Rosa Villella v Telstra Corporation Ltd
[2014] VSCA 263
•17 October 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2014 0116
| ROSA VILLELLA | Appellant |
| v | |
| TELSTRA CORPORATION LTD | Respondent |
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| JUDGES: | KYROU JA and GINNANE AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 17 October 2014 |
| DATE OF JUDGMENT: | 17 October 2014 |
| MEDIUM NEUTRAL CITATION: | [2014] VSCA 263 |
| JUDGMENT APPEALED FROM: | Villella v Telstra Corporation Ltd [No 1] [2014] VCC 913 and [No 2] [2014] VCC 914 (Judge Lewitan) |
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LEGAL PRACTITIONERS – Application by solicitor to file notice of ceasing to act for appellant – Application granted – Supreme Court (General Civil Procedure) Rules 2005 r 20.03(4).
PRACTICE AND PROCEDURE – Application by respondent for dismissal of certain grounds of appeal as incompetent because they deal with interlocutory rulings – No application for leave to appeal made – Notice of appeal also raises substantive grounds –Application referred to be heard by Court as constituted for hearing of appeal – Supreme Court (General Civil Procedure) Rules 2005 rr 64.03(4), 64.22(6).
SECURITY FOR COSTS – Application by respondent for order that appellant provide security for respondent’s costs of appeal – Whether ‘special circumstances’ justifying order for provision of security exist – Appellant having difficulty meeting financial obligations – Risk that appellant’s financial obligations will deplete her net assets and render her incapable of meeting a future costs order – Application granted – Supreme Court (General Civil Procedure) Rules 2005 r 64.24(2).
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr J Korman | Shamrock Woodland Lawyers |
| For the Respondent | Mr I D McDonald | Moray & Agnew |
KYROU JA
GINNANE AJA:
Introduction
The appellant is the proprietor of a house in Pakenham (‘Property’). She received insurance payments in respect of water damage sustained by the Property on 1 March 2010, 4 February 2011 and 26 November 2011. On 8 March 2012 the appellant complained to the respondent about water damage allegedly caused by works negligently performed by the respondent at the Property in June 2009. The works allegedly comprised the removal of wires from an existing 10 millimetre conduit, the reconnection of that conduit to the Property and the installation of a replacement telephone line through a 50 millimetre conduit that the respondent laid between the boundary fence of the Property and the house (‘Works’). The damage caused to the Property by the third insurance incident is the same as the damage allegedly caused by the Works.
The respondent denied that it carried out the Works and denied liability. The appellant instituted proceedings in the County Court. Although both parties estimated that the trial would take 10 days, it took 39 days between 3 February 2014 and 31 March 2014. The judge found in favour of the respondent. On 29 August 2014, her Honour made an order dismissing the proceeding and on 1 September 2014 she made an order requiring the appellant to pay the respondent’s costs (‘Orders’). The costs order requires the appellant to pay the respondent’s costs on a party and party basis up to 11 am on 9 May 2013 and thereafter on an indemnity basis.
Her Honour published her reasons for judgment on 29 August 2014[1] in which she made the following findings:
[1]Villella v Telstra Corporation Ltd [No 1] [2014] VCC 913 (‘Reasons for Order’).
(a) the respondent did not carry out the Works;
(b) even if the respondent carried out the Works, the water damage was not caused by water entering the Property through the 10 millimetre conduit as alleged by the appellant;
(c) the appellant had not performed any work to rectify the water damage resulting from the third insurance incident; and
(d) if the respondent is liable to the appellant, she is entitled to damages of $112,679.93.
On 3 March 2014, the 20th day of the trial, the appellant made an application that the judge recuse herself on the ground of apprehended bias. The appellant complained that the judge had:
(e) narrowed the permitted scope of her counsel’s cross‑examination of one of the respondent’s witnesses, Ms Cathcart, who gave evidence about the respondent’s discovery;
(f) allocated less time to the appellant for cross‑examination compared with the time allowed to the respondent and blamed the appellant for the length of the trial;
(g) answered questions on behalf of Ms Cathcart;
(h) asserted client legal privilege on behalf of the respondent;
(i) required the appellant’s counsel to destroy the effect of his cross‑examination;
(j) advised the respondent on how to exercise its rights; and
(k) interposed another witness when Ms Cathcart was giving evidence.
