Schuller v S J Webb Nominees Pty Ltd - [2015] SASC 8

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
SCHULLER v S J WEBB NOMINEES PTY LTD
[2015] SASC 8
Reasons for Decision of The Honourable Justice Nicholson
29 January 2015
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
PROCEDURE - COSTS - SECURITY FOR COSTS - POVERTY
The applicant (respondent to the appeal) has sought an order for security for its costs of an appeal from a decision of the District Court.
Whether an order for security for costs would stultify the appeal given the appellant's impecuniosity.
Held:
1. The application is allowed.
2. The appellant has failed to discharge the onus of proving that an order for security would stultify the appeal.
3. The further prosecution of the appeal is stayed until the appellant pays the sum of $15,000 into Court to secure the respondent's costs of the appeal.
Supreme Court Civil Rules 2006 Rule 194, Rule 295, referred to.
Dagenham Nominees Pty Ltd (t/as Banwell Marine Service) v Shanks (2011) 110 SASR 577, [2011] SASC 163; Morgan v WorkCover Corporation [2012] SASC 190; Sands v State of South Australia [2013] SASC 105; Ramstrom v Baldino [2014] SASC 29; M, PJ v W, JW [2014] SASC 87; Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holdings Pty Ltd & Ors (No 3) [2014] SASC 148; Diakos v Mason [2010] SASC 108; Citicorp Australia Ltd & Ors v Cirillo & Anor [2003] SASC 204; Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153, (2003) 130 FCR 317; Del Bosco v Outtrim [2008] NSWSC 105; Kirkham v Tassone [2015] SASC 6, considered.

SCHULLER v S J WEBB NOMINEES PTY LTD
[2015] SASC 8
NICHOLSON J.
Introduction

These reasons concern an application by the respondent to an appeal for an order for security for its costs of the appeal. I will refer throughout to the applicant on this application as the respondent and to the respondent to this application as the appellant.
The appellant failed with her claim in the District Court for damages for personal injury allegedly caused by the negligence of the respondent, the proprietor of a hotel. The appellant’s case, at trial, was that she had become intoxicated at the hotel, danced on a chair in the saloon bar, fell off the chair and badly injured her knee. This occurred on the third occasion that night that the appellant had danced while on the furniture. On each of the three occasions she had been told to stop and get down.
The appellant alleged at trial, and on the appeal maintains, that the respondent breached, in a number of ways, a duty of care owed to her which breaches caused or contributed to the accident such that the respondent should be liable for damages.
The trial Judge held: that no duty of care was owed in the circumstances; that even if a duty had been owed there was no breach on the facts; that, in any event, the appellant voluntarily agreed to accept the risk of dancing on a chair; and that, in the event that the trial Judge were to be incorrect with respect to his findings on liability, the contributory negligence of the appellant would lead to a reduction in any award of damages to the extent of 90 per cent. The Judge went on to assess the amount of damages he would have awarded if, contrary to his findings, the respondent were to be liable.
The appellant has appealed against each of these findings, including the assessment of damages on the basis that the assessment was manifestly inadequate.
By interlocutory application, the respondent has sought an order for security for its costs of the appeal. In support of the application, the respondent relies on the affidavit of its solicitor, Nadia Karine Blake, sworn on 8 December 2014. In opposition to the application, the appellant relies on her own affidavits, one sworn 29 December 2014 and one sworn 20 January 2015. In addition, I have had the benefit of written and oral submissions presented by counsel for each party and I have had regard to the judgment in the court below, the appellant’s notice of appeal and the respondent’s notice of alternative contention.
