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Benjamin v GB Franchising Australia Pty Ltd [2008] ACTCA 11 | Case summary | Zoe

ACTACTCA

Benjamin v GB Franchising Australia Pty Ltd [2008] ACTCA 11

[2008] ACTCA 11

Court of Appeal (ACT)|2008-07-01

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Source facts

Court

Court of Appeal (ACT)

Decision date

2008-07-01

Source

Original judgment source is linked above.

Judgment

Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.

JOHN BENJAMIN v GB FRANCHISING AUSTRALIA PTY LIMITED

[2008] ACTCA 11 (1 July 2008)

PRACTICE AND PROCEDURE – Appeal from single judge – whether order interlocutory or final – whether appeal incompetent – order final and appeal competent.

PRACTICE AND PROCEDURE – Costs – Security for costs – respondent to appeal seeking security – grounds for granting – impecuniosity of appellant – factors in determining whether to order security – security ordered.

PRACTICE AND PROCEDURE – Judgments and orders – stay of execution – pending appeal principles for granting a stay – impecuniosity of appellant – capacity to appeal preserved – stay granted.

Bankruptcy Act 1966 (Cth) s 60(2)

Corporations Act 2001 (Cth) ss 206B(2), 436A, 459F, 598

Supreme Court Act (ACT) 1933 s 37J

Civil Procedures Rules 2005 (NSW) r 51.50

Court Procedures Rules 2006 (ACT) r 5312

Supreme Court Rules 1937 (ACT) O 33B, O 65

Uniform Civil Procedure Rules 1999 (Qld) r 772

Goodberry Holdings Pty Limited v Senatore and Ors [2005] ACTSC 141

Tampion v Anderson (1973) 3 ALR 414

Salter Rex & Co v Ghosh [1971] 2 QB 597

Border Auto Wreckers (Wodonga) Pty Ltd v Shrathdee [1997] 2 VR 49

Bozson v Altrincham Urban District Council [1903] 1 KB 547

Hall v Nominal Defendant (1966) 117 CLR 423

Licul v Corney (1976) 180 CLR 213

Carr v Finance Corporation of Australia Limited [No 1] (1981) 147 CLR 246

Ex parte Bucknell (1936) 56 CLR 221

Cowell v Taylor (1885) 31 Ch D 34

Rainbow v Kittoe [1916] 1 Ch 313

Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310

Arnold v Queensland (1987) 73 ALR 607

Ivory v Telstra Corporation Limited [2001] QCA 490

Scerri v Northam Holdings Pty Limited [1967] VR 674

Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1

Transglobal Capital Pty Limited and Anor v Yolarno Pty Limited (2004) 60 NSWLR 143

