Transglobal Capital Pty Ltd v Yolarno Pty Ltd
[2004] NSWCA 136
•6 May 2004
NEW SOUTH WALES COURT OF APPEAL
CITATION: TRANSGLOBAL CAPITAL PTY. LIMITED & ORS. v. YOLARNO PTY. LIMITED [2004] NSWCA 136 revised - 19/05/2004
FILE NUMBER(S):
41238/03
HEARING DATE(S): 21/04/2004
JUDGMENT DATE: 06/05/2004
PARTIES:
Transglobal Capital Pty. Limited
Garry Charles Taylor (Appellants)
Yolarno Pty. Limited (ACN 002 225 183) (Defendant)
JUDGMENT OF: Beazley JA Santow J Ipp JA
LOWER COURT JURISDICTION: Supreme Court
LOWER COURT FILE NUMBER(S): CA41238/03
LOWER COURT JUDICIAL OFFICER: Handley JA
COUNSEL:
In person (Appellant)
T. Hale SC/Mr. J. White (Respondent)
SOLICITORS:
In person (Appellant)
Hunt Partners (Respondent)
CATCHWORDS:
SECURITY FOR COSTS - Part 51 r. 16 of Supreme Court Rules - Interpretation -"Special circumstances" - Whether impecuniosity of itself may constitute special circumstances - Whether other circumstances relevant.
LEGISLATION CITED:
Corporations Law
Supreme Court Act 1970
Trade Practices Act 1974
DECISION:
1. Set aside the Order made by Handley JA on 2 February 2004 staying the appeal for a period of 6 weeks
2. Set aside the further Order made by Handley JA that the appellants provide security for the respondent's costs of the appeal
3. Set aside the consequential order made by Handley JA granting liberty to apply to have the appeal dismissed for want of prosecution
4. Otherwise confirm the stay of execution of the Judgments appealed from
5. Order the respondent to pay the appellants' costs of this application.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 41238/2003
BEAZLEY JA
SANTOW JA
IPP JA6 May 2004
TRANSGLOBAL CAPITAL PTY. LTD. & ANOR. v. YOLARNO PTY. LTD.
The appellants were defendants in proceedings brought in the Equity Division of the Supreme Court of New South Wales. The trial judge found against the appellants in an amount exceeding $100,000.00. The appellants made an application to this court that the orders made by the trial judge be stayed until the hearing of the appeal. Handley JA, sitting as a single Judge of the Court granted the stay on condition that they provide security for the respondent’s costs of the appeal in the amount of $20,000.00. The appeal was also stayed for 6 weeks. If security was not provided in that time, the respondent was to have liberty to apply to have the appeal dismissed for want of prosecution.
The appellant seeks review of the decision of the appeal judge pursuant to s.46(4) of the Supreme Court Act (NSW) 1970 which gives this court power to discharge or vary a judgment given by a judge of appeal.
HELD per curiam:
(i)“Special circumstances”, being the requirement of the Supreme Court Rules for ordering security for the costs of an appeal cannot be predicated upon a “general rule” of practice to order security in the case of an impecunious appellant.
(ii)If an application for security for costs is made in this jurisdiction, it is necessary to have regard to the circumstances of each case, and impecuniosity is only one relevant consideration.
Orders
1.Set aside the Order made by Handley JA on 2 February 2004 staying the appeal for a period of 6 weeks.
2.Set aside the further Order made by Handley JA that the appellants provide security for the respondent’s costs of the appeal.
3.Set aside the consequential order made by Handley JA granting liberty to apply to have the appeal dismissed for want of prosecution.
4.Otherwise confirm the stay of execution of the Judgments appealed from.
5.Order the respondent to pay the appellants’ costs of this application.
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 41238/2003
BEAZLEY JA
SANTOW JA
IPP JA6 May 2004
TRANSGLOBAL CAPITAL PTY. LTD. & ANOR. v. YOLARNO PTY. LTD.
