H, AW v K, S (No 2) - [2022] SASCA 88

SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
H, AW v K, S (No 2)
[2022] SASCA 88
Judgment of the Honourable Justice Bleby
1 September 2022
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
Application for security for costs.
The appellant is appealing against a decision of a single judge of this Court, granting the respondent’s application for costs in respect of the appellant’s claim and the respondent’s counterclaim.
The respondent seeks an order that the appellant is to provide security for costs in the sum of $35,000.
Held, granting the application for security for costs:
1. The appellant is to provide security for costs by payment of $25,000 into Court.
2. The appeal is stayed until security in that sum is provided by the appellant.
Family Law Act 1975 (Cth) s 4AA; Uniform Civil Rules 2020 (SA) rr 115.1, 132.6, 195, 195.1(3), 215.3, referred to.
Australian Dream Homes Pty Ltd v Stojanovski [2016] VSCA 38; Diakos v Mason [2010] SASC 108; Draoui v Le & Ors [2020] SASC 115; Fleming v Advertiser News Weekend Publishing Company Pty Ltd (No 3) [2016] SASC 81; H, AW v K, S [2021] SASC 128; H, AW v K, S (No 2) [2022] SASC 49; H, AW v K, S [2022] SASCA 69; Logue v Hansen Technologies Ltd (2003) 125 FCR 590; Nanosecond Corporation Pty Ltd & Anor v Glen Carron Pty Ltd & Anor [2019] SASC 124; NV Sumatra Tobacco Trading Company v British American Tobacco Australia Services Ltd [2008] FCA 1542; PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, considered.

H, AW v K, S (No 2)
[2022] SASCA 88
Court of Appeal – Civil

BLEBY JA: This is an application for security for costs on an appeal against a costs order of this Court. On 18 July 2022, I granted leave to appeal[1] and indicated that the next step in the appeal proceedings was for the respondent to pursue her application for security for costs.
[1] H, AW v K, S [2022] SASCA 69.
The appellant and the respondent were in a personal relationship from about August 2014. During that time, the appellant gave the respondent some large sums of money and a luxury motor vehicle. After the relationship broke down, the appellant sought a declaration that the respondent held a sum of money on trust for him and that he owned the motor vehicle which remained in her possession. He sought restitution of the money in the alternative. The primary judge found that the motor vehicle and the money were gifts and dismissed the appellant’s application.
The respondent counterclaimed, seeking a declaration that she and the appellant had been in a de facto relationship within the meaning of s 4AA of the Family Law Act 1975 (Cth). The primary judge dismissed the counterclaim.
The basis of the costs orders the primary judge made are set out in my previous judgment. The judge ordered that the respondent was entitled to her costs in respect of the claim and the counterclaim on a standard costs basis from 7 February 2019 to 25 November 2020 and then from 25 November 2020 on an indemnity basis.
It is not necessary to rehearse the grounds on which the appeal against this order is now brought. I granted leave to appeal on the basis that the appellant’s contentions are reasonably arguable and raise questions of principle that have a degree of importance.
The application for security for costs is brought pursuant to r 215.3 of the Uniform Civil Rules 2020 (SA) (UCR). That rule previously referred to UCR r 115.1(2)‑(6) inclusive but no longer does so. That change does not render the matters listed in r 115.1 irrelevant to the considerations of an application for security for costs on an appeal. They remain relevant to the exercise of the Court’s discretion as a matter of principle. The position as I described it in Draoui v Le & Ors remains apposite:[2]
There is no longer any requirement that the party seeking security demonstrate the existence of ‘special circumstances’ before the discretion is engaged. The Court is simply required to exercise the discretion judicially, having regard to established principles.[3]
(Footnote in original)
[2] [2020] SASC 115 at [29].
[3] Nanosecond Corporation Pty Ltd & Anor v Glen Carron Pty Ltd & Anor [2019] SASC 124 at [30] (Peek J); Lesses v Maras [2016] SASC 117 at [5] (Doyle J); Fleming v Advertiser News Weekend Publishing Company Pty Ltd (No 3) [2016] SASC 81 at [13]-[14] (Stanley J).