King v Commercial Bank of Australia Limited (1920) 28 CLR 289

Murchie v The Big Kart Track Pty Limited (No 2) [2003] 1 Qd R 528

It is not necessary to trace the whole of the history of the antecedent proceedings but some background is necessary for an understanding of this matter. See, in particular, Goodberry Holdings Pty Limited v Senatore and Ors [2005] ACTSC 141.
Goodberry Holdings Pty Limited (ACN 107 309 400) (“Goodberry Holdings”) was incorporated on 8 December 2003 apparently to manage a joint venture for the development of the business of Goodberry’s Australia Ltd (ACN 093 192 002) (“Goodberry Australia”) in Australia.
Subsequently, the Respondent was incorporated. It was, until May 2004, a wholly owned subsidiary of Goodberry Australia and then became a wholly owned subsidiary of Goodberry Holdings (“Goodberry Holdings”).
On 13 July 2004, Ezio Marco Senatore (“Mr Senatore”) and Stephen Brennan (“Mr Brennan”) were appointed Administrators of the Respondent under s 436A of the Corporations Act 2001 (Cth) (‘the Act’).
On 14 July 2004, Goodberry Holdings commenced proceedings in this Court seeking to set aside the appointment of Mr Senatore and Mr Brennan as Administrators of the Respondent. These are the proceedings resulting in the judgment referred to at [4] above. There were various applications and orders made in these proceedings and various affidavits filed.
In particular, the Appellant filed an affidavit of 19 July 2004 in which he deposed to being a Director of Goodberry Holdings. He set out various matters relating to the Respondent and then, significantly, deposed: 16. I agree in my personal capacity to inject such capital into the Second Respondent [i.e. the Respondent] as will render it solvent in the event that examination of the affairs of the Second Respondent shows it to be insolvent.
The administration ended on 19 August 2004 and Crispin J ordered that the remuneration of the administrators, including legal costs incurred in the proceedings, be paid by the Respondent.
An application was then made to Crispin J for an order requiring the Appellant to comply with the undertaking. His Honour dismissed that application: Goodberry Holdings Pty Ltd v Senatore and Ors (supra).
His Honour did, however, make some observations as to the construction of the undertaking. It had been submitted that the undertaking was limited to any funds necessary to render the Respondent solvent as at 19 July 2004. A statement of assets and liabilities had been annexed to the Appellant’s affidavit which purported to show that it was solvent. Before his Honour, the Appellant submitted that his undertaking was intended only to mean that if that statement was wrong, he would inject such funds as were necessary to correct any error or shortfall in respect of that statement. His Honour rejected that submission at [13] to [14]. His Honour said at [14]: [The relevant] undertaking was given in the context of an application made by a company of which he was a director to ensure that the restructuring program would continue in the future. It was also given in the knowledge that the administrators might well have already incurred costs in facilitating that restructuring, and presumably in the knowledge that further costs might be incurred in the future. It should also be noted that the undertaking was, in its terms, expressed to operate in the future. It was an undertaking to inject such capital as “will render” the relevant company solvent.
Later, his Honour said at [19]: In my opinion, the undertaking should not be understood as applicable only to the time when the undertaking was given or at the time when the orders were made. The undertaking was not in its terms so limited. Furthermore, as I have mentioned, the undertaking was given in the context of an expressed anxiety so as to avoid irreparable damage to the applicant and to facilitate the restructuring of the Goodberry’s Group.
For reasons suggested in the judgment referred to at [4], an application was then made on 7 June 2006 that the Respondent be wound up under s 459F of the Act. A winding up order was made by the Registrar on 7 August 2006 and Mr Frank Lopilato was appointed the Liquidator.
On 5 February 2007, Mr Lopilato issued in the winding up proceedings what was called “Interlocutory Process” seeking an order under s 598 of the Act that the Appellant pay certain moneys. It appears that, in support of this application, Mr Lopilato relied upon the undertaking set out in [9]. On that application, Crispin J then made the order the subject of this appeal on 1 August 2007. Application – Dismissal of the Proceedings
The first set of orders sought by the Respondent was that the Notice of Appeal be dismissed. It became clear that this was on the basis that the order of Crispin J was said to be interlocutory and, therefore, the Notice of Appeal had been filed out of time and was statute-barred. See r 5312 of the Court Procedures Rules 2006 (ACT).
