Moxia Pty Ltd & Ors v AMP General Insurance Ltd

[1993] HCATrans 164

..

.

• ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No Ml22 of 1992

B e t w e e n -

MOXIA PTY LIMITED, EDMUND
PETER GAIDA and JUDITH MARJORIE

GAIDA

Applicants

and

AMP GENERAL INSURANCE LIMITED

Respondents

Application for special leave

to appeal

DEANE J

TOOHEY J

McHUGH J

Moxia 1 . 18/6/93

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 18 JUNE 1993, AT 9.31 AM

Copyright in the High Court of Australia

MR P.B. MURDOCH, QC: If it please the Court, I appear with

my learned friend, MRS C.M. KENNY, for the

applicant. (instructed by F.R.E. Dawson & Son)

MR J.D. HAMMOND:  If it please the Court, I appear for the

respondent. (instructed by Hall & Wilcox)

DEANE J:	Mr Murdoch.
MR MURDOCH:	May it please the Court, it is our submission

that in making an order for security for costs in

this case, the Full Court, in the exercise of their

discretion, acted on a wrong principle of law,

namely that the impecuniosity of the appellants was

in itself a ground justifying the making of the

order.

That is a principle that appears to be

embodied in a number of authorities of the

Full Court of Victoria which, it is submitted, is

contrary to High Court authorities and recently

published authorities in other States. If the

Court pleases, we have handed the Court an outline

of our arguments. ·

DEANE J:  We will take a moment and read it, Mr Murdoch.

MR MURDOCH: If the Court pleases.

DEANE J: Yes, Mr Murdoch.

MR MURDOCH:  It is apparent from Order 64 rule 17(2) of the

Rules of the Supreme Court, which provides that:

The Full Court may, in special circumstances,

make an order that security be given for the

costs of an appeal -

is an order involving two stages.	The first stage
is that before the door to the exercise of

discretion is opened, the court must be satisfied that there exist special circumstances, and it is

then only in the event that the court is satisfied

that special circumstances exist that the door to

the_exercise of discretion is opened.

It appears to be the substance.of the

Victorian case to which reference has been made in the outline of argument that the court in those cases regarded the existence of special

circumstances as in itself justifying an order for

security of costs by itself, without the

consideration of any other matters.

Mexia 2 18/6/93

That would appear to follow from passages in

Smail v Burton, (1975) VR 776, a copy of which the

Court has there, and in a passage at page 777 the

Full Court said this, firstly in the second

paragraph - and I will read just the first

sentence:

The power of the court .to make such an

order is a discretionary one and should only

be exercised when special circumstances exist

in the proceedings.

Now, with respect, that would appear to be an

inaccurate statement of the law and the order under
which the court was then proceeding is in the same
form as the current order. It is clear that the
making of such an order is a discretionary one, the

power, but it can only be exercised when special

circumstances exist in the proceedings, not should
only be exercised when special circumstances exist,

and it appears to suggest there that if one is

satisfied that special circumstances exist, that is

sufficient for, in the next paragraph, from line

15, the court says this:

Despite the modern social trend in assisting

impecunious litigants to be heard in court

without suffering any handicaps imposed by a

lack of means, the Full Court in Scerri v

Northam Holdings Pty Ltd, has reaffirmed the

well-established practice that the court will

regard the likelihood that an appellant will

be unable to pay the respondent's costs of the

appeal if the appeal should fail, as

constituting special circumstances in which

the appellant should be ordered to provide security for costs under the provisions of

O 58 r 16 -

and that sentence suggests that the court regards

the existence of special circumstances as being in

the court can then proceed to make an order for	itself, without anything more, a matter upon which
security for costs.

Likewise, in Kardynal v Dodek, (1978 VR 414, a

copy of which the Court has, His Honour

the-Chief Justice, Mr Justice Young, said this, at

the bottom of page 414, at about line 50:

Those facts are not in substance denied by the

material filed on behalf of the appellant, and
accordingly I think that it is shown that the
appellant is impecunious. Order 58, r 16

provides, amongst other things, that security

for the costs of an appeal shall be given as

may be directed by the Full Court under

Moxia 3 18/6/93

special circumstances, and it is well
established that the impecuniosity of an
appellant amounts to special circumstances

within that rule justifying an order for

security.

In our submission, it is apparent from the

matter that it is upon that basis that the

order that was made by the Full Court in this here of whether or not security for costs of this

appeal ought to have been granted.

McHUGH J:	I rather thought that the impecuniosity of the appellants was a background fact and that the
special circumstance, which was not in terms
identified by the Full Court, was the nature of the
grounds of appeal, and that was the real reason why
security was awarded.  It was not so much that the
defendants were impecunious but that, in the very
special circumstances of this appeal, the
respondents would have to defend again what they
had obtained at first instance.

