Luc v Sazzi (SA) Pty Ltd - [2011] SASCFC 137

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Permission to Appeal in Private)
LUC v SAZZI (SA) PTY LTD
[2011] SASCFC 137
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Kelly and The Honourable Justice Kourakis)
16 November 2011
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - BY LEAVE OF COURT - GENERALLY
PROCEDURE - COSTS - SECURITY FOR COSTS - OTHER MATTERS
Application for permission to appeal to the Full Court in private - the action involves Sazzi (SA) Pty Ltd ("the company") and five defendants - the action arises out of the circumstances under which the first four defendants terminated the company's lease of a premises, and the fifth defendant acquired a lease of the premises from the first four defendants - a Master of the District Court made an order that Sazzi (SA) Pty Ltd provide security for costs in the amount of $28,000 - a Judge of the District Court allowed an appeal against the decision by the Master and set it aside - the Judge then ordered that one of the shareholders of the company, the present respondent, give a personal guarantee in respect of the costs of the fifth defendant - the Judge also ordered that the director give an undertaking not to dispose of assets - whether it was reasonably arguable that the Judge placed too much weight on a relevant consideration.
Held: the Court is generally reluctant to grant permission to appeal against interlocutory orders in civil proceedings, and in particular against orders relating to questions of costs - however, this particular case raises several issues of principle - firstly, it is arguable that the Judge placed too much weight on a relevant consideration, and it is reasonably arguable that the decision to allow the appeal was wrong, for the same reason - secondly, the interrelationship between the principles governing applications for security for costs against natural persons and the principles applicable to corporations in circumstances such as these warrants closer consideration.
Permission to appeal to the Full Court in private granted, subject to the appellant satisfying the Full Court that the appeal lies to the Full Court and not to a single Judge.
District Court Act 1991 (SA) s 43(2); Surpeme Court Civil Rules 2006 (SA) r 280, referred to.
Sazzi (SA) Pty Ltd v Chang & Ors [2011] SADC 120; Epping Plaza Fresh Fruit and Vegetables Pty Ltd v Bevendale Pty Ltd [1999] VSCA 43; [1999] 2 VR 191; Specialised Explosives Blasting and Training Pty Ltd v Huddy's Plant Hire Pty Ltd [2009] QCA 254; (2009) 259 ALR 387; Harper v Ariadne Australia Ltd [1984] 2 Qd R 523, discussed.

LUC v SAZZI (SA) PTY LTD
[2011] SASCFC 137
Full Court: Doyle CJ, Kelly and Kourakis JJ

THE COURT: The appellant has applied for permission to appeal against a decision by a Judge of the District Court.
The Judge allowed an appeal against a decision by a Master of the District Court. The order was made in proceedings in the District Court between Sazzi (SA) Pty Ltd (“the company”) and five defendants. The defendants are in two groups: the first four defendants, who were the landlords of the plaintiff, and the fifth defendant, who acquired a lease of the premises from the first four defendants, which premises were previously occupied by the plaintiff. It is the circumstances under which the first four defendants terminated the plaintiff’s lease, and the fifth defendant took over the premises, from which the action arises. The fifth defendant is the appellant.
The Master’s decision was that the company provide security for costs in an amount of $28,000. The Judge allowed the appeal against that decision, and set it aside. The Judge ordered that one of the shareholders of the company, the present respondent, give a personal guarantee in respect of the costs of the fifth defendant. The Judge also ordered that that director give an undertaking not to dispose of assets.
The Judge found as a matter of fact that neither the company, nor either of the two directors of the company (the other director was bankrupt) could meet an order for security for costs in the sum of $28,000. It is apparent from the Judge’s reasons that he put considerable weight on the circumstance that a guarantee had been offered by one of the two directors of the company. The Judge referred to a statement by Connolly J in Harper v Ariadne Australia Ltd [1984] 2 Qd R 523 at 532, to the effect that if an individual person who conducts his or her business through a company will “bring his own assets into play”, that might justify refusing an order for security for costs: reasons at [30].
The Judge said that the Master had erred in failing to consider the significance of this statement. The Judge then exercised afresh the power to grant security for costs. The Judge said that the claim made by the company was arguable; a factor in the company’s lack of funds was the actions of the defendants; that the proceedings would be stultified if a cash security were required, and the Judge referred to the circumstance that the shareholder had “pledged her personal guarantee”. The Judge was aware that the shareholder might lack the assets to make good that guarantee.
The Court considers that it is reasonably arguable that the Judge erred in giving the weight that he gave to the statement by Connolly J. That statement has been qualified or departed from in a number of cases. For example, in Epping Plaza Fresh Fruit and Vegetables Pty Ltd v Bevendale Pty Ltd [1999] VSCA 43; [1999] 2 VR 191 the Court denied that the statement by Connolly J supported a proposition that an order for security for costs should rarely be made when those who stand behind a company are prepared to pledge what they have. In Specialised Explosives Blasting and Training Pty Ltd v Huddy’s Plant Hire Pty Ltd [2009] QCA 254; (2009) 259 ALR 387 at [39] the Queensland Court of Appeal likewise emphasised that there is no general principle that when the shareholders of a company offer to be personally liable for its costs, an order for security for costs should not be made.
To say that is not to deny the relevance of the factor identified by Connolly J, when considering the exercise of the discretion or power to order security for costs. However, it is reasonably arguable that the Judge put more weight on this factor than was warranted, both in finding that the Master was wrong, and in allowing the appeal.
There are good reasons why this Court is reluctant to grant permission to appeal against interlocutory orders in civil proceedings, and in particular against orders relating to questions of costs. However, the present case does raise several issues of principle. First, it is arguable that at [29] of the Judge’s reasons he has given too much weight to the factor identified by him, and it is reasonably arguable that the decision to allow the appeal was wrong, for the same reason. A relevant circumstance is that the Judge recognised that the respondent may well be unable to make good her guarantee, a circumstance that some might think would have supported the appellant’s application.
Secondly, the interrelationship between the principles governing applications for security for costs against natural persons and the principles applicable to corporations in circumstances such as these warrants closer consideration.
Another factor calling for consideration is the prospect of further delay in the proceedings. To delay them is undesirable. The application for security for costs was first made more than two years ago. The fact that two years later the question of security for costs has still not been finalised is unfortunate. However, it appears that the company and the appellant have each contributed to the delay, in one way or another.
In all the circumstances, and subject to the point that follows, the Court considers this is an appropriate case for a grant of permission to appeal. The appellant should set down the appeal for hearing without delay.
The further matter is this. Section 43(2) of the District Court 1991 (SA) provides that an appeal against an interlocutory judgment given by a Judge lies to the Supreme Court constituted of a single Judge. It may be that the Judge’s decision to allow the appeal and to set aside the order made by the Master is an interlocutory judgment. This topic is not addressed in the application for permission to appeal. In that event, the appeal would lie to a single judge rather than to the Full Court. On this point we refer also to r 280 of the Supreme Court Civil Rules 2006 (SA). As no submissions have been addressed on the point, we do no more than draw attention to the possibility of a problem for the appellant.
The order of the Court is that permission to appeal be granted, subject to the appellant satisfying the Full Court that the appeal lies to the Full Court and not to a single Judge.
It is for the appellant to consider whether or not the appeal should be brought before a single Judge and whether to ask that it be referred to the Full Court. Either way, the appellant should ensure that the appeal be brought on for hearing as soon as practicable.