Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner & Anor (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
GOLDEDGE HOLDINGS PTY LTD v LIQUOR AND GAMBLING COMMISSIONER & ANOR (No 2)
[2015] SASC 81
Judgment of The Honourable Justice Lovell
29 May 2015
PROCEDURE - COSTS - SECURITY FOR COSTS
The appellant seeks an order for an extension of time to appeal a decision of the Chief Justice of the Supreme Court - the respondents seek security for its costs of the appellant's appeal to the Full Court - whether the appellant will be able to pay costs if unsuccessful - consideration of factors leading to the making of an order for security for costs.
Held: extension of time allowed - application allowed - appellant to provide security for costs.
Gaming Machines Act 1992 (SA); Gaming Machines (Miscellaneous) Amendment Act 2004 (SA); Supreme Court Civil Rules 2006 (SA) rr 194, 281(1), 295(1)(g); Corporations Act 2001 (Cth) s 1335(1), referred to.
Dagenham Nominees Pty Ltd (t/as Banwell Marine Services) v Shanks [2011] SASC 163; Jackamarra v Krakouer and Another (1998) 195 CLR 516, applied.
Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner & Anor [2014) SASC 147, discussed.
D'Orta-Ekenaike v Victoria Legal Aid and Another (2005) 223 CLR 1; Spiel v Commodity Brokers Australia Pty Ltd (in Liq) (1983) 35 SASR 294, considered.

GOLDEDGE HOLDINGS PTY LTD v LIQUOR AND GAMBLING COMMISSIONER & ANOR (No 2)
[2015] SASC 81
Application to a single Judge: Civil
LOVELL J.
Background of the facts