It is relevant to the discretion that the application is brought on an appeal. It is well established that the Court will order security for costs of an appeal more readily than it will for trial. As Kourakis J said in Diakos v Mason:[4]
… The statutory right of a further review by way of appeal is a safeguard against error, but the fact remains that the plaintiff has had his side of the controversy judicially determined and in fact determined adversely to him. Moreover, the risk of injustice to an appellant if an order for security is prohibitive can be assessed with greater certainty on an appeal than at first instance.
[4] [2010] SASC 108 at [10].
Against that background, it is helpful to have regard to the broad statements of principle that inform the discretion. In Australian Dream Homes Pty Ltd v Stojanovski,[5] the Victorian Court of Appeal said:
The basis for making an order for security for the costs of an appeal lies in identifying a risk, which is unacceptable in all the circumstances, that the respondent to the appeal may be put to the expense of defending the judgment or decision in its favour without the benefit of expecting that, in the usual course, if it is successful in doing so, the unsuccessful appellant will be required to pay the respondent’s costs of the appeal. As already observed, the considerations that may bear on the Court’s discretion to order security are of many kinds, depending on the features of the particular case. But it is fundamental to the resolution of any application for security to identify the nature and extent of the risk in question (usually, as here, the risk as to the appellant’s impecuniosity).
[5] [2016] VSCA 38 at [40].
One of the more unusual features of this application is that the respondent accepted that the appellant is not impecunious; indeed, he is wealthy. Risk of impecuniosity can be put to one side.
The starting point for the respondent’s prosecution of this application is her contention that the appellant is ordinarily resident in the United States of America. She accepted that is it her onus to demonstrate this. She contended that this can be established even if there is evidence that he is sometimes resident in Australia.
The primary judge at trial described the appellant as a dual Australian/American citizen who travels extensively for his work. The evidence as to where the appellant is ordinarily resident is considerably more circumstantial. In Logue v Hansen Technologies Ltd,[6] Weinberg J observed that the purpose of ordering security for costs against an applicant ordinarily resident outside of Australia (using the language of the Federal Court Rules) was to create a fund for enforcing a costs judgment ‘thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant’s claimed country of residence’.[7] His Honour undertook a comprehensive review of the cases addressing the concept of being ‘ordinarily resident’ in a jurisdiction. He observed:[8]
What these cases, and others like them seem to establish is that the test for ordinary residence depends to a significant degree upon the state of mind of the person whose residence is in question. The language used in a number of the cases focuses upon whether the person habitually and normally resides in the jurisdiction, and does so for a settled purpose.
[6] (2003) 125 FCR 590.
[7] (2003) 125 FCR 590 at [18].
[8] (2003) 125 FCR 590 at [26].
The original Summons filed in this matter in February 2019 (that is, three and a half years ago) identified the appellant’s address as being at Point Piper, New South Wales. However, early in those proceedings, the appellant swore an affidavit identifying his address as being in Pebble Beach, California. The respondent observed that the identification of this address was for no specified purpose other than to identify the deponent of the affidavit. All other affidavits in the primary proceedings were sworn by the appellant’s solicitor upon information and belief. The respondent further pointed to the appellant’s unsworn Trial Affidavit, which was annexed to the affidavit of his solicitor of 9 April 2021. That also identified the appellant as being resident at Pebble Beach, California.
The appellant holds an Australian driver’s licence. The residence apparent on that driver’s licence is the same as the residential address given on the Summons. It seems sufficiently clear that the appellant is, or at least has been, resident in New South Wales for certain purposes. That does not, however, explain his self‑description as being resident in Pebble Beach, California.
The onus of the respondent in demonstrating that the appellant is not ordinarily resident in Australia relates to the present, not the time when the principal proceedings were commenced.[9] The evidence shows that in the past, the appellant has been resident in both the United States and in Australia. There is little evidence as to what might be said to be an intention by the appellant to have formed a ‘settled purpose’ to reside in Australia or otherwise.[10]
[9] Logue v Hansen Technologies Ltd (2003) 125 FCR 590 at [30].
[10] Logue v Hansen Technologies Ltd (2003) 125 FCR 590 at [32].
