Kabwand Pty Ltd v National Australia Bank Ltd

[1988] FCA 808

JUDGMENT No. ....-.. g.O&&g&

-IN THE FEDERAL COURT OF AUSTRALIA	)
)

QUEENSLAND DISTRICT REGISTRY	1	QLD. No.G355 of 1988
)
GENERAL DIVISION	1

BETWEEN:

KABWAND PTY. LIMITED

First Appellant

AND :

E.J.R. PASTORAL COMPANY PTY. LIMITED

Second Appellant

AND :

EDWARD PLANTAGENET SOMERSET	and
ELSIE JOY SOMERSET

Third Appellants

AND :

NATIONAL AUSTRALIA BANK LIMITED

Respondent

SPENDER J.

variations.

BR1 SBANE

20 December

In relation to these two motions, I can indicate at the

outset that I propose to grant both of the motions, with

FEDERFlL COUkT	REGISTRY	N o . 6 1 07 2295881
i .	*	'

2 .

In relation to the motion seeking a stay of the order

made by Neaves J. on 29 September 1988, the order that I propose to make today is that the order be stayed save that the bank is

entitled to go into possession of the two properties "Gunnadoo"

and "Glenhaven" pursuant to Order	No.3 of	the orders of his
Honour,

As to the application for injunctive relief concerning

the power of sale pursuant to the mortgages given over both of

those properties and over a number of the units at 17 James

Street, Toowoomba, I propose to make no order, but I grant

liberty to apply to this court.

ne to the respondent's motion that he appellants

provide security for costs, I think it appropriate in the

circumstances that security for costs be provided by the

appellants by 33. January 1989 in a sum which	I think has been
appropriately quantified at $15,000.00, and that in the event	of

security in that sum not being provided by that time, the appeal

should be dismissed.

I have come to these conclusions because, as indicated

by senlor eouneel for the National Bank, the authorities and the

relevant principles both in relation to the application for a

stay nd in respect of security for costs have b en

comprehensively canvassed in the submissions of senior counsel

for the appellants, and there is no substantial argument as to

the applicable principles. SufEice to say, I have had regard to the principles revealed in the authorities which have been cited to me, and it is unnecessary to refer to them again.

There are, however, several aspects to which I wish

expressly to refer	concerning the	application for security for
costs.

The first aspect relates to the observations made by

Brennan J. in __ Lucas v. Yorke (1984) 58 A.L.R. 20. That case was

-

concerned with circumstances by	no means the same as these,	and
it must be recognized that such differences can	be	important.
Brennan J. was	concerned with the	discretion conferred by 0.70
r.10	of the High Court Rules	to make an order for security for

costs.

A number of observations made by his Honour in that

decision have a	related relevance to	applications, such as the
one before this court, which	is an application that an order	the

subject of an appeal be stayed pending the determination of the

appeal, the appeal being one as of	right.	His Honour said at
p.21:-

“Mr. Lucas seeks an order for security for the

costs of the appeal on the grounds that the

appellants will be unable to meet the costs of the

appeal if their appeal should fail. The inability

of an appellant meet o he costs of an

unsuccessful appeal is a relevant factor in

exercising the discretion conferred by 0. 70, r.

10 of the Rules of this Court, but it is no more

than a factor to be weighed in all the

circumstances (DJE Construciions Pty.Ltd. v.

Maddocks (1981) 38 A.L.R. 185). The discretTon	is
not fettered by a	rule, such as the rule adopted

by the Court of Appeal in Hall v. Snowdon, Hubbard
h Co. [l899] 1 O.B. 593, Fhat security for costs

isdinarily ordered when a respondent shows that

the appellant, if unsuccessful; will be unable

through poverty to pay the costs of the appeal. The discretion under 0. 70, r. 10 is absolute, like the discretion under the High Court Procedure

Act

- 1903 (Cth.) considered by Rich J . i

Commercial Bank of Australia Ltd. (1920) 2“P C.L.R. V

289 . I would respectfully adopt what Rich J. said

(at 292), mutatis mutandis, to the discretion now

to be exercised:

'The legislature, however, has left

absolute discretion to the court, and

has	done	so	without	prescribing	any
rules	for	its	exercise.	In	these

circumstances no rules can be formulated

in advance by any judge as to how the

discretion shall be exercised. It

depends entirely on the circumstances of

each particular case. The discretion

must, of course, exercised be
judicially, which means that in each
case the Judge has to inquire how, on
the whole, justice will be best served,

whether by altering the amount and, if

so, to what extent, or by letting it

stand unaltered.'"

