Penhalluriack v Farnell; Farnell v Penhalluriack

[2008] VSCA 250

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 3821 of 2008

FRANCIS WILLIAM PENHALLURIACK

(AS EXECUTOR OF THE ESTATE OF MALCOLM HILARY CHIPPERTON, DECEASED)

Applicant

v

PATRICIA FARNELL

Respondent

PATRICIA FARNELL

Applicant

v

FRANCIS WILLIAM PENHALLURIACK

(AS EXECUTOR OF THE ESTATE OF MALCOLM HILARY CHIPPERTON, DECEASED)

Respondent

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APPLICATION ON SUMMONS

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JUDGES:	KELLAM and DODDS-STREETON JJA
WHERE HELD:	MELBOURNE
DATES OF HEARING:	3 October and 28 November 2008
DATE OF JUDGMENT:	5 December 2008
MEDIUM NEUTRAL CITATION:	[2008] VSCA 250

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PRACTICE AND PROCEDURE — Application for security for costs of appeal – Appellant’s probable inability to pay costs of appeal – Whether conduct of applicant caused appellant’s impecuniosity – Whether special circumstances.

PRACTICE AND PROCEDURE — Application for leave to appeal costs orders - Whether appellant alleged specific independent error in the costs order.

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APPEARANCES:	Counsel	Solicitors
Ms Farnell in person
For Mr Penhalluriack	Mrs K R Rees	T J Mulvany & Co Lawyers

KELLAM JA:

1. I agree with the disposition of the applications before the Court as proposed by Dodds-Streeton JA and I do so for the reasons stated by her.

DODDS-STREETON JA:

1. There are two related applications before the Court:

(a)       An application for security for the costs of the appeal.

(b)An application for leave to appeal from the costs order made in the proceeding below.

Application for security for costs

1. The applicant, Francis Penhalluriack, as executor of the estate of Malcolm Chipperton, deceased, applies by summons dated 18 August 2008 for an order that the respondent, Patricia Farnell, pay security in the sum of $16,000 for the costs of her appeal from the judgment of Bell J given on 24 June 2008, failing which the appeal should stand dismissed.  Before us, the applicant sought an additional sum of $1,546 as security for his costs of the hearing on 3 October 2008 which the respondent was ordered to pay.  The total amount of security sought by the applicant was thus $17,546.

1. The respondent was represented by counsel in the proceeding below, but represented herself in the hearing before us.  She opposed the application for security for costs.

1. Before Bell J, the respondent sought a declaration of paternity under s 10(1) of the Status of Children Act 1974.  She argued that Mr Chipperton (who was deceased by the date of the application) was the biological father of her child, Ms Sassons, who was born on 19 April 1979, at which time Ms Farnell was married to Raymond Farnell.  In support of her application, the respondent contended that her then husband, although the presumed father of her child, was impotent, infertile and had

ceased to have sexual intercourse at the time of Ms Sassons’ conception.  Bell J found no admissible evidence of those assertions.  He accepted, however, the respondent’s evidence that she had had sexual intercourse with Mr Chipperton around the date of conception and that Mr Chipperton, on numerous occasions prior to March 1998 acknowledged, and apparently believed, that Ms Sassons was his daughter.

1. Bell J found that by March 1998, Mr Chipperton no longer believed that Ms Sassons was his daughter and thereafter denied it.  Further, three successive DNA tests on tissue samples from the respondent, Mr Chipperton and Ms Sassons (two of which were performed in the course of Family Court proceedings), excluded the possibility of Mr Chipperton’s biological fatherhood.  The results of a fourth DNA test privately commissioned by the respondent were not put before the Court and his Honour concluded, pursuant to Jones v Dunkel,[1] that they would not have assisted her.

   [1](1959) 101 CLR 298.

1. The respondent also relied on an alleged physical likeness between Mr Chipperton and Ms Sassons, of which Bell J observed:[2]

There is a photograph of Mr Chipperton in evidence, and I was able to compare it with Ms Sassons’ physical appearance when she gave evidence.  Of course this is a very unsatisfactory way to make such a comparison.  On the evidence I would accept there is some physical likeness between the two, but it is certainly not strong or remarkable.  Viewing this evidence with the caution required, I can say no more than that the physical likeness between Mr Chipperton and Ms Sassons is some evidence confirming my earlier finding that he could have been her father.  The evidence is not sufficient for me to make a finding about the alleged lack of likeness between Ms Sassons and Mr Farnell.

