Horton v Warranted Financial Solutions Pty Ltd (in liq)
[2011] VSCA 256
•24 August 2011
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2011 0016
| STEVEN LESLIE HORTON |
| v |
| WARRANTED FINANCIAL SOLUTIONS PTY LTD (IN LIQUIDATION) (ACN 006 351 837) |
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JUDGES: | HARPER JA and WILLIAMS AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 24 August 2011 | |
DATE OF JUDGMENT: | 24 August 2011 | |
MEDIUM NEUTRAL CITATION: | [2011] VSCA 256 | |
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PRACTICE AND PROCEDURE – Application to amend Notice of Appeal – Application for a stay of the orders made below pending the hearing and determination of the appeal – Security for costs.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr T P Mitchell | SP Business & Litigation Lawyers |
| For the Respondent | Mr B Carew | Gadens Lawyers |
HARPER JA:
The trial of this proceeding was originally fixed for hearing in the County Court on 9 September 2010. On 31 August, however, the parties agreed to an adjournment to the first available date after 15 December. The Court subsequently re‑fixed the trial for 18 January this year.
The dispute is between a company in liquidation and its former sole director, secretary and perhaps sole shareholder, Mr Steven Horton. In essence, the company claims that between 1 August 2007 to 10 February 2009, it made payments totalling $355,522.12 on Mr Horton's behalf and at his direction. These were for his personal benefit. They did not form part of his salary or remuneration. They were payments made by way of loan. But they have not been repaid.
Mr Horton filed a defence. In it, he pleads that:
The amount claimed by the [company] was the subject of mutual dealings between [me] and [the company] and does not take into account [my] entitlement … to the value or the benefits provided by [me] to the [company]… and [I] am entitled to set off against the advances made by the [company] to … [me] unreconciled amounts owing to [me] at the time of the liquidation.
The proceeding came before his Honour Judge Anderson on the appointed day, 18 January 2011. A week before that, Mr Horton's solicitors had informed the solicitors for the liquidator to the effect that they intended to seek to cease to act, and that, if the application were granted, Mr Horton would act for himself. Nevertheless, nothing in the correspondence or the accompanying documentation indicated that the matter was not ready to proceed. On the contrary, there was reference to the fact that Mr Horton was aware of the trial date; and included in the material received by the liquidator's solicitors was a letter in which Mr Horton thanked his solicitors for the thoroughness with which they had acted for him in the past.
This remained the position when the Court was convened on 18 January. His Honour was informed by the member of the firm acting for Mr Horton that the firm sought leave to file a notice of cessation to act. Mr Horton, being present, was asked by the judge whether he consented. He said that he did. He was also asked whether he was prepared to represent himself. He said that he was 'quite capable of doing that', but referred to an application for more time to prepare, an application which his solicitor had earlier foreshadowed orally to his Honour. Counsel for the liquidator told his Honour that the application, that is the application to withdraw, should be granted. His Honour ordered accordingly.
It was only after the order allowing the solicitors to withdraw had been made that a more formal request for an adjournment was advanced by Mr Horton. But he had no material with which to support the application. This is and was totally unsatisfactory. Applications of this kind made in these circumstances must be supported by material which assists the judge in exercising his or her discretion to grant or refuse the adjournment. Here, his Honour had nothing. Yet Mr Horton had much to explain.
The date of trial had been fixed weeks before. The parties had indicated that they would be ready after 15 December. Mr Horton was necessarily a principal source of instructions to his solicitors and the principal witness for the defence. He knew by 11 January that his solicitors intended on 18 January to seek leave to withdraw. By 18 January, he ought, therefore, to have been thoroughly familiar with the case. It was not a difficult one conceptually. He simply had to introduce evidence which would prevent the company discharging its burden of proof. That evidence would have been to the effect that, by agreement between him and the company, he had provided services to it on the basis that he would be remunerated; or alternatively, that by a quantum meruit, he was owed for services rendered. He would further have to put forward evidence sufficient to prevent the company discharging its burden of proof that he had not received the remuneration due to him; and that, for that reason, he was entitled to set off the amount owing against the amount claimed.
That case ought to have been prepared before the solicitors gave notice that they intended to withdraw. Having been prepared, it ought to have been possible in the week (at least) remaining before trial, for Mr Horton to master it, and so to be ready to represent himself when the matter came before the judge on 18 January. If he was not, the judge was entitled to sworn evidence explaining why not. In its absence, the judge was entitled to infer that this was in reality an application to avoid, or at least delay, the payment of a debt justly owing to the claimant.
Another consideration which his Honour was bound to take into account was the prejudice, if any, to the innocent party were the application to be granted. His Honour held that there would be some prejudice to the company and - more importantly - its creditors if the matter were further delayed.
