Lawless v Mackendrick
[2014] WASCA 105
•15 MAY 2014
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: LAWLESS -v- MACKENDRICK [2014] WASCA 105
CORAM: NEWNES JA
HEARD: 20 FEBRUARY 2014
DELIVERED : 15 MAY 2014
FILE NO/S: CACV 94 of 2013
BETWEEN: KEVIN GERARD LAWLESS
Appellant
AND
ALASTAIR MACKENDRICK
PAMELA MACKENDRICK
First RespondentsCHRISTOPHER DEREK BLAKE
Second RespondentTHE KING AND I PTY LTD
Third Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :KENNETH MARTIN J
Citation :LAWLESS -v- MACKENDRICK [No 4] [2013] WASC 272
File No :CIV 1146 of 2006
Catchwords:
Practice and procedure - Security for costs of appeal - Relevant considerations - Turns on own facts
Legislation:
Supreme Court (Court of Appeal) Rules 2005 (WA), r 44(1)
Result:
Security for costs ordered
Category: B
Representation:
Counsel:
Appellant: Mr T Galic
First Respondents : Mr G A Rabe
Second Respondent : Mr A D Bereyne
Third Respondent : Mr P G McGowan
Solicitors:
Appellant: Galic & Co
First Respondents : Stables Scott
Second Respondent : Jackson McDonald
Third Respondent : DLA Piper Australia
Case(s) referred to in judgment(s):
Brundza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171
Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Lawless v Mackendrick [No 3] [2011] WASC 298
Mann v Dabelstein [2006] WASCA 176
Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
NEWNES JA: This is an application by the first respondents for security for the costs of the appeal. The application was filed promptly, some 20 days after the filing of the notice of appeal. The application was opposed by the appellant on the ground that such an order might stifle the appeal.
The background
It is appropriate, before turning to the specific issues which arise on the application, to outline briefly the relevant background to the appeal.
The appellant's claim arose out of a contract for the purchase by Curtin Hotels Pty Ltd of the Imperial Hotel in York from the first respondents. The appellant was the sole director of Curtin Hotels. Settlement of the sale occurred on 30 June 2000. The business was subsequently operated by Curtin Hotels, through the appellant, until 2005 when it failed. Curtin Hotels later went into liquidation and Curtin Hotels' alleged causes of action against the respondents in relation to the sale of the business were assigned to the appellant by the liquidator of Curtin Hotels. The appellant commenced proceedings against the respondents in February 2006 relying upon the assigned causes of action.
The appellant claimed, in substance, against the first respondents in deceit, or in the alternative, for negligent misrepresentation; against the second respondent, a financial consultant; and against the third respondent, a real estate agent, for alleged negligent misrepresentation.
In particular, it was alleged that the first respondents had falsely represented to Curtin Hotels that the business would make a profit of $120,000 per annum. That alleged representation was based upon a letter, dated 7 January 2000, from one of the first respondents, Dr Alastair Mackendrick, to a business agent, Ms Groves, who at the time was seeking (ultimately unsuccessfully) to list the business for sale. In the letter, Dr Mackendrick provided some information about the business, including the appointment of a new manager, and said that the first respondents were 'expecting a minimum of $120,000 profits per annum which we [the first respondents and their new manager] will share'. The appellant alleged that, on behalf of Curtin Hotels, he had been provided with a copy of the letter by Ms Groves in February 2000 and that in purchasing the business Curtin Hotels had relied upon the statement in it as to the profitability of the business. The appellant further alleged that when asked by the appellant about the profit prediction in the letter, the second respondent, Mr Blake, and third respondent, by its real estate representative, Mr Mulcahy, had each negligently endorsed it.
To a significant extent, at least, the case turned on the oral evidence at trial. On the issue of credibility, the primary judge considered that the appellant's evidence on controversial issues was 'generally unreliable' and that it could not be accepted unless it was independently supported by another reliable witness or a reliable document [87]. His Honour also concluded that the appellant was 'prone to fabricate evidence when it suited his purpose' [139]. Where the evidence of Mr Blake or Mr Mulcahy conflicted with that of the appellant in respect of relevant discussions, his Honour preferred the evidence of Mr Blake and Mr Mulcahy [178], [199], [213(25)]. His Honour described Dr Mackendrick's evidence as 'generally, measured and responsive' [159].
A critical issue in the case was whether the appellant, on behalf of Curtin Hotels, had received a copy of the letter of 7 January 2000 before settlement of the sale or only after settlement had taken place. On that issue, the primary judge noted that Ms Groves could not recall whether she supplied a copy of the letter to the appellant or when she would have done so, if she did [79]. The primary judge found that the appellant had not discussed the letter with either of the second or third respondents before settlement [217]. He accepted the evidence of Mr Blake and Mr Mulcahy in that respect. His Honour rejected the appellant's evidence that he received a copy of the letter in February 2000; he found as a fact that the appellant had first received a copy of the letter in 2005 [223] ‑ [225], [230] ‑ [231]. His Honour also accepted Dr Mackendrick's evidence that no financial information about the business was withheld from Curtin Hotels [213(17)].
The primary judge went on to say that if he were wrong in those findings, he was satisfied that the appellant placed no reliance on the letter as the appellant was confident of his own abilities as a hotelier; his key concern was turnover; and he had given evidence that he would always hire professionals to check any figures such as future profitability [232].
The appellant's claim against each of the respondents was dismissed and the appellant was ordered to pay the respondents' costs of the action to be taxed. I understand that the costs have not yet been taxed but it is clear that they will be very substantial, including, as they do, an interlocutory process which dragged on for some seven years (due primarily to the appellant's defaults: see Lawless v Mackendrick [No 3] [2011] WASC 298 [38]) and a 10‑day trial.