After four days of argument, on 6 March 2014, the judge rejected each of the above complaints and made a ruling refusing to recuse herself. Her Honour published her reasons for the ruling on 29 August 2014.[2]
[2]Villella v Telstra Corporation Ltd [No 2] [2014] VCC 914 (‘Reasons for Ruling’).
The appellant has filed an amended notice of appeal containing 14 grounds of appeal. Ground 1 relates to the judge’s refusal to recuse herself. Grounds 2 to 4 concern rulings made by the judge on the respondent’s discovery. Ground 5 relates to the relevance of the absence of certain records from the respondent’s database. Grounds 6, 7 and 8 allege that the judge erred in making the findings set out at [3(a)], [3(b)] and [3(c)] above, respectively. Ground 9 alleges that there was insufficient evidence for the finding set out at [3(c)] above, which was said to be tantamount to a finding of fraud. Grounds 10 to 13 relate to the judge’s findings on quantum. Ground 14 relates to costs.
The Court has before it an application by the appellant’s solicitors, Shamrock Woodland Lawyers (‘Shamrock’), for leave to file a notice that the firm has ceased to act for the appellant, and two applications by the respondent. The first application is that the entire appeal, or alternatively grounds 1 to 4 in the amended notice of appeal, be dismissed as incompetent. The second application is that the appellant provide security for the respondent’s costs of the appeal.
We will consider these applications in turn.
Appellant’s solicitor ceasing to act
Where, as in the present case, a notice of appeal has been served, a solicitor requires the leave of this Court in order to file a notice that he or she has ceased to act.[3]
[3]Supreme Court (General Civil Procedure) Rules 2005 r 20.03(4) (‘Rules’).
In Plenty v Gladwin,[4] the High Court stated that a court has a discretion whether or not to grant leave to a solicitor to file a notice of ceasing to act for a particular party. The Full Court said:
[U]nless there are special circumstances which render it expedient to retain the solicitor on the record the order will generally be made as a matter of course upon proof that the solicitor has in fact ceased to act for the party and that no steps have been taken to take the solicitor’s name off the record.[5]
[4](1986) 67 ALR 26 (‘Plenty’).
[5]Plenty (1986) 67 ALR 26, 27.
Shamrock’s application for leave to file a notice that it has ceased to act for the appellant is supported by an affidavit sworn by Mr Paul Bradley of Shamrock. Mr Bradley states that Shamrock was engaged by the appellant to assist with the preparation, filing and service of the notice of appeal and the initial preparation of the draft appeal book index. Mr Jonathan Korman of counsel also provided assistance with the drafting of the notice of appeal. Subject to Mr Bradley’s appearance today to instruct Mr Korman in relation to the respondent’s applications, Shamrock holds no further instructions, and has effectively ceased to act.
Shamrock has advised the solicitors for the respondent of its intention to cease to act for the appellant. Shamrock also advised the appellant in writing of the respondent’s applications. Shamrock has passed on to the appellant correspondence and documents relating to her appeal.
Written submissions on behalf of the appellant on the respondent’s applications have been prepared by Mr Korman and have been filed. Mr Korman appeared today to oppose the respondent’s applications, instructed by Mr Bradley.
Neither the respondent nor the appellant has objected to the granting of Shamrock’s application.
It is clear from Mr Bradley’s affidavit that Shamrock has ceased to act for the appellant. No steps have been taken to remove the name of that firm from the record. No circumstances have been identified which would render the granting of leave inexpedient. For these reasons, we would grant Shamrock’s application for leave to file a notice that it has ceased to act for the appellant.
Dismissal of appeal as incompetent
Grounds 1 to 4 of the amended notice of appeal deal with interlocutory rulings. Section 74(2D) of the County Court Act 1958 provides that an appeal does not lie to this Court from an interlocutory judgment or order except with the leave of this Court. The appellant has not sought leave. Rule 64.03(4) of the Rules provides that, where leave to appeal is required and a notice of appeal is served before leave has been granted, a respondent may apply to this Court for an order dismissing the appeal as incompetent.