[2]At [31] of the reasons for decision.

1. His Honour concluded that there was no evidence to displace the presumption that Mr Farnell was the father of Ms Sassons.  He dismissed the respondent’s application.

1. The respondent, by notice of appeal dated 7 July 2008, appeals from Bell J’s decision on the following grounds:

1.The Court constituted by the Honourable Mr Justice Bell was wrong in not making a declaration of paternity to the effect that Mr Chipperton was the father of Cindie Sassons.

2.The Court was wrong in finding that “as night follows day” the DNA evidence proved that Mr Chipperton was not the father of Cindie Sassons.

3.         In the circumstances of the Court making its findings that:

a. Mr Chipperton had unprotected sexual intercourse with Ms Farnell at or about the time that Cindie Sassons was conceived;

b. Ms Farnell did not have sexual relations with Mr Farnell or any other person at or about that time;

c. Mr Chipperton made admissions as to his paternity of Ms Sassons;

d. There was some physical likeness between Mr Chipperton and Cindie Sassons;

the Court was wrong in finding that Mr Chipperton was excluded as being the father of Cindie Sassons by reason of the results of the DNA evidence.

4.         There was no evidence or no sufficient evidence that the results of:

a.         Simons Gene Type Diagnostic Laboratories; and/or

b.        The Australian Red Cross Blood Unit; and/ or

c.         The Victoria Police Forensic Testing Service Centre;

excluded Mr Chipperton from identification as Ms Sassons father.

1. Rule 64.24(2) of the Supreme Court Rules provides:

(2)The Court of Appeal may in special circumstances make an order that security be given for the costs of an appeal.

1. The principles governing the jurisdiction to order security for costs under r 64.24(2) are well established.  They were set out in the recent decision of Maher & Anor v Commonwealth Bank of Australia Ltd & Anor:[3]

   [3][2008] VSCA 122 (Unreported, 26 June 2008), [79]–[81].

In Rowan v Australian Associated Motor Insurers Ltd (Unreported, Supreme Court of Victoria, Full Court, Fullagar and Marks JJ, 16 December 1988), Fullagar J (with whom Marks J concurred) stated:

I do not think that this court should or even could lay down in advance what does or does not constitute special circumstances, and I think that the scope of the rule is of the character indicated by Rich J in King v Commercial Bank of Aust (1920) 28 CLR 289 at 292, where his Honour said of s 35 of the High Court Procedure Act, “No rules can be formulated in advance by any judge as to how the discretion shall be exercised. It depends entirely on the circumstances of each particular case”.

In Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972, the following matters were identified as relevant to the exercise of the discretion:

a.        the prospects of success of the appeal;

b.        the quantum of risk that a costs order would not be satisfied;

c.whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim;

d.whether any impecuniosity of the appellant arises out of the conduct complained of;

e.whether there are other aspects of public interest which weigh in the balance against such an order; and

f.whether there are any particular discretionary matters peculiar to the circumstances of the case.

The probable inability of an appellant to pay the respondent’s costs should an appeal be unsuccessful has been held to constitute ‘special circumstances’ which will justify an order under Rule 64.24(2) that the appellant give security for the costs of the respondent [See Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] 9 VR 382. The position is different in the High Court, the Federal Court and the New South Wales Supreme Court, where the Court places less emphasis on the impecuniosity of the appellant in considering whether to order security for the costs of the respondent (See Williams Civil Procedure, 164.24.80-162.4.85)].   In Mobilia v Voudiotis [2002] 4 VR 327 (‘Mobilia’), Batt JA (with whom Eames JA agreed) stated:

The Court’s discretionary power to order that security for costs be given for the costs of an appeal is conditioned in r 64.24(2) upon there being ”special circumstances”.  The probable inability of an appellant to meet an order for the respondent’s costs of an appeal is a special circumstance:  Scerri v Northam  Holdings Pty Ltd.  Such probability is amply established here … The Court’s discretion is therefore enlivened …

1. In support of the security for costs application, the applicant relied on the affidavits of his solicitor, Philip Tiernan, sworn 3 September 2008, 30 September 2008 and 13 November 2008.

1. Mr Tiernan deposed to the respondent’s failure to comply with previous costs orders made against her in the Family Court on 15 October 1998 and by Hansen J on 16 May 2005, and to unsuccessful attempts to recover costs.  He estimated the costs of the proceeding before Bell J (in which the respondent was represented pro bono) at over $100,000.

