McVicar v S & J White Pty Ltd - [2006] SASC 233

SUPREME COURT OF SOUTH AUSTRALIA
(Applications Under Various Acts or Rules)
MCVICAR v S & J WHITE PTY LTD (TRADING AS ARAB STEED HOTEL)
[2006] SASC 233
Judgment of The Honourable Justice White
4 August 2006
PROCEDURE - COSTS - SECURITY FOR COSTS
Application pursuant to r 95.13 for the appellant to provide security for costs of appeal to the Full Court - requirement for "special circumstances" - whether discretion should be exercised - plaintiff claiming damages for personal injuries - impecuniosity held not to constitute special circumstances as the plaintiff's impecuniosity was alleged to result from the act of defendant which was the subject of the litigation - limited financial assistance provided by WorkCover, in conjunction with the plaintiff's impecuniosity, held not to constitute special circumstances - discretion to order security not enlivened - application refused.
Supreme Court Rules 1987 (SA), r 95.13; Workers Rehabilitation and Compensation Act 1986 (SA), s 54; District Court Act 1991 (SA), s 43; WorkCover Corporation Act 1994 (SA), s 13; Social Security Act 1991 (Cth), s 1166, s 1167, referred to.
Baulderstone Pty Ltd and Others v WorkCover Corporation and Another (1995) 64 SASR 519; Fletcher v Federal Commissioner of Taxation (1992) 110 ALR 233; Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; Cowell v Taylor [1885] 31 Ch D 34; Kennedy v McGeechan [1978] 1 NSWLR 314; Archer Pty Ltd v Woodhead Australia Pty Ltd [1995] SASC 5020; Citicorp Australia Ltd & Ors v Cirillo & Anor (2003) 228 LSJS 132; Foxgold Pty Ltd v Paterson [2005] SASC 376; Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310; Rourke v White Moss Colliery Company 1 CPD 556; Farrer v Lacy, Hartland, & Co [1885] 28 Ch D 482; de Groot v The Nominal Defendant [2004] NSWCA 88; Wood v Merck Sharp & Dohme (Australia) Pty Ltd (2000) NSWDDT 8; Octocane Pty Ltd v SRJ Property Development Pty Ltd and Another (1999) 74 SASR 471; The Shed People Pty Ltd (In Liq) v Turner [2003] SASC 404; Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1; John Arnold's Surf Shop Pty Ltd (In Liq) v Heller Factors Pty Ltd and Allert (1979) 22 SASR 20; Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 121 ACLR 616; Newtrend Pty Ltd v Oceanic Life Limited [1990] WAR 1, considered.

MCVICAR v S & J WHITE PTY LTD (TRADING AS ARAB STEED HOTEL)
[2006] SASC 233
Civil

WHITE J. This is an application that the appellant provide to the respondent security for the costs of his appeal to the Full Court.
The application is bought pursuant to Rule 95.13(b) of the Supreme Court Rules 1987 which provides that the Court “may if there are special circumstances order that such security as the Court thinks fit be given for the costs of the appeal”.
The respondent accepts that it must demonstrate the existence of “special circumstances” in order that the Court’s discretion to order security be enlivened. It was accepted (correctly in my opinion) that Rule 95.13 involves a two-stage process: proof by the respondent of the existence of special circumstances, and when that is established, an exercise of a discretion by the Court as to whether security should be ordered.
Background Circumstances
The appellant suffered serious injuries in an industrial accident at the respondent’s premises on 13 September 1999. He was there in his capacity as an employee of a Mr Keough who was carrying out a contract to clean a kitchen canopy.
The appellant sued the respondent in the District Court seeking damages. An order was made that the liability aspects of the plaintiff’s claim be heard and determined in advance of the damages aspects. By a judgment delivered on 8 May 2006, the plaintiff’s claim was dismissed.
The appeal to this Court is brought from that decision.
The appellant claimed and received substantial amounts of compensation in respect of his injuries from WorkCover Corporation of South Australia (“WorkCover”) pursuant to the Workers Rehabilitation and Compensation Act 1986 (SA) (“WRCA”). By notice dated 2 June 2003, WorkCover’s claims agent gave notice of an intention by WorkCover to recover, pursuant to s 54(7) of the WRCA, a sum in excess of $500,000 in respect of compensation paid and payable under the WRCA. The appellant has continued to receive payments of income maintenance from WorkCover since June 2003 so that it is probable that WorkCover may now assert an entitlement to recover, pursuant to s 54(7), a much increased amount.
