Hoser v Pelley

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0031

RAYMOND HOSER	First Applicant
and
KOTABI PTY LTD (ACN 007 395 048)	Second Applicant
v
MARK DAVID PELLEY	Respondent

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JUDGES:	EMERTON P and J FORREST AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	18 January 2023
DATE OF JUDGMENT:	20 January 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 1
JUDGMENT APPEALED FROM:	[2021] VCC 1425 (Judge Smith)

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PRACTICE AND PROCEDURE – Application for leave to appeal – Security for costs – Impecuniosity – Applicable principles – Where delay in making application for security for costs – Where lack of evidence of financial position of applicants – Supreme Court (General Civil Procedure) Rules 2015 r 64.38(2) – Mikkelsen v Li [2022] VSCA 126; Wu v Bi [2022] VSCA 22, discussed – Application for security for costs dismissed.

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Counsel
First Applicant:		In person
Second Applicant:		No appearance
Respondent:		Mr I Robertson
Solicitors
Applicants:	-
Respondent:	Robertson Legal & Conveyancing Lawyers Pty Ltd

EMERTON P
J FORREST AJA:

Introduction and background

The first applicant, Raymond Hoser, is a professional snake catcher whose activities include catching and removing snakes found in suburban Melbourne, training dogs to avoid snakes, and staging snake and other reptile demonstrations at schools, school fetes and children’s parties.
Mr Hoser carries on his business through the second applicant entity, Kotabi Pty Ltd (‘Kotabi’). Mr Hoser is and was at all material times the sole director, secretary and shareholder of Kotabi.
The respondent, Mark Pelley, is also a professional snake catcher engaged in similar activities. His business competes with Mr Hoser’s business.
In or about 2017, Mr Pelley began to advertise his services online via Google, and subsequently via Facebook. This aggrieved Mr Hoser, who was of the view that the advertisements contained terms which were similar to, and in some cases identical with, registered trademarks owned by him. Mr Pelley disputed this. Mr Hoser began to publish allegations about Mr Pelley on Facebook and elsewhere accusing him of, among other things, trademark infringements, theft, scamming and violent sexual offending.
On 22 March 2019, Mr Pelley commenced a proceeding in the County Court of Victoria seeking damages (including aggravated damages) and a restraining order in respect of 17 publications that appeared on Facebook and other communications or social media sites during the period 5 April 2018 to 29 December 2019.
The trial of the proceeding commenced before Judge Smith sitting alone on 18 May 2021 and was conducted over 25 sitting days. Mr Pelley was represented by counsel and Mr Hoser appeared on behalf of himself. The trial judge, his Honour Judge Smith, refused Mr Hoser’s application to appear on behalf of Kotabi.
On 3 February 2022, Judge Smith published his reasons for judgment, finding in favour of Mr Pelley.[1] His Honour was not satisfied that all of the publications in issue were likely to enable a reasonable reader to identify Mr Pelley as the person referred to in them.[2] The judge found that those which did identify Mr Pelley carried a number of serious defamatory imputations.
[1]Pelley v Kotabi & Anor [2021] VCC 1425.
[2]See, eg, ibid [76], [81].
Mr Hoser, by way of defence, alleged that those imputations were true or substantially true. However, the judge rejected this and found that Mr Hoser and Kotabi had failed to establish that any of the imputations in the publications were ‘justified.
Judge Smith made orders on that date requiring that Mr Hoser and Kotabi pay to Mr Pelley the sum of $179,000 (comprising damages, aggravated damages and interest), and Mr Pelley’s costs on the standard basis to be determined by the Costs Court, in default of agreement between the parties.[3] His Honour did not consider that a restraining order was appropriate.[4]
[3]Ibid [299].
[4]Ibid [293].
On 4 April 2022, Mr Hoser and Kotabi filed an application for leave to appeal the decision and orders of Judge Smith. They advance a number of grounds of appeal involving a voluminous amount of material and relating to a lengthy and complex judgment. Essentially, he argues that a ‘serious miscarriage of justice’ was occasioned in the proceeding below because ‘the main findings [made] against the applicant were unavailable to the judge on the evidence’.
On 14 July 2022, Mr Hoser and Kotabi were granted an extension of time in which to apply for leave to appeal the orders of Judge Smith. At the hearing of the application for an extension of time, Mr Pelley’s counsel told the Court that he would be making an application for security for his costs of the application for leave to appeal and any appeal.
On 20 September 2022, Judicial Registrar Pedley ordered that, if Mr Hoser wished to amend his application for leave to appeal and/or his written case, he was to do so by 13 October 2022. He did not do so.
