Rules of the Supreme Court - O63 r10(1), O63 r10(5)

Hills v London Passenger Transport [1937] 4 All ER 230

Kempthorne v Tropiano [1965] WAR 123

Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632

Pax Holdings Pty Ltd v Bamboo Creek Holdings Pty Ltd, unreported; FCt SCt of WA; Library No 7925

Smail v Burton [1975] VicRp 76; [1975] VR 776

Wollongong Corp v Cowan [1955] HCA 16; (1955) 93 CLR 435

I agree with the reasons to be published by Owen J and with the orders proposed.

This is an application by the appellants seeking leave to adduce fresh evidence pursuant to Order 63 rule 10(1) of the Rules of the Supreme Court 1971("Rules") at the hearing of the substantive appeal. There is also before the Court an application by the respondents seeking security for the costs of the appeal pursuant to Order 63 rule 10(5) of the Rules.

The first appellant is an incorporated body known as the Australian Democrats WA Division Inc ("WA division"). This body was incorporated in Western Australia in 1977 for the purpose of establishing a state division of the unincorporated association known as the Australian Democrats Political Party ("national party"). The second appellant, David Edward Churches was the President of the first appellant. There are twelve separate respondents to the action. The first, second and third respondents are separate incorporated divisions of the national party representing the members of the national party in Victoria, Australian Capital Territory and South Australia. The fourth, fifth, sixth, and twelfth respondents are individual members who, the appellants say, claim to represent the interests of the members in New South Wales, Queensland, Tasmania and Western Australia. The seventh to eleventh respondents are designated office holders of the National Executive of the national party.

Some time in 1994 there was dissension among members of the WA division who were at the time, also members of the national party. In July 1994 the national executive branch of the national party resolved to expel a number of the members of the WA division from the national party. Thereafter, the parties were in dispute as to whether the purported expulsions had been carried out in accordance with the constitution of the national party and over the conduct of the affairs of the party both before and since July 1994. Eventually the action, Civ 1522 of 1997, was commenced on behalf of the WA division ("first plaintiff") and David Edward Churches ("second plaintiff"). In the action the plaintiffs claimed relief against the defendants for breach of contract, breach of a duty of care, passing off and misleading and deceptive conduct under the Trade Practices Act 1975. The subject matter of the action covered the matters in dispute which I have already described.

The respondents then made an application to a Master for summary judgment pursuant to Order 16 of the Rules. The grounds of the application were that the statement of claim disclosed no reasonable cause of action, was scandalous, frivolous and vexatious and an abuse of the process of the court. In the alternative the plaintiffs sought orders pursuant to Order 20 rule 19(1) to strike out certain paragraphs in the statement of claim. The respondents were successful. The Master struck out the plaintiffs' statement of claim and dismissed the action on the basis that:

(1) there was no evidence before the court capable of supporting any reasonable cause of action; and

(2) the pleadings contained in the statement of claim were embarrassing and were not capable of disclosing any reasonable cause of action.

In his reasons the learned Master considered the evidence before him. He said that on a proper and fair construction of the constitution of the national party the appellants' case was so hopeless that no amount of amendment to the pleadings would overcome the defects. The Master said:

"The plaintiff's case is so hopeless that it is doomed to fail. The defendants are accordingly entitled to summary judgment and, further, to have the statement of claim struck out and the application dismissed, with costs including the costs of the application".

The appellants filed a notice of appeal against the decision of the Master. The grounds of appeal are that the decision is wrong in fact and law and should not have given rise to the order disposing of the action summarily and striking out the statement of claim. The relevant grounds are set out in the notice of appeal. They are numerous and there is no need to repeat them here. The appeal has not yet been listed for hearing.

Meanwhile, the appellants have sought leave to adduce fresh evidence. The respondents seek an order for security for their costs of the appeal. It is these two matters with which we are now concerned.