Judgment
THE COURT: The matter before this Court is a review of a decision of Handley JA in which his Honour acceded to an application by the appellants that orders made by Gzell J on 19 November 2003 be stayed. However, his Honour made the stay subject to a condition that the appellants provide security for the respondent’s costs of the appeal in the amount of $20,000.00. His Honour ordered that execution of the judgments be stayed for a period of 6 weeks and that the security also be provided within that time. His Honour further stayed the appeal for the same period. His Honour then directed that if security was not provided within that time the respondent was to have liberty to apply to have the appeal dismissed for want of prosecution.
Handley JA’s order was made under the powers conferred upon a single Judge of Appeal by s.46(2). The application for review of Handley JA’s order was made under s.46(4) of the Supreme Court Act 1970 which provides:
“(4) The Court of Appeal may discharge or vary a judgment given by a Judge of Appeal or an order made or direction given by a Judge of Appeal.”
An application made under sub-section 4 is not an appeal to the Court: see s.19(2); Pt. 51 r.4(b).
The nature of this Court’s power under s.46(4) to discharge or vary a judgment given by a Judge of Appeal was subject to extensive consideration by the Court in Wentworth v. Wentworth (1994) 35 NSWLR 726. It is not necessary, therefore, for this Court to engage in a detailed consideration of the authorities in which the section has been considered. Mahoney, Handley and Powell JJA who constituted the Court in the Wentworth v. Wentworth each expressed the test to be applied in somewhat different terms. Mahoney JA considered that it was necessary to show that there had been a misdirection in principle or that the order made was plainly wrong (see p.731). Handley JA considered that the power under s.46(4) was at least subject to the principles in House v. The King (1936) 55 CLR 499 and Re Will of Gilbert (1946) 46 SR(NSW) 318; 63 WN 176. His Honour observed that the orders under challenge were interlocutory orders made in a matter of practice and procedure and as such were the subject of the exercise of a judicial discretion. His Honour also endorsed the reasons of Mahoney JA. Powell JA, at 737, considered that it was necessary to demonstrate that the discretion had “clearly miscarried”.
The three tests propounded by their Honours were considered by the Court in Patrick v. Howorth [2002] NSWCA 285. In that case, the respondent had made an application for security for the costs of an appeal, which application was heard by Handley JA. His Honour ordered security and the appellant made application under s.46 for a review of his decision. We should pause at this stage to observe that, in the authorities, there appears to have been a uniform adoption of the language “application for review”. The use of those words may themselves give rise to confusion. Usually, where a party is entitled to seek a review of a decision it is typically a review of a decision of a lower judicial officer, e.g. of a Registrar, and special principles apply. It is not necessary to discuss those principles as they are not relevant to the present application. This is apparent from the Court’s consideration of the power under s.46(4) in Patrick v. Howorth. There, Heydon JA observed at para.10:
“It is not open to this Court to make, or to refuse to make, an order for security of the kind which it or its individual members would have made had it or any one of them been sitting to determine the respondent’s original application for security for costs.”
His Honour then reviewed the test as or formulated by each of the members of the Court in Wentworth v. Wentworth. He considered that those tests overlapped, as they clearly do. His Honour then stated that an order which was subject “to review” under s.46(4):
“will ordinarily not succeed unless the decision turns on an error of law, a material error of fact, a failure to take into account some material consideration or the taking into account of an irrelevant consideration, or unless the decision is so unreasonable as to suggest that one of these types of error has been committed even though it does not appear on the face of the reasoning.”
This replicates the classic formulation of the principles governing the review of discretionary decisions in House v. The King. Hodgson JA and Young CJ in Eq agreed.
It is against that background of principle that this Court must approach the application before it. Before doing so, a brief reference to the original proceedings is warranted. The respondent was the plaintiff in proceedings brought in the Equity Division of the Supreme Court of New South Wales. Those proceedings were heard by Gzell J who delivered Judgment on 19 November 2003. The appellants were the defendants in those proceedings. The respondent had sought damages from the appellants for breach of contract, breach of the Trade Practices Act 1974 (Cth): s.52 and breach of the Corporations Law (Cth): s.780 and s.781. The claims arose out of an arrangement whereby the first appellant, Transglobal Pty. Ltd. provided consulting services to the respondent which was, at the time, seeking to attract investment capital in relation to a non-operating abattoir that it had acquired at Orange and which it was seeking to put back into operation on a considerably expanded basis.