On 24 October 2022, Mr Pelley’s solicitors wrote to Mr Hoser and Kotabi expressing concern that Mr Hoser had on numerous occasions stated in court that he had no funds or spare cash and that Mr Hoser and Kotabi would be unable to satisfy a costs order made against them if the application for leave to appeal and any appeal is unsuccessful (the ‘October letter’). Mr Pelley sought, within 14 days, details of real estate, shares, superannuation and other assets owned by Mr Hoser and Kotabi, along with details of any liabilities and copies of tax returns for the financial years ending in June 2020, 2021 and 2022. This letter provided, with details, an estimate of Mr Pelley’s costs of the application for leave to appeal and any appeal in the amount of $72,057. It also included a demand for payment of the judgment debt in the County Court proceeding in the amount of $179,000 and required that security in the total amount of $251,057 be provided by 5.00 pm on 7 November 2022, in default of which an application for security for costs would be made to this Court.
We pause to observe that the demand for the payment of the judgment debt cannot form part of the demand for security. This should be the subject of a separate enforcement proceeding under O 66 of the County Court Civil Procedure Rules 2018.
On 30 November 2022, Mr Pelley (and his lawyers) were advised by the Court that Mr Hoser’s application for leave to appeal and, if leave was granted, the appeal, were fixed for hearing on 7 February 2023.
On 5 January 2023 (over two months after the demand for ‘security’ and scarcely more than one month before the hearing of the application for leave to appeal and the appeal), Mr Pelley filed an application for security for costs under r 64.38 of the Supreme Court (General Civil Procedure) Rules 2015 (the ‘Rules’). The application does not state the amount of security that is sought.
Together with written submissions, the application for security is supported by two affidavits:
(a)an affidavit sworn by Mr Pelley on 4 January 2023 in which he simply deposes to statements made by Mr Hoser in correspondence that his business is ‘virtually wiped out’, he has no ‘spare cash’ and can barely afford to feed himself or his animals, and he has no funds to pay any lawyer; and
(b)an affidavit sworn by Mr Pelley’s solicitor, Ian Robertson, on 5 January 2023, in which Mr Robertson deposes to Mr Pelley seeking security in the amount of $251,057, being the sum of estimated costs and disbursements of acting in the application for leave to appeal together with the County Court judgment debt.
In his affidavit, Mr Robertson deposes to having sent the October letter and to having received no response.
Neither Mr Robertson nor Mr Pelley depose to having carried out any investigations to establish the financial position of either Mr Hoser or Kotabi. It is apparent that Mr Pelley relies on the statements made by Mr Hoser himself and, implicitly, on Mr Hoser’s failure to respond to the demand for financial information contained in the October letter.
Mr Hoser (apparently on his own behalf and on behalf of Kotabi) has filed a notice of opposition to the application for security for costs, submissions in support of that notice and an affidavit sworn by him on 16 January 2023. None of this material contains any financial information.
The notice of opposition states that the application for security for costs is an abuse of process at a late stage of proceedings in that it seeks to prevent the ‘finalisation’ of an appeal. It advances the contention that Mr Pelley has not offered security for costs in the event that he loses the appeal, knowing that Mr Hoser has incurred substantial legal costs to date and Mr Pelly has no intention of ever paying those costs to Mr Hoser.
Among other things, Mr Hoser contends that it is contrary to the case law for Mr Pelley to be granted an application for security for costs at this late stage of the proceeding, that Mr Pelley sought security for costs in the Court of Appeal on 14 July 2022 ‘and was told by the judges at the time that they would not be likely to grant it’. According to Mr Hoser, Mr Pelley has reneged on an earlier undertaking to the Court, by filing the application for security for costs on 5 January 2023. He should not be given any latitude now.
Mr Hoser further asserts that his lack of funds was caused by the destructive actions of Mr Pelley, who used ‘next level methods’ to destroy the business that he had built up over 50 years. He submits that the lack of funds is not a legal basis to effectively strike out a valid appeal in respect of a ‘quite obviously defective’ County Court judgment. According to Mr Hoser, to order security for costs will stultify an appeal that has reasonable prospects of success.
Finally, Mr Hoser contends that the amount claimed by Mr Pelley is ‘questionable’. He refers to the fact that a Magistrate refused to make an order for costs in the amount of $10,000 in favour of Mr Pelley in November 2019, arising from criminal charges against Mr Pelley being dropped.
In his submissions in support of his notice of opposition, Mr Hoser revisits the issues litigated at trial in the County Court, relating to Mr Pelley’s alleged use of Mr Hoser’s trademarks and the steps allegedly taken by Mr Pelley to damage Mr Hoser’s business. He again submits, relevantly, that the application for security for costs has been brought on too late in the proceedings and asserts that Mr Pelley should be putting up security for his costs. He also argues that the amount claimed for security is questionable and that his lack of funds was caused by the destructive actions of Mr Pelley.
Mr Hoser’s affidavit essentially repeats these submissions.