Between 1998 and 2011, the appellant, Goldedge Holdings Pty Ltd (“Goldedge”) was the lessee of the Colac Hotel. In 1999, Goldedge obtained a gaming machine licence for the hotel from the first respondent, the Liquor and Gambling Commissioner (“the Commissioner”) pursuant to the Gaming Machines Act 1992 (SA) (“the Act”).
In 1999, having successfully obtained a gaming machine licence, Goldedge purchased 10 gaming machines and operated them on the premises as part of its business as lessee of the hotel. The gaming machine licence restricted the number of gaming machines that it could operate.
In 2005, the Gaming Machines (Miscellaneous) Amendment Act 2004 (SA) (“the GMA Act”) was introduced. This Act created a gaming machine entitlement scheme, whereby the right to operate a gaming machine could be traded between licensees, in effect allowing a licensee to purchase the right to operate additional machines from another licence.[1] In 2007, Goldedge sold two of the 10 entitlements under the new gaming machine entitlement scheme, and kept the proceeds of that sale.
[1] Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner & Anor [2014] SASC 147 [2].
In 2011, Mallen’s Colac Hotel Pty Ltd (“Mallens”) terminated the lease agreement for breach of contract, in particular, for unpaid rents and other unpaid obligations. On 14 May 2012, upon application by Mallens, the Commissioner transferred the gaming machine licence to Mallens. The Commissioner also accepted Mallens offer to sell the remaining eight gaming machine entitlements attached to the gaming machine licence in the Commissioner’s approved trading round conducted under the GMA Act. The sale price for each entitlement was $54,472.73 (exclusive GST) and was duly paid by the purchaser to Mallens.
During 2013 and 2014, Goldedge brought an application challenging the validity of the Commissioner’s decision(s). At trial, Goldedge submitted that entitlements were separate from a licence, in particular arguing that it was not obliged to transfer all of the gaming machine entitlements at the time when the licence was transferred to Mallens. Goldedge also submitted that it was entitled to sell the gaming machine entitlements and retain the proceeds of sale as part of the Commissioner’s approved trading round. Goldedge sought a declaration that the Commissioner acted unlawfully, and an order that Mallens make restitution to it for wrongfully retaining the proceeds of the sale of entitlements connected to the licence.
On 8 October 2014, Chief Justice Kourakis dismissed the application after finding that the gaming machine licence and gaming machine entitlements were inextricably linked under the GMA Act. Consequently, as Goldedge was no longer the holder of a gaming machine licence it could not hold or trade a gaming machine entitlement. The Chief Justice found that the Commissioner was bound to accept the Mallens’ offer to sell the gaming machine entitlements because it was the holder of the gaming machine licence at the time.
The interlocutory proceedings
By application, filed on 9 February 2015, the appellant seeks an order that it be granted an extension of time within which to appeal to the Full Court of the Supreme Court from the orders made by the Chief Justice of this Court.
The orders of the Chief Justice were made on 8 October 2014 and the Notice of Appeal was filed on 9 February 2015. Pursuant to r 281(1) of the Supreme Court Civil Rules 2006 (SA) the Notice of Appeal was to be filed within 21 days. The time for appealing the order dismissing the appellant’s claim expired on 29 October 2014. Thus, Goldedge must first obtain an extension of time to enable it to appeal to the Full Court.
The respondents oppose the extension of time. Should the appellant’s application be granted, Mallens seek an order that Goldedge provide security for costs of the appeal in the sum of $29,000 (exclusive of GST). The Commissioner is also seeking security for costs in the amount of $25,000.
Evidence
The following affidavits were read and received:
(i)affidavit of Josip Plesa, appellant, affirmed 9 April 2015;
(ii)second affidavit of Josip Plesa, appellant, affirmed 14 April 2015;
(iii)affidavit of Girish Patel, solicitor, affirmed 28 November 2014;
(iv)second affidavit of Adrian Tisato, lawyer, sworn 11 March 2015;
(v)third affidavit of Adrian Tisato, lawyer, sworn 22 April 2015; and
(vi)affidavit of Sean Thomas O’Flaherty, affirmed 16 March 2015.
The first two were in support of the appellant’s case and the latter four in support of the first and second respondents’ case.
In addition to the affidavit material tendered, Mr Plesa gave evidence on oath on behalf of the appellant. In the present case, the appellant is a company registered under the Corporations Act 2001 (Cth). Mr Plesa is the director of the appellant. His evidence will also form part of the overall evidence relied upon in these proceedings. I accept his evidence in general.
The application for an extension of time
The Court has the discretionary power to grant an extension pursuant to the Supreme Court Civil Rules 2006 (SA). It is for the appellant to establish on the balance of probabilities that the discretion should be exercised in its favour.
Grounds for an extension of time
Essentially, the appellant relies on four grounds to support an extension of time, which include the:[2]
1.merits of the appeal;
2.delay caused by the appellant’s former solicitor and former counsel;
3.delay caused by the Christmas holiday period; and
4.delay in the appellant obtaining relevant documents.
[2] Notice of Appeal dated 6 February 2015, p 4 [4].
Mr Plesa’s affidavits and evidence establish the history of delay. There was difficulty in his communications with his former solicitor, Mr Patel and former counsel, Mr Ower. Also, he was unable to retrieve relevant court documents in a timely fashion and further time was lost in the period it took to both find and fund new legal representation for the purposes of an appeal.