During the course of argument today, we expressed the preliminary view that it is undesirable for this Court to consider separately at this stage the merits of grounds 2 to 4. This is because grounds 5 to 9 are substantive grounds dealing with the judge’s critical findings of fact and the appellant’s complaints about discovery may have a bearing on those substantive grounds. Ground 1 largely arises out of the manner in which her Honour dealt with discovery issues. While a favourable outcome for the appellant on that ground may obviate the need for the Court to consider the other grounds, the particular circumstances and history of the proceeding tell against fragmentation of the appeal.[6] Further, ground 1 can best be considered in the context of the trial as a whole and grounds 5 to 9 will provide an appropriate framework for that context to be exposed.
[6]Cf Itek Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207, 233–6 [154]–[165]. See also Rules r 64.22(6); Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478, 482–4 [4]–[8].
After we expressed our preliminary view, the respondent agreed that, in all the circumstances, the best course is that the question of leave to appeal in respect of grounds 1 to 4 be dealt with by the Court as constituted to hear the appeal in respect of grounds 5 to 14.
Accordingly, we would order that the respondent’s application that the appeal, or alternatively grounds 1 to 4 in the amended notice of appeal, be dismissed as incompetent, be referred for hearing by the Court as constituted to hear the appeal.
Security for costs
Pursuant to s 74(5) of the County Court Act 1958, r 64.24(2) of the Rules applies to the respondent’s application for security for costs. The rule provides that this Court may, in ‘special circumstances’, order that security be given for the costs of an appeal.
What constitutes special circumstances ‘depends entirely on the circumstances of each particular case.’[7] However, the probable inability of an appellant to pay the respondent’s costs if the appeal is unsuccessful has long been held to constitute special circumstances justifying an order that the appellant provide security.[8]
[7]Rowan v Australian Associated Motor Insurers Ltd (Unreported, Full Court, Supreme Court of Victoria, 16 December 1988) 1.
[8]See Scerri v Northam Holdings Pty Ltd [1967] VR 674, 674; Mobilia v Voudiotis (2002) 4 VR 327, 328 [2].
Although impecuniosity is considered to be a sufficient ground upon which to order security for the costs of an appeal, other circumstances may exist which justify the court declining to order that security be provided.[9]
[9]See, eg, Lagarna Pty Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd [1995] 1 VR 150.
In Equity Access Ltd v Westpac Banking Corporation[10] the following factors were considered to be relevant to the court’s discretion to order security for costs:
[10](1989) 11 ATPR ¶40-972 (‘Equity Access’). See also Maher v Commonwealth Bank of Australia [2008] VSCA 122, [80]; Ribbera v Eagle Fuels Pty Ltd [2014] VSCA 173, [30].
(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.[11]
[11]Equity Access (1989) 11 ATPR ¶40-972, 50,635.
In Equity Access, the first factor was described as follows: ‘the chances of success of the applicant; whether the applicant’s claim is bona fide or a sham’. It appears that the report of the case combined two separate factors into a single factor. The factors are not coextensive. Although a claim that has good prospects of success is unlikely to be a sham, a claim that is not a sham may have no prospects of success. Subsequent cases have tended to refer only to the applicant’s prospects of success and to omit any reference to whether the applicant’s claim is bona fide or a sham.
The respondent’s application for security for costs is supported by two affidavits sworn by Ms Kathryn Footner, the solicitor for the respondent.
Ms Footner has instructed Mr Ariel Weingart, a costs consultant, to prepare a bill of costs in taxable form of the respondent’s costs of the County Court proceeding, but that bill has not yet been prepared. Ms Footner estimates that those costs will amount to approximately $500,000.
Mr Weingart has assessed the respondent’s likely costs of defending the appeal on the standard basis at $95,175.70 plus GST.
It is common ground that the appellant is the registered proprietor of the Property and that the Property is subject to a registered mortgage with Bankwest.