The question of whether an order is final or interlocutory is not always easy to determine. Indeed, in Tampion v Anderson (1973) 3 ALR 414, the Privy Council suggested that in any actual case, the most helpful advice may be that of Lord Denning MR in Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601, namely This question of ‘final’ or ‘interlocutory’ is so uncertain that the only thing for practitioners to do is to look up the practice books and see what has been decided on the point. Most orders have now been the subject of decision. See, to the same effect what was said by Brooking JA in Border Auto Wreckers (Wodonga) Pty Ltd v Shrathdee [1997] 2 VR 49 at 52.
I note, in this context, that there is a comprehensive list of orders held to be interlocutory and final in Neil J Williams QC, Civil Procedure Victoria (LexisNexis Butterworths, Chatswood, 2000, looseleaf) at I 64.01.445 and I 64.01.450. Regrettably, none of the examples there given are on point so far as this proceeding is concerned.
The test, however, that has been adopted is that proposed by Alverstone CJ in Bozson v Altrincham Urban District Council [1903] 1 KB 547 at 548-9, namely “[d]oes the judgment or order, as made, finally dispose of the rights of the parties?” This has been adopted by the High Court: see Hall v Nominal Defendant (1966) 117 CLR 423 at 439-40, 443, 447; Licul v Corney (1976) 180 CLR 213 at 219; Carr v Finance Corporation of Australia Limited [No 1] (1981) 147 CLR 246 at 248, 253, 258.
It is beyond doubt that the answer to this question depends on the order made not upon the nature of the application made to the court: Ex parte Bucknell (1936) 56 CLR 221 at 225. Thus, the fact that the application here was entitled “Interlocutory Process” was not determinative.
In this case, the Appellant was not a party to the winding up proceedings. He only became a party because the “Interlocutory Process” was served on him and which, based on s 598 of the Act, entitled the liquidator to obtain an order against certain persons of whom, apparently, the Appellant was one. In my view, the making of the order under that section finally disposed of the issues between the Respondent and the Appellant in those proceedings. That it was made in the winding up proceedings and that the order directed the Appellant to pay the money to the Respondent is not relevant to that issue.
Accordingly, on 25 February 2008, I dismissed that part of the Respondent’s application and reserved the question of costs. Application – security for costs
In the second limb of the application, the Respondent sought an order for security of costs against the Appellant.
The Court Procedures Rules 2006 (ACT) provide for the Court of Appeal to make an order for security for costs. Rule 5302 is in the following terms (omitting notes): Appeals to Court of Appeal – security for costs 5302 (1) Security for costs of an appeal is not required unless the Court of Appeal otherwise orders. (2) This rule does not limit division 2.17.8.
The rule does not specify whether a single judge has power to make an order under r 5302. This matter was not addressed at the hearing, but I am, of course, required to ensure that I am exercising a jurisdiction that I have. Section 37J of the Supreme Court Act 1933 (ACT) provides for the powers that may be exercised by a single judge of the Court of Appeal. Paragraph 37J(1)(l) refers to “costs and other matters incidental to a matter mentioned in paragraphs (a) to (k)”.
It seems to me that jurisdiction as to costs includes jurisdiction as to security for costs. A pointer to and confirmation of this approach may be gained from the fact that the rules in relation to security for costs were contained in O 65 (Costs) of the Supreme Court Rules 1937 (ACT) until 1992 when O 33B (Security for Costs) was made, separating out the procedure. Whilst a different procedure, the application for security for costs is about the protection of a successful defendant or respondent for his, her or its costs, though it is intended to prevent abuse of process. Insofar as it is arguably not directly making an order to award costs, it is so closely allied that as to come within the category.
I am satisfied that, as a single judge, I do have jurisdiction to hear and determine this application.
In one important respect, the ACT rule differs from the traditional rule which regulates security for costs on appeal. That rule has required the applicant (usually the respondent to the appeal) to show special circumstances before security will be ordered: see, e.g., r 51.50, Uniform Civil Procedures Rules 2005 (NSW).
On the other hand, the structure of the ACT rule suggests that the default position is that no security is payable. Thus, the applicant at least has to make out the case for security. Whether the threshold is lower is unclear, though there may be little warrant for reading into the provision that the application must demonstrate special circumstances.
Although there is much similarity between security for costs at trial and security for costs on appeal, there are some important differences, at least one of which is relevant to these proceedings. The major difference is that while impecuniosity is not a ground for ordering security for costs at trial (Cowell v Taylor (1885) 31 Ch D 34 at 38), impecuniosity may be a ground for ordering security for costs on appeal: Rainbow v Kittoe [1916] 1 Ch 313 at 318. While important in this circumstance, however, it has been said not to be decisive: Lall v 53-55 Hall Street Pty Limited [1978] 1 NSWLR 310 at 313.
