Antov v Bokan

Background

1. In order to explain the nature of paragraph two of Lidija's notice of motion, and the procedural irregularity that required further steps to be taken after the oral hearing on 18 February 2019, it is necessary to say something about the relatively convoluted procedural history of this litigation.
2. The principal and only substantial asset of the late Ljubica Dimitrovska's estate is a house in Granville in Sydney. There is no evidence of its value, but it was common ground at the bar table that it was unmortgaged.
3. In late 2015, each of Radmila and Vase sought provision from Ljubica's deceased estate pursuant to the Succession Act 2006 (NSW). Those proceedings appeared to reach agreement at a settlement conference in March 2016, whereby Vase's claim was dismissed but Radmila received 42.5% of her mother's estate. However, before orders to that effect were entered, Vase and Radmila sought to depart from the agreement, with the consequence that Lidija filed an application seeking a declaration that a concluded agreement had been reached. In September 2016, Vase filed a new originating process which alleged that the entirety of the estate was held beneficially for him pursuant to a constructive trust.
4. On 15 February 2017, Kunc J determined that a concluded agreement had been reached at the settlement conference, but stayed enforcement of the agreement so as to permit the determination of Vase's claim: Antova v Bokan [2017] NSWSC 115. Nevertheless, his Honour entertained an application by Lidija for a lump sum costs order, which led to orders 1-5 made on 8 May 2017: "(1) The plaintiffs are to pay the defendant's costs pursuant to orders 2 and 5 made on 24 February 2017 assessed in the sum of $91,180.02 (inclusive of GST). (2) The plaintiffs are to pay the defendant's costs of the defendant's Costs Motion Application referred to in order 7 made on 24 February 2017 assessed on the ordinary basis in the sum of $10,570 (inclusive of GST). (3) The first plaintiff is to pay forthwith the defendant's costs referred to in orders 1 and 2 above. (4) Without prejudice to the defendant's right to enforce orders 1 and 2 against the first plaintiff or any of her assets, the first plaintiff's liability to pay the costs referred to in orders 1 and 2 above is charged in the sum of $101,750.02 (together with any interest payable thereon pursuant to s 101 of the Civil Procedure Act 2005 (NSW) on, and is to be paid from, the defendant's share of the provision ordered for her pursuant to order 4(i) made on 24 February 2017. (5) The defendant is entitled to indemnity out of the estate of the late Ljubica Dimitrovska in respect of the costs referred to in orders 1 and 2 above on the indemnity basis. …" See Antova v Bokan (No 2) [2017] NSWSC 556.
5. The operation of those orders and their interrelationship with the proceedings subsequently heard and determined by Ward CJ in Eq give rise to the principal area of complexity in this application. Ultimately, the following became common ground. 1. Both lump sum costs orders were joint and several, so that Lidija was entitled to enforce them against either Vase or Radmila at her election. 2. Insofar as Radmila was required to pay, the order was secured by a charge over Radmila's 42.5% of the estate. 3. Insofar as Vase was obliged to pay all or part of the order, the order was stayed pending the determination of his claimed constructive trust. 4. That stay remained in place until October 2018, but was lifted when on 5 October 2018 Ward CJ in Eq made orders finally disposing of the 2015 proceedings.
6. Vase's appeal will either succeed or fail. If it fails, then Lidija has the right to be paid the (now quantified) costs the subject of the orders made on 8 May 2017, and to have recourse against the share of the estate to which her sister Radmila is entitled. There is no suggestion that there is anything other than an abundance of assets to meet that obligation.
7. On the other hand, if Vase's appeal succeeds, then the effect will be that the whole of the estate is held beneficially for him, which will in turn have the effect of removing the security presently enjoyed by Lidija for her existing costs orders, but supplementing his own assets enabling him more readily to meet his liability to Lidija under the quantified costs order. Further, if the appeal succeeds, it is likely that the costs order adverse to Vase made by Ward CJ in Eq will be set aside and he will obtain the benefit of a favourable costs order in this Court. However, it was accepted that even the utmost success by Vase in this Court would not interfere with the unchallenged and now quantified costs orders made by Kunc J in February and May 2017.
8. It follows from the foregoing that irrespective of the outcome of the appeal, the appears to be no real difficulty in Lidija enforcing her existing rights pursuant to the costs orders made by Kunc J in February and May 2017.
9. This leads to another peculiarity. Although enforcement of the costs order against Radmila has never been stayed, and although the stay on the order, insofar as it obliges Vase to pay costs to Lidija, has been lifted now since 5 October 2018, no steps have been taken by Lidija to enforce her unchallenged entitlement to that amount. Indeed, although those costs have now been placed at the forefront of the submissions in support of the stay of Vase's appeal, there is no evidence that either Radmila or Vase have ever received a demand from Lidija to pay the (quantified) amounts they owe.
