Samantha Lee Cook T/As Kissmyblackarts v Groove Is in the Park Pty Ltd - [2010] SASC 289

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
SAMANTHA LEE COOK T/AS KISSMYBLACKARTS v GROOVE IS IN THE PARK PTY LTD
[2010] SASC 289
Judgment of The Honourable Justice Anderson
15 October 2010
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - WHEN APPEAL LIES - BY LEAVE OF COURT - INTERLOCUTORY ORDERS AND JUDGMENTS
The applicant/defendant seeks permission to appeal against the judgment of a judge of the District Court - judgment was given on appeal from a decision of a master of the District Court - decision of the master was interlocutory - whether permission is required.
Held: Permission is required.

PROCEDURE - COSTS - SECURITY FOR COSTS - OTHER REASONS FOR SECURITY
The master refused the applicant's application in the District Court for security for costs - applicant seeks security for costs as the respondent/plaintiff is a trustee company with no assets.

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - PARTICULAR CASES - OTHER MATTERS - COSTS
Whether the judge erred in exercise of the discretion not to order security for costs - where judge found "threshold test" passed - judge found reason to believe respondent/plaintiff would be unable to pay applicant/defendant's costs if unsuccessful.
Held: The judge did not err in the exercise of the discretion - permission to appeal is refused.
Supreme Court Civil Rules 2006 r 288 and r 288(1)(a)(ii); Corporations Act 2001 (Cth) s 1335; District Court Civil Rules 2006 r 194(1)(a) and s 286, referred to.
Beverage Bottlers (SA) Ltd (in liq) & Anor v Abode Enterprises Pty Ltd [2009] SASC 272; Ward v Motor Accident Commission [2008] SASC 346, applied.
Graziano v Graziano [2008] SASC 142, discussed.

WORDS AND PHRASES CONSIDERED/DEFINED
"Interlocutory judgment"

