McKessar v John Durham Pascoe as trustee for Samson Street Superannuation Fund
[2020] WASCA 106
•29 JUNE 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: MCKESSAR -v- JOHN DURHAM PASCOE as trustee for SAMSON STREET SUPERANNUATION FUND [2020] WASCA 106
CORAM: MURPHY JA
MITCHELL JA
HEARD: 26 JUNE 2020
DELIVERED : 26 JUNE 2020
PUBLISHED : 29 JUNE 2020
FILE NO/S: CACV 16 of 2020
BETWEEN: PAMELA MCKESSAR
Appellant
AND
JOHN DURHAM PASCOE as trustee for SAMSON STREET SUPERANNUATION FUND
First Respondent
BLADE BAY PTY LTD
Second Respondent
FILE NO/S: CACV 20 of 2020
BETWEEN: PAMELA MCKESSAR
Appellant
AND
JOHN DURHAM PASCOE as trustee for PHBB MURRAY STREET SUPERANNUATION FUND
First Respondent
BLADE BAY PTY LTD
Second Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: STEWART DCJ
File Number : CIV 1219 of 2017 and CIV 1220 of 2017
Catchwords:
Practice and procedure - Interim order - Application for security for costs - Application for stay of primary court orders - Turns on own facts
Legislation:
Nil
Result:
First respondent's application for security for costs granted
Appellant's application for stay of primary court orders granted
Category: B
Representation:
CACV 16 of 2020
Counsel:
| Appellant | : | In person |
| First Respondent | : | Mr M Rogers |
| Second Respondent | : | No appearance |
Solicitors:
| Appellant | : | In person |
| First Respondent | : | Michael Rogers & Associates |
| Second Respondent | : | No appearance |
CACV 20 of 2020
Counsel:
| Appellant | : | In person |
| First Respondent | : | Mr M Rogers |
| Second Respondent | : | No appearance |
Solicitors:
| Appellant | : | In person |
| First Respondent | : | Michael Rogers & Associates |
| Second Respondent | : | No appearance |
Case(s) referred to in decision(s):
Deverell v Peter Johnson Earth Moving Pty Ltd (1991) 32 FCR 268
Docklands Press v Stewart & Anor [2014] VSC 536
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Easy Stay Mining Accommodation Pty Ltd v Mt Morgans WA Mining Pty Ltd [2020] WASCA 86
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56
Hill v Zuda Pty Ltd as trustee for The Holly Superannuation Fund [2020] WASCA 87
Oze‑Igiehon v Rasier Operations BV [2017] WASCA 107
Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679
Smart v Power [2019] WASCA 106
Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168
REASONS OF THE COURT:
Introduction
This matter came to a hearing by way of an amended registrar's notice dated 20 May 2020 for the parties to attend on 26 June 2020 to consider (1) the first respondent's applications filed 12 May 2020 for security for costs in CACV 16 and 20 of 2020, and (2) the appellant's applications filed 18 May 2020 in CACV 16 and 20 of 2020 seeking that the orders of the primary court made in CIV 1219 and 1220 of 2017 be stayed.
The appeals are against an ex tempore decision of Stewart DCJ delivered on 3 February 2020 in CIV 1219 and 1220 of 2017 (primary decision). The primary decision concerned proceedings brought against the second respondent, Bladebay Pty Ltd (Bladebay) and the appellant, Pamela McKessar (Ms McKessar) by the first respondent, John Pascoe (Mr Pascoe) (1) in his capacity as trustee of the Samson Street Superannuation Fund (Samson Super Fund) (in CIV 1219 of 2017), and (2) in his capacity as trustee of the PHBB Murray Street Superannuation Fund (PHBB Super Fund) (in CIV 1220 of 2017). CIV 1219 and 1220 of 2017 were heard together. In the proceedings, Mr Pascoe sought payment of moneys that he had loaned to Bladebay as trustee of the Samson and PHBB Super Funds. Mr Pascoe also sought to recover the moneys from Ms McKessar as the alleged guarantor of the loans.[1]
[1] ts 410.
The judge entered judgment in favour of Mr Pascoe in both matters on 3 February 2020. Ms McKessar appeals against the judge's orders pursuant to the primary decision. Bladebay has not appealed and has not filed a notice of intention.
At the conclusion of the hearing on 26 June 2020, we made orders in each appeal to the following effect:
1.The appellant pay into court security for costs in the sum of $10,000.
2.The orders of the primary judge be stayed pending the determination of the appeal or earlier further order.
We said we would provide reasons subsequently, and these are our reasons.
The primary decision
Background
Mr Pascoe has 55 years' experience working as an accountant and auditor. He was 82 years of age at the time of the primary decision. Mr Pascoe is the trustee of the Samson and PHBB Super Funds.[2]
[2] ts 413.
Ms McKessar is a chartered accountant. At all material times, Ms McKessar was the sole director and shareholder of Bladebay.[3]
[3] ts 409.