Nevertheless, care must be taken that an order for security for costs of an appeal, especially where the Appellant is impecunious, must not have the effect of stifling an action that should, in the interests of justice, be heard and determined on its merits: Arnold v Queensland (1987) 73 ALR 607 at 613.
As noted above, the position in this Territory is different from that in other jurisdictions in that it does not expressly require special circumstances to be shown before security for costs will be ordered on appeal. On the other hand, in Queensland the Court has an unfettered discretion, without even the apparent default position as in the Territory that security is not required unless ordered: r 772, Uniform Civil Procedure Rules 1999 (Qld).
In Queensland, the impecuniosity of the appellant has been said to be “important and provides a persuasive reason for ordering security”: Ivory v Telstra Corporation Limited [2001] QCA 490. This is similar to the situation in Victoria, where in Scerri v Northam Holdings Pty Limited [1967] VR 674 at 674the Full Court referred to “the long and well-established practice of this Court, [under which] inability of an appellant to pay a successful respondent’s costs … constitutes special circumstances” justifying an order for security for costs. See also Commonwealth Bank of Australia v Eise (1991) 6 ACSR 1 at 3.
In New South Wales, the position is a little different. In Transglobal Capital Pty Limited and Anor v Yolarno Pty Limited (2004) 60 NSWLR 143, the Court of Appeal held at 150-1 that the weight of authority was that something more than impecuniosity of the appellant was required before security would be ordered, although impecuniosity was a relevant matter. The other relevant matters would include the nature of the proceedings and the merits of the appeal.
In the High Court of Australia, the various provisions over time have given the court a wide discretion. As Rich J said of the then provision in King v Commercial Bank of Australia Limited (1920) 28 CLR 289 at 292 The Legislature, however, has left absolute discretion to the Court, and has done so without prescribing any rules for its exercise. In these circumstances no rules can be formulated in advance by any Judge as to how the discretion shall be exercised. It depends entirely on the circumstances of each particular case. The discretion must, of course, be exercised judicially, which means that in each case the Judge has to inquire how, on the whole, justice will be best served …. This passage was expressly followed and adopted by Brennan J in Lucas v Yorke and Anor (1983) 50 ALR 228 at 229. See also P S Chellaram & Co Limited v China Ocean Shipping Co and Anor (1991) 102 ALR 321 at 323.
Even in Victoria a more comprehensive approach has more recently been taken. In Commonwealth Bank of Australia v Eise (supra) Young CJ (with whom Fullagar J agreed) said at 3: The impecuniosity of an appellant is, generally speaking, a starting point, sometimes the finishing point in an application of this kind. That is to say, that there has been a long established practice that the impecuniosity of an appellant is a ground for ordering that security for costs be provided. It is not, however, the only consideration. There are other factors that may be taken into account. One of those factors is the prospects of success on the appeal … [The Appellant] sought at one stage in his argument to seize upon another fact that is sometimes taken into account in considering whether security for costs should be ordered, that is when there is a significant point of law of great public importance involved in an appeal. Again that is not a question that is treated as conclusive, but is something that may be taken into account.
It seems to me that impecuniosity of an appellant is an important and relevant factor in an application for security of costs on appeal. I accept that the default position is that no security is required, but the discretion of the Court is not fettered in considering whether that default position ought to be displaced. As was pointed out in the High Court, the court must consider the circumstances of each case.
It is further clear to me that, when it comes to an appeal, the impecuniosity of the appellant is a very relevant factor. As was said in Cowell v Taylor (supra), “the appellant has had the benefit of a decision by [a court] 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”. As I have indicated, this is not to be taken in the Territory, perhaps unlike England and Wales, as determinative, but is a relevant and important factor.
Also relevant is the prospects of success of the appeal and whether the issue in the appeal is one of public importance. Further, as was said in Commonwealth Bank of Australia v Eise (supra) at 4 the appellant should not be ordered “to provide greater security than is absolutely necessary”.