10. What has already been said is sufficient to deal with paragraph two of the notice of motion. I would not stay Vase's appeal on the basis that he has not paid costs ordered to be paid by him (and his mother Radmila in 2017), in circumstances where (a) no step has been taken to date to enforce that order, (b) Lidija has the benefit of security in respect of that order, and (c) until the notice of motion was filed, no demand has been made against either Radmila or Vase to pay that order.
11. The gravamen of Vase's case in opposition to paragraph 1 of the notice of motion is that he is impecunious and making either of the orders sought would stultify the appeal. I shall return to this below, but of immediate concern is the practical reality that on any view, the most straightforward way for Lidija to enforce the costs orders to which she is entitled is to proceed against Radmila or Radmila's share of their mother's estate. So far as the evidence discloses, Radmila would have no answer to any such demand, but would be entitled to contribution from her son (who is under a coordinate liability with his mother in respect of the costs order). This serves to emphasise the fact that any impecuniosity of Vase is apt to have a direct and detrimental effect on his mother Radmila.
12. Radmila was joined to the appeal, but no notice of appearance (submitting or otherwise) had been filed by her when the motion was heard. I was told that she had been served (although there was no evidence of this). I was also told that she had received independent legal advice.
13. Further, although Lidija's notice of motion has, in the way I have sought to indicate, a direct effect on her sister, the notice of motion was not served upon her, nor is she expressed to be a respondent to it.
14. Because some outcomes of the notice of motion would have a direct and deleterious impact upon Radmila, I made directions that she be informed of the hearing and the possibility that her right of contribution against her son might be diminished, and gave her an opportunity to be heard before any orders were made.
15. Radmila has now filed a submitting appearance. As a result of correspondence provided to my chambers on 1 March 2019, I am satisfied that she has done so in circumstances where she was aware of the pending application, and the effect the appeal may have on her rights vis-à-vis her half-sister and her son.

Submissions in support of Lidija's application for security for costs

1. Lidija sought security for costs against Vase, a natural person (and contrary, perhaps, to what was put in paragraphs 14 and 52 of her written submissions) accepted in oral submissions that she needed to establish special circumstances within the meaning of r 51.50 of the Uniform Civil Procedure Rules 2005 (NSW).
2. There appeared to be no dispute as to the principles to be applied in such a case, including that mere impecuniosity on the part of Vase would not constitute "special circumstances".
3. Lidija relied upon eight matters: "(a) The particular conduct of the Appellant in the conduct of the case below as relevant to security for the Appeal. (b) The position and effect of the appeal on the position of the Second Respondent. (c) The Appellant has not paid costs orders made below following an earlier hearing that are now operative. (d) The First Respondent will not recover her costs of the trial nor the costs of the Appeal should she be successful. (e) The prosecution of the Appeal will further deplete available funds for both the First Respondent and the Second Respondent from the only available asset, namely, the estate of their deceased mother. (f) The appeal does not have reasonable prospects of success, is unreasonable and of a harassing nature. (g) The appeal has not been brought bona fide. (h) The appeal raises issues not taken at trial."
4. It is desirable to elaborate on each of those matters. 1. The conduct of Vase of which Lidija complained in paragraph (a) was departing from the agreement which was reached (and found by Kunc J to have been reached) at the settlement conference, and the late commencement of the constructive trust proceedings, which had been found by the primary judge to be "unjustifiably oppressive" to Lidija (at [312]). It was said that this prolonged the proceedings, forcing Lidija to incur costs which would never be recovered. 2. The second point was the fact that the proceedings now brought by Vase would have the effect of depriving Radmila of the entirety of her interest under her mother's estate, which, so it was said, would give rise to concern on the part of the court and constituted one aspect of special circumstances. 3. The third matter was the failure to pay the costs orders made by Kunc J in early 2017. This has been addressed above, when dealing with paragraph 2 of the notice of motion. 4. The fourth matter turned upon what were said to be deficiencies in the evidence of Vase as to his impecuniosity. There was evidence that he owned a property in Macedonia, and it was said that no reason was given as to why that property could not be sold. Complaint was made that he provided no evidence as to the basis of the retainer of his lawyers. The position was contrasted with what was said in an affidavit made by Vase in November 2015 as to his having $142,000 in the bank. The bank records which had been produced by Vase in response to a notice to produce served in connection with this present application disclosed a single bank account, into which from time to time relatively large amounts (up to the size of $20,000) were withdrawn and deposited, although for the last 21 months (since 24 May 2017) the only significant deposits into the account were weekly payments of salary (of $887.70). 5. The fifth matter requires no elaboration. 6. It was said as to the sixth and seventh matters that I should find that there were no reasonable prospects of success in the appeal and indeed that I should infer that it is prosecuted by a man who lacks bona fides. The latter submission was based upon the failure to challenge credit findings and the likelihood that prior and future costs orders would never be paid. The short answer to these submissions is that Vase has filed written submissions, signed by senior counsel, as well as junior counsel who appeared at trial, and Mr Heath very properly eschewed any submission that those counsel were in some way advancing an appeal which was improper or unethical. 7. Finally it was said that grounds 1 and 2 of the appeal raise issues which were not raised at first instance. Mr Sahade maintained that the points had been raised at first instance. Neither party was able to point to the transcript or written submissions at first instance where the points were made.