Brennan J. also observed at p.21:-

"It is an important consideration that the making

of an order for security for costs will

effectively shut out an appeal designed to recover

losses which have caused the appellants'

impecuniosity (see Farrer v. Lacy, Hartland & Co.

( 1 8 8 5 ) 2 8 Ch.D. 482 at 4 8 5 ) . That factor has

additional weight if the question on which the

appeal turns is an important question of law

appropriate for consideration by this Court. I do

not stress the importance of the question for
determination lest the public interest in the

resolution of that question override the interests

of the parties (cf. Kardynal	v. Dodek 119781 V.R.
414). "

In relation to taking that approach to the question of

security for costs, it has to be noted in the particular case

before this court that the making of an order f o r security f o r

costs on this material does not seem to me in any event

necessarily to result in the consequence that the appellants will

be shut out of their appeal. That consideration is an important

one. The position simply is that, notwithstanding that the

litigation involves questions which ave resulted in the

impecuniosity of the appellants	in the absence of the provision
of security for	costs, an unsuccessful appeal will mean simply

that the respondents to the appeal will suffer further losses and

be without remedy.

The second aspect of the principles and authorities to

which I wish expressly to refer concerns the approach adopted	by
the Court of Appeal of New South Wales in Alexander	v. Cambridge
Credit Corporation Ltd. (1985) 2 N.S.W.L.R.	685 on an application

for a stay of a judgment at first instance pending an appeal.

Most of the authorities to which the court's attention was

directed concerned the principles applicable where an application

for special leave	to appeal to	the High Court or the Privy
Council is sought.	That circumstance is a different one from	the

situation with which I am concerned.

Similarly, those authorities dealing with security for

costs relied on in submissions were concerned with the provision

of security by a plaintiff or applicant at first instance, and it

is not necessarily	the case that principles applicable	there
translate directly to a situation where	an applicant has had	his

day in court and has been unsuccessful and is seeking to appeal.

In Alexander's Case, the court consisted of Kirby J. as

president, and their Honours Hope and McHugh, JJ.. Contrary to those formulations which reflect rules which require exceptional

or 'special' circumstances, such as the rules applicable in the

Supreme Court of Victoria to applications for stays, the relevant

rule in New South Wales was Pt. 51, r . 10 of the Supreme Court

Rules 1970 (N.S.W.), which provided relevantly:-

"10. An ... appeal to the Court of Appeal shall not -

(a) operate as a stay of execution or of

proceedings under the decision of the court

below:

(b) invalidate any intermediate act or

proceeding, except so far as the Court of

Appeal may direct or, subject o any

direction of the Court of Appeal, as the

court below may direct."

The language of that rule is to be considered in

comparison with the	terms of 0. 52 r. 17	of the Federal Court
-	Rules which	provides:-

"(1) An appeal to the Court shall not -

(a) operate as a stay of execution or of

proceedings	under	the	judgment	appealed
from; or

(b) invalidate any intermediate act or

proceeding,

except so far as the Court or a Judge or the court

below may direct. If

A comparison of the rules indicates the close similarity

between the requirements and the nature of the discretion is
unfettered. It is similar to that discretion conferred on the
High Court under 0. 70 r. 10 permitting an order for security for

costs. It seems to me in those circumstances that I ought

properly to follow or adopt he conclusion of the Court of Appeal expressed at p. 694, where the court referred to recent decisions

of the Court of Appeal and said of those decisions:-

'...recent decisions of this Court, reflecting the

language of the rules and the frequency and nature
of appeals, have expressed the approach to be
taken without reference to the need for 'special'

or 'exceptional' circumstances to justify a stay.

Thus in Waller v. Todorovic (at 3 ) the court

merely pointedto the need for the party seeking a

stay to establish a reason therefor. To like

effect is the judgment of Mahoney JA (with whom

Moffitt P and Glass JA agreed ) in Re Middle

Harbour Investments Ltd. (In Liq) (Court of

Appeal, 15 December	1976, unreported). In that
case, Mahoney JA said this (at	2):

'Where an application is made for a stay of proceedings, it is necessary that the

applicant demonstrate an appropriate

case. Prima facie, a successful party

is entitled to the benefit of the

judgment obtained by him and	is entitled
to commence	with the presumption that

the judgment is correct. These are not matters of rigid principle and a court asked t o grant a stay will consider each

case	upon its merits,	but	where	an
applicant	stay	h s	n	for

demonstrated an appropriate case but has
left the situation in the state of
speculation or of mere argument, weight

must be given to the fact that the

judgment below has been in favour of	the
other party.'