The starting point in relation to the appellants' motion to adduce further evidence is Order 63 Rule 10(1). It gives the Court the power, on appeals from a judgment after trial or hearing of any cause or matter upon the merits, to admit further evidence but only on 'special grounds' and with special leave. A summary judgment has been held to be a judgment after hearing upon the merits: Langdale v Danby [1982] 3 All ER 129 at 137. It follows that an appellant can only adduce further evidence on appeal from a summary judgment pursuant to Order 16 if it can demonstrate the existence of "special grounds". In this respect, an appeal from a summary judgment is different to an appeal from an interlocutory order. In the latter case, special leave is not necessary: The Australian Electrical Electronics Foundry & Engineering Union of Western Australia Branch v Hamersley Iron Pty Ltd, unreported; FCt SCt of WA; Library No 980156; 6 April 1998.

The classic statement of what amounts to "special grounds" for the purpose of appeals to the Full Court comes from the judgment of Denning LJ in Ladd v Marshall [1954] EWCA Civ 1; [1954] 1 WLR 1489 at 1491. The dicta was expressly approved by the House of Lords in Skone v Skone [1971] 1 WLR 812 at 1133. The statement reads:

"In order to justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; second, the evidence must be such that, if given, it would probably have an important influence on the result of the case, although it need not be decisive; third, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible."

These principles have been accepted and followed in this Court and in other Australian jurisdictions: see Lill v Merchant Capital (WA) Ltd (1996) 15 WAR 536 at 557. In Akins v National Australia Bank (1994) 34 NSWLR 155 the Court of Appeal held that if fresh evidence is to be adduced on appeal, it must have been unobtainable by reasonable efforts at the time of trial, it must be credible, and there must be a high degree of probability that if the evidence were adduced there would be a different verdict. In Maddestra v Penfolds Wines Pty Ltd [1993] FCA 406; (1993) 44 FCR 303 the Federal Court held that a party applying for leave to adduce further evidence on appeal has the obligation to show that it is of such cogency that, if it had been adduced at trial, it would have led in all likelihood to a different result.

There is no precise formula as to how the Court should exercise its discretion in deciding whether to admit further evidence on appeal. However it has been said that the exercise should be undertaken with regard to the context in which it arises (including the nature of the litigation) and also the public interest in the finality of litigation: Doherty v Liverpool Hospital (1991) 22 NSWLR 284 at 297.

Given the above, leave to adduce further evidence will only be granted if the appellants can demonstrate to the satisfaction of the Court that the new evidence meets the following requirements:

(1) the evidence could not, with reasonable diligence, have been previously obtained;

(2) if the evidence had been given at the hearing it would probably have had an important influence on the result of the case; and

Previous Efforts to Obtain the Evidence - Reasonable Diligence

Paragraph 13 of the Affidavit of David Edward Churches dated 5 May 1998 sets out the evidence sought to be adduced. This evidence consists of a number of documents namely:

(1) Letter from Ms S Hudson to Mr L E Smith dated 19 December 1995 ("DEC8");

(2) Minutes of the Inaugural Committee Meeting of the Australian Democrats held in Perth on 13 March 1995 ("DEC9");

(3) Minutes of the National Executive Meeting of the Australian Democrats held in Sydney on 13 & 14 August 1994 ("DEC10");

(4) Memorandum from Ms S Hudson to WA Division office bearers dated 13 July 1994 ("DEC11"); and

(5) Transcript of evidence of the Honorable Helen Hodgson MLC, given on 14 October 1997 ("DEC12").

Paragraph 14 of Churches affidavit sets out the appellants' reasons why this evidence was not and could not reasonably have been adduced at the hearing before the Master. The second appellant deposes that such documents, with the exception of DEC11, did not become available to the appellant until the hearing on a complaint in the Court of Petty Sessions in Perth on 21 October 1997. In relation to the letter DEC11, although this was in the appellant's possession at the time of the hearing, the appellant claims that its significance only became apparent once the first appellant obtained the document DEC8 in the proceedings before the Court of Petty Sessions.

As the evidence sought to be adduced consists either of oral testimony obtained during the proceedings in the Court of Petty Sessions, or was produced pursuant to Summons of a Witness at those proceedings, I am satisfied that such evidence could not have been obtained with reasonable diligence at the time of the hearing in August 1997.