Mr Larkings, who appeared for the Respondent (the applicant for security) relied heavily on the impecuniosity of the Appellant, but in his written submissions acknowledged that this was not sufficient. There is no real doubt that, while not completely impecunious, the Appellant would not be able in a reasonable period to pay the costs of the appeal were he to fail in it.
Mr Larkings, also pointed to the fact that, in effect, Crispin J had twice held against the Appellant: once in Goodberry Holdings Pty Limited v Senatore and Ors (supra) and once in the decision from which this appeal is taken. He submitted that, given that there had been no appeal from the earlier decision and that to re-open it would be “unjust and improper”.
In response, Mr Cook, who appeared for the Appellant, submitted that the Appellant could not have appealed against that decision as, in it, his Honour had dismissed the application of the Respondent. He further submitted that the reasons did not provide an estoppel or a res judicata as against the Appellant. Indeed, in the proceedings leading to the order from which the present appeal is taken, Mr Cook indicated that he argued the point again which Crispin J had commented on adversely in the earlier proceedings.
In this, Mr Cook is clearly correct. As has been said in K R Handley, Spencer Bower, Turner and Hardly The Doctrine of Res Judicata (Butterworths, London, 1996) at pp 29-31: When an action or application is dismissed after a hearing, it is necessary to determine what matters beyond the actual dismissal conclude the parties. This depends on whether the dismissal involved the determination of any particular issue of fact or law, otherwise it only decides that the party has been refused relief … Where a proceeding has been dismissed, no finding of fact will establish an estoppel unless it was necessary to the dismissal. It is clear that in the earlier decision of Crispin J, the construction of the undertaking was not necessary to the dismissal. It, therefore, cannot establish an estoppel or a res judicata.
Nevertheless, it is not irrelevant that there have been two occasions on which the construction of the terms of the undertaking has been found to be unfavourable to the Appellant, although by the same judge on each occasion, and the judge to whom the undertaking was given.
Mr Cook relied on the High Court’s decision in Australian Consolidated Press Limited v Morgan and Anor (1965) 112 CLR 483 which, he said was authority for the proposition that an ambiguously worded undertaking will not be held against the person who gave it. As Barwick CJ said at 491: Let it be assumed that the language of the undertaking must in the long run bear the meaning and denote the things which the Court has decided it has or does: yet in proceedings for contempt for breach of the undertaking, it is not enough that the Court is satisfied of that meaning or denotation. I think it ought also to be satisfied that that meaning or denotation is such as the appellant might fairly be expected to have contemplated when giving the undertaking. I do not mean that the Court must be satisfied that the appellant gave the undertaking in that sense. It is sufficient that that sense is one which the appellant ought fairly to have had in view as a sense in which the undertaking could be understood. See also Bryant and Anor v Keith Harris & Co Limited and Ors (1980) 49 FLR 137, especially at 147. This does not seem to be an issue which Crispin J directed his mind if, indeed, it was raised in submissions before his Honour.
In this sense, the drafting of an undertaking is a matter to which lawyers must give careful attention. Mr Cook suggested that the undertaking in the paragraph of the affidavit was “drafted by a solicitor one might have thought fairly quickly without perhaps due respect for what precisely …”. If that is the fact, it is a poor reflection on the drafter and the approach by the profession (if such it be) to matters as serious as an undertaking. An undertaking should be drafted with no less care and precision than an injunction, where authority makes clear that precision is required to make clear what the injunction requires for compliance. See Redland Bricks Ltd v Morris [1970] AC 652 at 666; Tito v Waddell (No 2) [1977] Ch 106 at 321; Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 502; Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd [1991] 1 Qd R 301 at 308; Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318 at 336; Nexus Mortgage Securities Pty Ltd v Ecto Pty Ltd [1998] 4 CR 220 at 221-222; Coflexip SA v Stolt Comex Seaway MS Ltd [1999] 2 All ER 593 at 600; Attorney-General v Punch Limited [2003] 1 All ER 289 at 297-298.
It seems to me that there is at least an arguable case that the undertaking means what Mr Cook says. It is, perhaps, not strong, since it must have been clear that someone external to the Respondent and the Appellant, such as the administrators would have to ascertain whether the Respondent was insolvent or not and that this would have to be paid for.