1. Mr Tiernan deposed that the respondent’s counsel acknowledged that she had no significant financial resources and the respondent herself had confirmed that she needed financial help ‘pretty desperately’. 

1. Mr Tiernan, as an experienced litigation solicitor, estimated the applicant’s costs of the appeal (which would be a one day hearing) at more than $16,000, in support of which he exhibited a draft bill of costs.  His letter to the respondent dated 13 August 2008 seeking security in that sum elicited the respondent’s confirmation, by a facsimile dated 21 August 2008, that she was unable to pay such costs.  The respondent also stated ‘You have been aware that I have no financial resources from the outset.’

1. Mr Tiernan further deposed that:

(a)the Chipperton estate would be insolvent unless an interest in a property at East Bentleigh (the subject of current proceedings) is held to belong to it or gives rise to a debt to the estate.  Mr Chipperton’s daughters, one of whom is under a disability, seek further provision from the estate in a proceeding under Part IV of the Administration and Probate Act1958.  Those proceedings were compromised in a settlement dated 24 June 2008, which is not yet operative and cannot (save for its application to Mr Chipperton’s disabled daughter) be finalised, pending the outcome of the appeal;

(b)under the settlement, the estate will obtain the East Bentleigh property valued at $610,000 and after the deduction of its liabilities will have assets valued at about $285,000;

(c)the applicant, as executor (who is also a creditor of the estate) meets its ongoing liabilities of over $500 per fortnight in connection with the property, which increases the estate’s debt to him;

(d)under the settlement, the East Bentleigh property will be transferred to a third party on certain conditions, the deceased’s daughters will each receive a payment of about $52,000 and the executor will be repaid and reimbursed for the litigation costs.  One daughter will also be reimbursed for, inter alia, legal costs;  and

(e)the estate could be further reduced depending on the costs order made in the proceeding before Bell J, which could leave it unable to reimburse the applicant for the costs of the appeal. 

1. In opposing the application for security for costs, the respondent deposed to her belief that the appeal has good chances of success, but would be stifled by an order for security.  She reiterated that Bell J erred in rejecting her claim and asserted that the relevant DNA evidence could be unreliable.

1. The respondent asserted that the applicant has prolonged the litigation needlessly.  Although the respondent asserted that in 2004 two of Mr Chipperton’s daughters refused DNA tests which would have averted the need for litigation, correspondence in 2006 indicated that one daughter was willing to undergo a DNA test on condition that the respondent undertook in writing to accept the validity of the test and to desist from litigation concerning the alleged relationship.  There is no evidence that the respondent agreed to those conditions.

1. The respondent deposed to her belief that the DNA tests performed during Mr Chipperton’s lifetime were outdated and inaccurate and that tests on the DNA of putative half-siblings would be preferable.  She further deposed that one of Mr Chipperton’s daughters funded the applicant in the proceeding, from which he initially withdrew.

1. The respondent conceded that her financial situation is poor and she had hitherto been represented by lawyers acting pro bono.  She asserted that her financial hardship was principally caused by Mr Chipperton, but provided no detailed account of the circumstances.  The respondent conceded that it was improbable that she could satisfy a costs order in the appeal, should one be made against her.

1. By an affidavit in reply sworn 30 September 2008, Mr Tiernan denied that the applicant was responsible for protracting the litigation, and noted that an adjournment was at the respondent’s request and the time table was set to enable her to gather expert evidence, which was ultimately not produced.

1. The respondent’s acknowledged impecuniosity constitutes special circumstances, as it is highly probable that she will be unable to satisfy any order that she pay the applicant’s costs of the appeal. 

1. There are no details of the assertion that the conduct of the late Mr Chipperton caused the respondent’s financial plight.  The relationship between the alleged impoverishing conduct of Mr Chipperton and the respondent’s claim was not articulated.  The respondent’s impecuniosity does not appear to arise from any conduct complained of in the proceeding, which involved a claim for a declaration under the Status of Children Act 1974.  

1. There is no claim, nor any basis for a claim, against Mr Chipperton’s daughters.  Their refusal to undergo a DNA test cannot assist the respondent in opposing the present application. 