Applicable principles

The application for security for costs is made under r 64.38 of the Rules, which states relevantly:
(2) A party may apply to the Court of appeal for an order—
(a)that the applicant or appellant give security for the costs of the application or appeal, and for the manner, time and terms for giving the security;
(b)that the application or appeal be stayed until security is given; and
(c)that, if the applicant or appellant fails to comply with the order to provide security within the time specified in the order, the application or appeal be dismissed.
To the extent that security for costs is sought against a corporation who is a party to the proceeding, the Court also has discretion to make an order for security under s 1335 of the Corporations Act 2001 (Cth).
The principles in relation to an application for security for the costs of an application for leave to appeal are well-established. They were recently summarised by this Court in Wu v Bi:
An order for security for costs of an application for leave to appeal is designed to ameliorate a risk that an unsuccessful respondent, put to the expense of defending a judgment in their favour, will be unable to recover costs against an unsuccessful applicant, being a risk which is unacceptable in all the circumstances. It is therefore essential to an application for security that the ‘nature and extent’ of that risk be identified. The party making the application for security bears the onus of establishing the matters which give rise to the risk. Usually, the risk is said to arise because the applicant is impecunious.[5]
[5][2022] VSCA 22, [10] (McLeish and Emerton JJA) (‘Wu’).
The power of the Court to order security for costs involves an exercise of discretion, informed by the following factors:[6]
(a)the prospects of success of the application for leave to appeal or appeal;
(b)the degree of risk that a costs order might not be satisfied;
(c)whether the giving of security would be oppressive in that it would stifle a reasonably arguable claim;
(d)whether any impecuniosity of the applicant arises out of the conduct complained of by the applicant;
(e)whether there are aspects of the public interest which militate against the giving of security; and
(f)whether there are particular discretionary matters peculiar to the circumstances of the case.
[6]Ibid [11]. See also Mikkelsen v Li [2022] VSCA 126, [11] (Kyrou and Walker JJA) (‘Mikkelsen’).
When considering factor (b), a finding that the applicant is impecunious is often a reliable basis for assessing whether a costs order might be satisfied in the future and the degree of that risk. However, it is not necessary that the applicant be presently impecunious.[7] Impecuniosity is significant but not decisive; it is one of the matters which may give rise to an unacceptable risk that a costs order would not be satisfied.
[7]Mikkelsen [2022] VSCA 126, [28]–[29].
In Mikkelsen v Li,[8] Kyrou and Walker JJA considered a number of cases which refer to ‘impecuniosity’ in the context of an application for security for costs. Their Honours stated that impecuniosity is a ‘convenient label to indicate that an appellant’s financial position is problematic’, rather than that they are actually insolvent.[9] The requisite impecuniosity may be satisfied where the applicant has cash flow difficulties and a perilous financial position,[10] or where the applicant has no assets or income,[11] or had previously been represented by lawyers on a pro bono basis.[12]
[8][2022] VSCA 126.
[9]Ibid [27].
[10]Ibid [24], citing Wu [2022] VSCA 22, [31].
[11]Ibid [23], citing Bodycorp Repairers Pty Ltd v Oakley Thompson & Co Pty Ltd [No 3] [2016] VSCA 185, [13], [20] (McLeish JA).
[12]Ibid [22], citing Penhalluriack v Farnell [2008] VSCA 250, [20], [22] (Dodds-Streeton JA, Kellam JA agreeing at [1]).
Where the evidence of the applicant’s financial position is incomplete or equivocal, the Court may draw an inference of impecuniosity. This may be in circumstances where the applicant has failed to provide requested financial information due to a desire to obscure an insufficiency of assets, or meet previous costs orders where amounts due have been agreed or fixed or assessed by a relevant court.[13] In assessing the applicant’s financial position, the Court may consider a judgment debt that is the subject of the application for leave to appeal as a liability in assessing the applicant’s financial position.[14]
[13]Wu [2022] VSCA 22, [14]–[16].
[14]Mikkelsen [2022] VSCA 126, [34]–[37]. See also Villella v Telstra Corporation Ltd [2014] VSCA 263, [39] (Kyrou JA, Ginnane AJA); Hii v Federal Commissioner of Taxation [No 3] (2016) 238 FCR 304, 310 [18]–[22] (Collier J); George 218 Pty Ltd v Bank of Queensland Ltd [2016] WASCA 56, [49]–[52] (Murphy JA); Xenos v FAL Healthy Beverages Pty Ltd [2017] NSWCA 240, [27] (Gleeson JA).