According to the plaintiff’s written application, the order for security is sought pursuant to Rule 194 of the Supreme Court Civil Rules 2006. I leave aside any question of whether or not Rule 194 is confined to the making of such an order with respect to a plaintiff prior to trial rather than with respect to an appellant unsuccessful at trial. In any event, there is now an express power to make such an order against an appellant, to be found in rule 295(1)(g). That rule provides:
(1)The Court may exercise any of the following powers in relation to an appeal or an application for permission to appeal:
(g) the Court may, in special circumstances, order that security be given for the costs of an appeal;
It is common ground that the appellant is impecunious. In any event, I make such a finding on the basis of the affidavit evidence that is before me. Irrespective of how much the appellant may owe her own solicitors (as to which there is no evidence) she is presently liable, pursuant to costs orders made in the court below, to meet the respondent’s party/party costs of the trial. The respondent has prepared a short form bill of costs in the amount of a little over $109,000 plus interest. Of course this may change if the appellant were to be successful on appeal.
According to the affidavit evidence, the appellant enjoys a moderate taxable income from her work as an administration assistant and grain worker. In the financial year 30 June 2014, her taxable income was a little over $50,000. Whilst she is not a permanent full time employee, she is of the belief that her working arrangements are reasonably secure.
The appellant is the sole parent of a teenage daughter who attends high school and who lives with the appellant on a full time basis. The appellant receives some child support payments from her daughter’s father, together with some Centrelink assistance from time to time. The appellant lives in rental accommodation and has outlined in her affidavit her weekly expenses. She estimates that after all fixed commitments have been taken into account she will have approximately $300-$400 disposable income each week. However, this will depend on the amount of her earnings from employment which are irregular and on the natural variability of her expenses in each week. The appellant owns no real property or any other assets of consequence apart from a little over $2,000 in her savings account and some pieces of household furniture and effects which she collectively estimates to be worth approximately $3,500-$4,000. She is liable for a personal loan with respect to her motor vehicle in the amount of $15,000.
I am satisfied that the appellant has a very limited capacity to borrow and that all of her resources are likely to be devoted, in the foreseeable future, to maintaining a modest living for herself and her teenage daughter. I am satisfied that she is not in a position to meet, from her own resources, the adverse costs order that is presently in place.
Before a discretion to make an order for security for costs in this matter can arise I must first be satisfied, in accordance with the requirements of rule 295(1)(g), that there are “special circumstances”. The question of whether impecuniosity, by itself, may amount to special circumstances for this purpose has not been finally determined although there is some authority to the effect that it can.[1] Impecuniosity combined with a weak case on appeal has been held as sufficient both to constitute special circumstances and, in appropriate circumstances, to justify an order for security.[2]      I am satisfied, on the basis of the appellant’s impecuniosity and my assessment of her prospects on the appeal, that “special circumstances” have been established in this matter so as to enliven the discretion to make an order for security.
[1]    See, generally, Dagenham Nominees Pty Ltd (t/as Banwell Marine Service) v Shanks (2011) 110 SASR 577, [2011] SASC 163 at [54]-[56] (Blue J); Morgan v WorkCover Corporation [2012] SASC 190 at [12] (Vanstone J); Sands v State of South Australia [2013] SASC 105 at [10]-[11] (White J); Ramstrom v Baldino [2014] SASC 29 at [6] (Nicholson J); M, PJ v W, JW [2014] SASC 87 (Bampton J) and Essential Beauty Franchising (WA) Pty Ltd & Ors v Pilton Holdings Pty Ltd & Ors (No 3) [2014] SASC 148 at [24] (Nicholson J).
[2]    See, for example, Diakos v Mason [2010] SASC 108 and Citicorp Australia Ltd & Ors v Cirillo & Anor [2003] SASC 204.
On the evidence before me I am satisfied also of the following matters.
(i)The application for security has been brought sufficiently promptly.
(ii)The appeal is bona fide.
(iii)The appellant’s impecuniosity has not been caused or contributed to, in any significant way, by the respondent’s conduct.
(iv)After reviewing the judgment of the court below, the appellant’s criticisms of that judgment and the respondent’s arguments in support of that judgment, the appellant’s prospects of overturning that judgment and obtaining a substantial award of damages in her favour can only be described, at best, as moderate.