SAMANTHA LEE COOK T/AS KISSMYBLACKARTS v GROOVE IS IN THE PARK PTY LTD
[2010] SASC 289
Civil
ANDERSON J.
Introduction

This is an application for permission to appeal against a judgment of a judge of the District Court in which His Honour dismissed an appeal from a decision of a master of that court.
The master had originally refused an application by the applicant/third defendant for security for costs.
Rule 288 of the Supreme Court Civil Rules 2006 is the relevant rule regarding permission to appeal. I set it out later in these reasons. Permission is required under that section because the judgment appealed from is a judgment given on appeal from an interlocutory judgment.
Background
District Court Proceedings
The plaintiff (and respondent), Groove Is In The Park Pty Ltd, is a concert promoter in Australia. It is common ground that the plaintiff is a trustee company for the Groove Is In The Park Trust.
The plaintiff is suing Big Xity Entertainment (first defendant), Timothy Blair (second defendant) and Samantha Lee Cook, trading as Kissmyblackarts (third defendant/applicant).
The plaintiff alleges that the first defendant contracted to obtain the services of an American rapper called Nasir bin Olu Dara Jones. The plaintiff alleges that it paid $50,000 to the first defendant, and that the third defendant, as agent for the first defendant, personally guaranteed the obligations of the first defendant. The services of the rapper were not obtained and the tour did not proceed.
The plaintiff has brought proceedings seeking payment, alleging that the third defendant has failed to repay the $50,000. The third defendant denies any obligation to pay.
Application before the Master
The third defendant made an application for security for costs, which the master refused.
The application for security centred on s 1335 Corporations Act 2001, rather than the District Court Civil Rules 2006. It was accepted that if the third defendant was unable to satisfy the test under s 1335, it would not qualify under r 194 DCR. Section 1335 provides:
Where a corporation is a plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
The authorities in relation to this section, as set out by the master and referred to by the Judge on appeal provide that the section involves a two-stage process. The first stage, or “threshold test” is to consider the question “if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence”. If an applicant can satisfy the “threshold test”, the court has an unlimited discretion as to whether to grant the application.
The master found that the “threshold test” was not satisfied – that the third defendant had not established credible testimony to the effect that the plaintiff corporation, Groove Is In The Park Pty Ltd, would be unable to pay the third defendant’s costs if she were successful in her defence.
However, the master went on to say that if he be wrong in that view, he would, in any event, be disinclined to exercise his discretion to order security. His Honour referred to the following factors: that there was no suggestion the plaintiff’s claim was not bona fide; the strength/weakness of the case was not relevant; the plaintiff was a true plaintiff in that, although it is a trustee, it was the entity which contracted with the third defendant; and there had been delay in the application for security, which was not raised until about 12 months after the proceedings were instituted in September 2008.
The application was therefore refused.
Appeal to District Court Judge
The third defendant appealed against that refusal to a judge.
The judge proceeded in the same manner as the master as to the treatment of s 1335. However, in respect of the “threshold test”, the judge held that the master had erred. His Honour found that the master placed weight on evidence given by a Mr Gilchrist (a director of the plaintiff) that the plaintiff was trading profitably, whereas the correct position was that it was in fact the Trust which was trading profitably. The judge found that, apart from the assertion of Mr Gilchrist, there was no evidence the plaintiff was trading profitably and it was not a “trading company” in its own right. Similarly, the master relied on evidence asserting the plaintiff was solvent, referring to assets of $12,786.40 in one account a term deposit of $100,000 in another. While the plaintiff was solvent, the judge found that those assets were held on trust by the plaintiff and could be transferred easily to the Trust.
The judge found that there was evidence that the plaintiff was a trustee company that owned no assets itself and had a paid-up capital of $3. The judge found that this satisfied the “threshold test” – this amounted to credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in her defence. The judge therefore held that the master erred in respect of the “threshold test”.
However, the judge found that the third defendant had not demonstrated that the master erred in the exercise of his discretion in refusing the application for security. The judge referred to the factors that the master had taken into account in exercising his discretion and found that the master had not erred in his identification of and weight given to the factors relevant to its exercise.
He therefore dismissed the appeal.
Application for permission to appeal to Supreme Court
The third defendant/applicant applies to this Court for permission to appeal against the decision of the District Court judge.
The (paraphrased) grounds of appeal are:
1.The judge erred in finding he was not at liberty to exercise his discretion in preference to the master until the appellant demonstrated the master had erroneously exercised his discretion, and therefore erred in interpreting r 286 DCR.
2.The judge erred in finding the master made no error in identifying the factors relevant to the discretion.
3.The judge took into account irrelevant considerations:
(a)     he attached weight to the erroneous appearance the plaintiff was trading;
(b)    he attached undue weight to the alleged delay in bringing the application.
4.The judge failed to have regard to relevant considerations:
(a)     he failed to attach any weight to the weakness of the plaintiff’s case;
(b)    he failed to attached weight to the fact that the plaintiff is a corporation that is a bare corporate trustee, does not trade itself, and holds all assets on trust;
(c)    he failed to examine whether there was real delay, the background and explanation for delay, and what (if any) prejudice accrued as a result of the alleged delay.
5.The judge erred in confirming the finding of the master that “the third defendant executed a contract which on its face appears to guarantee repayment if the tour did not proceed.”
6.The judge should have exercised the discretion himself.
7.The judge erred in failing to order the plaintiff provide security for costs.
Arguments
Is permission to appeal required?
Mr Robertson SC for the applicant argued before me on the basis that he accepted that the orders appealed from were interlocutory and therefore he required permission to appeal. However, after argument, Mr Robertson advised of two decisions which he drew to the court’s attention. The first is that of Graziano v Graziano [2008] SASC 142. The second is Beverage Bottlers (SA) Ltd (In Liquidation) & Anor v Abode Enterprises Pty Ltd [2009] SASC 272.
In the latter decision of the Full Court, Kourakis J notes at [118]:
[118]The parties agree that even if the judgment of Judge Burley be interlocutory, permission to appeal to the Full Court is not required for the reasons given by Bleby J in Graziano v Graziano.