An ASIC search exhibited to Ms Footner’s first affidavit discloses that the appellant is the sole director and shareholder of RV Investments (Aust) Pty Ltd (‘RV’). RV was the defendant in an unrelated County Court proceeding in which judgment was entered against it on 11 April 2014 in the amount of $242,000 plus interest.[12] In that proceeding, RV was also ordered to pay the costs of the successful plaintiff, ACN 110 769 929 Pty Ltd (in liq), formerly known as Rent and Buy Pty Ltd (‘ACN’). RV filed a notice of appeal in this Court, and on 26 June 2014 it was ordered to provide security for costs in the amount of $52,000. RV did not comply with this order. On 5 September 2014, the Court dismissed the appeal by RV for want of prosecution.[13] On 11 August 2014, ACN made an application for an order to wind up RV.
[12]See ACN 110 769 929 Pty Ltd (in liq) v RV Investments (Aust) Pty Ltd [2014] VCC 436.
[13]RV Investments (Aust) Pty Ltd v ACN 110 769 929 Pty Ltd (in liq) [2014] VSCA 210.
The appellant has filed an affidavit sworn by her which contains three exhibits. The first exhibit shows that on 28 July 2014, the Property was valued at $1,975,000. The second exhibit is a single page from a Bankwest bank statement (‘Bankwest statement’) which shows that, as at 24 September 2014, the mortgage over the Property had a balance of $1,411,746.56. The third exhibit is a single page from an ANZ Bank Visa statement (‘ANZ statement’) which shows that, as at 29 September 2014, the appellant owed $8,477.78 on her ANZ Bank Visa credit card. The appellant deposed that she has a personal loan with the Commonwealth Bank (‘CBA account’) with a current balance of $8,264.36 but she did not exhibit a bank statement. The appellant also deposed that, apart from the costs payable under the Orders and the liabilities set out above, she has ‘no significant personal liabilities’. Finally, the appellant deposed that she owns six racehorses — which she names in her affidavit — and that she estimates that they have a combined value of $400,000 to $500,000.
The Bankwest statement shows that the balance in the mortgage account was $1,399,979.08 on 25 June 2014 and $1,411,746.56 on 24 September 2014; that interest of approximately $6,000 was debited on each of 30 June 2014, 29 July 2014 and 29 August 2014; that home loan arrears notice fees of $35 were debited on 10 and 28 July 2014; and that a single payment of $6,000 was made by the appellant between 25 June 2014 and 24 September 2014. This means that, during this three month period, the appellant paid only one of three instalments that were due and that the balance in the account increased by $11,767.48.
The ANZ statement shows that the credit limit for the appellant’s Visa account is $8,500, that the opening balance on 19 September 2014 was $9,077.78 and that the appellant paid the amount of $600 on 29 September 2014 to reduce the balance to $8,477.78.
The appellant’s affidavit did not state anything about her income and did not provide any details of her usual monthly expenditure.
The respondent submitted that the prospects of the appeal succeeding are ‘very weak’ and that, in view of the appellant’s financial position, there is a risk that any order for costs of the appeal in favour of the respondent will not be satisfied by the appellant. The respondent also relied on 10 matters which were said to be peculiar to the circumstances of the present case, in support of its application for security for costs. Many of those matters relate to the manner in which the trial was conducted by the appellant. In oral argument, the respondent relied on an additional matter, namely, that if the appellant conducts the appeal as a self‑represented litigant, a higher cost burden would befall the respondent.
The appellant submitted that, in relation to her prospects of success in the appeal, all that she is required to show is that her appeal is bona fide and not a sham.[14] She contended that she satisfies this requirement. She also submitted that her affidavit establishes that she would be able to meet any order for costs that may be made against her. According to the appellant, the 10 additional matters upon which the respondent relies in its written submissions are irrelevant.
[14]The appellant relied upon Livingspring Pty Ltd v Kliger Partners [2007] VSC 443, [82].
In our opinion, there are special circumstances in the present case that warrant the making of an order that the appellant provide security for the respondent’s costs of the appeal.
The first relevant issue is the prospects of success of the appeal. For the reasons set out at [24] above, we do not accept the appellant’s submission that this issue merely requires consideration of whether the appeal is bona fide and not a sham. However, in the present case, we have not considered this issue in detail and will assume, in the appellant’s favour, that the appeal is genuine and arguable. Accordingly, we will treat the prospects of success as a neutral factor in relation to the application for security for costs.