There is no evidence as to where the appellant is presently physically located. His previous residency in Australia is at least inferentially attributable to one purpose, being property investment. He owns several properties in New South Wales, each apparently close to the address on his driver’s licence.
By contrast, the respondent, in pointing to the appellant’s self-identification of Pebble Beach, California as being his residence, submitted that this is the best evidence of his state of mind as to his ordinary residence as contemplated by Weinberg J in Logue.
The affidavit of the respondent’s solicitor, Angela Clare Ferdinandy, filed on 29 July 2022, details various past addresses identified by the appellant over the past few years. An American Express card statement dated February 2017 identifies a post office box in Rancho Cordova, California. An ASIC search from April 2021 identifies the same Point Piper address as the appellant’s driver’s licence. A Velocity Frequent Flyer statement dated September 2019 identifies a post office box in Rose Bay in New South Wales. An ANZ bank statement from 2015 identifies a post office box in Western Australia.
Ms Ferdinandy’s affidavit further notes that on 23 April 2021, the appellant admitted under cross-examination that he had a Californian driver’s licence. Further, on 23 June 2022 and 25 July 2022, Ms Ferdinandy wrote to the solicitor for the appellant, requesting that they reveal his residential address in the United States and in Australia. On 26 July 2022, the appellant’s solicitor responded by saying that their office was awaiting instructions and requesting the reason for that enquiry. The state of Ms Ferdinandy’s investigations ended with no information as to where the appellant was currently living.
The appellant’s earlier affidavit raises an inference that the appellant has previously identified as being ordinarily resident in the United States. The appellant has chosen not to explain his residential arrangements further. He has simply relied on other past indications that point to Australian residence. Again, the persuasive onus is not his. However, this is a matter within his knowledge.
The totality of information before the Court is productive of uncertainty. However, the evidence relied on by the respondent is sufficient to raise an evidential onus on the part of the appellant to dispel the inference, arising on the balance of probabilities, that the appellant is ordinarily resident in the United States. The evidence that he may well also be resident in Australia for certain purposes does not dispel that inference.
The next matter of consequence is the appellant’s asset position in Australia. The appellant is the registered proprietor of four properties in New South Wales. That fact is the subject of an affidavit of his solicitor, which exhibits copies of the Infotrack NSW Lands Title searches of those properties.
Together, the properties are of significant value. Each property is encumbered by a mortgage. There is no information before the Court as to the net value of the appellant’s investments once the mortgages are accounted for. Again, it appears that the appellant has chosen not to reveal his net asset position in Australia. That is his prerogative. The burden remains on the respondent. Having said that, the respondent is not in a position to show anything other than that the appellant has assets in Australia and that those assets are subject to mortgages.
The costs order made at trial is another relevant piece of information going to the facility for recourse to the appellant’s assets in Australia. The respondent conceded that as things stand, the appellant’s liability to the respondent would be in the hundreds of thousands of dollars.
The appellant therefore has considerable assets in Australia and a considerable costs liability. He has a further liability in the form of mortgages over each property. The extent of that liability is unknown. While it cannot be said the appellant has no assets in the jurisdiction, there is reason to be concerned that his net asset position may not be sufficient to discharge his costs liability in the event of his being unsuccessful on the appeal, taking into account the costs orders already made.
The appellant focused his submission on this topic to the effect that is it the combination of ordinarily being resident outside of the jurisdiction and not having any assets in the jurisdiction that enlivens the relevant risk. To this end, he relied on the observation of McHugh J in PS Chellaram & Co Ltd v China Ocean Shipping Co:[11]
… However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.
[11] (1991) 102 ALR 321 at 323.
In NV Sumatra Tobacco Trading Company v British American Tobacco Australia Services Ltd,[12] Greenwood J observed that in the Federal Court, a person would normally be ordered to give security for costs where they are not ordinarily resident in the jurisdiction and have no assets in the jurisdiction. However, contrary to what I understood to be the tenor of the appellant’s submission, the question of assets (combined with the question of residence) is not meaningfully reduced to a binary question of whether there are or are not assets within the jurisdiction. Greenwood J continued:[13]
The purpose of ordering security for costs against a party ordinarily resident outside the jurisdiction is to ensure that a successful party will have “a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement” (Energy Drilling Inc. v Petroz NL (1989) ATPR 40 – 954 per Gummow J at 50, 422). The reference to a “fund” within the jurisdiction seems to suggest that a reference to “no assets within the jurisdiction” within the general principles is to be treated as a reference to no assets which are readily accessible to enforcement and satisfaction of the costs order.