The trial judge found in favour of the respondent, holding that it was entitled to judgment against the first appellant in the sum of $311,317.40 for breach of the Trade Practices Act or as damages for breach of contract. His Honour made an order in the same amount against the second appellant as a person involved in the contravention of Part 5 of the Trade Practices Act in accordance with the provisions of s.75B of that Act. The claim against a further party was dismissed and his Honour also rejected the respondent’s claim to judgment under the Corporations Law. It is against those orders that the appellants have appealed as of right.
By Notice of Motion filed on 23 December 2003 the appellants sought an order that the execution of the judgment of Gzell J be stayed until the hearing of the appeal. In his original affidavit in support of his application for a stay, the second appellant set out the financial circumstances of himself and of the first appellant. In short, both applicants are impecunious. The first appellant has not operated since 2000 and has had no income since the financial year 2001. The second appellant is unemployed and, except for earnings of about $130.00 per week in the financial year ending 30 June 2003, has had no income for a period of about 18 months. He has debts in the order of $75,000.00 and owes legal expenses in the order of about $60,000.00.
The first appellant has not been placed into liquidation at this stage and the second appellant, it appears, would resist any such application to the extent possible to do so because, the first appellant currently has a claim in the Local Court against the present respondent to recover fees of approximately $20,000.00. The consequence is that, even if the first appellant’s claim for its fees was successful, the respondent has a worthless judgment against the appellants both for its claim and for its costs.
Handley JA found therefore that “the grant of a stay of execution on the judgments below, without any other order could operate to the financial detriment of the successful party” (emphasis added). (Judgment para. 7) His Honour observed that if the appeal failed, the respondent would be unable to recover the further costs of the appeal. His Honour continued:
“The Court endeavours to protect respondents from prejudice of this kind by ordering security for costs.”
His Honour considered that an order for security even though made as a condition of a stay was governed by the provisions of Part 51 r.16 of the Supreme Court Rules which provides:
“(1) Where a Notice of Appeal … has been filed …, the Court of Appeal may, in special circumstances, order that such security as the Court of Appeal thinks fit be given for the costs of the appeal.
(2) Subject to sub-rule 1, no security for the costs of an appeal to the Court of Appeal shall be required.”
Counsel for the respondent at one stage during the course of his submissions argued that the provisions of Pt.51 r.16 did not govern an order for security imposed as a condition of a stay. We do not agree. Handley JA was plainly correct in applying that provision. This leads directly to the question of what constitutes “special circumstances” for the purposes of the rule and what circumstances his Honour found to be special in this case. We will deal with the second of these questions first. Before doing so however some more general comments need to be made.
In England, there appears to have been a well settled principle of the general law that the impecuniosity of a plaintiff was not a bar to a litigant bringing proceedings: see Cowell v. Taylor (1885) 31 Ch. D. 34. However, as Bowen LJ explained at 38:
“There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of her Majesty’s Courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another.”
See also Harock v. Ashberry (1881) 19 Ch. D. 84; Kardynal V. Dodek [1978] VR 414.
However, given the express provisions of Pt. 51 r.16 the ‘exception’ said to apply in relation to appeals does not apply to litigation in this Court. Indeed, the converse is the case. The rule of Court is that “Subject to sub-rule 1 no security for the costs of the appeal shall be required”. Sub-rule 1 then provides the exception to the general rule and vests in the Court a discretion to order security “in special circumstances”. There is no specification in the rule of what constitutes or might constitute special circumstances.
It follows that because this Court’s power to order security for costs of the appeal is governed by r.16, care must be taken when considering cases from other jurisdictions. Unless those jurisdictions have rules or orders to the same effect, such authorities are unlikely to be of relevance and may be misleading.
As we have said, however, Handley JA sought to apply r.16. Having then referred to the requirement for special circumstances, His Honour said there was a “general practice” of the Court particularly in commercial cases, and leaving aside appeals in personal injury litigation:
“to protect a respondent from the financial consequences of an unsuccessful appeal, so far as that can properly be done by an order for security for costs of the appeal.” (para. 8)
His Honour then stated, at para. 9:
“There seems to be no reason why this general principle should not be applied in the present case.”