MR MURDOCH: With respect, Your Honour, we would submit that

that is not so and can be demonstrated, for two

reasons. Firstly, the affidavit material relied
upon by the applicant for security for costs
pointed in essence to only one thing and that was

the impecuniosity. There was a throw-away line

that there were no strong prospects of success, but

the affidavit material pointed only to

impecuniosity.

Secondly, when the application was called

upon, the court having read the affidavit material,

the court asked counsel for the respondent to the

application to address the court first, and that

appeared to proceed on the basis that the court was

of the belief that the applicant for security,

having shown that the appellant was impecunious,

had done sufficient, and thereafter the burden

rested upon the respondent to dissuade the court

from making the order which otherwise it would

regard itself as justified to make.

- With respect, it also appears from what

Mr Justice Brooking said at line 8 on page 104,

where His Honour says:

I will content myself with saying that, in my

opinion, what has to be shown to warrant the

making of an order for security for costs has

been shown in this case -

and, with respect, what His Honour there is

referring to is what was shown by the applicant for

Mexia 18/6/93

security, that it was highly unlikely that, should

the appeal be unsuccessful, that the appellant
would be able to pay the costs. And, of course, it

also proceeded from the frank admissions that were

made by the appellants in their affidavit where it

was said, both on behalf of the company and on

behalf of the individuals, that they were, in the

case of the company, impecunious or insolvent, and

in the case of the individuals, relying upon

Commonwealth services for the purposes of their support.

TOOHEY J:  But .Mr Murdoch, if you look at what

Mr Justice Tadgell said, he seems to have been

influenced by the fact that what the appellants

were seeking was a retrial of the action,

effectively, because they were asking for judgment,

not that the matter go back for a retrial, so the

Full Court would be called upon, as it were, to

canvass every issue in the case.

MR MURDOCH: His Honour, indeed, was affected by that. we

would say, also affected by a misunderstanding of

what was in fact the substance of the true nature
of the appellants' appeal, which was that in making

the findings of fact that he made, His Honour

Mr Justice Beach either misstated or ignored

uncontradicted evidence to the contrary of the

findings which he made. So the substance and

principal grounds of appeal regarding the facts

were not simply that the court ought to look again

at the facts but rather that they ought to look at the facts for the purposes of understanding how it

was that Mr Justice Beach had made findings which,

on the evidence, were entirely inappropriate and

unsupported.

TOOHEY J:  But how could the Full Court not only set aside

the judgment appealed from but enter judgment for

the appellants, as opposed to sending the matter

back for retrial, without itself canvassing all the

issues that were raised before the trial judge?

MR MURDOCH: With respect, Your Honour, most of those issues would certainly have had to have been raised but we would submit that His Honour Mr Justice Tadgell

understood the thrust of the submissions by the

respondent to the application, His Honour thinking

that the appeal was simply for the purposes of

rehashing again the evidence rather.than looking at

the evidence with a view to seeing whether there

was any evidence which supported the critical

findings which His Honour Mr Justice Beach made.

McHUGH J:  But this does not seem to me at the moment to be

a case that is a suitable vehicle to test this

principle. Here was a case in which credit was

Moxia 18/6/93

very much in issue, your clients lost the credit

issue, and the appeal is going to be very lengthy.

MR MURDOCH: With respect, Your Honour, the plaintiffs lost

because, in the end, His Honour Mr Justice Beach

found that the second plaintiff had lit the fire

himself. The question of whether or not he lit the

fire himself is really unaffected by issues of

credit and the principal ground of appeal on that

issue by the plaintiffs was that His Honour had

either misunderstood or misstated the evidence and

in so doing had acted contrary to uncontradicted

evidence and therefore it would be quite apparent

to the court on appeal that there was then no

foundation for the finding that he made that this

second plaintiff had lit the fire himself.

There were really only two issues. The first

was: did the second plaintiff light the fire; and

the second issue was, in all the circumstances was
the claim made a fraudulent one? And in both

respects the appellants say that they had strong

prospects of success. The Court will see that from

the judgments of both Mr Justice Brooking and

Mr Justice Tadgell, that they cast aside the interesting questions of law raised regarding the

applicability of the Insurance Contracts Act, by

His Honour Mr Justice Brooking saying:

While some argument has been addressed to the

Court on a question raised by the appeal
concerning the construction of a Commonwealth

Act, the argument has essentially concerned

the suggestion by the appellants that the

learned Judge erred in making the findings of

fact which he made.

And Mr Justice Tadgell made reference to the same

issue.

We would submit that there were several

reasons submitted to the court why, in the exercise

of its discretion, it ought not to grant an order
for security for costs, and none of those competing
considerations has been the subject of

consideration either by Mr Justice Brooking or

Mr Justice Tadgell.