Mr Pascoe and Ms McKessar met through accountancy and have known each other for approximately 25 years.[4]
2007
[4] ts 413.
In about 2007, Mr Pascoe agreed to provide various sums of money from the Samson Super Fund and the PHBB Super Fund to Ms McKessar.
The debt owed by Ms McKessar was documented in:
1.A document acknowledging the debt owed by Ms McKessar to the Samson Super Fund in the sum of $19,461 as at 30 June 2008, signed by Mr Pascoe and Ms McKessar. Interest and principal were to be paid on 31 December 2009 or such earlier date as shall be agreed upon between the parties to the agreement.[5]
2.A document acknowledging the debt owed to Mr Pascoe by Ms McKessar in the sum of $61,669 during the period 1 July 2008 to 28 February 2009 signed by Mr Pascoe and Ms McKessar. Interest and principal were to be paid on 31 December 2009 or such earlier date as shall be agreed upon between the parties.[6]
[5] ts 413.
[6] ts 413.
2008 discussions
In about mid-2008, there were some discussions between Ms McKessar and Mr Pascoe about changing the arrangement to the extent that the money would be loaned to Bladebay. It was proposed that the existing debt would be 'transferred' to Bladebay and that any future advances would be made to that entity.[7]
[7] ts 414.
The March 2009 documents
In March 2009, the parties executed four documents. The documents were prepared by Ms McKessar. Each document was signed by Mr Pascoe and Ms McKessar.[8]
[8] ts 414.
The first document, dated 1 March 2009, included the following:[9]
[9] ts 414 - 415.
I, John Durham Pascoe, as trustee for the [Samson Super Fund], confirm that $27,249 is the amount owed at 30 June 2008 by Bladebay ... This includes interest due from compounding prior to and including 30 June 2008 … Interest rate [is] 12.5% compounded annually …
[The interest and principal repayments are]:
(1) To 31 December 2009, interest to be added to [the] original principal to form a new amount of principal outstanding. The updated interest plus principal calculated at 31 December 2009 to be referred to as 'New Principal'.
(2) From 1 January 2010, interest on the outstanding balance of 'New Principal' to be paid monthly with the first payment due on 1 February 2010.
(3) Repayments of New Principal are to be made once per annum or such greater frequency as shall be mutually agreed. The minimum amount of annual payment shall be 2 per cent for the two years to 1 January 2012, 4 per cent for the three years to 1 January 2015, 6 per cent for the two years to 1 January 2017, 8 per cent for the four years to 1 January 2021 and 10 per cent for the four years to 1 January 2025. The aforesaid percentages are of the amount of the New Principal as at 1 January 2010.
This agreement supersedes any letters written by [Ms McKessar] acknowledging the receipt of funds and acknowledging the debt.
The second document, dated 1 March 2009, was to the effect that Mr Pascoe, as trustee for the PHBB Super Fund, confirmed that $152,621 was the amount owed as at 30 June 2008 by Bladebay, and that this included interest due or compounding prior to and including 30 June 2008. Again, interest was recorded at 12.5% compounded annually. The document contained the same terms as terms (1), (2) and (3) in the first document.[10]
[10] ts 415 - 416.
The third document, dated 15 March 2009, was to the effect that Mr Pascoe, as trustee for the Samson Super Fund, confirmed that during the period 1 July 2008 to 31 December 2009 he would lend Bladebay amounts up to $200,000 on the same terms as (1), (2) and (3) of the first document.[11]
[11] ts 416.
The fourth document, dated 15 March 2019, was to the effect that Mr Pascoe, as trustee for the PHBB Super Fund, confirmed that during the period 1 July 2008 to 31 December 2009 would lend Bladebay amounts up to $200,000 on the same terms as (1), (2) and (3) of the first document.[12]
[12] ts 416 - 417.
The guarantee and Ms McKessar's fax of 22 May 2009
There were certain discussions in which, according to Mr Pascoe, Ms McKessar offered a guarantee, following which Ms McKessar signed a note to Mr Pascoe and faxed it to him. The note included the following:[13]
[13] ts 425.
Hi John … I will … guarantee the Bladebay loans so that [it] is easier for you to collect[.]
May 2010 mortgages by Ms McKessar
In May 2010, three second mortgages in favour of Mr Pascoe were executed over properties owned by Ms McKessar known as the York property, the Woodlands Unit and the Ashby Property. The mortgages were witnessed by Mr Milne[14] and were unregistered.[15] Mr Pascoe subsequently lodged caveats over the Woodland Unit and the Ashby Property based on the mortgages executed by Ms McKessar over those properties.[16]
[14] ts 435 - 436.
[15] ts 434.
[16] ts 411.
Ms McKessar's defence
Ms McKessar was self-represented at trial.
Ms McKessar denied that any amount was due and payable by her.[17] She denied that there was any evidence that she had provided personal guarantees of the loans.[18]
[17] ts 410.