His Honour next referred to the argument that the respondent was wealthy, an inference that he found was available to be drawn from comments in the trial judge’s reasons. He then said:
“Except in personal injury litigation which attracts special principles, the courts do not discriminate when ordering security for costs between wealthy respondents in commercial cases and other respondents who are not so well endowed financially.”
His Honour accepted that it was not possible to find that the appeal was without some merit in the sense that it was not one where the Court could summarily dismiss the appeal as frivolous or vexatious. Except to that extent however, his Honour did not form an opinion as its prospects of success.
What then were the special circumstances upon which his Honour relied? It seems to have been his reasoning in para. 8 that there was a general practice of the Courts to protect respondents from the financial consequences of an unsuccessful appeal which his Honour said was a “general principle.” On his Honour’s reasoning, such protection to respondents was needed where an appellant was impecunious, as was the case with the appellants here.
Meaning of ‘special circumstances’
“Special circumstances” is a notion which is found in many legislative contexts and must therefore take its meaning from the particular context in which it appears. As Spigelman CJ said in relation to a different statutory context in R v Simpson [2001] NWCCA 534, they are words of “indeterminate reference and will always take their colour from their surroundings.” But in whatever context the phrase appears, the circumstances must be “special,” that is, “out of the ordinary”, “unusual”: R v Baker [2002] NSWCCA 184, although the specialness must be adjudged in the particular circumstances under consideration. In Simpson, Spigelman CJ further pointed out at [60] that:
“Statutory words of such generality usually lead courts to refuse to identify in advance a list of matters capable of satisfying the statutory formulation. Whilst certain considerations might not often be sufficiently ‘special’, so that an exceptional justification is required for them to attain the requisite statutory quality, nevertheless there may always be circumstances in which such a factor is of sufficient strength, either alone or in combination with other factors, to justify a conclusion that ‘special circumstances’ are made out on the facts of a particular case. It will be comparatively rare for an issue to arise in terms of a proposition that a particular circumstance is incapable, as a matter of law, of ever constituting a ‘special circumstance’.”
The question of what constitutes special circumstances for the purposes of Pt.51 r.16 has been considered by a number of cases in this Court. In Kennedy v. McGeechan, (16 September 1974 Moffitt P, Hutley and Samuels JJA reported at (1978) 1 NSWLR 315(N)) the Court said that whilst reported decisions on the rule might be of assistance, “each case must be judged on its own merits as to whether special circumstances exist”. The Court considered that the impecuniosity of an appellant might constitute special circumstances
“[i]n that it is a circumstance which may deprive or delay a respondent receiving his costs of appeal, if the appeal fails, which costs a successful respondent can usually expect he will actually receive.”
In this regard, the Court considered that it was relevant that on the appeal, the respondent already had a favourable judgment, which was “presumably correct”. That of course is not the case at first instance, where there has been no adjudication on the claim. To that extent, the Court considered that an applicant for security for the costs of an appeal was in a stronger position. This explains the approach of the English courts as set out in Cowell v Taylor. The Court in McGeechan said however that “impecuniosity may not conclude the matter”. The Court had a wide discretion and impecuniosity was not to be looked at in isolation. Other factors might be relevant. One such factor was the possibility that a genuine appeal might be frustrated if security was ordered. Another possible relevant circumstance was where the liberty of the subject was involved, which was the case in McGeechan.
In McGeechan, the Court also considered that the availability of legal assistance, in the sense of the provision of State funded legal aid, should be taken into account. The relevance of the availability of such assistance was that, under the legislation governing its provision, there had to be a certification by a barrister as to the merits of the appeal. That matter is not relevant here.
The other circumstance which was relevant to the Court in McGeechan was the importance of the subject matter of the appeal. The Court considered that the subject matter of the litigation was, from the respondent’s point of view, “quite trifling”. Their Honours considered that, given the combined effect of the respondent’s impecuniosity and the extraordinarily trifling nature of the appeal, it was an appropriate case in which to order security.