[12] [2008] FCA 1542.
[13] NV Sumatra Tobacco Trading Company v British American Tobacco Australia Services Ltd [2008] FCA 1542 at [15].
In the present case, I am satisfied that while the appellant has assets within the jurisdiction, the state of the evidence (on the respondent’s onus) is that the appellant also has debts of some significance. The evidence does not go so far as to show the appellant’s net asset position. In my view, while the respondent has not established that the appellant has no assets in the jurisdiction ‘which are readily accessible to enforcement and satisfaction of the costs order’, she has established that the appellant’s asset and liability position is such that there is a risk that the assets are not readily accessible to enforcement and satisfaction of the costs order.
That conclusion cannot carry the same weight as would a finding that the appellant has no assets in the jurisdiction in circumstances where he is ordinarily resident in the United States. However, having regard to the broad nature of the discretion available on the application, it seems to me that it remains a relevant consideration. It was open to the appellant to adduce evidence identifying precisely his net asset position. Absent any such clarifying evidence, the respondent has only been able to go so far in proving the appellant’s asset position. That uncertainty does not resolve matters in favour of the appellant on account of the respondent’s onus. To the contrary, the respondent has established the existence of a real risk that she will not be able to recover her costs of the appeal.
The respondent then pointed to certain aspects of the appellant’s conduct to date constituting noncompliance with his obligations in the course of the litigation. The respondent accepted that by itself, this conduct would not justify an order for security for costs. Rather, she submitted that the appellant’s past conduct of noncompliance is demonstrative of the risk of future noncompliance.
The respondent’s written submissions detail a host of instances of the appellant not complying with his obligations in the course of the litigation. Many of these are inconsequential, certainly for the purposes of the present application. In oral submissions, the respondent focused upon three instances that she submitted created the apprehension of risk of future noncompliance.
The first of these was that the appellant did not comply with the obligation in UCR r 132.6 to respond to the respondent’s filed offer.[14] The appellant has never provided an explanation for this failure to comply with this obligation.
[14] H, AW v K, S (No 2) [2022] SASC 49 at [9].
Second, the appellant was invoiced for the trial fees by the Court on 7 July 2021. He was required to pay them by 21 July 2021 but did not do so until 19 May 2022, the day after the costs decision was delivered. The respondent observed in submissions that it might be apprehended that the timing of this payment indicates that he only made it in order to pursue the costs of the present appeal. Whether or not that inference can be drawn, the delay is indicative of the appellant being unwilling to comply with his obligations within the litigation.
Third, on 24 June 2022, the solicitors for the respondent wrote to the solicitors for the appellant, setting out the total costs, disbursements and counsel fees incurred. The letter contained an offer to accept a sum (redacted in the copy in evidence) pursuant to r 195 of the UCR. Pursuant to UCR r 195.1(3), the appellant was required to respond to that offer within 28 days, either by accepting the offer, making a counteroffer of a fixed sum for the total amount of the costs, or offering to meet within 14 days to negotiate an amount for costs. He did not do so. On 9 August 2022, the solicitors for the respondent wrote again to the appellant’s solicitors, observing the appellant’s noncompliance and requesting that he comply forthwith. It appears there has been no response to that correspondence.

The appellant’s ongoing attitude to his obligations in this litigation is extremely poor. His past behaviour gives good reason to think that he will continue to delay and deflect from meeting his financial obligations in the litigation. By itself, this does not provide an objective basis to strengthen any conclusion or proposition that there would be no assets within the jurisdiction readily accessible to enforcement and satisfaction of the costs order. However, in the circumstances of this case, and for the reasons appearing below, I regard it as a relevant discretionary factor.