1. The respondent’s prospects of success on appeal are slim.  Bell J required formal proof of the three DNA tests, all of which excluded Mr Chipperton’s paternity.  He found the respondent’s complaints that the tests were defective or unreliable were unsubstantiated.  At trial, the respondent was represented by competent counsel.  There was no cross-examination in relation to two of the impugned DNA tests and in relation to the third test, his Honour found that the applicant’s expert witness was not shaken under cross-examination.  His Honour concluded that although the DNA evidence was properly subjected to scrutiny, ‘in the final analysis, the courts will act on properly proved DNA evidence not shown to be unreliable.’ 

1. In the present case, an order for security would not work oppressively.  The respondent’s prospects of success are poor and her substantive claim has been ventilated both in the proceeding below and in proceedings in the Family Court, which ordered two of the DNA tests and, in August 1999, restrained the respondent and Ms Sassons from issuing further paternity or maintenance claims against Mr Chipperton.

1. The financial status of the estate, the nature of the claims against it and the status of the settlement thereof are also powerful circumstances favouring a grant of security for the costs of the appeal.

1. In all the circumstances, the application for security for the costs of the appeal should be granted.

Application for leave to appeal from costs order

1. On 2 October 2008, Bell J ordered that the respondent pay the applicant’s costs of the proceeding on a party/party basis. 

1. His Honour noted that although he made certain findings in favour of the respondent, the applicant had acted reasonably in his conduct of the defence and was entitled to contest all of the factual and DNA issues in the case.  As the applicant was successful on the substantive issue and issue apportionment was inappropriate, his Honour concluded that costs should follow the event.

1. The respondent, by an amended summons filed 20 October 2008, seeks the following orders:

1.The [Respondent] have leave to appeal against the Order of Justice Bell made 2 October 2008 in proceeding No. 7534/04 that costs be awarded to the [Applicant] on a solicitor client basis.

2.That this appeal be heard together with the appeal filed by the [Respondent] by Notice of Appeal dated 7 July 2008.

3.In the alternative, that the Notice of Appeal filed by the [Respondent] dated 7 July 2008 be amended to include paragraph 1 of this Summons in the Orders sought.

4.        Any further order the Court deems appropriate.

1. The notice of appeal does not include an appeal from the costs order perhaps because, at the date of filing, the question of costs had not yet been determined.

1. It should be noted that the summons misstates the basis of the costs order made by Bell J.

1. The affidavits in support of the respondent’s application were the affidavits of Patricia Farnell sworn 20 October 2008, 5 November 2008, 17 November 2008 and 25 November 2008 and the affidavit of Cindie Sassons sworn 16 November 2008.  Written submissions dated 2 October 2008 and 20 November 2008 were also filed.

1. Affidavits in opposition were sworn by Mr Tiernan on 13 November 2008, 17 November 2008, 19 November 2008, and 26 November 2008.

1. Ms Farnell’s affidavits were largely argumentative and contained much inadmissible material.  She asserted, in essence, that the applicant had no valid reason to oppose her application for a declaration of paternity, but had embarked on a ‘gladiatorial path’.  She stated that the respondent had refused all attempts to mediate or conciliate and reiterated her belief that the beneficiaries of the estate were responsible for the present litigation because they refused to undergo DNA tests sought by the respondent.  The respondent stated that ‘knowledge of paternity is also a recognised human rights issue’, which should not be stifled by a requirement for security.  She complained of various aspects of the decision below.  She also asserted that the costs judgment ‘is wrong in law’.

1. Cindie Sassons, by her affidavit sworn 17 November 2008, deposed to her willingness to undergo DNA testing, her distress over the question of her paternity, her desire that Mr Chipperton’s acknowledged daughters undergo DNA testing and her desire for co-operation, which ‘would have been the end of it for them’.

1. The complaints that the applicant had conducted unnecessary litigation and engaged unnecessarily expensive and irrelevant expert witnesses were reiterated in the respondent’s written submissions dated 20 November 2008, which asserted that an award of costs or security against her would be  contrary to the interests of justice and the public interest.

1. Mr Tiernan, by his affidavits in opposition, disputed the respondent’s assertions, and stated that Ms Farnell acquiesced in Bongiorno J’s statement on 21 July 2006 that there was no point in having a mediation.

1. Section 17A(1)(b) of the Supreme Court Act 1986 provides:

(1) An order made by the Trial Division constituted by a Judge —

…

(b) as to costs which are in the discretion of the Trial Division—

is not subject to appeal to the Court of Appeal except by leave of the Court of Appeal or by leave of the Judge constituting the Trial Division which made the order.