WorkCover instituted its own proceedings seeking to enforce its claim to recovery. Those proceedings were instituted in the Workers Compensation Tribunal on 12 September 2002 but discontinued on 22 January 2003. However, in December 2005, and only shortly before the hearing of the appellant’s claim in the District Court commenced, WorkCover obtained an order reinstating its proceedings.
Section 54(7) of the WRCA provides:
(7) Where—
(a)compensation is paid or payable to a person (the injured party) under this Act;
(b)the injured party has received, or is entitled to, damages from another person (the wrongdoer) in pursuance of rights arising from the same trauma as gave rise to the rights to compensation under this Act;
(c)the person by whom the compensation is paid or payable under this Act (the claimant) is entitled to recover the amount of the compensation by virtue of subsection (5) or (6),
then the following provisions apply:
(d)the claimant is entitled to recover the amount of compensation paid or payable under this Act from the wrongdoer or the injured party but subject to the following qualifications:
(i) no amount may be recovered from the wrongdoer in excess of the wrongdoer's unsatisfied liability to the injured party; and
(ii) the claimant must exhaust its rights against the wrongdoer before recovering against the injured party; and
(iii) no amount may be recovered from the injured party in excess of the amount of the damages received by the injured party;
(e)the claimant shall, on giving notice to a wrongdoer of an entitlement to recover compensation under this section, have a first charge, to the extent of the entitlement, on damages payable by the wrongdoer to the injured party;
(f)any amount recovered by the claimant against a wrongdoer under this subsection shall be deemed to be an amount paid in or towards satisfaction of the wrongdoer's liability to the injured party;
(g)an action for the recovery of compensation under this subsection—
(i)may be heard and determined by the Tribunal (constituted of a presidential member); and
(ii)must be commenced within 3 years after the date of the trauma referred to in paragraph (b).
The effect of the notice issued by WorkCover’s agent, and of the institution of the proceedings by WorkCover, is that it has a first charge on any damages which the appellant may recover in the present proceedings.[1] This means that if the respondent is ultimately found liable to the plaintiff, it will have to pay to WorkCover the amount of its proper claim before making any payment of the damages to the plaintiff. If despite that obligation, the plaintiff does receive payment of the damages in full, he will be obliged to pay to WorkCover the amount of its proper entitlement from those damages.
[1] Baulderstone Pty Ltd & Others v WorkCover Corporation and Another (1995) 64 SASR 519.
In practical, if not legal, terms the fate of WorkCover’s own recovery action against the respondent in the Workers Compensation Tribunal is likely to be determined by the outcome of the appellant’s claim against the respondent in the present proceedings.
Appellant’s Agreement with WorkCover
WorkCover’s solicitor has informed the respondent’s solicitor that WorkCover has agreed to pay the fees incurred by the appellant in retaining senior counsel in relation to the appeal. The respondent accepts that there is no other agreement in relation to costs between WorkCover and the appellant in relation to the matter.
Special Circumstances and the Impecuniosity of the Appellant
The respondent submits that special circumstances for the purposes of Rule 95.13 should be found to exist in the present case because the appellant is impecunious and because he has the benefit of an agreement with WorkCover concerning the payment of counsel fees.
In asserting that the appellant is impecunious, the respondent relies upon statements made by the appellant’s counsel in opening the District Court trial to the effect that the appellant had, in the past, been bankrupt and that between 1996 and his injury in 1999 he had been in receipt of unemployment benefits. The District Court was told that the appellant had commenced working with Mr Keough only shortly before the subject accident. He had been paid $70.00 for each job he performed which, on average, had been one per month. The respondent also pointed to the liability of the appellant to it for the costs of the District Court trial. The respondent quantified those costs at $80,000 (of which $31,000 was for counsel fees). Finally, it pointed to the absence of any assets held by the appellant to which recourse might be had by the respondent to satisfy the order for costs which it already held and any further order for costs in its favour which might be made at the conclusion of the appeal.
Initially Mr Milte, who appeared for the appellant, disputed the characterisation of the appellant as impecunious. He referred to the receipt by the appellant of income maintenance from WorkCover at the net rate of $341.00 per week. Mr Milte acknowledged, however, that the appellant did not have the means, if called upon to do so, to meet the likely costs of the appeal of the respondent as well as the costs of the respondent in relation to the District Court trial. In addition, in an affidavit sworn in connection with the present application, the appellant said:
I am concerned that if an order was made that I pay into court the sum of $23,000.00 as security for the respondent’s costs of appeal and I was not able to raise that sum, then that would preclude me from maintaining my genuine appeal.
Accordingly, although the appellant is not impecunious in the sense of having no money at all, I am satisfied that he is impecunious in the sense in which that expression is relevant for the purposes of a security for costs application, namely, that he lacks the means himself to meet the order for costs which would probably be made against him in the event that he is unsuccessful on the appeal.