Vanstone J agreed with Kourakis J in dismissing the appeal but does not comment on that aspect. Neither does Layton J.
In my view it is not a statement by one judge of the Full Court which amounts to any persuasive view. It merely notes the parties’ agreement and refers to Graziano.
Dr Bleby for the respondent submitted that in any event Graziano does not stand for the proposition that no permission is required. He pointed to the reasons of Bleby J in that matter at [9]-[10]:
[9]Rule 281 of the Supreme Court Civil Rules 2006 specified the circumstances in which permission to appeal is necessary. While permission is necessary in respect of “an interlocutory judgment of the Court given by a Judge” [Rule 281(a)(i)], and in certain other types of appeal, it does not specify that permission is necessary in respect of an interlocutory judgment of a judge of the District Court. The appeal must therefore be taken to be an appeal as of right.
[10]I reject the argument of the respondent that the effect of s 43(1) of the District Court Act is to incorporate, by reference, the provisions of r 281(a)(i) so that the reference to “Court” in that rule is a reference to the District Court. The language of s 43(1) of the District Court Act is insufficient to constitute the incorporation by reference of r 281. It refers to and relies on the rules of this Court for what they say about the regulation of appeals to this Court. The word “Court” in r 281(a)(i) is defined in r 4 as meaning the Supreme Court unless the contrary intention appears. It does not so appear. The reference in that rule to this Court is therefore a reference to the Supreme Court.
Whereas Bleby J was dealing with r 281 SCR of the rules in Graziano, the relevant rule now is r 288 SCR. Rule 288 SCR provides:
288(1)Subject to any statutory provision to the contrary, an appeal to the Court lies by permission of the Court if—
(a)The judgment subject to the appeal is:
(i)an interlocutory judgment of the Court given by a judge;
(ii)a judgment given on appeal from an interlocutory judgment.
…
Dr Bleby pointed out that the decision in Graziano was a decision on an appeal from two interlocutory judgments of a judge of the District Court. It was not an appeal from a judgment given on an appeal from an interlocutory judgment and therefore within the terms of r 288(1)(a)(ii) SCR.
In my view r 288(1)(a)(ii) SCR now makes it clear that an applicant requires permission to appeal from any judgment given on an appeal from an interlocutory judgment. It applies to all judgments given on appeal from interlocutory judgments, whether they be in the District Court or the Supreme Court.
Dr Bleby pointed to the decision of the Full Court in Ward v Motor Accident Commission [2008] SASC 346. That matter followed a similar procedural course to this, although the Full Court was considering the question of an appeal from a single judge of this Court. It was held that permission was required pursuant to the rule which then operated, namely, r 281(a)(ii) of the Supreme Court Civil Rules 2006.
It is my view that permission to appeal is required in this matter. The decisions referred to the court by counsel do not influence the interpretation of the rule.
The argument in support of permission to appeal
I have earlier set out the grounds of appeal.
By his written outline Mr Robertson condensed the grounds as follows:
4.The errors the appellant points to are substantially set out in the Notice of Appeal filed 12 August 2010 (FDN 1), namely:
a.     An error in the interpretation of Civil Rule 286 as to the nature and content of an appeal from a decision of a Master of the District Court to a Judge of the District Court (Ground 1);
b.     An error in the application of Civil Rule 194(1)(a) insofar as it concerns an action brought by a party in a representative capacity (Ground 4.2);
c.     Errors of fact that have caused the exercise of the learned Judge’s discretion to miscarry (Grounds 2, 3.1, 4.2 and 5); and
d.     Errors in the exercise of the Court’s discretion (Grounds 3.1, 3.2, and 4).
It appears therefore that the applicant seeks permission to appeal on the basis that there has been an error by the judge in the District Court in the interpretation of the Civil Rules. In addition the applicant suggests there are errors of fact which have caused the discretion to miscarry and further errors in the actual exercise of the discretion.
Mr Robertson questioned whether the judge misinterpreted r 286 DCR, relating to the appeal from the master as providing for a rehearing and not a hearing de novo. He raised the point that because the rules had changed, this Court should look at the matter critically. He also argued that the judge wrongly applied r 194(1)(a) DCR in relation to an action brought in a representative capacity. Further, he submitted that once the judge identified an error by the master, he should have interfered with the exercise of discretion. Mr Robertson then argued that the judge has wrongly applied tests under the repealed rule relating to security for costs.
Consideration of argument
The first two points are procedural. In my view neither warrants the grant of permission to appeal. This is not an appropriate case in which the point in issue needs to be considered by this Court. In my view the judge’s consideration of the “rehearing” was correct. He dealt with the rehearing appropriately. He cited decisions of other judges of the District Court in support: see reasons at [8].
Likewise I can see no error in the way the judge dealt with r 194(1)(a) DCR. The plaintiff was not suing in a representative capacity, as the judge said at [14].
The judge found that there was evidence that the plaintiff was a trustee company that owned no assets and had a paid-up capital of $3. It was for that reason His Honour found there was credible testimony that there was reason to believe the corporation would be unable to pay the defendant’s costs.
The judge therefore disagreed with the master and found that the “threshold test” was not satisfied. This is not a case to review the question of whether an order for security for costs is required under s 1335 of the Corporations Act or whether it is necessary in the interests of justice. I can find no error in His Honour’s consideration of r 194 DCR.
As Dr Bleby points out, to give permission in this matter would involve arguing for the third time issues relating to security for costs in what is a relatively small claim, and ultimately involved a discretionary exercise.
Dr Bleby also pointed to the fact that the appeal seeks to re-argue factual matters relating to the exercise of discretion. The judge dealt with the factors identified by the master as relevant to the discretion. He set them out in his reasons and concluded that it had not been demonstrated that the master erred in the exercise of his discretion.
Conclusion
It is my view that permission to appeal is required. It is also my view that on ordinary principles there is nothing to warrant the grant of permission to appeal in this matter. The appellant seeks to re-agitate matters which have been already argued twice and which largely involve questions of discretion in determining whether to grant security for costs.
As I have said, the question of the interpretation of the rules, in my view, in the circumstances of this case does not warrant the grant of permission to appeal. There is no obvious error in the way the judge has interpreted the rules.
For those reasons I would refuse permission to appeal.