Khneiger v Cookson - [2013] SASC 12

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
KHNEIGER & ANOR v COOKSON
[2013] SASC 12
Judgment of The Honourable Justice Stanley
1 February 2013
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - STAY OF PROCEEDINGS
Applications by the respondent for security for costs and for payment out of the Suitors fund - application by the appellant for a stay of enforcement of the original judgment.
Held: Order made that the appellants must provide security for costs in the amount of $20,000 - special circumstances exist - should the appeal be unsuccessful, the respondent faces the real prospect of being unable to recover costs from the appellants.
At a later hearing, the appellants indicated that they were unable to provide security as ordered.
Held: Order made for the payment of $6,258.97 to the respondent out of the Suitors fund.
Appeal dismissed - appellant has indicated that they are not in a position to provide security and will not be pursuing the appeal.
Supreme Court Civil Rules 2006 Rule 295, referred to.
Dagenham Nominees Pty Ltd trading as Banwell Marine Services v Gary Shanks [2011] SASC 163, applied.

KHNEIGER & ANOR v COOKSON
[2013] SASC 12
Civil
STANLEY J:
Introduction

There are two applications by the respondent. An application for security for costs and an application for payment out of the Suitors fund of an amount of $6,258.87 to the respondent.
Background
The respondent brought action in the District Court against the appellants for damages over the purchase of a snack bar business. The respondent succeeded at trial. The appellants appealed, and the Full Court allowed their appeal and remitted the matter for retrial.
An order was made that the appellants have the costs of the appeal. There was an interim allocator given in relation to those costs in the sum of $6,258.87. The respondent was required to pay that amount into Court as a condition for a stay of enforcement of the appellants’ claim for the costs of the appeal. She did so on 2 July 2010.
Subsequently there was a final allocator in relation to the costs of the appeal entered in an amount of $35,500.
On retrial in the District Court the respondent obtained a judgment in the sum of $54,000 plus interest and costs. The amount of interest is still to be determined by the District Court. The respondent is seeking interest in an amount of $62,000.
In addition, liability for the costs of the first trial and the quantum of those costs are yet to be determined.
On 28 September 2012 the appellants filed a notice of appeal from the judgment of the District Court in the second trial.
On 13 November 2012 the respondent effected service on the appellants of bankruptcy notices. The payment required under the Bankruptcy Notice is $18,500, being the amount of the District Court judgment less the amount of the allocator.
In the period subsequent to the reservation of judgment in the second District Court trial and the delivery of that judgment, the appellants disposed of property they owned at Wattle Park for an amount of $1,020,000. On the same day as settlement of the Wattle Park property, the first appellant purchased property at Beaumont as the trustee for the Khneiger Family Trust, for a purchase price of $515,000.
The first appellant in an affidavit sworn on 14 December 2012 deposes to his capacity to borrow the judgment sum of $18,500 albeit with some difficulty. Otherwise he asserts that he is unable to provide security for the costs of the appeal due to a lack of funds.
Security for costs
The respondent applies for an order for security for costs of the appeal to the Full Court.
By an affidavit of her solicitor, Brenton John Grant, he estimates the costs of the appeal likely to be incurred by the respondent capable of being recovered on a party/party basis if the appeal was dismissed to be an amount of $33,620.
The respondent brings the application for security on the basis that on the available evidence the appellants are unlikely to be able to satisfy any costs order made against them in the event the appeal was dismissed.
I am satisfied that is the case.
6SCR 295(1)(g) provides:
The Court may, in special circumstances, order that security be given for the costs of an appeal.
The operation of this rule was considered by Blue J in Dagenham Nominees Pty Ltd trading as Banwell Marine Service v Gary Shanks.[1]
[1] [2011] SASC 163.
His Honour considered that the correct approach to the application of 6SCR 295(1)(g) is that:[2]
1.impecuniosity of the appellant (at least in the case where the appellant is a company) can suffice to enliven the discretion of the court;
2.the mere fact that the appellant is impecunious does not mean that the discretion ought to be exercised in favour of granting security for costs (in the same manner as pursuant to s 1335).
[2] [2011] SASC 163 at [54].
His Honour reached this conclusion for the following reasons:[3]
1.It accords with, and applies, the decisions of the New South Wales Court of Appeal in Kennedy v McGeechan and Lall v 53-55 Hall Street, where the relevant rule and context were essentially identical to the present and which have been applied on at least three occasions in this Court.
2.The traditional general law approach described in Cowell v Taylor distinguished between actions at first instance (where impecuniosity did not justify an order for security) and appeals (which were an exception to that general rule).
3.The Full Court in Collins v Emacord Autos applied the traditional general law approach in the context of an application for security for costs at first instance and to a natural person.
4.The reference to “special circumstances” in the predecessor to r 194 was in a very different context to the reference in r 295(1)(g) in that it was the last and residual category after four more specific categories were enumerated, and those specific categories themselves included impecuniosity in paragraph (a) (impecuniosity plus nominal plaintiff) and (d) (circumstances authorised by statute, including s 1335 of the Corporations Act).
5.Rule 295(1)(g) uses the criterion “in special circumstances” as the sole criterion to cover every appeal in which security for costs may be sought. This will include both individual and corporate appellants and will also include any of the circumstances in which r 194 would be satisfied (eg appellant resident outside Australia, appeal brought for ulterior purpose etc).
[3] [2011] SASC 163 at [55].
While his Honour, in Dagenham, was addressing the position of an appellant who was a company rather than a natural person, I am satisfied that the same approach should be applied to the position of a natural person. In saying that, I do not overlook the traditional reluctance of courts to order security for costs against natural persons, but I consider that the operation of 6SCR 295(1)(g) is not intended to be confined to corporate litigants.
Applying those principles, the power of the Court to order security for costs is enlivened by the fact of impecuniosity. I am satisfied of the appellants’ impecuniosity.
If security is not ordered, the respondent confronts the prospect of a lengthy and complex appeal after a 10-day District Court trial, which itself followed a five-day District Court trial and a Full Court appeal. If successful in defending the proposed appeal to the Full Court, she faces the real prospect of being unable to recover the costs of that appeal from the appellants. I am satisfied that special circumstances exist. I am further satisfied that in the exercise of my discretion I should order security for costs.
In making an order I have regard to the intimation that there is some possibility of the appellants being able to raise the sum of $18,500. In the circumstances I take a broad brush approach to the question of the amount of security. I would make an order in the amount of $20,000.
Payment out
The respondent seeks an order for the payment out of the Suitors fund of the amount of $6,258.87. She does so on the basis that there is no longer any justification for that amount to be held in the Suitors fund, given the judgment in her favour in an amount which exceeds any liability she owes to the appellants for the costs of the appeal.
The appellants contend that it is premature to address this matter until such time as the fate of the appeal is decided.
I agree.
I am not prepared to make an order at this stage. I am prepared to reconsider the matter once the fate of the appeal is clear.
Further hearing on 1 February 2013
When this matter came back before me, the appellants indicated that they were not in a position to provide security, and would not be pursuing the appeals.
In the circumstances, I made the order sought by the respondent for payment of the sum of $6,258.97 out of the Suitors fund.
On the application of the respondent, which was not opposed by the appellants, I made an order dismissing the appeal.