The appellant has appealed against his Honour's decision.
The relevant principles
Under r 44(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) (Court of Appeal Rules), the court has a very wide discretion to make an order for security for the costs of an appeal: Mann v Dabelstein [2006] WASCA 176 [16].
The purpose of an order for security for costs is protective, so as to ensure that the primary purpose of an award of costs (that is, indemnification of the successful party) is achieved: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [67]. There is an obvious injustice to a respondent who, having been successful on the merits at trial, is compelled to contest the matter for a second time without a probability of obtaining their costs if ultimately successful. In exercising the discretion to make an order for security for costs, however, the court seeks to achieve a balance between ensuring that adequate and fair protection is provided to the respondent, and avoiding injustice to an impecunious appellant by unnecessarily shutting them out of the appeal.
The factors which are relevant on an application by a respondent for security for the costs of an appeal cannot be stated exhaustively but will ordinarily include:
(a)whether the appellant is likely to be able to satisfy an order for costs if the appeal is unsuccessful;
(b)the appellant's prospects of success on the appeal;
(c)the fact the appellant has already lost at first instance on the merits, that being a circumstance which favours the exercise of the discretion in favour of an order for security for costs;
(d)whether the appellant would be shut out of the appeal if security for costs were ordered; and
(e)whether there has been any delay in the respondent filing the application for security for costs.
Where an order for security for costs is made, the amount of the security to be provided by an appellant must be related to the costs likely to be incurred by the respondent on the appeal, but the court does not endeavour to give a complete and certain indemnity to the respondent: Brundza v Robbie & Co [No 2] [1952] HCA 49; (1952) 88 CLR 171, 175. If the appellant is impecunious, the security ordered should not be greater than is absolutely necessary: Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1, 3 ‑ 4; Natcraft Pty Ltd v Det Norske Veritas [2002] QCA 241 [9].
The disposition of the application
The appellant's counsel did not concede that the appellant would be unable to meet any order for costs made against him but I am satisfied that is likely to be the case. Searches by the first respondents' solicitors have revealed that there is no land registered in the appellant's name and there is no indication that the appellant has significant assets of any other sort. The appellant has not responded to requests by the first respondents' solicitors for details of his financial resources. In his appeal notice, the appellant says he is applying for legal aid for the appeal and the appellant's explanation for his tardiness to date in pursuing the appeal is that he is reliant on obtaining the assistance of pro bono counsel for the appeal, as he is suffering personal financial hardship. (As to tardiness, an amended appellant's case including a schedule under practice direction 7.4 was not filed and served until 28 March 2014, some seven months after the filing of the appeal notice.)
The appellant did not adduce any evidence as to his financial position or the financial resources that might be available to him, but the appellant's counsel simply submitted that an order for security for costs 'might' stifle the appeal.
In support of the application, counsel for the first respondents also argued that the appeal had no prospect of success. All of the grounds of appeal, it was submitted, challenge findings of fact based on his Honour's assessment of the credibility of the witnesses, including his rejection of the appellant's uncorroborated evidence. Counsel referred to the well‑known dictum that when the decision of the trial court depends upon a resolution of a clash of critical oral testimony it will be difficult to show error unless there are factors such as incontrovertible facts or other uncontested testimony demonstrating error, or the findings are 'glaringly improbable' or 'contrary to compelling inferences' in the case: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [28] ‑ [29]. There was nothing, it was submitted, in this case capable of indicating error.
Counsel for the appellant accepted that the central issues on the appeal were the findings of fact by the primary judge that the appellant did not receive the letter before settlement and, if he did receive it, that he did not rely on it. He submitted, however, that putting aside questions of credibility, there was sufficient objective evidence on which his Honour should have found that the letter was received before settlement and relied upon by the appellant. The findings of the primary judge, it was submitted, were against the weight of the evidence.
It is impossible on what is before me to reach a firm view on the appellant's prospects of success on the appeal. But having considered the reasons for judgment of the primary judge and the appellant's grounds of appeal and written submissions, it is evident that the appellant's case on appeal is not without its difficulties. It depends upon overturning findings of fact. Some, at least, of the relevant findings of fact depended upon issues of credibility and in respect of his material findings of fact his Honour has given detailed reasons, which the appellant will have to demonstrate were erroneous if the appeal is to succeed. Suffice it to say that on a preliminary view, the appellant could not be regarded as having a strong case on appeal.
In summary:
(i)the first respondents have a judgment after trial in their favour;
(ii)the appellant is unlikely to be able to meet an order for costs if he is unsuccessful on the appeal;
(iii)while a firm view on the appellant's prospects of success on the appeal cannot be reached at this stage, on a preliminary view the appellant could not be regarded as having a strong case on appeal;
(iv)there has been no delay by the first respondents in bringing the application for security for costs;
(v)an order for security for costs might frustrate the appeal.
The exercise of the discretion to order security for costs requires the court to have regard to all the relevant factors, giving them such weight as it considers appropriate, and to consider where the interests of justice lie. In this case, having regard to the matters to which I have referred, I am satisfied that an order for security for costs should be made.
The amount of security
The first respondents have provided a draft bill of costs. The total amount of the bill is $35,606. That appears to be based on a one day hearing. The bill of costs includes, among other things, items for counsel's and solicitors' fees, respectively, for advising and appearing on the application for security for costs, and advising on and preparing the first respondents' answer. That would appear to exceed what is properly allowable under the scale of costs. In my view, having regard to the relevant scale of costs, an appropriate amount by way of security would be $20,000.
I will hear the parties on the date by which that security should be provided.
Conclusion
The appropriate orders are:
1.the appellant give security for the first respondents' costs of the appeal in the sum of $20,000 by a date to be fixed; and
2.unless the security is provided by that date the appeal as against the first respondents is dismissed.
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