[18] ts 411.
Ms McKessar claimed that the funds provided to Bladebay were part of an equity arrangement which was established around March 2009. The advances made to it were treated as loans repayable at the discretion of Bladebay.[19]
[19] ts 411.
Ms McKessar also said that at no time was it ever suggested that she would be liable to repay anything relating to Bladebay. In fact, Bladebay was established so that Ms McKessar would not be personally liable.[20] Ms McKessar asserted that Bladebay was used by mutual consent of both parties, including Ms McKessar, so that limited liability would prevail. Further, Mr Pascoe deliberately made payments to a sole‑director company, without entering into any formal loan agreement.[21]
[20] ts 411.
[21] ts 411.
Ms McKessar also asserted that the mortgage documents used as a basis for the caveats lodged on her property were fraudulent.[22]
[22] ts 411.
The issues to be determined at trial
The judge considered the issues to be determined as:[23]
[23] ts 411.
1.What were the terms of the agreement for the loans to Bladebay?
2.Did the parties agree to vary the terms of the agreement?
3.Did Bladebay breach the terms of the loan agreement?
4.Did Ms McKessar guarantee the obligations of Bladebay?
The primary judge's findings as to liability
Findings on credit
The judge took into account that Ms McKessar was self‑represented.[24]
[24] ts 411 - 412.
The judge found that, while Mr Pascoe had little memory of some events, he was a credible witness and was 'steadfast and unshaken' in his evidence as to the critical matters in contest in the trial.[25]
[25] ts 438.
The judge found Mr Milne to be a convincing witness and accepted his evidence that he witnessed Ms McKessar's signature on the mortgage documents.[26]
[26] ts 438.
The judge found that Ms McKessar lacked credibility in relation to the critical matters in contest in the matter.[27]
[27] ts 438.
What were the terms of the agreement for the loans to Bladebay?
The judge preferred the evidence of Mr Pascoe to that of Ms McKessar in relation to the terms of the agreement for the loans to Bladebay from the superannuation funds.[28]
[28] ts 439.
Her Honour found that the terms of the agreement were those set out in the four signed loan documents referred to at [12] ‑ [16] above.[29] She did not accept Ms McKessar's evidence that she prepared those documents because Mr Pascoe needed something for the auditor. The judge found that the documents clearly set out the terms of the loan and the monthly repayments.[30]
[29] ts 441.
[30] ts 439.
The judge also accepted Mr Pascoe's evidence that he never agreed to Ms McKessar's version of the Bladebay arrangements.[31] Further, the judge described Ms McKessar as a sophisticated witness, an experienced businessperson and a chartered accountant of many years' experience. On this basis, her Honour did not accept that Ms McKessar would not have documented an arrangement that the loans would be repayable at Bladebay's discretion if such an arrangement existed.[32]
[31] ts 439 - 440.
[32] ts 440.
The judge found that the fact that Ms McKessar had, on one occasion, sought to obtain an extension for repayment of the loans further indicated that Ms McKessar's version of the Bladebay arrangement was to be rejected.[33]
[33] ts 440.
Did the parties agree to vary the terms of the agreement?
The judge found that the evidence of Mr Pascoe did not support a finding that the agreement had been varied in May 2010. Further, counsel for Mr Pascoe also conceded in his closing submissions that the evidence in this respect was slight.[34]
[34] ts 441.
Was there an implied term in the loan agreement that in default of payment, the balance is due immediately?
The judge referred to the decision of Deverell v Peter Johnson Earthmoving Pty Ltd,[35] where the Full Court of the Federal Court said:[36]
[35] ts 442; Deverell v Peter Johnson Earthmoving Pty Ltd (1991) 32 FCR 268, 273.
[36] ts 442.
There is no rule that an implication must be made, in a contract for payment of a debt by instalments, that, in default of any payment, the balance becomes due immediately. In some circumstances, a contention might be open that a right of acceleration is necessarily implicit[.]
The judge considered that there was no reason in this case to depart from the general rule. Her Honour found that the terms of the agreement, as documented in the four loan documents, established that Bladebay was obliged to repay the loans according to a defined schedule at the interest rate set out in those documents.[37]
[37] ts 442.
Did Bladebay breach the terms of the loan agreement?
Bladebay conceded at trial that no repayments had been made in accordance with the terms of the loan agreements except for a sum of $2,050 paid to Samson Super Fund and an offset of $7,500 in relation to each of the Samson and PHBB Super Funds.[38]
[38] ts 442.
Accordingly, her Honour found that Bladebay was in breach of the terms of the loan agreements for the repayment of the loans. Bladebay was obliged to repay the loans according to a defined schedule. Bladebay had failed to do so.[39]
[39] ts 442.
Did Ms McKessar guarantee the obligations of Bladebay?