McHUGH J: What about the position of the company? If the

company is insolvent, there is a prima facie right,

is there not, to obtain an order for security for

costs against the company?

MR MURDOCH:  Under the provisions of the corporations law?

MCHUGH J: Yes.

Moxia 6 18/6/93

MR MURDOCH: There is, Your Honour, but nevertheless there

is a discretion which has to be exercised and, in

this particular circumstance, it was clear that the

company was a company controlled by the two

individuals, their livelihood and future depended

upon it and, of course, the individuals as well had

an insurable interest in some of the property.	So
in the event that there were proper grounds upon
which security ought not to have been ordered

against the individuals, the appeal was then going
to go forward and the court ought not, in those
circumstances, to make an order for security for

costs against the company but not make an order for

security for costs against the individuals allowing

the same issues then to go forward on appeal.

McHUGH J:  Who had the greater interest in the proceedings,

the company or the individuals?

MR MURDOCH:  The company had the greater financial interest,

but the individuals had a substantial financial

interest, because a lot of the property which was

destroyed in the fire was leased by the

individuals, not by the company. It was they who

had the responsibility to pay and, in many

respects, they had also guaranteed obligations of
the company so they had a direct financial interest

in the destruction of the company's property. And

it is clear that in this matter this was not a case

which involved, as some of the cases have, a

vexatious litigant or an appeal which constituted

an abuse of the process of the court. Here there

was no doubt, and it was found, that there was a

contract of insurance. It was a contract of

insurance which responded in the circumstances of a

fire. There was a fire. There was property

damaged in the fire. There was loss and damage

suffered as a result of the occurrence of the fire.

So that in that circumstance the only issues which

then fell to be considered were: whether or not

the second plaintiff was responsible for causing	the fire and, secondly, what was the quantum of the
loss and damage? A document which the court has
there - - -

McHUGH J:  But is it your case that the trial judge erred in

finaing that the second plaintiff set the factory

on fire because he failed to take into account

evidence of other witnesses as oppdsed to the

credibility of the - - -

MR MURDOCH:  Indeed, Your Honour. The question of whether

or not the fire was lit by the second defendant had
nothing to do with the questions of credibility.

The questions of credibility have, with respect,

infected His Honour's mind in coming to that

Mexia 7 18/6/93

conclusion. Might I take the Court to the critical

passages in His Honour Mr Justice Beach's judgment.

DEANE J:  We are dealing with an application for leave. We

are not hearing the appeal.

MR MURDOCH:  Indeed, Your Honour.

DEANE J: But take us to the passages.

MR MURDOCH:  The relevant passages, if the Court pleases,

appear at page 36, about line 16 where, after

His Honour has said that:

to be merely suspected of setting the fire

falls far short of what is required before a

finding of arson can be made -

His Honour said -

In the circumstances of this case there were only two matters which caused me initially to hesitate before making such a finding, firstly the time at which the call was received at the

Scoresby Fire Brigade relating to the fire -

and if I can interpolate there, the time was

recorded at the Scoresby Fire Brigade as being 9.18
in the evening. Secondly, he says:

and the evidence of Thommasini to the effect that the car he heard driving away after the explosion was not Gaida's care because it

sounded like a 6 cylinder care whereas Gaida's

Range Rover was a VB. Having given the matter

careful thought those matters are not

sufficient to dissuade me from finding that

Gaida himself started the blaze.

The evidence from the Scoresby Fire Brigade was

that the call that the fire had occurred happened
at 9.18 pm.	The evidence of Mr Thommasini, who was

a.motor mechanic of 20 years, was that immediately

after he heard the explosion which created the fire

he rushed out of his building and immediately ran

towards the vicinity of the building where the fire

occurred. At that time he heard a motor vehicle

constantly skidding and accelerati~g away at a very

high speed.

MCHUGH J:  I appreciate that, but I mean, your client had

every opportunity to light the fire, he was present

at the factory at quarter to nine, he told,

according to the trial judge, lies concerning his

movements on the night, lies about the financial
position of the company, lies about the time it

took him to drive from the factory to his home.

Moxia 18/6/93

MR MURDOCH: When one say "lies", Your Honour -

McHUGH J: Well, that is what the trial judge -

MR MURDOCH:  What His Honour did was to determine that

Mr Gaida's estimate of driving home that journey

for 45 minutes was wrong and that he preferred to accept the evidence of a Constable Major who said that the drive would take 32 minutes.

DEANE J: But that only states part of it because, what

His Honour found was, faced with the fact your

client·at the last moment invented a story about

not driving home the ordinary way, but driving

another way to avoid being breath-tested.