There are authorities which suggest that, as a general rule, the impecuniosity of an appellant ought not be regarded as a special circumstance enlivening the discretion to order security for costs of an appeal. Many of those authorities were reviewed by Hill J in Fletcher v Federal Commissioner of Taxation[2] and by the Court of Appeal in New South Wales in Transglobal Capital Pty Ltd v Yolarno Pty Ltd.[3]There are also authorities to the opposite effect, many of which were also reviewed in Transglobal Capital Pty Ltd v Yolarno Pty Ltd.[4] It is not necessary to repeat that review.
[2] (1992) 110 ALR 233.
[3] [2004] NSWCA 136 at [28], (2004) 60 NSWLR 143 at 149-150.
[4] Ibid at [29].
The authorities show the attempts by the Courts to balance a number of considerations. The first is that litigants should not be precluded by reason of their lack of means from access to the Courts to enforce their rights. The second is that, in general, a successful party should be able to enforce the orders for costs made in its favour, and a third is that, in general, one party should not be able to engage another in expensive litigation without being at risk for the costs of that litigation in the event that he/she is unsuccessful.
The tension between these two positions is seen in the oft quoted passage from the judgment of Bowen LJ in Cowell v Taylor:
The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also, I believe, in equity. There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty’s Courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another. There is also an exception introduced in order to prevent abuse, that if an insolvent sues as nominal plaintiff for the benefit of somebody else, he must give security … Those are the common cases, I do not say that there may not be others.[5]
[5] (1885) 31 Ch D 34 at 38.
To similar effect is the following passage from the Full Court of the New South Wales Supreme Court in Kennedy v McGeechan:
The impecuniosity of an appellant may constitute a “special circumstance” leading the Court to order security, in that it is a circumstance which may deprive or delay a respondent receiving his costs of the appeal, if the appeal fails, which costs a successful respondent can usually expect he will actually receive. In an appellate situation, a respondent seeking security is in a stronger position than a defendant at first instance, to the extent that he has a decision in his favour, which is presumably right until displaced.
However, impecuniosity may not conclude the matter. Considerations of possible frustration of an apparently genuine appeal or concerning the subject matter of the appeal, such as appeals involving matters of great moment or the liberty of the subject, may provide reasons to refuse an order. The foregoing observations are made not to circumscribe the discretion, but in order to indicate its width.[6]
[6] [1978] 1 NSWLR 314 at 315.
Decisions of single judges of this Court are to the effect that impecuniosity by itself may, in some circumstances, constitute “special circumstances” for the purposes of Rule 95.13. That was the position adopted by Lander J in Archer Pty Ltd v Woodhead Australia Pty Ltd[7] when, after referring to the authorities mentioned above, he said that he would approach the matter “upon the basis that depending upon the circumstances of the case, impecuniosity may constitute special circumstances” (emphasis added).[8] Similarly, in Citicorp Australia Ltd & Ors v Cirillo & Anor[9] Sulan J concluded that “impecuniosity alone can amount to special circumstances” (emphasis added).[10] The decision of Perry J in Foxgold Pty Ltd v Paterson[11] is to similar effect.
[7] [1995] SASC 5020.
[8] Ibid.
[9] [2003] SASC 204; (2003) 228 LSJS 132.
[10] Ibid at [23].
[11] [2005] SASC 376 at [9].
Decisions in New South Wales have also emphasised that the existence of special circumstances is a matter to be determined in the circumstances of each case.[12]
[12] Kennedy v McGeechan [1978] 1 NSWLR 314 at 315; Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 at 312; Transglobal Capital Pty Ltd and Another v Yolarno Pty Ltd [2004] NSWCA 136 at [20]-[33], (2004) 60 NSWLR 143 at 148-151.
In the particular circumstances of this case, I do not regard the appellant’s impecuniosity as constituting special circumstances for the purposes of Rule 95.13. Two interrelated factors lead me to that conclusion. First, the plaintiff’s allegation is that he has suffered a major loss of his earning capacity by reason of a tort by the respondent. The Courts have not generally required plaintiffs whose impecunious state results (or is alleged to result) from the act of the defendant which is the subject of the litigation to give security for costs in order that they might enforce their claims.[13]
[13] See also Rourke v White Moss Colliery Company 1 CPD 556; Farrer v Lacy, Hartland, & Co [1885] 28 Ch D 482.