1. In Etna v Arif[4], Batt JA with whom Charles and Callaway JJA agreed, considered that:

… the current of authority is to the effect that leave is required to appeal against an order as to costs even though the appeal relates also to the merits, at any rate where, as here, the challenge to the order as to costs goes beyond the mere consequence of success of an appeal on the merits.This does not, of course, derogate from the rule, applied almost daily, that leave is not necessary in order for the costs order below to be set aside when an appeal on the merits succeeds. [378].

[4][1999] 2 VR 353. See also Hartley Poynton v Ali [2005] VSCA 314, [17] (Ormiston JA).

1. The principles governing the grant of leave to appeal against a costs order were recently restated in Spotless Group Ltd v Premier Building and Consulting Pty Ltd (Rec Appt) and North Suburban Properties Pty Ltd[5] as follows:

   [5][2008] VSCA 115, [10]–[11].

It is well established that an appellate Court will not, in the absence of strong reasons, interfere with the exercise of discretion by the Court below with respect to the question of costs.  As Callaway JA said in Hanlon v Brookes (1997) 15 ACLR 1626, 1632):

It is almost invariably the case that the judge at first instance is better placed to deal with the costs after a long trial and counsel seeking leave ordinarily has a difficult task.  The test is not whether we should have exercised the discretion in the same way as his Honour did but whether there was or were a ground or grounds on which he could reasonably do so.

This Court may disturb the costs orders made below where an error in principle is identified (McCauley v McCauley (1910) 10 CLR 434, 455 (Isaacs J)), where the judge acted on a manifestly erroneous view of the facts (See, for example, Whiteman v Johnson [1995] 2 VR 637, 639–40 (Phillips JA); ETNA v ARIF [1999] 2 VR 353), or where the award is manifestly unreasonable (ETNA v ARIF [1999] 2 VR 353, 378 (Batt JA)). But the applicant must satisfy a high threshold for such a grant of leave. The test to be applied is not whether the Court of Appeal would have made the same order but whether there is a ground upon which the order by his Honour could reasonably be made (ETNA v ARIF [1999] 2 VR 353, 378 (Batt JA)). Some manifest error must be exposed to take the case out of the ordinary situation in which, wherever a discretion is to be exercised, minds may differ on the result (Wentworth v Rogers [No 3] (1986) 6 NSWLR 642, 644 (Kirby P)). Ormiston JA recognised this high threshold in Transport Accident Commissioner v O'Reilly [1999] 2 VR 436, 457 observing that:

It is extraordinarily difficult to show that a court of first instance or a tribunal with wide discretionary powers has erred in the exercise of its powers to award costs, if there be some basis for making an order other than the conventional order in favour of the successful party.

1. The question arises whether the respondent requires leave to appeal against the costs order made below. That depends on whether her challenge to the costs order goes beyond the substantive grounds of appeal. If it does not, leave under s 17A(1)(b) of the Supreme Court Act1986 is not required.

1. The respondent has appealed from Bell J’s judgment on the merits.  If the appeal is successful, all orders made below, including the costs order, could be set aside as a consequence of the successful appeal.  No leave to appeal from the costs order would be required. 

1. Before us, the respondent had difficulty in articulating with precision the basis of her challenge to the costs order and it was difficult to discern whether it was independent of the substantive grounds of appeal.

1. The extensive material filed in support of the application reiterates, and complains of, the alleged errors in the principal judgment, the defects of the DNA tests and the refusal of the beneficiaries to undergo DNA testing.  It does not appear to assert a specific, independent error in the costs order.  If that be so, leave to appeal from the costs order is, in my opinion, unnecessary.  Alternatively, the respondent could be taken to assert that, independently of the substantive grounds of appeal, costs should not have been ordered against her because the applicant needlessly intermeddled in the proceeding when funded by the beneficiaries, after initially indicating that he would take no part in it.  As the primary judge observed, however, the applicant acted reasonably and properly.  He was entitled to uphold the interests of the estate (including non-pecuniary interests, such as the deceased’s reputation).  Further, there is no evidence that the applicant misconducted the litigation or needlessly prolonged it.  There is, in my opinion, no manifest error of principle, manifestly erroneous view of the facts or manifestly unreasonable feature of the trial judge’s costs judgment or order which would justify interference with his exercise of discretion in relation to costs.

1. The respondent’s application made by summons filed 20 October 2008 should be dismissed.

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