I have found that the state of the evidence supports the conclusions, on the balance of probabilities, that the appellant is ordinarily resident in the United States and that there is a risk that there are insufficient assets in Australia to satisfy his costs liability (given his present liability for the costs of the trial). The appellant’s demonstrated disregard for his obligations to pay fees and comply with the rules on costs heightens, in my view, the risks associated with his non-residence and asset position. The objective evidence indicates that this is a litigant who organises his affairs so as to avoid compliance with his obligations with respect to fees and costs. To be clear, I regard this behaviour as informing and heightening the risk presented by the uncertain asset position and his more likely, and otherwise uncertain, residential status.
The respondent next invoked the finding of the primary judge at trial that ‘[the appellant is] one who was prepared to use his wealth both to reward and punish those who pleased or, conversely, displeased him’.[15]
[15] H, AW v K, S [2021] SASC 128 at [14].
The respondent submitted that this finding showed a depth of emotion and irrationality in the appellant’s behaviour, giving rise to vindictiveness and spite that increased the risk of noncompliance with court orders. That is to say, she submitted that the finding shows the appellant to be a person whose emotions may well override other concerns that might cause him to comply, such as matters of business reputation and the like. She submitted that this indicated that the present costs appeal was in part motivated by a desire to punish the respondent. While it could not be said that the appeal constituted an abuse of process and was thereby liable to be struck out, the facility of security for costs was available where the proceedings were in part informed by some ulterior motive.
I do not accept this submission. It may well be that the appellant is to some degree motivated by a desire to punish the respondent. However, I have already found that the appeal, which is defensive in the sense that it is brought against a costs order made in part on an indemnity basis, is reasonably arguable. In my view, this submission does not take the matter any further.
Finally, the respondent relied on a consideration which she characterised as ‘wrapping up’ all of the matters she relied on, in that there was an unacceptable risk attendant on her capacity to enforce any costs order. To this end, she relied on Logue, where Weinberg J said:[16]
It is clear, however, from the relatively few reported cases in this Court that the purpose of ordering security for costs against an applicant “ordinarily resident outside Australia” is to create a fund within this country against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant’s claimed country of residence …
[16] Logue v Hansen Technologies Ltd (2003) 125 FCR 590 at [18].
In my view, the respondent has demonstrated that there is an unacceptable risk that she will not be able to enforce a costs order in the event of success on the appeal or, in the alternative, her attempts to do so would be subject to an unacceptable risk of delay and obstruction that would require her to incur yet more costs. In reaching this conclusion, I rely on the combination of matters set out above.
I also take into account my previous conclusions that the appeal is reasonably arguable and that there is some degree of public importance to the issues raised. I take account of the fact that there is no question of the appellant being impecunious. By the same token, neither is there any risk that by ordering security, the appeal would be stifled. Importantly, I take into account the fact that this is an appeal against a costs order. The appellant has had the opportunity to litigate this costs question once.
As to quantum, the respondent’s solicitor’s first affidavit gave a short estimate of the costs of the appeal. She estimated this at $37,500. This included $10,000 in solicitors’ fees, $16,500 for senior counsel and $10,000 for junior counsel. A further $1000 was estimated for minor disbursements, including transcript. The estimate was not broken down further. In particular, the $10,000 in solicitors’ fees were not explained at all.
In oral submissions, the respondent suggested that a realistic estimate produced an even higher figure. This was premised on the appeal taking two days of hearing. While there are some issues arising that could not be described as simple, as estimate of two days is not realistic.
The legal issues on the appeal are clear, albeit that they will require some degree of close attention by counsel in preparation. Nevertheless, they have already been litigated once. The estimate of two days’ preparation for each of senior and junior counsel, together with $10,000 for solicitors’ fees, is excessive. I would allow three days preparation total for counsel as between senior and junior together. I would allow one day for the solicitor’s attendance at the appeal and some small amount for preparation. In my view, the sum of $25,000 would be appropriate to order as security.
Conclusion
I propose to make the following orders:
1.The appellant is to provide security for costs by payment of $25,000 into Court.
2.The appeal is stayed until security in that sum is provided by the appellant.
I will hear the parties as to the date after which the respondent may have liberty to apply.