The Relative Importance of the Evidence to the Result

The next question to be addressed is whether the evidence, if given at the hearing, would probably have an important influence on the result of the case. In considering this question it is necessary to look at the cogency of the evidence.

The appellants contend that the evidence sought to be adduced relates in a material way to certain findings made by the Master and shows that those findings were made in error. The appellants claim that had the evidence been available to the Master it would have had an effect on his decision to grant summary judgment to the respondents The findings the appellant claims are in error are that:

(1) the first appellant was not a properly constituted division of the Australian Democrats political party;

(2) the first appellant was not the governing body of the Australian Democrats in WA;

(3) the first appellant does not have any right to be represented on the National Executive of that party and has no capacity to endorse or approve candidates for elections for that party;

(4) the first appellant has no right to assert that it enjoys the exclusive right to use of the name "Australian Democrats" in WA; and

(5) that no members of the first appellant are members of the Australian Democrats party.

The respondents claim that it is not possible to define the issues in question in the appeal as none of the grounds of appeal set out in the Notice of Appeal could have been ascertained from the decision of the Master. This is, they claim, because the Master came to the decision to strike out the statement of claim and dismiss the action on the basis that the pleadings contained in the statement of claim were hopelessly inadequate, embarrassing and did not reveal a discernible cause of action. They argue that as the grounds of appeal do not address the Master's findings as to the pleadings, they have no basis and any evidence claimed to relate to these grounds should not be allowed as it is not relevant. They claim that the substantive issues raised in the appellants' grounds of appeal do not arise out of the Master's decision as the decision addressed only the issue of pleadings.

In reading the reasons for decision it is not particularly easy to distinguish between matters that are pure pleading points and matters of substance that are contained in the pleadings. While I accept the respondents' proposition that the Master's decision to strike out the statement of claim was the result of what he found to be inadequate pleadings, this was only one of two reasons given by him. The other reason was that the evidence before the Court did not disclose any reasonable cause of action. I think it is this part of the Master's decision that forms the basis of the appellants' case. The real substance of the appellants' challenge is that the findings of the Master that are set out in ground 1 of the grounds of appeal formed the basis of his conclusion that there was no reasonable cause of action.

The appellants claim that had the new evidence been available to the Master at the time he would not have arrived at these findings. I think that by attacking it in this way the appellants are in danger of confusing the real issue on appeal. It seems to me that the Master's decision to dismiss the action on the ground that there was no reasonable cause of action was the result of him finding that:

(1) the first appellant was not and could not have been a member of the national party; and

(2) the expulsion of individual members of the WA division from the national party had the effect of removing any power that the WA division previously had to act as governing body or representative body of the national party.

If this is correct, it appears that a number of the findings objected to by the appellants arose as a consequence of the first appellant being found no longer to hold its position as the recognised governing body in Western Australia. In my opinion to succeed in overturning these findings the appellants need to show that either:

(1) the expulsion was invalid and, as a result, the first appellant still retained (and retains) its position as governing body in Western Australia; or

(2) even if the expulsion was valid, it did not have the effect of removing the first appellant from its position as governing body in Western Australia.

It appears from the Master's reasons that after having considered the constitution of the national party he found that under clause 11.2 the division executive must be a body elected by members of the national party in that division. The learned Master found that the effect of the expulsion of a number of members of the first appellant from the national party in 1994 meant that they were no longer members of the national party. Accordingly they were not eligible to hold a position on the division executive nor did they have the power under clause 11.2 to elect a division executive. As a result of the expulsion, the Master held that the first appellant, while remaining an incorporated body, could no longer be considered a properly constituted division of the national party. Having reached the conclusion that the first appellant had lost its status as a recognised division of the national party it follows that it could no longer enjoy the powers previously enjoyed by virtue of its position as the state governing body. As a result the first appellant would no longer have the right to be represented on the national executive, endorse and approve candidates and use the name "Australian Democrats".