The judge found that, around the period prior to 22 May 2009, (1) Mr Pascoe was being told to 'strengthen' his position in relation to the loans, (2) moneys were being advanced to Bladebay on a regular basis, and (3) Ms McKessar wanted Mr Pascoe, on behalf of the Samson Super Fund and the PHBB Super Fund, to continue to loan moneys to Bladebay.[40] In this context, the judge found that Ms McKessar orally guaranteed the obligations of Bladebay in relation to the loan agreements at a time before Ms McKessar's handwritten note dated 22 May 2009 (referred to in [17] above) was faxed to Mr Pascoe. Her Honour found that the handwritten note evidenced the oral guarantee in writing and satisfied s 4 of the Statute of Frauds (1677) (Imp).[41] The judge was also satisfied that Ms McKessar was the author of the handwritten note and that she understood what was in the note. The note did not simply replicate what Mr Pascoe had told her to write.[42]
[40] ts 443.
[41] ts 444.
[42] ts 444.
Her Honour noted that 'a guarantee which is supported by present or executory or future consideration can secure past debts'.[43] It was not in dispute that not all advances were past advances. Bladebay received moneys from the superannuation funds throughout 2009, in 2010, and there was one payment of $10,000 on 23 September 2011.[44]
[43] ts 445; referring to Docklands Press v Stewart & Anor [2014] VSC 536 [36].
[44] ts 445, 448.
The judge found that the ordinary meaning of the words in the note were unambiguous and meant, in effect, 'I will also guarantee the Bladebay loans so that it is easier for you to collect'.[45] The judge rejected Ms McKessar's construction of the handwritten note as merely a statement of future intention.
[45] ts 444.
The judge said that, in the circumstances as they existed shortly before May 2009, the word 'will' in the fax of 22 May 2009 expressed an 'immediate intention'. Her Honour said that the fax of 22 May 2009 'evidence[d] [Ms McKessar's] personal guarantee of the Bladebay loans … that she gave and Mr Pascoe accepted'.[46] Although not expressed in these terms, possibly on one view of her Honour's reasons, her Honour concluded that the fax of 22 May 2009 ought be construed as a statement to the effect that 'in accordance with our earlier oral agreement I will guarantee the Bladebay loans'.[47]
[46] ts 446.
[47] ts 444.
Accordingly, Ms McKessar was bound by the guarantee.[48]
[48] ts 448.
The mortgage documents
In relation to the mortgage documents, the judge was satisfied that they were valid and found that the documents related to the Bladebay loans, not Ms McKessar's personal loans.[49] Her Honour found that the giving of the mortgages further supported the conclusion that Ms McKessar had previously guaranteed the Bladebay debts.[50]
[49] ts 448.
[50] ts 446.
The appropriate final orders
Counsel for Mr Pascoe gave the judge a schedule of payments based on the four loan documents found by the judge to evidence the loans to Bladebay. Ms McKessar agreed with the calculations. The judge accepted that the Samson Super Fund was entitled to the sum of $455,692.30 with interest accruing at $105.58 per day from 29 January 2020, and that the PHBB Super Fund was entitled to the sum of $388,248.23 with interest accruing at $90.55 per day from 29 January 2020.[51]
[51] ts 448.
The judge's orders of 3 February 2020
On 3 February 2020, judgment was entered in CIV 1219 of 2017 for Mr Pascoe as trustee of the Samson Super Fund that:
1.[Bladebay] and [Ms McKessar] do pay to [Mr Pascoe] the sum of $453,220.20.
2.[Bladebay] and [Ms McKessar] do pay [Mr Pascoe's] costs to be taxed if not agreed.
On 3 February 2020, judgment was also entered in CIV 1220 of 2017 for Mr Pascoe as trustee of the PHBB Super Fund that:
1.[Bladebay] and [Ms McKessar] do pay to [Mr Pascoe] the sum of $388,700.98.
2.[Bladebay] and [Ms McKessar] do pay [Mr Pascoe's] costs to be taxed if not agreed.
Grounds of appeal
Ms McKessar has filed an identical appellant's case in CACV 16 and 20 of 2020. There are 13 grounds of appeal.
Ground 1 alleges that the judge erred in fact in finding that Mr Pascoe and Mr Milne were credible witnesses and that Ms McKessar was not.
Ground 2 alleges, in effect, that the judge erred in accepting the evidence of Mr Pascoe and Mr Milne, as their evidence allegedly conflicted on certain matters as to how the signatures of Ms McKessar and the witness came to be on the mortgage documents.
Ground 3 alleges, in effect, that the judge erred in not accepting Ms McKessar's denial of knowledge or recollection of the mortgage documents, and in not accepting that she had no contact with the witness 'for a good two to three years either side of when the documents were supposedly witnessed'.
Ground 4 alleges, in effect, that the judge erred in finding that the mortgage documents provided evidentiary support for the conclusion that Ms McKessar had provided a personal guarantee for the loans, when she should have accepted Ms McKessar's evidence that the documents were created by Mr Pascoe without Ms McKessar's knowledge.