The meaning of special circumstances was again considered by the Court in Lall v. 53-55 Hall Street Pty. Ltd. [1978] 1 NSWLR 310. There the Court was constituted by Moffitt P, Reynolds and Glass JJA. The case involved a litigant in person who had brought numerous applications in the Court against the respondent. The Court had regard to McGeechan, as well as to the Court’s further decision in Hunters Hill Municipal Council v. Pedlar (unreported Court of Appeal 9 May 1978). Their Honours considered it was unnecessary to traverse the ground those decisions covered. They stated however, (at 312) that, it followed from the principles stated in those cases that on an application for security where special circumstances needed to be established, regard ought to be had to the nature of the appeal and any other relevant circumstance.
In the case with which the Court was dealing in Lall, namely that of a litigant in person, the Court observed that it had been the frequent experience of the Court that the other party to the proceedings was subjected to numerous applications surrounding both the original and appellate aspects of the proceedings. The Court observed that the ordering of security where that has occurred could thereby “provide the appropriate procedure to protect a litigant from unreasonable and harassing appeals” (at 313). The ordering of security in such cases would serve to prevent the untrammelled pursuit of rights by such a person becoming an “instrument of grave injustice” to the opponent. The Court was of the view that justice to the respondent, in what the Court categorised as “the special class of case to which we have referred” called for the making of an order. Their Honours concluded:
“An appeal of the type and in the type of circumstances referred to may provide ‘special circumstances’ … to exercise the discretion to make an order for security.”
Neither of these decisions, in our opinion, provide support for the existence of a general practice or for a principle that impecuniosity of itself, may constitute special circumstances. However, a review of both old and more recent case law on the subject indicates that there appears to be a conflict as to whether impecuniosity alone is sufficient to amount to “special circumstances” for the purposes of Pt.51 r.16 (or rule in the same or similar terms).
The following are cases where it has been held that, normally at least, impecuniosity is not sufficient of itself: Abdurahman v. Field (unreported NSWCA 4 March 1986: Kirby P, Glass and Samuels JJA); Maritime Services Board & Anor. v. Citizens Airport Environment Association Inc. (unreported NSWCA 23 December 1992 per Kirby P.); Uptown Sydney Development Corporation Pty. Ltd. & Ors. v. Bank of New Zealand (No. 1) (1993) 11 ACSR 300 per Kirby P; Saba v. National Australia Bank Ltd [1999] NSWCA 93 per Sheller JA; McWilliam v. Penthouse Publications (unreported NSWCA 21 January 1999 per Registrar Jupp).
Cases in which it has been held that impecuniosity alone may amount to “special circumstances” are: Scerri v. Northam Holdings Pty. Ltd. (1967) VR 674 per Winnecke CJ (Little and Gowans JJ agreeing; in that case, the Chief Justice referred to the “long and well-established practice of this Court” of holding that an appellant’s inability to pay the costs of the appeal constituted special circumstances); Ciappina v. Ciappina (1983) 70 FLR 287 per Neave J; his Honour relied upon Harlock v. Ashberry (1881) 19 Ch D 84 and Kardynal v. Dodek [1978] VR 414 as establishing the proposition; Strata Consolidated (Aust) Pty. Limited v. Bradshaw [2000] NSWCA 114 (per Registrar Jupp); and Citicorp Australia Ltd. v. Cirillo & Anor. [2003] SASC 204 (per Sulan J). It is interesting to observe however, that in these cases, with the exception of Ciappina, there were other circumstances which the Court took into account, in addition to the appellant’s impecuniosity, in determining to order security. It is also to be noted that none of those decisions is a decision of a judge of this Court.
These and other cases were reviewed by Hodgson JA sitting alone, in Porter v. Gordian Runoff Ltd. & Anor. [2004] NSWCA 69. His Honour considered that the weight of authority in New South Wales supported the view “that impecuniosity” can of itself amount to special circumstances within Pt.51 r.16(1). His Honour qualified this view by saying “I also accept that orders would not normally be made simply because an appellant is impecunious.”
We would not state the conclusion to be drawn from the cases in the same terms as did Hodgson JA. If anything, the weight of authority is to the effect that something more is usually required. It may be however, that our view may involve no more than looking through a different edge of the prism of this line of authority.