The second is that claimants for damages for personal injury have generally been understood as being in a special category.[14] In de Groot v The Nominal Defendant, Handley JA said that it was “practically unheard of” for a plaintiff/appellant in personal injury cases to be ordered to provide security.[15] He described the ordering of security in such cases as “contrary to the long established practice of the Court”.[16] I also note that in Wood v Merck Sharp & Dohme (Australia) Pty Ltd, O’Meally P said:
I do not know of, nor have counsel been able to refer me to, any case in which an order for security of costs has been given in a personal injury case.[17]
The reluctance of Courts to order security for costs in personal injury claims may be because impecuniosity of a personal injury litigant is an ordinary, rather than special, circumstance, or because the majority of personal injury damages claims are defended on behalf of defendants by insurers exercising rights arising under insurance contracts and are therefore, in reality, forensic contests between injured individuals on the one hand, and substantial financial corporations on the other. Alternatively, it may be because the Courts have recognised the special interest of those whose physical or mental integrity has been compromised by injury to vindicate their rights. Alternatively again, it may be because personal injury claims are a common illustration of the type of case mentioned earlier, namely, cases in which the plaintiff’s impecuniosity results (or is alleged to result) from the very conduct of the defendant of which the plaintiff complains in the action. It may result from a combination of these factors.
[14] Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) NSWCA 136 at [16]-[17]; (2004) 60 NSWLR 143 at 147.
[15] [2004] NSWCA 88 at [29].
[16] Ibid at [30].
[17] (2000) NSWDDT 8 at [19]; (2000) NSWCCR 270.
Mr Robertson, for the respondent, accepted that the special position of personal injury claimants is relevant to claims for security for costs in respect of first instance trials. However, he submitted that those considerations were not so important after a trial when a plaintiff is seeking to exercise rights of appeal. Mr Robertson relied in particular on the passage from Bowen LJ in Cowell v Taylor quoted above. There may be cases in which an obdurate plaintiff may be said to be “dragging” a defendant through multiple Courts in seemingly endless litigation, but it cannot realistically be said that this is such a case. The plaintiff is exercising a right of appeal from a first instance decision.[18] Mr Robertson eschewed any submission that the appeal was not made bona fide or that it was altogether without merit. It was not suggested that there was any element of vexation or abuse about the appeal. On the contrary, on the basis of Mr Milte’s submission, it appears that there are some matters of substance which the appellant wishes to agitate. I am unable to see any reason why the approach of the Court to security in the case of personal injury claims should not be applied in the present case. In my opinion, the matters which underpin the approach of the Courts to applications for security in personal injury claims have force at the appellate level as well as at first instance.
[18] District Court Act 1991 (SA), s 43.
For these reasons, I am not prepared to hold that the present appellant’s impecuniosity, considered by itself, constitutes special circumstances within the meaning of Rule 95.13. This is not say, however, that there may never be cases in personal injury litigation in which an order for security would be appropriate. It is possible to imagine circumstances in which it may be appropriate. Generally though one would expect that impecuniosity of the plaintiff would not, by itself, be sufficient to constitute “special circumstances”.
The Position of WorkCover

Mr Robertson submitted that the financial interest of WorkCover in the outcome of these proceedings and the financial assistance which it is providing to the appellant in connection with the appeal constituted, in conjunction with the appellant impecuniosity, special circumstances. He referred to a passage in the judgment of the New South Wales Full Court in Kennedy v McGeechan:
If the rights of the other persons may be affected and they have an interest in this litigation, or are aiding the respondent with his own costs, this provides a reason why an order should be made, rather than why it should not be made. Those who seek some benefit from the proceedings, should share the risk of an adverse order for costs.[19]
[19] [1978] 1 NSWLR 314 at 316.
Further, it is well established that when a litigant claims that the effect of an order for security will be to stifle or stultify the litigation by reason of its inability to provide the security, regard may be had to the financial status of those standing behind the litigant who will benefit from its success in the litigation.[20] Hence, regard has been had in the authorities to the position of the creditors of a company in liquidation,[21] the shareholders of a proprietary company,[22] the beneficiaries of a trust,[23] and that of commercial litigation funders.[24]
[20] Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1; Octocane Pty Ltd v SRJ Property Development Pty Ltdand Another [1999] SASC 231 at [44]-[49]; (1999) 74 SASR 471 at 478-479; The Shed People Pty Ltd (In Liq) v Turner [2003] SASC 404 at [38]-[42].
[21] John Arnold’s Surf Shop Pty Ltd (In Liq) v Heller Factors Pty Ltd and Allert (1979) 22 SASR 20.
[22] Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616.
[23] Newtrend Pty Ltd v Oceanic Life Limited [1990] WAR 1.
[24] See for example The Shed People Pty Ltd (In Liq) v Turner (2003) SASC 404.