Discussion

The likely costs that will be incurred by Mr Pelley in the application for leave to appeal and any appeal are itemised in the October letter. As mentioned earlier, the letter contains a breakdown of the various items likely to be incurred in the defence of the application for leave to appeal and appeal, totalling $72,057.
For the reasons that follow, we consider it unnecessary to analyse in detail the factors concerning: (a) the prospects of success of the application for leave to appeal or appeal; (b) the degree of risk that a costs order might not be satisfied; (c) whether the giving of security would be oppressive in that it would stifle a reasonably arguable claim; and (d) whether any impecuniosity of the applicant arises out of the conduct complained of by the applicant.
This is because we have concluded that the application for security has been made too late. This security application has been listed and heard as a matter of some urgency, but less than three weeks before the date fixed for the hearing of the application for leave to appeal and the appeal. Even if Mr Hoser was minded and able to give the security, he would need to be given some time in which to gather the funds. A period of 28 days is conventionally allowed for the provision of security. In the meantime, preparation for the hearing of the application for leave to appeal and the appeal will need to continue right up until the day of the hearing itself, whether or not the security is provided.
In July 2022, Mr Pelley’s lawyers foreshadowed that an application for security would be made. The October letter was sent some three months later and it gave Mr Hoser until 7 November 2022 to respond. Mr Hoser did not respond to the October letter. It was also clear by 13 October 2022 that the proposed grounds of appeal were not going to change. On 30 November 2022, the application for leave to appeal and the appeal were listed for hearing on 7 February 2023. However, nothing further was done by Mr Pelley until 5 January 2023.
In the course of oral argument, the bench inquired of counsel for Mr Pelley whether there was some explanation for the delay in making this application, particularly once the hearing date had been set. Counsel (who is also Mr Pelley’s solicitor), frankly and commendably, took responsibility for the delay which he said was brought about by the Christmas break and the fact that his representation of Mr Pelley was on a ‘pro bono’ basis. He repeated the submission contained in his written case that if the delay was to be regarded as a significant factor then the hearing date could be adjourned.
The granting of an order for security is discretionary. Mr Pelley has left it far too late to make this application: the delay of nearly two months after the October letter is unacceptable, particularly in light of his and his lawyer’s knowledge of the February hearing date. In the circumstances, we decline to make the order sought. We also reject the suggestion that the hearing date be adjourned.
Furthermore, as discussed, the October letter has impermissibly conflated the estimate of costs and disbursements for the application for leave to appeal with the judgment debt. Mr Hoser was within his rights to decline to give security in the amount sought.
Given our conclusion that security should not be ordered, and given the impending hearing of the application for leave to appeal and, if leave is granted, the appeal, it is not appropriate to comment on the merits of the proposed grounds of appeal. We say no more than that the grounds remain disordered and difficult to discern. There appear to be a number of proposed grounds that are spurious, but we cannot conclude that they are all without merit.
As to whether Mr Hoser is impecunious, he has not provided any evidence of his financial situation, other than to assert that he has no ‘funds’ and that this is the fault of Mr Pelley. Whilst it may be inferred that it is likely that Mr Hoser will be unable to meet Mr Pelley’s costs of the appeal, this is not a foregone conclusion as there is no hard evidence about Mr Hoser’s financial position. In any event and given our conclusion as to the tardiness in making this application, it requires no further consideration.

Had this application been made in a timely fashion, we may have made an order for security for costs. However, it was not.
The application for security for costs is dismissed.
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[2023] VSCA 1

20 January 2023