In this regard we consider that the approach of Sheller JA in Saba v. National Australia Bank Ltd demonstrates how the provisions of r.16 operate. In his judgment his Honour first referred to the comment of Kirby P in Uptown Sydney Development Corp. v. Bank of New Zealand at p.301 that it was not enough for the purposes of Pt.51 r.16(1) “that the balance of justice or convenience favours the making of an order …” His Honour next had regard to the concern expressed by the Court in Kennedy v. McGeechan that a genuine appeal involving a substantial sum of money could be frustrated if an order for security was made. Sheller JA then concluded:
“12.It is one thing if an appeal is shown to be hopeless or to be unreasonable or of an harassing nature; it is one thing if an appellant has adopted a procedure of which an appeal is part, to press a hopeless claim through endless litigation. However, in the present case I am not persuaded that this is not a perfectly genuine appeal.
…
13.… I am not prepared to frustrate the opponent’s prima facie right to pursue it simply because he may be in an impecunious situation with the consequence that an order for security may bring the appeal to an end.”
In our opinion, “special circumstances”, being the requirement of the Supreme Court Rules for ordering security for the costs of an appeal cannot be predicated upon a “general rule” of practice. To do so runs the danger of inverting the requirements of Pt.15 r.16 so as to make the exception provided for in sub-section (1) the general practice whereas sub-section (2) requires the opposite. If an application or security for costs of an appeal is made in this jurisdiction, it is necessary to have regard to the circumstances of each case.
There is no doubt that when a Court is invested with a discretion over a period of time, principles and matters emerge which guide that discretion. That does not, and cannot as a matter of law, transpose itself into a general rule of practice. A circumstance which may emerge in a series of cases as being relevant must be weighed with other circumstances relevant to the case before the Court.
In our opinion, his Honour by applying a general practice that the respondent was entitled to be protected and that impecuniosity was sufficient for that purpose, did not apply the provisions of Pt.51 r.16 according to their terms. In that circumstance, this Court is entitled to be re-exercise the discretion vested in the Court under Pt.51 r.16.
In this case, there was considerable focus upon the appellants’ impecuniosity. As the cases to which reference has been made demonstrate, impecuniosity is a relevant matter to take into account in determining whether there are “special circumstances”. This case however was not like those to which we have referred where security was ordered. The appellants have not brought multiple proceedings in the Court or any oppressive series of applications. They were defendants to a claim brought by the respondent and unsuccessfully defended that claim, although not all claims made by the respondent were successful. In particular, only one out of four representations relied upon under s.52 were found to have been established. The appellants have an appeal as of right in this Court which they have sought to exercise. The Court has not been prepared to find that the appeal is without merit. The subject matter of the appeal is not trifling. It represents a substantial damages claim to the respondent who was successful in its claim at first instance. The reverse side of the coin of the plaintiff’s success is that it represents a substantial financial burden to the appellants, to the extent that their financial survival is at stake. In the end result, the burden may be more apparent than real in the sense that in their present circumstances neither appellant is in a position to pay that claim. However, there are other considerations relevant to the appellants. In particular, there is no other basis, so far as the Court is presently aware, upon which the first appellant could be wound up or the second appellant could be made bankrupt other than as a result of enforcement of the judgment in this case. Liquidation or bankruptcy are themselves significant deficits. Further, the appellants unchallenged evidence was that they do not themselves have, nor do they have recourse to, funds to provide the security. Their appeal therefore would be frustrated if the order for security remained in place.
As the impecuniosity of the appellants was the only matter said to constitute “special circumstances”, and given the matters to which we have referred we are not persuaded that this is an appropriate case for the making of an order for security.
Accordingly we make the following Orders:
1.Set aside the Order made by Handley JA on 2 February 2004 staying the appeal for a period of 6 weeks.
2.Set aside the further Order made by Handley JA that the appellants provide security for the respondent’s costs of the appeal.
3.Set aside the consequential order made by Handley JA granting liberty to apply to have the appeal dismissed for want of prosecution.
4.Otherwise confirm the stay of execution of the Judgments appealed from.
5.Order the respondent to pay the appellants’ costs of this application.
**********
LAST UPDATED: 19/05/2004
175
7
3