Consideration

1. There is jurisdiction to make an order for security for costs, failing which an appeal brought by a natural person will be stayed, in circumstances where the certain or near-certain consequence is that the appeal will be stultified. However, a court will be reluctant to take that course. Statute gives a litigant a right of appeal, in a case such as this, and I proceed on the basis that senior counsel now briefed considers that there are reasonable prospects of success.
2. Lidija sought security in the amount of $130,000. That amount came about in a curious way. The day after a notice of intention to appeal had been filed (which is to say, before any grounds had been articulated) an employed solicitor described as a Senior Associate wrote a letter asserting that the appeal would take 2-3 days, that junior counsel would charge $4,000 per day and $500 per hour and a partner would charge $495 per hour. She then set out the following work which needed to be undertaken: "Solicitors (a) Reviewing Grounds of Appeal. (b) Advising our client and instructing Counsel. (c) Attending on directions hearings in relation to the Appeal. (d) Preparation for Appeal. (e) Attendance at the Appeal. In our assessment, the costs for this work would be $50,000. Counsel (a) Reviewing Grounds of Appeal. (b) Review Summary of Argument served by the Appellant. (c) Prepare Summary of Argument in reply. (d) Review any response to the Respondent's summary of argument. (e) Advising solicitors and client. (f) Attending on directions hearings in relation to the Appeal. (g) Preparation for Appeal. (h) Attendance at the hearing of the Appeal. In our assessment, the fees for Counsel in respect of this work would be approximately $80,000. We invite your client to pay into court the sum of $130,000 or otherwise secure that sum in a form to our satisfaction on or before 4pm 9 November 2018, failing which we will file and serve a Notice of Motion seeking security without further notice to you and rely on this letter and any response (or lack of response) without further notice to you." (emphasis in original)
3. Nothing else was said, either in that letter or subsequently, to justify how either of those amounts were calculated.
4. In the case of counsel it would appear that the estimate involves 20 full days' work at $4,000 per day (it may involve slightly less, if the $80,000 included GST). This is absurd. Respondent counsel appeared through the trial and it was plain from his oral submissions before me, as well as his success at first instance, that he was well familiar with the detail of the nine day hearing.
5. Appeals tend to be much less costly than trials, especially where as here the trial occupied many days in court and the appeal will be much shorter. Appeals also tend to impose greater costs on the appellant than the respondent. The tasks of a respondent to an appeal typically involve preparing written submissions and preparing for and appearing at an oral hearing. It is also necessary to check the sufficiency of the appeal book (the preparation of which is the responsibility of the appellant) and sometimes it is necessary to give consideration to a cross-appeal or notice of contention.
6. In the present case, that amounts to (a) responding to 12 double-spaced pages supplied by the appellant and (b) preparing for and appearing at the hearing. In the present case, Lidija has secured complete victory at trial, and so no cross-appeal is available. There might conceivably be a notice of contention, but there has been no suggestion of this at any stage. Doing the best I can, and with the advantage - not shared by the Senior Associate - of having the proposed amended notice of appeal and the written submissions in support, this seems plainly to be a one day appeal, which may in fact be completed in half a day.
7. I can understand counsel charging around a day to respond to the written submissions which have been served, and further amounts for preparation for the appeal, and the hearing of the appeal, but the result is only a small fraction of the $80,000 sought by way of security. I cannot conceive of a costs assessor permitting anything save a small fraction of the $80,000 claimed for counsel's fees. There was no evidence, save for what was said in the Senior Associate's letter. (True it is that Lidija's solicitor swore that "I understand and readily believe that set out in [that letter] is an estimate [of Lidija's costs]" [sic]. Accepting that formulation as compliance with s 75 of the Evidence Act 1995 (NSW), I do not regard that statement as taking the matter any further.)