Mr Horton complains that there was no evidentiary foundation for this conclusion. There did not need to be. The trial date had already been adjourned once. A further adjournment would have had to inevitable effect of keeping both the company and its creditors out of such of the funds as it was successful in reclaiming. Prejudice was therefore likewise inevitable. No evidence was needed to support that conclusion.
Having refused the adjournment, his Honour proceeded with the trial; and, following its conclusion, delivered judgment. Mr Horton did not give evidence.
I have read the trial transcript. It demonstrates that the case against Mr Horton was very strong. In these circumstances it is not surprising that the judge gave judgment for the company. The evidence was that, in a report into the company's affairs filed by Mr Horton himself on 5 March 2009 - after the company went into liquidation - Mr Horton was included in Schedule B as a debtor for the sum in question ($355,522.12) 'subject to any claim by debtor as employee of the company'. But there was no claim to which that amount was subject - indeed, any such claim was later disavowed: Schedule E, which concerned claims by employees, was left blank.
His Honour considered the evidence given by the liquidator, Mr Muldoon. That witness told the Court that, from his knowledge of the company's documents, there were none which showed an employment or management agreement between the company and Mr Horton, or recording the performance of management services by him for the company, or recording any entitlement in Mr Horton to set off amounts owing to him against his loan account. Nor were there any resolutions of the company in relation to the payment of management fees to Mr Horton. Indeed, the tax records put into evidence show that Mr Horton was employed not by the company, but by a different entity - Wooddale Investments Pty Ltd - which, according to the documentary evidence, provided management services to the then plaintiff, the present respondent.
Given that the company had tendered evidence, which had not been challenged, that the sum claimed had been received by Mr Horton as a loan, but had not been paid, the defence could not succeed without evidence in rebuttal. None came. Accordingly, his Honour's conclusion that the company was entitled to succeed was, on the evidence then available to his Honour, in my opinion, unimpeachable.
It is against this background that the Court has before it today three applications. Two are made by the appellant, one by the respondent. The first is an application to amend the Notice of Appeal. The second is for a stay of execution of the judgment of the County Court of 18 January 2011. Each of these is brought by the appellant. The third is an application made by the respondent. It is for security for costs.
The present Notice of Appeal seeks to advance three grounds of appeal, as follows:
1.The trial judge erred in refusing the request of the appellant for an adjournment and accordingly the appellant was not able to properly present his case.
2.The trial judge ought to have found that the appellant be given a period of eight weeks from 18 January 2011 to prepare his case for hearing.
3.The trial judge erred in reaching his decision by relying upon the accounts of the Company to evidence a loan owing by the defendant when the accounts were not final accounts and the report as to Affairs disclosed the defendant's set-off for unpaid remuneration.
The proposed Amended Notice of Appeal does not contain an equivalent of the third ground of appeal as set out in the present notice. Otherwise, however, it restates grounds 1 and 2 of the present notice in different terms, and with accompanying particulars. It is in the following terms:
1.By refusing the application by the appellant to adjourn the trial, the primary judge seriously prejudiced Mr Horton's ability to present his case at trial and thereby denied Mr Horton procedural fairness.
Particulars
(i)Seven days before the trial was listed to commence Mr Horton’s solicitors notified Mr Horton that they intended to cease acting for him in the proceeding.
(ii)On the day the trial was listed to commence, Mr Horton’s solicitors were given leave to, and did, cease to act for him.
(iii)Mr Horton had no opportunity to prepare to conduct the case himself.
(iv)Mr Horton had no opportunity to consult his accountant about the conduct of the case because he was away at the time of the hearing.
2.In refusing Mr Horton's adjournment application, the primary judge's discretion miscarried by failing to take into account a relevant consideration, namely the likely prejudice to Mr Horton of refusing the adjournment.
Particulars
(i)Prejudice that may be suffered by a party is a relevant consideration in determining an adjournment application.
(ii)Mr Horton identified the reasons why he needed an adjournment to prepare his defence:
(a)to confer with his long term accountant, who was away at the time of the trial;
(b)to familiarise himself with the Court Book, which had recently been served;
(c)to review the company records which were in the possession of WFS;
(d)to prepare to conduct his defence without legal assistance; and
(e)because he would effectively be deprived of the opportunity to defend the claim against him without the adjournment.
(iii)The primary judge failed to consider any of these matters in deciding to refuse the adjournment.
3.In exercising his Honour's discretion to refuse Mr Horton's adjournment application, the learned judge relied on a finding of fact for which there was no evidence and the judge's discretion thereby miscarried.
Particulars
(i)There was no evidence that WFS would suffer any prejudice if the trial was adjourned.
(ii)In the absence of any evidence to that effect, the learned judge found that some prejudice to the plaintiff would follow from an adjournment.