The new evidence will only be admissible if it can be used to show that the expulsions were invalid or that after 1994, that is when the expulsion of those members of the first appellant occurred, the appellant still remained the properly constituted divisional body of the national party and as such still maintained its right to exercise the privileges of that position. The question to be decided is whether the evidence contained in documents DEC8 - DEC12, is capable of showing that the expulsion was invalid or if valid, did not have the effect of removing the first appellant from its position as the governing body of the national party in Western Australian. To determine this question the information contained in each document must be considered. The object is to see whether any of the evidence is capable of shedding new light on the validity or effect of the national party's decision to expel a number of members in a way that would "probably have an important influence on the result of the case".

DEC8 is a letter dated 19 December 1995 to the Electoral Commissioner from Ms Sam Hudson, the national secretary of the national party. In the letter the author requests confirmation from the Electoral Commission that the national party be represented as the Australian Democrats on ballot papers for WA elections. The letter written on behalf of the national party states that:

(1) the national party and the WA division are separate competing political organisations in Western Australia;

(2) that all previous candidates in Western Australia elections under the name Australian Democrats have been endorsed by the national party; and

(3) that WA voters would expect that if they vote Australian Democrats in a state election they are in fact voting for the same party as if they vote Australian Democrats in the federal election.

In my opinion this letter does not materially assist the appellants' case. The letter was written in July 1995 approximately one year after the expulsion of members of the WA division from the national party. The letter does nothing more than confirm that a dispute exists between the national party and the WA division over which party is entitled to represent the Australian Democrats in Western Australia. There is insufficient in this letter to justify, or assist in drawing, an inference that because the WA division continued to function in its own right it remained the governing body of the Australian Democrats in Western Australia.

DEC9 is the Minutes of the Inaugural Committee of the Australian Democrats held in Perth on 13 March 1995. These minutes cover a resolution by certain members of the national party in Western Australia to apply for recognition by the national executive as the Australian Democrats division executive in Western Australia. It also includes a statement of intention to resolve that all members of the national party residing in Western Australia be deemed to be members of this division unless they object. These minutes do not reveal anything new in relation to the findings of the Master. Following the expulsion from the national party of those members of the executive division in Western Australia there was in accordance with clause 11.2 of the national constitution no executive division in place in the State. All these minutes reveal is the intention of the national party to form a new executive division comprising those members residing in Western Australia who still remained members of the national party. This evidence contains nothing material to the issue whether the first appellant, after July 1994, remained a properly constituted governing body of the Australian Democrats.

DEC10 is the Minutes of the National Executive dated 13 August 1994. The minutes contain information regarding the WA division. In particular, they record the action taken by the national executive in sending letters to all members of the WA division advising them of the invalidity of the WA division and requesting that members be required to join one or other of the parties but not both. The minutes also note that legal advice obtained indicated that there was not, in Western Australia, a division of the Australian Democrats within the meaning of clause 5 of the constitution. Further the minutes reveal that the national executive intended to appoint a caretaker committee to administer the affairs of the national party in WA.

In my opinion this evidence does not contain any information capable of sustaining an argument that the expulsion was invalid or that the appellant was still the division executive in Western Australia. As a result it would not have had any influence on the decision of the Master.

DEC11 is a memorandum dated 13 July 1994 from Ms Hudson on behalf of the national executive. This memo informs the WA division office bearers that in the opinion of the national party's legal advisor the first appellant has not fulfilled certain requirements under the Associations Incorporation Act 1987. The argument is that if this were so there had not been a valid resolution passed since 1978. As a result the state division executive had not been valid since 1978. The memo notes that according to legal opinion the WA division was technically leaderless and had no state division executive at all. There is no indication in the evidence whether and to what extent the national executive relied on the opinion. If they did and if it were shown to be wrong it might be seen as assisting the appellant's case. However, an argument to that affect was not advanced by the appellant in support of its appeal.

I cannot see how otherwise this evidence could assist the appellants' case. If anything, this memorandum goes against the appellants' case as it indicates that while after 1994 the appellant existed as a legal entity, it had not been the valid state division executive since 1978.