8. The same letter also maintained that a partner would charge $50,000 for preparing and attending at the appeal. That is absurd as well. For one thing, it would be wrong to order security based on the wastefulness of having a partner, as opposed to a paralegal or junior solicitor, check the accuracy and completeness of the appeal books and causing submissions to be filed (indeed, it may be noted that a partner did not sign the letter demanding security for costs). In most cases there will be either one or two brief directions hearings prior to an appeal, in addition to the hearing itself. There is no scope for a solicitor to spend 100 hours of time, or anything like it, in a case where counsel has been retained.
9. As I indicated during the hearing, I could see a sound basis for Lidija incurring solicitor-client costs in the order of $15,000 to respond to the appeal. Not all of those costs would be recoverable in the event that it failed, and orders for security for costs are often made in amounts which provide less than full security for a likely recovery of assessed party-party costs. Those considerations point to the possibility of security in the amount of $5,000 or $10,000 being ordered.
10. Lidija's exorbitant demand for security carried with it two results. The first was the need, as a matter of practical reality, to have a hearing which - for all I know - may have lasted longer than the appeal itself, consuming court time and causing both parties to incur costs. The second was that while Vase gave evidence, which I accept, that he could not readily provide security in the amount of $130,000 or anything like that amount, the evidence was silent as to whether a realistic amount of security, of say $5,000 or $10,000, would stifle the appeal.
11. The position then is as follows. An absurdly high amount of security for costs has been demanded. As I indicated during the hearing, I would not order that amount or anything like it.
12. It is possible that special circumstances have been established, although I am inclined to doubt that they have been, on the limited material made available to me. However, for the reasons which follow, it is not necessary for me to reach a concluded view on that.
13. If I were to order security for the costs of the appeal, it would be in an amount in the order of $5,000 or $10,000. The first time that anything like a realistic quantification was put forward was by me, during the hearing. Vase had no opposition to that course. Were I to order security in that amount, UCPR r 42.1 would suggest that Lidija be ordered to pay the costs of her notice of motion, one aspect of which was misconceived, and the other rejected as being absurdly high. An order for security in an amount less than a tenth of that sought, in circumstances where a separate misconceived application was also made, is tantamount to failure by Lidija. But I would not on the one hand stay Vase's appeal pending the provision of $5,000 or $10,000 security for her costs of the appeal, while on the other hand ordering Lidija to pay Vase's costs of her motion. That would give rise to real prejudice to Vase, who on the one hand would have his appeal stayed until a small amount of security were provided, but on the other hand would have an unquantified interlocutory costs order in his favour, of roughly the same order of magnitude as the security ordered.
14. I have considered whether in those circumstances I should permit the interlocutory costs order to be enforced immediately, but that is apt to give rise to further disputation over a small amount, and thus not fully address the prejudice mentioned above.
15. Part of the reason for the awkward possibilities mentioned above is that it may well be that more court time has been used determining Lidija's flawed application for a stay pending the payment of security for costs or the payment of costs long ago quantified than will be used for determining the appeal. This is an exceptionally undesirable result. Had a less unrealistic application been made, it is quite possible that no court time would have been spent.
16. This entire application is about costs. It is as well to bear in mind s 60 of the Civil Procedure Act 2005 (NSW), which provides that: "In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute."
17. In all those circumstances, I have determined that it is not appropriate to order any security. In part that is because of the practicalities mentioned in [36]-[38] above. In part it is because litigants and their lawyers are under obligations to assist the court to further the overriding purpose of the just, quick and cheap resolution of the real issues in the proceedings. The real issues are the issues raised in the appeal. The real issues are not the costs of the appeal, nor security for those costs, and certainly not security in an amount vastly exceeding those costs. Whether or not security in an amount of $130,000 should be ordered has been a serious distraction from the real issues in the proceedings.
18. In many cases an application who applies for an excessive amount of security for costs may receive security for a lesser amount. But I regard the present as an exceptional case, having regard to the second paragraph of the notice of motion, the amount sought, the confined nature of the appeal, and the costs that have been incurred to date on the application which, I would infer, are of around the same order of magnitude as those which will be incurred on the appeal itself.
19. For those reasons, I shall dismiss the notice of motion filed on 8 January 2019. There is no reason for costs not to follow the event.
20. At the conclusion of the hearing, I directed that the time for Lidija's filing of submissions cease to run. That direction expires of its own force with the dismissal of her motion. I note that Lidija's submissions, in response to the short submissions served by Vase, are to be filed by 15 March 2019 (the notice of appeal was filed on 20 December 2018 and Vase's submissions were filed on 1 February 2019, with time ceasing to run between 18 February and today). I anticipate that the Registrar will advise the parties of a callover at which a day for the hearing of the appeal will be allocated.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 March 2019