MR MURDOCH:	The deviation?
DEANE J: Yes.

MR MURDOCH: Indeed, Your Honour. Nevertheless, the

uncontradicted evidence of Mrs Gaida was that

Mr Gaida arrived home at 9.30 pm. The minimum time

that Mr Major ever drove the distance was 26

minutes and generally 32 minutes. If the fire took

place immediately within two or three minutes of
the phone call to the Scoresby fire station, then

it could not have been lit by Mr Gaida because he would not have had time to move from the premises

to his home.

His Honour clearly accepted that the vehicle

which accelerated away from the vicinity of the
rear of the factory, immediately after the
explosion took place, was clearly somehow involved
in the causing of the explosion and the setting of

the fire.

Mr Thommasini, a mechanic of 20 years, says

that that vehicle was certainly a six cylinder

motor car, not a VB, and was certainly not	Mr Gaida's Range Rover that he was seen in on that	evening. In those circumstances, having regard to
the time that the explosion must have taken place, the time that it would have taken Mr Gaida to drive
home, and the fact that Mr Thommasini, an expert
with-motor cars, identifies the get-away vehicle as being certainly not his, then it cannot have been
that Mr Gaida is the person who lit.the fire.

The case was only ever put by the defendant on

the basis that Mr Gaida himself lit the fire.

There was no suggestion that he was ever conspiring

with any other person for the purposes of lighting

it.

Moxia 9 18/6/93

TOOHEY J: But, Mr Murdock, you only have to look at the

notice of appeal, the grounds of appeal on page 48

and the pages that follow to see the way the appeal

would be run, and it would be essentially an

examination of the evidence below - not of just one

witness, but of a whole string of witnesses who are

listed there, and this is what I assume is the

basis of Mr Justice Tadgell's comment, that, in

effect, it was a retrial that was being sought;

that is, a rerun of the case before the trial

judge.

MR MURDOCH:  We would submit, Your Honour, that even if it

was the misfortune of the appellant to, in effect,

have to run a retrial and that that would therefore
be longer than a normal appellate hearing and may

cost some more, is just one of those matters which

is taken into account in exercising the discretion

whether or not to grant an order for security for

costs.

TOOHEY J: That is really my point, that if you put that

into the pot along with impecuniousity, the brew

that you are left with at the end is one that does

add up to special circumstance or, at least, is

capable of adding up to a special circumstance.

MR MURDOCH:  In the end, of course, Your Honour, it then

becomes a question of the exercise of discretion

but, we wouild submit, in all the circumstances,

that section 10 of the Supreme Court Act provides

that a person has a right of appeal. In the

circumstances it is only in the most unusual of

circumstances that a right to appeal could be taken

away by a court exercising a discretion which it

knows is not simply a.discretion to grant security

for costs, but the exercise of a discretion which

will, of itself, bring to an end that appellant's

right to appeal. In circumstances where a finding

has been made against one of the appellants that he

is an arsonist and has no opportunity to then

maintain his appeal for the purposes, among other

things, of clearing his name - in those

circumstances we would submit that the discretion

really fell to be exercised only one way.

- It was clear that these appellants were made

impecunious solely by reason of the failure of the

defendant to indemnify them under the policy,

together with the costed expense that they incurred in running the proceedings and, with respect, there are authorities which would suggest that if the

impecuniousity of the appellant has been caused by

an act on the part of the respondent, that is one

matter which the court will seriously consider

before it orders them to pay security for costs.

Mexia 10 18/6/93

But in the circumstances there was a number of

other competing factors which, in all the
circumstances, ought to have driven this Court to
refuse the application; not the least of which was
that the respondent was an insurance company of the

size and apparent wealth of a company like AMP

which, in the circumstances, it is submitted, has

used an application for security for costs as a

means of stymying what is otherwise a right of the

appellant to pursue the appeal. I think there is

nothing else, if the Court pleases, that we can

urge in favour of the granting of special leave.

DEANE J: Thank you, Mr Murdoch. The Court need not trouble

you, Mr Hammond.

The order for security for costs in this matter was made in the exercise of a judicial

discretion. In the particular circumstances of the

case, as identified by Tadgell J. in his judgment,

we consider that an appeal would not enjoy

sufficient prospect of success to warrant a grant

of special leave. Accordingly, the application for

special leave to appeal is refused.

MR MURDOCH: If the Court pleases.

MR HAMMOND: If the Court pleases.

DEANE J:  Mr Murdoch, do you want to say anything about

costs?

MR MURDOCH:  Not if the Court pleases.

DEANE J: Well, the application is refused with costs.

MR HAMMOND: If the Court pleases.

AT 10.05 AM THE MATTER WAS ADJOURNED SINE DIE

Mexia 11 18/6/93