DEC12 is the oral testimony of the Honorable Helen Hodgson MLC in relation to the meeting in August 1994. At the meeting the national executive resolved to expel a number of members of the first appellant from the national party. Ms Hodgson testified that in July 1994 a meeting of the national executive was held where it was resolved to expel a number of members including the second appellant from the national party. The evidence also revealed that in August 1994 a resolution was passed to withdraw recognition of the first appellant and that the first appellant be disbanded. Further, Ms Hodgson stated that at this meeting in August there was no-one from Western Australia present. The appellant claims that this evidence is cogent to the point that at all material times prior to August 1994 the appellant had been the WA division of the national party and that the circumstances surrounding the meeting in August give rise to an arguable case that the constitution was not followed and as a result the resolution was void.

I do not accept the appellants' submission. The Master found that since the expulsion in 1994 none of the members of the first appellant were members of the national party and that because they were not members of the national party they were incapable, under cl 11.2 of the constitution, of electing a division executive. As a result from the time of the expulsion of members in July 1994 there was no division executive in place. The resolution in August merely confirmed what had been the effect of the expulsion of members in July. By August, as members of the first appellant were no longer members of the national party and there was no existing division executive in place in Western Australia, the argument that the resolution in August was invalid because of a lack of Western Australian representation cannot hold as there was no division executive existing capable of representing members in Western Australia. So long as the resolution was approved by three quarters of the national executive and there is no evidence that it was not, there is insufficient to sustain the appellants' argument that the expulsion was void. Given the above reasons I do not find that this testimony is sufficiently cogent to have had any influence on the Master's decision.

In my opinion there is nothing contained in any of the evidence the appellant seeks to adduce which would have an important influence on any of the findings made by the Master. None of the evidence, on its own or together, could be said to be relevant to the appellants' contention that it remains the governing body of the national party in Western Australia, or that it would probably have had an important influence on the decision of the Master. The appellants have not satisfied me that "special grounds" pursuant to O63 r10(1) exist. As a result their motion to adduce new evidence will be declined.

The respondents, by notice of motion dated 6 April 1998, seek an order pursuant to O63 r10(5) of the Rules that the appellants give security for the respondents' costs of the action in the sum of $20,000.

Order 63 rule 10(5) gives the Full Court the power in "special circumstances" to make an order that security be given for the costs of an appeal. The power to grant the order is discretionary and it is up to the Court to determine whether or not the relevant circumstances of the application amount to "special circumstances".

The respondents contend that the relevant circumstances in favour of its application are that:

(1) the evidence shows that the first appellant is impecunious;

(2) the appellants are under an obligation to pay the costs ordered against them in the action below estimated at approximately $15,000; and

(3) the appeal is so without merit that the appellants have no prospects of success.

Evidence as to the first appellant's impecuniosity can be found in the affidavit of John Gordon Evans dated 3 April 1998. In his affidavit Evans states that he is the authorised officer of the Australian Democrats in Western Australia pursuant to s113C of the Electoral Act (WA) 1907 and the deputy registered officer of the Australian Democrats in Western Australia pursuant to the Commonwealth Electoral Act 1918. Evans deposes to the fact that the first appellant, as of April 1994, had net assets of $350 and that following the judgment in the action delivered on 23 December 1997, the appellants are liable to pay the respondents costs estimated at $15,000.

Further evidence of the first appellant's impecuniosity is found in the affidavit of David Edward Churches dated 8 May 1998, where in responding to Evans' affidavit, he accepts the impecuniosity of the first appellant. In para 1 he states:

"The impecunious nature of the first appellant is due directly to the matters in issue sought to be determined by the appellants in CIV 1522 of 1997, the substantive action against which summary judgment was given which is now appealed against."

While the impecuniosity of an appellant may be an important consideration in exercising a discretion pursuant to O63 r10(1) and may sometimes constitute special circumstances, it is not conclusive: Lall v 51-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 at 312. Generally speaking the approach usually taken is that the impecuniosity of an appellant will not in itself result in an order for security being made: Kennedy v McGeechan [1978] 1 NSWLR 314 at 315.

