20,000, and the amount ordered was $18,000. In Sims, the court noted that the issues were not complex and the evidence was relatively limited, and that the appeal should not take more than half a day. The amount sought was $20,000, and the amount ordered was $15,000. In Boksmati, the court doubted the existence of a 'significant factual dispute'43 and allowed security in the sum of $20,000. In Wise Energy Group, the court noted that the appeal involved dealings of 'some complexity';44 that each party intended to brief senior counsel; and that the appeal was estimated to take one day. The amount sought for security in that case was $85,000, and the amount ordered was $40,000. In Frigger No 2, the issues in the appeal included fairly wide-ranging factual contests in relation to a 12-day trial in the District Court.45 The court accepted the estimate of costs provided in 'some detail' by the respondent,46 and ordered security in the sum of $45,000.

60 Other relatively recent decisions include Romeo v Wesley College,47 and Ailakis. In Romeo, the appeal turned on short points of no particular complexity, and the sum of $12,000 was ordered. In Ailakis, the appeal was estimated to take one day, and the issues were reasonably complex. In that case, the sum sought was $65,000, and the amount allowed was $40,000.

61 Ultimately, of course, the quantum of security will be determined by reference to the court's evaluation of all the relevant circumstances of the particular case, and is not governed by orders made in other cases.

62 In this matter, in the appellants' amended case, the appellants estimate that it will take two hours to present their case orally. If it be assumed that a similar time were occupied by the respondent, followed by a reply by the appellants, the case on appeal would likely take the best part of one day.

63 Each ground of appeal alleges that the judge erred in fact and in law. The guarantors also raise questions of procedural fairness and the conduct of the trial in relation to the issues raised in grounds 1, 2, 5 and 7. In other words, the appeal does not merely raise questions of law for determination, but also questions of fact and, in relation to a number of the grounds, questions of procedural fairness in which the conduct of the proceedings below will require some consideration. The substantive issues raised in the appeal are matters of some complexity at least. On the other hand, whilst there is a prospect that there may be an allowance for senior counsel, it is to be noted that the appellants do not propose to brief senior counsel, and such an allowance could not be assured in that regard. Also, I am not persuaded that the amounts claimed in Mr Abberton's affidavit in relation to scale items 23(d) and 23(l) are a reasonable guide for present purposes. Further, I am cognisant that, generally speaking, the court does not set out to give a complete indemnity to the respondent: Brundza v Robbie & Co [No 2].48

64 Taking a broad view and in all the circumstances, it would seem to me that a sum in the amount of $32,000 should be ordered for security.

Conclusion

65 The respondent's application for security for costs should be allowed and the appellants should provide security for costs in the sum of $32,000.

______________________________________

1George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434.
2 Primary decision [7].
3 Primary decision [9] - [11].
4George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 (S).
5 Primary decision [111].
6Re Regis Towers Real Estate Pty Ltd [2006] NSWSC 852.
7Re Regis Towers [25] - [26], [28] - [32].
8Boambee Bay Pty Ltd (in liq) v Equus Financial Services (1991) 26 NSWLR 284.
9Hanson Construction Materials Pty Ltd v Vimwise Civil Engineering Pty Ltd [2005] NSWSC 880.
10Hanson Construction [14] - [24].
11Bank of Queensland Limited v Dodrill [2011] QCA 130; [2011] 2 QD R 541.

12Dodrill [4], [24], [26].
13Pravenkav Group Pty Ltd v Diploma Construction (WA) Pty Ltd [No 2] [2014] WASCA 106 [16] - [21].
14Wise Energy Group Company Ltd v Rocke [2015] WASCA 192 [19] - [22].
15Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 [35(c)].
16Professional Vending Services Pty Ltd v Christou [2010] FCA 580 [13].
17Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279; (2006) 155 FCR 181 [10].
18Ailakis v Olivero [2013] WASCA 91 [5].
19Philips Electronics Australia Pty Ltd v Matthews [2002] NSWCA 157; (2002) 54 NSWLR 598.
20Mann v Dabelstein [2006] WASCA 176 [16].
21Ailakis [1].
22Ailakis [11].
23Ailakis [2], [3], [4].
24Cowell v Taylor (1885) 31 Ch D 34, 38.
25Rainbow v Kittoe [1916] 1 Ch 313, 318.
26Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82 [98], [100].
27Ailakis [6].
28Fletcher v Federal Commissioner of Taxation (1992) 37 FCR 288, 290, 293. In that case, the 'appeal' was in fact in the original jurisdiction of the court: Fletcher (291).
29Thompson v Robinson [2005] QCA 253 [6].
30Dodds v Kennedy [2011] WASCA 32[18(c)], [19].
31Ailakis [13].
32Dodds [18(d)], [19].
33Dodds [8], citing Carol Farrell by her next friend Ronald Charles Waugh v Royal Kings Park Tennis Club (Incorporated) [2007] WASCA 173 [32(b)], and Dodds [27].
34Mann [12], [17].
35Dodds [8], citing Farrell [32(e)].
36Dodds [7].
37Sims v Suda Ltd [No 2] [2015] WASCA 180 [18].
38Ebrard v Gassier (1884) 28 Ch D 232, 235.
39Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664; (2004) 208 ALR 564.
40Aus Asia Minerals Ltd v Ball [2015] WASCA 251 (S).
41Boksmati v Girgis Nominees (WA) Pty Ltd [2014] WASCA 101.
42Frigger v Clavey Legal Pty Ltd [No 2] [2015] WASCA 258.
43Boksmati [72].
44Wise Energy Group [41].
45 See Frigger v Clavey Legal Pty Ltd [2015] WASCA 217, referred to in Frigger No 2 [4]; Frigger v Clavey Legal Pty Ltd [No 3] [2015] WADC 21.
46Frigger No 2 [39].
47Romeo v Wesley College [2015] WASCA 52.
48Brundza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171, 175.