Grounds 5 and 6 appear to be related complaints about the judge's acceptance of the evidence of Mr Pascoe and Mr Milne in relation to the execution of the mortgage documents. Ground 5 asserts that Ms McKessar had applied to the Supreme Court to have the caveats removed on the basis that the mortgage documents were fraudulent. The Supreme Court, in CIV 1058 of 2019, allegedly held that the caveats could remain until the District Court case was heard, and that Mr Pascoe was required to establish, in the District Court proceedings, that there was a debt which gave the caveats substance.
Ground 6 alleges that the judge erred by taking into account the mortgage documents upon which the caveats were based. Ms McKessar contends that it is clear from the Supreme Court decision in CIV 1058 of 2019 that the existence of the caveats should not have been taken as evidence that the debt existed, and that the caveats could only remain once the debt had been proven in the District Court proceedings, which is the subject of this appeal.
Ground 7 alleges that the judge erred in fact by accepting that Mr Pascoe would not continue making funds available to Bladebay without a personal guarantee, when Ms McKessar had denied giving a personal guarantee.
Ground 8 alleges, in effect, that the judge erred in that she should have found that Mr Pascoe 'use[d] devious means to give the impression of a personal guarantee', and had failed to give Ms McKessar the opportunity to withdraw from the loan arrangement between Mr Pascoe and Bladebay if she did not wish to give a guarantee.
Ground 9 alleges, in effect, that the judge erred by making a finding against the 'weight of commercial evidence' that persons of Ms McKessar's and Mr Pascoe's background as practising accountants would rely on a badly handwritten note as evidence of a personal guarantee.
Ground 10 alleges, in effect, that the judge erred by making a finding 'against the weight of commercial evidence' that mortgage security was given, as it made 'no commercial sense for [Ms McKessar] to agree to this some two years after the loan agreement was entered into'.
Ground 11 alleges that the judge erred in 'giving little weight' to Mr Pascoe's knowledge that Bladebay had limited liability.
Ground 12 alleges that the primary judge erred by allowing herself to be distracted from what was 'clearly false evidence' from Mr Pascoe as to audit requirements. This ground impugns Mr Pascoe's evidence that comments by the auditor of the superannuation funds were why he decided he needed security, and that the audit report needed to be qualified. Ground 12 alleges, in effect, that the court should have found that (1) Mr Pascoe's audit report was not qualified in relation to the loan to Bladebay, (2) the audit issue had no relevance to Mr Pascoe creating the mortgage documents, and (3) Mr Pascoe conceded that he wanted to change the nature of the loans 'from unsecured and no personal guarantee to secured with a personal guarantee'.
Ground 13 alleges that the judge erred in interpreting the meaning of the word 'will' in the handwritten note faxed on 22 May 2009. It alleges, in effect, that the faxed note of 22 May 2009 meant that Ms McKessar intended or would at some point in the future enter into or execute a guarantee, and that no such guarantee was subsequently entered into or executed.
Mr Pascoe's application for security for costs
The application and affidavits
Mr Pascoe's applications filed 12 May 2020 sought orders that (1) Ms McKessar pay Mr Pascoe the amount of $10,000 as security for costs of each appeal, and (2) Ms McKessar pay the costs of the applications as agreed or taxed.
An affidavit of Mr Pascoe's legal representative, Michael Rogers, sworn 1 May 2020 was filed in support of the application. Mr Rogers deposed that the application for security for costs was made on the bases that Ms McKessar does not have capacity to pay the costs against her should an appeal prove unsuccessful and that the appeal lacks prospects of success.[52]
[52] Affidavit of M Rogers sworn 1 May 2020 in support of the first respondent's application, par 4.
In support of the assertion that Ms McKessar does not have capacity to pay the costs against her should an appeal prove unsuccessful, Mr Rogers deposed that (1) Landgate searches conducted on 3 April 2007 and 26 June 2007 revealed that Ms McKessar owns two properties - the Woodlands Unit, which is her place of residence, and the Ashby Property, which is occupied by her son, (2) each of the properties is encumbered by a registered mortgage held by Westpac Bank, (3) he 'suspects' that there is little equity in the properties, (4) from conversations he has had with Ms McKessar, it is his understanding that she is working as a company auditor, (5) it is his belief that Ms McKessar is a low income earner, and (6) Ms McKessar paid a reduced fee in lodging the appeal as she is a holder of a health card.[53] An email from Ms McKessar informing Mr Rogers, relevantly, that she is on a Centrelink pension is annexed to the affidavit.[54]
[53] Affidavit of M Rogers sworn 1 May 2020 in support of the first respondent's application, par 5.1.
[54] Affidavit of M Rogers sworn 1 May 2020 in support of the first respondent's application, annexure C.