(v)Notwithstanding that the respondent succeeded at trial, it is greatly at risk, at the least, of not recovering much, if any, of the very substantial costs it occurred in mounting that successful defence.
(vi)In the event that the respondent were to succeed in resisting the appeal it is highly likely that it would suffer further prejudice in being unable to recover its costs of the appeal, at least in the event that no security for its costs were to be provided.
(vii)The legal costs that will be incurred by the respondent with respect to the appeal are likely to be in the order of $14,000-$21,000 as itemised in the affidavit of Ms Blake.
In addition, the respondent submits that, given that the appellant has offered no explanation as to how she funded the proceedings at trial or as to how her appeal is being funded, I should infer that her solicitors have been and are supporting her on a contingency basis. If so, the respondent submits that the Court should place no, or little, weight on any argument that the granting of security for costs would serve to stultify the appeal, on the basis that the appellant’s solicitors have not provided sworn evidence that they are not prepared to support the appeal.[3]
[3] See Sands v State of South Australia [2013] SASC 105 at [37]-[40] (White J).
The appellant also relies on the observations of Kourakis CJ in Diakos v Mason,[4] to the effect that impecuniosity should be given greater weight in favour of an applicant for security for costs when that security is sought with respect to an appeal rather than a first instance trial. As Kourakis CJ observed:
An order for security for costs by a trial Judge may deny a plaintiff the important right to a judicial determination of his or her claim for redress of a wrong. However, the appellant has had the benefit of a judicial determination of the underlying controversy. The statutory right of a further review by way of appeal is a safeguard against error, but the fact remains that the plaintiff has had his side of the controversy judicially determined and in fact determined adversely to him. Moreover, the risk of injustice to an appellant if an order for security is prohibitive can be assessed with greater certainty on appeal than at first instance.
[4] Diakos v Mason [2010] SASC 108 at [10].
Ordinarily, the matters I have summarised thus far would point strongly in favour of an order for security being made. However, there are two matters of particular concern in the circumstances of this case. First, the appellant is the plaintiff in a personal injuries claim. Ordinarily, certainly at the trial level, the court would not order security for costs in such circumstances. I accept that we are not at the trial level but at the appeal level and I accept the force, in that respect, of the observations of the Chief Justice, just set out. Nevertheless, on my review of the trial judgment, whilst I am satisfied that the prospects of success are to be seen, at best, as moderate, I am not able, at this stage, to say that the appellant’s case has no prospects of success. In these circumstances, and given the state of the appellant’s personal and financial circumstances, the risk that any order for security for costs would serve to stultify the appeal and prevent the appellant from pursuing a potentially meritorious claim, becomes a very important consideration.
The second concern I have is this one of stultification. I am satisfied that the appellant would not be able to meet, from her own resources, an order for security, in any substantial amount such as that sought by the respondent. If the appellant’s resources were the only consideration, such an order would risk stultifying the appeal. However, it is not enough to merely assert, as the appellant has done, that the appeal will be stultified. Stultification is a matter that must be proved and the onus of proof rests with the appellant.
I accept, on balance, that the appellant’s legal advisers have reached an accommodation with her by which they have conducted her case on some form of contingency basis which may ultimately mean that she does not have to meet her own legal costs in part or in whole. That a contingency arrangement was in place for the trial has not been disputed by the appellant. However, counsel for the appellant submitted that there was no basis to infer that any contingency arrangement involves an uplift in the fees, ordinarily payable, should the appellant succeed with her claim. I accept that submission.
In Sands v State of South Australia,[5] White J said this.
[5] [2013] SASC 105 at [37]-[40].
The State submitted that the Court could be satisfied that an order that security be provided would not have the effect of stultifying the appeal. It drew attention to evidence indicating that the plaintiff’s solicitors and counsel were acting on a contingency basis. The evidence did not disclose the precise arrangements under the contingency agreement but the costs which must have been incurred in conducting the lengthy trial makes it apparent that the appellant’s solicitors will benefit substantially in the event of success in the appeal.