(iii)The learned judge did not identify what prejudice his Honour found would follow, or the basis for finding such prejudice.
The appeal presently before the Court is of right. Subject to the effect in practice of the refusal of a stay, or the granting of the application for security, the appeal will proceed. It is best that it proceed upon a basis which best elucidates the appellant's position. Both the respondent and the Court will benefit were that to be so. If the application is granted, the respondent will no longer be concerned with what is at present the third ground of appeal; and it will have the advantage of the particulars which the appellant proposed to incorporate into the new Notice. In these circumstances, it seems to me that the application to amend ought be granted.
The application for a stay raises some difficult issues. An appeal does not of itself operate as a stay of execution, but a stay may be ordered in exceptional circumstances. There is, accordingly, a presumption against a stay being ordered. The presumption will be displaced if the effect of refusing a stay would expose the appellant to the risk that he would be denied the fruits of a successful appeal. Thus, if a stay were refused, and if the appellant were to pay the judgment sum but was then successful on appeal only to discover that the respondent could not repay, then the fruits of the appeal would be denied to him.
The prospect of the appellant being forced into bankruptcy if the stay is refused is also relevant. His trustee in bankruptcy may elect not to proceed with the appeal. The chance of it being ultimately successful would therefore be lost.
The merits of the appeal cannot be fully explored on an application of the kind presently before the Court. On the other hand, they are so far as is reasonably possible, to be taken into account in deciding the fate of the application for a stay.
For the reasons already given, the appellant has, by his own neglect left the Court in a position in which it must assume that his case for a set-off is very weak, if not non‑existent. I am in these circumstances troubled by the possibility that the appellant is merely using the procedures of the Court to delay the receipt by the respondent of whatever fruits it may be able to obtain from a judgment debt to which it may be rightly entitled. Doing the best I can to weigh the several points for and against the appellant's present application, however, I have come to the conclusion that the application for a stay should be granted. The alternative would expose him to a significant risk that, were he to be successful in his appeal, that victory would be pyrrhic.
There remains the application for security for costs. The appellant does not dispute - in fact by his affidavit evidence confirms - the conclusion that he is presently impecunious. It is clear that this Court may, on an application for security for costs of an appeal, grant such application. That is so even where the respondent to the application is an individual. The position in those circumstances is therefore different to that which obtains at trial where ordinarily an application for security for costs will not be ordered against an individual plaintiff, although if the plaintiff resides outside the jurisdiction, different considerations apply.
In this case the respondent to the application for security does live outside the jurisdiction but, in any event, the normal constraints applicable in the circumstances of a trial do not apply when the application for security is made for the costs of an appeal.
In my opinion the application for security for costs should succeed.
The only question, it seems to me, on the matters which have been put to the Court by way of submission, is the amount of security to be ordered. The applicant for security (the present respondent to the appeal) has put in evidence a bill of costs prepared by a cost consultant. The applicant/respondent accepts that that bill should be reduced by a number of items which have been helpfully discussed between the Bench and counsel during the course of argument this morning.
In my opinion, the concessions made by the respondent were rightly made and the bill of costs should be reduced accordingly but, in any event, it seems to me that an appropriate amount to order by way of security for costs would in the circumstances be $17,000. I would propose that the Court so order.
WILLIAMS AJA:
I agree.
HARPER JA:
The orders of the Court will be that:
In respect of the appellant’s summons dated 17 May 2011:
1.Leave be granted to file and serve an Amended Notice of Appeal in the form exhibited as ‘SDG-1’ to the affidavit of Stephanie De Guio.
2.The matter be adjourned to an Associate Justice of the Court for a further directions hearing.
3.The costs of the application for leave to amend the Notice of Appeal be costs in the cause.
In respect of the appellant's summons dated 13 July 2011:
1.Pending the hearing and determination of this appeal, the order of Judge Anderson of the County Court made on 18 January 2011 in
proceeding no. CI-09-04351 be stayed.
2.The appellant pay the respondent’s costs of the application for such stay.
In respect of the respondent's summons dated 31 May 2011:
1.Pursuant to r 64.24(2) of the Supreme Court (General Civil Procedure) Rules 2005 the appellant give security for the respondent's costs of the appeal, including the costs of this application, either:
(a) by payment into Court to the Senior Master of the sum of $17,000 by way of security; or
(b) by providing to the Prothonotary in a form acceptable to him security in that sum.
2. The appellant give that security by 4.00 pm on Friday 23 September 2011.
3. If the said security is not given by that time, the appeal shall stand dismissed with costs in the respondent's favour to be taxed on a party/party basis in default of agreement.
4. Pending the giving of the security, the appeal be stayed.
5. The costs of this application be costs in the cause.
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