In email correspondence from 24 April 2020, Mr Rogers requested that Ms McKessar provide $20,000 as security for costs ($10,000 for each appeal). Ms McKessar refused and asserted that Mr Pascoe should be representing himself, rather than engaging a solicitor.[55]
[55] Affidavit of M Rogers sworn 1 May 2020 in support of the first respondent's application, par 8.1, annexure C.
On 2 June 2020, Ms McKessar filed an affidavit in CACV 16 of 2020 sworn 2 June 2020 in response to Mr Pascoe's applications for security for costs. Ms McKessar deposed in that affidavit (without annexing any financial documents) that she:
1.Is 'financially impecunious'.
2.Is partially retired, self-employed and currently earning an amount only sufficient to pay bills and meet commitments.
3.Has a COVID-19 deferral on the mortgage of her home.
4.Has savings of $400.
5.Has no superannuation.
6.Owns the unit where she resides (which appeared to be the Woodlands Unit) and the house that her son lives in (which appeared to be the Ashby Property), but that both properties are subject to mortgages with a net secured excess of $90,000 - $100,000. She expects that the net secured excess amount would drop to $20,000 as a result of the effect of COVID-19 on the property market.
7.Owns a car worth approximately $3,500, provided about $3,000 is spent on repairs.
Ms McKessar further deposed that (1) Mr Pascoe already has the benefit of caveats on the two land titles of the properties that she owns, (2) the value of the properties is unlikely to drop below the $10,000 being requested, (3) she has been advised by Mr Pascoe that Mr Rogers is representing Mr Pascoe for free, (4) Mr Pascoe has been the aggressor throughout the District Court proceedings, (5) Mr Pascoe should be representing himself, and (6) an order for costs would jeopardise the appeal proceedings.
There was also affidavit evidence before the court from Ms McKessar concerning her financial position in her affidavit sworn in support of her application for a stay (see [82] below). In that affidavit, Ms McKessar effectively stated (albeit, again, without annexing any financial documents) that:
1.her secured net asset position 'was likely to be zero with COVID‑19 issues relevant to asset sales'; and
2.her unsecured asset position 'is in the negative', but she has 'arrangements in place with all creditors to pay unsecured debt off'.
Mr Pascoe's submissions
On 9 June 2020, Mr Pascoe filed submissions in support of his applications for security for costs.
In relation to Ms McKessar's financial position, Mr Pascoe submitted that Ms McKessar is impecunious, and that she has admitted as much in her affidavit of 2 June 2020. Ms McKessar failed to mention that any equity in the properties that Mr Pascoe may benefit from is subject to the payment of the mortgages to Westpac Bank, and that he would not be able to exercise the right of a mortgagee to sell or foreclose without the consent of Westpac Bank. Overall, Mr Pascoe asserted that, should the appeal not succeed, he would receive the judgment sum at most but no costs due to the impecunious position of Ms McKessar.[56]
[56] First respondent's submissions in support of the first respondent's application, pars 4 - 5.
In relation to the prospects of success, Mr Pascoe submitted that the first six grounds of appeal will be unsuccessful on the basis that they do not impugn the finding of the primary court that Ms McKessar was a guarantor for the loans provided to Bladebay. Further, ground 7 is a mere denial that Ms McKessar agreed to provide the guarantee. Mr Pascoe submits that none of the other grounds of appeal have any prospects of success.[57]
[57] First respondent's submissions in support of the first respondent's application, par 6.
Mr Pascoe contended that it is irrelevant to his application for security for costs (1) if his solicitor is acting free of charge, (2) that he was the aggressor in the proceedings, and (3) that he is capable of self‑representation. Mr Pascoe submitted that he has expended legal and related costs in excess of $70,000 in relation to the District Court proceedings and has incurred disbursements in relation to the appeal. Mr Pascoe submitted that, if the appeal progresses to an appeal hearing, he will incur fees for counsel.[58]
[58] First respondent's submissions in support of the first respondent's application, par 7.
In relation to the amount of security to be ordered, Mr Pascoe submitted that the $10,000 requested would equate to approximately 20 hours of solicitor's work at the rate of $450 per hour plus GST, and would take into account interlocutory matters, as well as the appeal itself. The sum excluded disbursements such as counsel's fees and court costs.[59]
[59] First respondent's submissions in support of the first respondent's application, par 8.
The principles to be applied
The principles in relation to security for costs were outlined in George 218 Pty Ltd v Bank of Queensland Limited.[60] In summary:
[60] George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56 [41] ‑ [48]: see Oze‑Igiehon v Rasier Operations BV [2017] WASCA 107 [13]; Hill v Zuda Pty Ltd as trustee for The Holly Superannuation Fund [2020] WASCA 87 [42].
1.The power to order security is exercised to serve the interests of justice.
2.The discretion to order security is unfettered but must be exercised judicially. 'Special circumstances' do not have to be shown before an order for security for costs is made against an appellant.