The State’s submission was that the financial interests of the appellant’s solicitors provided an incentive for them to allow the appeal to proceed, including by providing security if necessary. The State also drew attention to the fact that the appellant’s solicitors had not asserted that stultification would be the consequence of an award of security. Given that the appellant’s solicitor had sworn a detailed affidavit in answer to the application for security, the omission of a statement to this effect is significant.
The fact that a litigant is prosecuting proceedings under a contingency fee arrangement with his or her solicitors has been regarded as a relevant consideration in the resolution of an application for security. In Bray v F Hoffman‑La Roche Ltd,[6] Finkelstein J (with whom Branson J agreed)[7] said:
It is also appropriate to bear in mind that it is commonly the case in a class action that a person will stand behind (I mean fund) the applicant. Usually this will be the applicant’s solicitor, who will sometimes charge what is referred to as a “contingency fee” for the privilege. When a proceeding is brought by a “nominal plaintiff” that is a plaintiff who will not himself benefit from the action but is making the claim for the benefit of someone else, an order for security is usually made. A party who is being funded by his solicitor is not really a “nominal plaintiff”. Nevertheless, the solicitor does stand to benefit from the action (especially as regards the additional fee) if the action is ultimately successful, as the solicitor would then be able to recover his costs. That is a relevant, though not a decisive, consideration when deciding whether security should be ordered.[8]
Similarly, Barrett J in Del Bosco v Outtrim[9] considered that evidence that the plaintiff’s solicitors were acting for her on a contingency basis precluded an order for the provision of security from having the effect of stultifying the prosecution of her claim.[10]
Some care may be necessary when relying upon a contingency fee arrangement in relation to applications for the provision of security for costs. One of the rationales for the recognition of contingency fee arrangements was the expected enhancement of access to justice for persons who could not otherwise engage in litigation. An over‑ready willingness to award security in such circumstances may have the effect of frustrating the achievement of that purpose. However, when a matter reaches the appellate stage, the need for caution is less apparent. Appellants will already have had access, under the contingency fee arrangement, to the courts in a first instance trial.
With respect, I agree in general with these observations.[11]
[6] [2003] FCAFC 153; (2003) 130 FCR 317.
[7] Ibid at [214]; 361-2.
[8] Ibid at [252]; 375.
[9] [2008] NSWSC 105.
[10] Ibid at [22]-[24].
[11] See, also, Kirkham v Tassone [2015] SASC 6 (Kourakis CJ).
In this case the appellant, even if successful, is likely to recover only a relatively modest award of damages. Furthermore, her costs incurred to date, judged by reference to those incurred by the respondent, are likely to be substantial. As a consequence, and given her impecuniosity, the appellant’s solicitors must be seen as also having a significant financial interest in the appeal. There is no evidence from the appellant or her solicitors as to whether they do or do not remain willing to support the appeal and, if so, to what extent. In the circumstances, I am not satisfied that the solicitors are not willing and able to support, financially, the appeal. The appellant has not discharged the onus of proving that an order for security, in an amount over and above that which she can afford to meet from her own resources, would stultify the appeal.
The appeal should be relatively confined in terms of expense. In her affidavit, Ms Blake has indicated that costs of somewhere between $14,000 and $21,000 are likely to be incurred by the respondent.
The appellant has made an open offer to pay $5,000 into Court by way of security. This amount accords with the amount that I expect the appellant could manage, given her financial circumstances. Nevertheless, for the reasons given, I am not satisfied that an order in the amount of $15,000, would have the effect of stultifying her appeal.
For these reasons I will allow the respondent’s application for an order for security for its costs of the appeal. I make the following order:
1.The further prosecution of the appeal is stayed until the appellant pays the sum of $15,000 into Court to secure the respondent’s costs of the appeal.
I will hear the parties on any consequential matters.