Although i t is true that, in a number of more

recent decisions of the Court, reference has been

made to the requirement of 'exceptional' and

'special' circumstances, and although the same

requirement appears still to be observed in

Victoria, the general practice of the Court

conforms more closely to that stated by Mahoney

JA. In our opinion it is not necessary for the

grant of a stay that special or exceptional

circumstances should be made out. I is sufficient

that the applicant for the stay demonstrates a
reason or an appropriate case to warrant the

exercise of discretion in his favour."

It may be that there is a distinction without any

substantial difference, between the formulation	as expressed by
the Court of Appeal in	the Supreme Court of New South Wales and
those which called for	special or exceptional circumstances.

It seems to me that in this particular case, while the

matter, as I have indicated,	is by no means free of difficulty,
there are reasons which make it	just to grant a qualified stay of

the order of Neaves J., pending the determination of the appeal.

I am very conscious of the strength of the submissions

of senior counsel for the respondents concerning the exercise of

the discretion for a stay. It is a matter of serious concern

that there is damage or interest accruing at the rate of $500

each day, with very little prospect, in truth, of that being recovered by the bank should the appeal by the appellants be unsuccessful. There is also a real concern as to whether the

appeal will, realistically, be carried through, given the

information in evidence before me of the financial situation of

the appellants. In the face of that information, it is

understandable why there has been no offer for security for

costs. It is also a matter of serious concern in relation to the prospects of the appeal that almost all of the grounds relate to

matters of fact or matters of credit.

The fact of the matter, however, is that an appeal based

on those grounds is not by that fact consigned to automatic

dismissal, and there is evidence before me that counsel have

advised that there is a reasonable prospect of success. The

matter is supported, at least to a minor extent, by a finding by

the learned primary judge which seems to me to be of

significance, which is set out in	the reasons for judgment of
Neaves J. at page 75.3.	That finding is carefully expressed, a

matter of which I take note, but notwithstanding that, and the

express finding of non-inducement, there is at least a factual

basis giving some colour to	the opinion of counsel to which	the
material has referred.

The third matter raises the question of delay. I am

conscious of the factors of financial capacity which essentially lie behind both of these matters, and it would have been preferable all round if the matter could have been heard in the Full Court sittings of the Federal Court held here in early

December. I do not think, however, that there has been any disqualifying delay on the part of the appellants in not having the matter ready for trial at that time. It is necessary that an extensive record be prepared, having regard to the terms of the grounds of appeal, and the correspondence exhibited in these applications indicate that it would not have been possible to have had the matter heard earlier than in Sydney in February

1989.

The reasons why I think a stay is appropriate and just,

given those matters to which I have already made reference, are, first, that the present circumstances of the appellants has been the consequence of the transactions the subject of the appeal, and that there is a direct relationship between matters which are

sought to be canvassed on the appeal and the present difficulties

of the appellants.

Secondly, the thrust of the order of Neaves J., if put

into effect, would render an appeal nugatory. I qualify that

expressly by declining to stay that part of the order which

delivers possession of the two properties to the respondent to

the appeal. It seems to me that there is no reason why it would be just to prevent the bank from the fruits of its judgment as to possession of those properties and, if the appeal is successful,

I am sure that monetary compensation will be an adequate remedy

for the absence of possession pending the determination of the

appeal.

The third aspect which has troubled me has been the fact

that there is a very real connection between the impugned conduct

and the right of the bank to these properties. This is a case

which, in a very clear way, illustrates	the situation where there
is a connection between	the applicant's circumstances and the

subject matter of the litigation. If the appellants are

successful and a stay is not granted,	their	rights will, to a
large extent, be nugatory.	The inconvenience and damage	caused
to the bank	by the grant	of the stay are very serious matters

but, at the end of the day, I think that with the qualification that I have indicated, I ought to grant the stay that the motion seeks.

As for security for costs, the relevant principles have

already been referred to.	This is not a case where	the making of
an order will necessarily shut	the appellants out from	their
appeal. Having regard to	the figures in evidence,	I order

security to be provided by 4 p.m. on 31 January 1989 in the sum
of $15,000.00, as it seems to	me that that is a matter to which
the respondents are entitled as a	matter of justice and that,

failing that, the appeals should stand dismissed.

It cannot be right that the appellants are entitled to a free appeal, in the sense that, if they win, they win everything

and, if they lose, they lose n o t @ & ~ i ~ ~ t ~ ~ ~ & a ~ ~ not? pdr-dw

lost. pnges are a truc copy of reasons for the

judgment tiercin of HIS Honour
Mr. Jucfice Spender