3.An appellant's inability to satisfy a costs order should the appeal fail is generally a significant factor in favour of an order for security for costs. However, if the respondent has caused the appellant's impecuniosity, that may be a relevant countervailing factor.
4.Impecuniosity is not in itself generally the sole ground for the making of an order for security. Even where the appellant is impecunious, in all the circumstances, the interests of justice may properly be served by not making such an order.
5.Other factors generally include the appellant's prospects of success, whether the appellant would be shut out of the appeal if security for costs were ordered, and whether there has been any delay in the respondent filing the application for security for costs.
6.Ultimately, each case will turn on its own circumstances, and it is not possible to set out an exhaustive list of the relevant considerations.
7.Where security is ordered against an impecunious appellant, the amount ordered should not be greater than is absolutely necessary.
Disposition
On Ms McKessar's evidence she is 'financially impecunious'. It appears that she has no assets other than the Woodlands Unit and the Ashby Property. It was not in dispute that each of those properties is encumbered by way of a first mortgage to Westpac. Her evidence was to the effect that her net equity in the properties may be, in light of recent events, in the order of zero to $20,000. Also, she said that her asset position for unsecured creditors was 'in the negative'. Whilst she said that she had made 'arrangements' to pay off her creditors, there was no evidence as to the details of those arrangements.
On Ms McKessar's evidence, there is a real risk that the recoupment of Mr Pascoe's costs in the appeal (if he were successful and awarded costs) would ultimately depend upon access to the proceeds of sale of the properties, which in practical terms would most likely arise upon realisation of the properties by Westpac in accordance with its rights as first mortgagee. On her evidence, there was also real doubt as to whether there would be any equity in the properties to satisfy any order for costs in any event, and that her unsecured net asset position was 'negative'. The evidence accordingly points to an inability to satisfy a costs order should the appeal fail. That is a significant factor in favour of an order for security for costs. Also, there was no suggestion, or any basis upon which this court could find, that Mr Pascoe had caused Ms McKessar's impecuniosity.
Further, appeal grounds 1 ‑ 12 do not, on a necessarily preliminary view of them, appear to have any reasonable prospects of success. That is because fundamentally all of those grounds allege error by the judge in making findings which, to a substantial degree, were based upon an assessment of the credibility of Mr Pascoe and Mr Milne as witnesses, and the lack of credibility of Ms McKessar as a witness. The limited scope for appellate interference in that event is well known, and none of the grounds go so far as to suggest that the judge's findings are wrong by reference to incontrovertible facts or uncontested testimony, or because they are glaringly improbable or contrary to compelling inferences, or because the judge failed to use, or has palpably misused, her advantage as a trial judge.[61]
[61] Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [28] ‑ [29]; Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 [43]; Smart v Power [2019] WASCA 106 [104].
Ground 13 alleges an error in the interpretation of the faxed note dated 22 May 2009. Insofar as it raises for consideration the meaning of a document, the ground is not identical in character to grounds 1 ‑ 12. It may be accepted that this ground has reasonable prospects of success in the relevant sense. Nevertheless, even ground 13 requires the demonstration of error in the context that the judge construed the 22 May 2009 fax in light of her findings as to all of the circumstances existing as at May 2009. They included findings as to what the parties said or did based on the judge's assessment of the credibility of the witnesses, including the finding that an oral guarantee had been given prior to 22 May 2009.[62]
[62] ts 446.
Overall, on the arguments as advanced in the appellant's case and explained in this application, grounds 1 - 12 of the appeal appeared to have no reasonable prospects of success. The same could not be said for ground 13. Nevertheless it was not apparent at this stage that ground 13 could be characterised as having good prospects of success.
As to the amount of security, there was some suggestion, albeit without any evidence, that Mr Pascoe may not have to pay solicitors' fees. There is no basis to infer as a fact that he would not, at least if the appeal were successful. An amount of $10,000 is reasonable for security for costs in each appeal.
In all the circumstances, it seemed to us that it was in the interests of justice to order security for costs.
Ms McKessar's application for a stay of the primary court orders
The application and affidavits
On 18 May 2020, Ms McKessar filed an application in each appeal seeking that (1) the court grant a stay of the order of the judgment of the District Court in CIV 1219 and 1220 of 2017, (2) that costs be in the cause. The applications were supported by Ms McKessar's affidavit sworn 18 May 2020.
In addition to deposing to the financial matters referred to in [67] above, Ms McKessar's affidavit of 18 May 2020 indicated in effect, that (1) Mr Pascoe served her with a bankruptcy notice dated 13 March 2020 based on the judgment debt in CIV 2019 of 2017, (2) she applied to the Federal Court on 6 April 2020 for an order that the time for compliance with the bankruptcy notice be extended until the resolution of this appeal, (3) at a hearing before the Federal Court on 4 May 2020, Mr Pascoe, in effect, consented to a reasonable extension of time to enable Ms McKessar to apply for a stay of the District Court orders, and (4) the Federal Court proceedings were adjourned until 25 May 2020.