For reasons already noted, WorkCover does stand to benefit substantially from success by the appellant in the litigation. On the other hand, the position of WorkCover is different from the position of the creditors, shareholders, beneficiaries and litigation funders considered in the authorities. In the latter category of cases, there is a form of commercial or fiduciary relationship, generally (but not invariably) arising from voluntary conduct by either the litigant or the entity standing behind it. It is also generally the position that the litigation is pursued by the plaintiff wholly or substantially for the purpose of benefiting the party behind it. WorkCover is a statutory corporation charged with the administration of the scheme of workers compensation established by WRCA.[25] It is obliged by force of the WRCA to pay the compensation to which an injured worker is entitled. The relationship of WorkCover with the appellant is that of a payer of compensation with a recipient of compensation. WorkCover’s financial interest in recovering the compensation arises from statutory provisions, the effect of which is to preclude an injured worker from recovering double compensation and to preclude a third party tort-feasor from benefiting, in the assessment of the damages which it is liable to pay, from the payments made under the WRCA. While it may not be accurate to say that the relationship between WorkCover and the appellant is wholly involuntary, it does not have the same character as the commercial or fiduciary relationships earlier considered.
[25] WorkCover Corporation Act 1994 (SA), s 13.
Further, it may be said that ordinarily a plaintiff does not bring a damages claim for the purpose of benefiting WorkCover. On the contrary, in the ordinary course, a plaintiff is unlikely to pursue a third party claim if the only beneficiary of success, in a practical sense, is likely to be WorkCover. In those circumstances, the plaintiff is more likely to leave it to WorkCover to exercise its own rights, if so advised, to pursue a recovery action. In those cases in which a plaintiff does bring a claim (absent a special agreement with WorkCover) it is reasonable to suppose that the plaintiff does so because he/she considers that the damages which may be recovered will exceed the amount of compensation paid or payable under the WRCA in respect of which WorkCover is entitled to recovery and thus brings the action for his/her own benefit.
The position of WorkCover in relation to recovery of compensation is similar to the position of the Commonwealth in respect of the recovery of Social Security benefits made under the Social Security Act 1991 (Cth), Part 3.1. One would not ordinarily think that because the Commonwealth will benefit, by reason of repayment of Social Security payments made to an injured plaintiff, that account should be taken of its position in determining whether the injured plaintiff should be required to provide security. (The provisions in ss 116-1167 by which the Secretary of the Department of Families, Community Services and Indigenous Affairs may require a Social Security recipient to take third party recovery action may be put to one side for present purposes).
The submissions of the respondent recognised that the position of WorkCover is different from others who stand behind a litigant and who stand to gain from a plaintiff’s success in litigation. Hence the submission emphasised the financial assistance being provided by WorkCover in the present case. As already noted, WorkCover has agreed to pay senior counsel’s fees in relation to the appeal.
I agree that the nature and extent of the financial assistance which may be provided is a relevant matter. It is obvious that the nature of the assistance may vary from case to case. It may be influenced by the extent to which WorkCover perceives it would have difficulty in pursuing its own recovery action without the co-operation or assistance of an injured worker.
In the present case, the assistance being provided by WorkCover can fairly be described as modest. That conclusion can be derived from the respondent’s own estimates of costs used in support of the claim for security. The respondent has estimated its costs of trial at $80,000 and of the appeal at $15,000. the appellant’s costs of the appeal are likely to be higher as he has to meet the costs of preparation of the appeal books. The figures used by the respondent to quantify the amount of security sought suggests that the senior counsel’s fees which may be incurred by the appellant may be of the order $6-7,000. On the basis of those figures WorkCover is providing financial assistance of less than ten per cent of the costs likely to be incurred by the appellant in the entire litigation. Though no doubt significant to the appellant, it is not, in an objective sense, substantial in the overall context of this litigation. That makes it difficult to regard WorkCover’s financial contribution as operating, in conjunction with the plaintiff’s impecuniosity, to constitute a special circumstance for the purpose of Rule 95.13.
In my opinion, the discretion in Rule 95.13 has not been enlivened as the respondent has not shown the existence of special circumstances.
The Discretion
In case I be wrong in the view which I have taken about special circumstances, I will indicate the position which I would have taken had I regarded the discretion as having been enlivened. The matters which bear upon the existence of special circumstances are also, in my opinion, relevant to an exercise of the discretion. In the present case, for the reasons which I have given in relation to the consideration of special circumstances, I would not have thought it appropriate to order security.
Conclusion
For the reasons given above, the application that the appellant provide security for the respondent’s costs of and incidental to the appeal is refused.