It was not disputed, and I accept, that Mr Plesa spoke to Mr Patel by telephone about the possibility of an appeal. Mr Patel advised Mr Plesa that counsel, Mr Ower and he thought there were no grounds to appeal. Mr Plesa gave evidence before me that while he initially accepted the advice of his former lawyer, he later, after speaking to his family, decided to seek a second opinion on the merits of pursuing an appeal.[3]
[3] T 18 lines 16-19.
The legal test
Whether an extension of time should be granted involves, consideration of; the reason for the delay, the length of the delay, the extent of any prejudice to other parties to the proceedings and a consideration of whether the appeal has any prospects of success.[4]
[4] Jackamarra v Krakouer and Another (1998) 195 CLR 516 [66].
The Notice of Appeal was not lodged until a little over three months after the Chief Justice dismissed the appellant’s claim. This is not a significant delay in bringing the appeal. Mr Plesa gave evidence that he had changed his mind about whether to lodge an appeal after speaking with his “missus and family”.[5] He took steps to seek further legal advice about the possibility of an appeal, and this delayed matters further.
[5] T 18 line 16.
Mr Doyle, counsel for Mallens, submitted that Mallens would suffer prejudice if an extension of time were granted. Counsel relied on the affidavit of Adrian Tisato of 11 March 2015 (exhibit R2) to the effect that Mallens has expended net proceeds of the sale of the entitlements, on the understanding that when it did so, there would be no appeal in this matter.[6]
[6] Affidavit of Adrian Tisato, dated 11 March 2015, p 3 [15.7].
Mr Doyle submitted that the Court should have regard to the public interest in the finality of litigation, as expressed by the High Court in D’Orta-Ekenaike v Victoria Legal Aid and Another:[7]
The principal qualification to the general principle that controversies, once quelled, may not be reopened is provided by the appellate system. But even there, the importance of finality pervades the law. Restraints on the nature and availability of appeals, rules about what points may be taken on appeal and rules about when further evidence may be called in an appeal (in particular, the so-called “fresh evidence rule”) are all rules based on the need for finality. As was said in the joint reasons in Coulton v Holcombe: “[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial.” The rules based on the need for finality of judicial determination are not confined to rules like those mentioned above. Those are rules which operate between the parties to a proceeding that has been determined. Other rules of law, which affect persons other than the parties to the original proceeding, also find their justification in considerations of the need for finality in judicial decisions. And some of those rules are rules of immunity from suit.
(My emphasis)
[7] (2005) 223 CLR 1, 17-18, [35]-[36].
During submissions, counsel for Goldedge criticised the lack of particularisation of the actual prejudice pleaded by Mallens as provided in the affidavit of Adrian Tisato dated 11 March 2015, and asserted that no suggestion had been made by counsel that the second respondent could not recall its assets.[8]
[8] T 27 lines 3-16.
I accept that Mallens has suffered some prejudice in the late filing of the Notice of Appeal.
As to whether the appeal has any prospects of success the appellant is not required to go into specific detail about any evidence or arguments it may raise on appeal. However, for reasons expressed by the High Court in Jackamarra v Krakouer and Another,[9] in deciding the application for an extension of time, the Court needs to consider the merits of the appeal.
[9] (1998) 195 CLR 516.
Mr Doyle submitted that the basis of the appeal is nothing more than bald assertions by the appellant that the Chief Justice was wrong. In particular, he submitted that the appellant demonstrates a misunderstanding of the subject matter of the proceedings before the Chief Justice by making complaints about the actual gaming machines and the gaming machine licence, when the sole issue at trial related to the gaming machine entitlements.
Mr Scragg, counsel for the appellant, submitted that there is an arguable case based upon the submissions made by the appellant’s counsel at first instance. In particular, he submitted that the Chief Justice had misinterpreted the legislation, and that there is a distinction between a gaming machine licence and a gaming machine entitlement.[10]
[10] T 52 lines 27–31.
In my opinion, the argument advanced by the appellant is weak but I cannot say it has no prospects of success.
Taking into account the submissions, I am satisfied that it would be a proper exercise of the discretion to grant the appellant’s application for an extension of time within which to appeal the decision.
Security for costs
There is a strong indication that the respondents will be unable to recover from the appellant the costs it incurs defending the appeal without an order for security for costs. Indeed, it appears that its chances of recovering the costs from the trial are poor. The mere fact that the appellant will be unable to pay the second respondent’s costs if the second respondent is successful on appeal, does not dictate that security for costs should necessarily be ordered.[11]
[11] Dagenham Nominees Pty Ltd (t/as Banwell Marine Services) v Shanks [2011] SASC 163, 582 [31].
Application for security for costs
During submissions Mr Doyle, on behalf of Mallens, sought security for costs pursuant to s 1335(1) of the Corporations Act 2001 (Cth). This section provides that:
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.
Mr Doyle submitted, and I accept, that an application for security of costs can apply to an appellant in the context of appellate proceedings for the purposes of being “plaintiff” within the meaning of s 1335(1) of the Corporations Act 2001 (Cth).[12]
[12] Dagenham Nominees Pty Ltd (t/as Banwell Marine Services) v Shanks [2011] SASC 163 [19].
The first question is whether there is “credible testimony that there is a reason to believe”[13] that the corporation will be unable to pay the costs if it loses the appeal. The affidavit evidence established that there is “reason to believe” that Goldedge will be unable to pay the costs of the respondent if successful. Goldedge did not seriously argue to the contrary.
[13] s 1335(1) Corporations Act 2001 (Cth).
I find that there is “credible testimony” that there is reason to believe that Goldedge will be unable to pay the costs if it loses the appeal. Having made that finding I now need to exercise the discretion, which is a wide one and no single factor is necessarily decisive. The circumstances in which the discretion should be exercised in favour of making an order cannot be stated exhaustively. There is no burden one way or the other. The discretion is to be exercised in all the circumstances of the case.[14]
[14] Spiel v Commodity Brokers Australia Pty Ltd (in Liq) (1983) 35 SASR 294, 300.
A factor to be taken into account, if established, is the stultification of the proceedings if an order for security of costs was to be made. In relation to the question of stultification the following principles apply:
1.the ability of not only the company but also those who stand behind it is to be considered for this purpose;
2.the onus of proof that neither the company nor those who stand behind it are able to provide the security and that an order would stultify the proceeding is upon the company; and
3.as part of discharging the onus of proof, the company is normally expected to put before the court a full and frank statement of the assets and liabilities of the company and of those who stand behind it.[15]
This factor was addressed by both parties.
[15] Dagenham Nominees Pty Ltd (t/as Banwell Marine Services) v Shanks [2011] SASC 163, 582 [32].
There was very little evidence from the appellant or from Mr Plesa about the current financial position of either of them. It is reasonable to infer that the appellant itself has no ability to pay an order for security for costs. Mr Plesa asserted in his affidavit that he has no real property or any personal property of significant value. He asserted that he did not have any savings in the bank, shares, stocks, or bonds. He further asserted that he has superannuation worth about $30,000. Mr Plesa did not explain how he was able to pay his previous lawyers, or indeed how he is funding this appeal and his application to set aside a default judgment in the District Court. The only information in his affidavit of 9 April 2015 is that he paid the funds to lodge a Notice of Appeal “by drawing down on my superannuation entitlements”.[16] The affidavit is silent as to why he cannot continue to draw down on those entitlements which he estimates are worth around $30,000.
[16] Affidavit of Josip Plesa, dated 9 April 2015, p 2 [10].
In my view, the appellant and Mr Plesa have not satisfied the onus of proof with regard to the issue of stultification.
It is also clear that a large proportion of the appellant’s financial problems and those of Mr Plesa have come about due to the judgment in the District Court rather the proceedings before the Chief Justice. I accept that those proceedings were related to an extent to the financial problems, but it cannot be said that the issues raised before, and decided by, the Chief Justice were a major cause of the impecuniosity of the appellant and Mr Plesa.
I also take into account the weak prospects of success of the appellant on appeal as discussed earlier.
In my view, this is a case where I should order security for costs. Even if I am wrong about the financial position of the appellant and Mr Plesa, I would still order security for costs in this case.
The appellant did not dispute the assessment of the estimated legal fees recoverable against the appellant should the company be unsuccessful in the appeal. The first respondent estimated its costs at around $25,000 and the second respondent estimated its costs between $29,000 and $39,000.
Application pursuant to rules of court
Both respondents rely, if necessary, upon r 295(1)(g) of the Supreme Court Civil Rules 2006 (SA) which provides: “... the Court may, in special circumstances, order that security be given for the costs of an appeal.”
To date, the appellant has not paid the first respondent’s costs as ordered by the Chief Justice. This in combination of the fact that the appellant does not own any real property and only has “a little bit of savings”[17] satisfies special circumstances and thus does enliven the discretion of the Court to order security for costs.
[17] Second Affidavit of Adrian Tisato dated 11 March 2015, p 4 [18].
I would make the same order as I did pursuant to s 1335(1) of the Corporations Act 2001 (Cth).
Orders
I would make the following orders:
1.that the appellant’s application for an extension of time within which to appeal against the decision of Chief Justice Kourakis of the Supreme Court dated 8 October 2014 in matter number 1156 of 2012 in the Supreme Court of South Australia be allowed; and
2.that the appellant pay security for costs to the Court in the amount of $35,000 within 21 days of the date of this order.

[2015] SASC 81

29 May 2015

Key Legal Topics

Areas of Law

Civil Litigation & Procedure

Legal Concepts

Appeal

Costs

Limitation Periods