It seems apparent on the evidence before this Court that if the first appellant is unsuccessful in the appeal then the respondents would be unlikely to get their costs. The first appellant claims that its impecuniosity is the direct result of the actions of the respondents and the liability that arises from its obligation to pay the costs from the action below. The appellants submit that while they are in a position to be able to meet the costs liable to be paid under Civ 1522 of 1997, they would be unable to raise an additional $20,000 for the payment of security. I acknowledge that security is sometimes denied where the impecuniosity of the appellant has been brought about by, if what the appellant contends is correct, the wrongful act of the respondent: Kiely v Beneficial Finance Corp Ltd (1991) 6 WAR 521 at 527. However, I do not think that the first appellant's impecunious state alone is enough to justify the Court refusing to exercise its discretion to grant an order for security.

The appellants contend that in exercising its discretion, the Court should take care not to make an order for security that will have the effect of frustrating an appeal that appears to have merit or that involves a matter of great public interest : Kennedy (supra) at 315. On the other hand, the respondents rely on the contention that it is because the appeal has no merit and no realistic prospects of success that special circumstances under O63 r10(5) exist.

While the impecuniosity of the appellant alone does not amount to special circumstances, the Court may be more inclined to exercise its discretion and grant an order if it can also be shown that in addition to the appellant's impecuniosity the appeal has no realistic prospect of success: Kiely (supra) at 527. Where it appears to the Court that there is little merit to the appellants' case it would be in the interests of justice to grant such an order. Therefore in order to determine whether to grant an order the Court needs to consider the merits of the appeal and its likelihood of success.

An examination of the appellants' grounds of appeal make it apparent that they address the issue of whether those findings made by the Master and outlined above were wrong in fact and law. They contend that it was those specific findings which led the Master to make an order to dispose of the action summarily by striking out the statement of claim as being embarrassing and disclosing no reasonable cause of action. However as previously discussed the appellants' grounds of appeal fail to address the main reasons for the Master's decision to dismiss the action. In order to succeed on appeal the appellants need to show that the expulsion was invalid or that despite the expulsion the WA division still maintained its authority as the governing body. If the appellant can succeed in showing either of these, then the findings made by the Master and set out in ground 1 of the notice of appeal may well be in jeopardy.

There is no direct evidence before this Court as to the invalidity of the expulsion. Further there is no evidence even capable of giving rise to any inference that the expulsion was invalid. The learned Master pointed out that the vote expelling the members was unanimous and that even if the two members from Western Australia eligible to vote had done so there still would have been a majority vote. The fact that it was resolved at the meeting to exclude a number of persons resident in WA from voting was not an act capable of rendering the resolution invalid. The decision to exclude certain people from Western Australia from voting was done on the basis that they were either the subject of the complaint or were called as witnesses at the hearing. There is nothing which appears to have been improper in excluding persons with a personal interest in the subject being voted on from exercising their vote.

In my view, on the materials before the Court, the appellants will face some difficulties in seeking to overturn the Master's findings of fact. That is not to say the appellants will not succeed but it is not inevitable that they will do so. On the other hand, I am conscious of the fact that an order for security may have the effect of frustrating an appeal that involves a matter of public interest.

I accept the appellants' contention that the matters to be determined by the appeal are matters of public importance. The appeal relates directly to the internal workings of a political party that, at the relevant time held strong support within the community and controlled the balance of power in the Senate. Further the outcome of the appeal will directly effect the identity of that political party in Western Australia and that this is a matter of concern for electors in both State and Federal elections. Given this it is my view that it is in the public interest that the appeal proceed and that it proceed without further delay.

As a result of the appellants' financial situation it is clear that the effect of any costs order would be to frustrate the appeal and impose further delay on the appeal proceeding as expeditiously as possible. However, it is clear also that without a security for costs order the respondent, if successful against the appellant, may not receive its costs. In the end, despite the potential inconvenience to the respondents, it is my view that the public interest in the appeal proceeding and the interests of justice in attempting to see this matter brought to some conclusion render a refusal to grant security as the more just solution. Accordingly I would refuse the respondents' motion for security for costs.

I agree with the reasons published by Owen J and with the orders proposed.