The second relevant issue is the quantum of risk that a costs order would not be satisfied. Although the appellant has not provided any details of her income and usual monthly expenditure, it appears from [31] and [32] above that she is having difficulty meeting her financial obligations when they fall due and keeping within her credit limit. As for whether the periods covered by the Bankwest statement and the ANZ statement are representative of the appellant’s true financial position, although the evidence to establish this is solely within her possession, she has failed to provide sufficient evidence to dispel the inferences arising from those statements.
The financial position of RV is also relevant, as the appellant is the sole director and shareholder of that company. The evidence at trial was that, in the period from 18 May 2010 until 26 March 2012, the appellant received a total of $543,220.56 from her insurer in respect of the three insured incidents and that, in the same period, she transferred to RV approximately $500,000. Notwithstanding this substantial cash inflow, RV did not pay the judgment debt of $242,000 arising from the County Court judgment on 11 April 2014 and did not provide the security of $52,000 ordered by this Court on 26 June 2014. RV now faces a winding up application. As the sole director and shareholder of RV, the appellant is responsible for its financial affairs and must be taken to have caused RV not to make the payments of $242,000 and $52,000 referred to above to meet its legal obligations.
A close analysis of the appellant’s assets does not give this Court any confidence that she will meet any order for costs.
Although the appellant has provided a current valuation for the Property, she has not provided any objective evidence of the value of the six racehorses she claims to own. Ms Footner’s second affidavit indicates that the appellant is not listed as the owner of those racehorses in the register of racehorses maintained by Racing New South Wales. At the commencement of today’s hearing, the appellant sought and was granted leave to file a second affidavit in response to Ms Footner’s second affidavit. According to the appellant’s second affidavit, some of the horses listed in her first affidavit were misnamed. That affidavit sets out details of the horses in fact owned by the appellant. However the affidavit does not provide any satisfactory material to enable us to assess the value of the horses.
In these circumstances, we place no weight on the appellant’s evidence that her racehorses have an estimated value of $400,000 to $500,000. We are unable to form any view as to the value of the appellant’s racehorses.
Overall, the appellant’s two affidavits do not provide a complete picture of her financial position.
Deducting from the value of the Property of $1,975,000 the total amount of $1,428,488.70 due on the Bankwest account, the ANZ account and the CBA account, leaves net equity of $546,511.30. The respondent has estimated its costs of the trial at $500,000. The Orders provide that all the respondent’s costs of the trial must be paid by the appellant on an indemnity basis. It follows that the respondent’s costs of the trial are likely to be assessed at approximately $500,000. If this amount is deducted from the net equity of $546,511.30, the appellant would only have $46,511.30 in equity and would not be able to meet in full an order for costs of the appeal if the costs are assessed at the estimated amount of $95,175.70.
As already discussed, the Bankwest statement shows that in the three month period from 25 June 2014 until 24 September 2014 the appellant’s net equity in the Property decreased by $11,767.48. If this trend continues, the appellant’s difficulty in meeting an order for costs of approximately $95,175.70 will increase with the passage of time. We note that, since swearing her first affidavit on 8 October 2014, the appellant has incurred further legal costs in relation to the appeal.
Given the appellant’s history with RV, there is a risk that even if she has the funds to pay the respondent’s legal costs, she would be unwilling to do so, forcing the respondent to take expensive enforcement action.
The third relevant issue is whether the making of an order for the provision of security for costs would be oppressive in that it would stifle a reasonably arguable claim. On the basis of the above discussion, it appears that, while the appellant would be able to provide security for costs of the appeal at present, she may not be able to meet an order for costs if it is made in the future. Accordingly, we are not satisfied that an order for security for costs would be oppressive in the relevant sense.
The fourth to sixth factors in Equity Access are not relevant to the application for security for costs. Save insofar as we have discussed them, the 10 matters upon which the respondent relies in its written submissions are also not relevant.
The remaining issue is the amount of the security to be provided by the appellant. The appellant has not filed any expert evidence challenging Mr Weingart’s assessment of $95,175.70. In our opinion, however, that assessment is excessive. Some of the individual amounts in Mr Weingart’s assessment are too generous. In our opinion, an appropriate amount for security for costs is $70,000.
Accordingly, we would order that the appellant provide security for the respondent’s costs up to and including the first day of the hearing of the appeal in the sum of $70,000.
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