Other matters are commonly regarded as relevant to the decision whether security should be ordered. These include where the impecuniosity of the appellant has been caused by the misconduct of the respondent (Farrer v Lacey Hartland & Co (1885) 28 Ch D 482 at 485), where the liberty of the subject is involved (Hood Barrs v Heriot [1896] 2 QB 375), where the appeal is an abuse of process (Weldon v Maples, Teesdale & Co (1887) 20 QBD 331), where the appeal is manifestly groundless (Lall v 53-55 Hall Street Pty Limited [1978] 1 NSWLR 310) where there has been great delay in prosecuting the appeal (P G Gobel Pty Limited (in liquidation) v Katherine Enterprises Pty Limited (1977) 29 FLR 108 at 113) and where the matter in issue raises a matter of public importance or a significant matter (Kennedy v McGeechan [1978] 1 NSWLR 314(n)). None of these seem relevant here; certainly none were argued.
I should also mention that Mr Cook did refer me to Fletcher and Ors v Commissioner of Taxation (1992) 37 FCR 288, although he referred me to the report in the Australian Law Reports sub nom Fletcher ors v Federal Commissioner of Taxation (1992) 110 ALR 233. It is, of course, always more preferable to use an authorised report of a case where available. I have read that case carefully, but did not find it of great assistance as the circumstances of that case were quite removed from this one.
Doing the best I can, it does seem to me that the factors favouring an order for security are: the impecuniosity of the Appellant, the fact that he has twice argued the construction of the undertaking and on both occasions the court construed it against him and that the case is not a strong one. On the other hand, the construction argument is arguable and there is certainly something to be said for suggesting that if the terms are ambiguous, they ought to be construed in the appellant’s favour, though the terms were drafted by his solicitor and, in the circumstances, the appeal should not be stifled and there was some delay by the Respondent before attempting a second time to enforce the undertaking.
Accordingly, I consider that an order for security in a modest sum should be made with reasonable time for the Appellant to obtain it. If the time causes a difficulty, then liberty to apply for an extension should be granted.
In my view, the appeal is unlikely to take more than half a day to be heard. The Appellant, of course, has to prepare the Appeal Papers. In my view, the sum of $5,000 is a reasonable sum to protect the Respondent but which will not, on the evidence before me, prevent the Appellant prosecuting the appeal.
Mr Cook also sought a stay of the order of Crispin J of 1 August 2007. This application was opposed by Mr Larkings.
The general principles in relation to a stay pending appeal have been set out by the NSW Court of Appeal in Alexander v Cambridge Credit Corporation Limited (Receivers Appointed) (1985) 2 NSWLR 685 at 694-5 where the Court said: … In our opinion it is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant … demonstrates a reason or appropriate case to warrant the exercise of discretion in his favour … The Court has a discretion whether or not to grant the say and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties … Two further principles may be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay … where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay.
A bankruptcy notice has already been served on the Appellant. If the Appellant is made bankrupt, he will not be able to pursue the appeal: s 60(2) Bankruptcy Act 1966 (Cth). As was pointed out in Kalifair Pty Limited and Anor v Digi-Tech (Australia) Limited and Ors; McLean Tecnic Pty Limited and Ors v Digi-Tech (Australia) Limited and Ors (2002) 55 NSWLR 737 at 742, an appellant whose appeal cannot proceed because of insolvency suffers irremediable prejudice. Although that case was different in that the appellant, through the judgment on appeal, had the chance of recovering a money judgment which is not available to the Appellant here, as there, execution on the judgment would clearly result in the inevitable bankruptcy of the Appellant were he not to succeed on the appeal and, of course this would have other consequences, such as preventing him from managing a corporation: s 206B(2) of the Corporations Act 2001 (Cth).
Accordingly, I am of the view that a stay pending appeal is justified. There should, however, be liberty to apply in the event that the Appellant does not prosecute the appeal expeditiously.
As to costs, it seems to me that the costs of the failed application to strike out the Notice of Appeal should be paid by the Respondent but should not be payable until the appeal is determined. The costs of the application for security are in the discretion of the court, of course, and there appears to be no consistent line of authority to assist me in deciding the issue. It seems to me that the just order is that the costs of the application for security should be costs in the appeal: Murchie v The Big Kart Track Pty Limited (No 2) [2003] 1 Qd R 528 at 532.
Finally, the Appellant must pay the costs of the stay application, but these should not be taxed or paid until the appeal is determined. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour Refshauge J.