On 28 May 2020, Mr Pascoe's legal representative, Mr Rogers, filed an affidavit in response to Ms McKessar's affidavit of 18 May 2020. The affidavit annexed an order of Registrar Benter of the Federal Circuit Court dated 25 May 2020, adjourning Ms McKessar's application until 27 July 2020 and extending the time for Ms McKessar to comply with the bankruptcy notice until 27 July 2020 or until any earlier further order.
Ms McKessar's submissions
On 10 June 2020, Ms McKessar filed submissions in support of her applications for a stay of the primary court orders.
Ms McKessar submitted that if a stay of the primary court orders is not obtained, Mr Pascoe is likely to pursue his bankruptcy application, rendering Ms McKessar bankrupt. However, if a stay of the primary court orders is granted, this is likely to give the Federal Court grounds to defer the application of the bankruptcy notice until the appeal of the primary court orders is finalised.[63]
[63] Appellant's submissions in support of the appellant's application, pars 1 - 2.
Ms McKessar asserted (although there is no affidavit evidence of this) that she 'earns her living as a Registered Tax Agent and as a Registered Superannuation Fund Auditor both of which must be relinquished upon bankruptcy'. She also submitted that she would lose her membership of the 'Chartered Accountant of Australia and New Zealand'. Ms McKessar asserts that even if the bankruptcy is later cancelled, 'the damage inflicted cannot be undone'.[64]
[64] Appellant's submissions in support of the appellant's application, pars 3 - 5.
Ms McKessar submitted that she does not have any cash or superannuation to fulfil a security for costs order. However, she has offered to transfer a life insurance policy to Mr Pascoe with a payout value of $1 million. Mr Pascoe was open to this option if his son could pay the premiums; however, this arrangement did not eventuate.[65]
[65] Appellant's submissions in support of the appellant's application, pars 6 - 7.
The principles to be applied
The principles in relation to a stay pending the determination of the appeal were not in dispute. In general terms:[66]
[66] Easy Stay Mining Accommodation Pty Ltd v Mt Morgans WA Mining Pty Ltd [2020] WASCA 86 [133]; Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9]; Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [22].
1.The successful litigant is ordinarily entitled to enforce a judgment pending the determination of any appeal.
2.It is for the applicant for a stay to move the court to a favourable exercise of its discretion. Under s 15(3) of the Civil Judgments Enforcement Act 2004 (WA) this court may only make a suspension order if there are 'special circumstances' that justify doing so and in an application for a stay under the Supreme Court (Court of Appeal) Rules 2005 (WA) this is also a usual requirement.
3.The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation or whether a refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. This may shortly be described as requiring the court to consider whether the right of appeal will be rendered nugatory if a stay is not granted.
4.If it can be demonstrated that the right of appeal will be rendered nugatory if a stay is not granted, the stay will generally still be refused unless it can be established that the appeal has ultimately reasonable prospects of success.
5.Finally, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
Disposition
There is, it may be accepted, a real risk that if a stay is not granted, Ms McKessar may be made bankrupt, and that it is unlikely that a trustee in bankruptcy would prosecute the appeal for the benefit of Ms McKessar's unsecured creditors. Accordingly, it may be accepted that if a stay were not granted, the appeal would likely be rendered nugatory. Nevertheless, generally, a stay will not be ordered unless it can be shown that ultimately the appeal has reasonable prospects of success. Ms McKessar has not demonstrated that matter in relation to grounds 1 ‑ 12. However, as indicated earlier, ground 13 cannot be characterised at this stage as having no reasonable prospects of success, even though it may face considerable hurdles given that the construction of the document depended in part upon the judge's findings as to the surrounding circumstances, determined with reference to her Honour's assessment of the oral evidence of the parties.
As to the balance of convenience, there is no doubt prejudice to Mr Pascoe in being kept out of the judgment money, particularly given Ms McKessar's current financial position and the risk that her financial position may worsen. On the other hand, there is no evidence that Mr Pascoe urgently requires the funds at this stage.
Although there was no evidence of the matters referred to in [86] above, it may be accepted that bankruptcy would likely adversely affect Ms McKessar's capacity to work as an auditor, tax agent or accountant. Ms McKessar also referred to an offer to transfer a life policy to Mr Pascoe (see [87] above), but there was no evidence as to that, and that is not a matter which could be taken into account in the absence of evidence.
Further, the appellant has filed her appellant's case and Mr Pascoe has filed his answer. The appeal is advanced and could be expected to be heard, in the ordinary course, later this year or possibly early next year.
Finally, Mr Pascoe is of an advanced age, and the strains of litigation are also to be taken into account in this context.
Taking everything into account, it seemed to us that it was in the interests of justice to order a stay.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DM
Associate to the Honourable Justice Murphy29 JUNE 2020
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