Brown v King

Judgment

1. By notice of motion filed on 14 March 2022 the respondent in this appeal, Mr King, seeks an order that the appellants provide security for costs, pursuant to r 51.50 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
2. The proceedings below were brought by the respondent against three defendants, Mr and Mrs Brown and Riverpines Vineyard Pty Ltd, a company associated with the Browns. The respondent sought to recover monies owed principally under a deed of loan and mortgage under which he had lent money to the defendants in connection with their operation of a vineyard and wine business in the Hunter Valley.
3. The respondent succeeded, and, by orders made by Schmidt AJ on 2 September 2021, each of Mr and Mrs Brown was ordered to pay some $2.1 million in Canadian dollars (being the currency of the loan), along with some A$1.55 million for interest, costs and other liabilities: see King v Brown (No 2) [2021] NSWSC 1060 (J). Riverpines Vineyard Pty Ltd was also ordered to pay certain amounts.
4. By a notice of appeal filed on 29 November 2021 Mr and Mrs Brown seek to appeal from the orders of Schmidt AJ, which were set out in King v Brown (No 3) [2021] NSWSC 1116.
5. The respondent says that various notices of appeal have been served on him since 29 November 2021, none of which has been filed. Both parties accepted that the relevant version for the purposes of argument was one apparently served on 15 February 2022. In that version there were only two appellants, being Mr and Mrs Brown. In the filed version, Riverpines Vineyard Pty Ltd was listed as a third appellant. I understand that company to be in administration. Both parties were content to proceed on the basis that security for costs was not sought as against Riverpines, as it was no longer intended that it be an appellant. Where I refer here to the appellants, I am referring to Mr and Mrs Brown. My analysis below is directed to the 15 February 2022 version of the notice of appeal.

Relevant principles governing security for costs on appeal

1. Rule 51.50(1) of the UCPR provides as follows: In special circumstances, the court may order that such security as the Court thinks fit be given for costs of an appeal.
2. In an oft-cited passage in Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247, at [18], Basten JA set out six principles governing such applications for security for costs (with Ipp JA relevantly agreeing at [1] and Hoeben JA agreeing at [40]). These principles were derived from the Court's earlier decisions in Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; [2004] NSWCA 136 and Porter v Gordian Runoff Ltd [2004] NSWCA 171. They are as follows: 1. no order for security should be made in the absence of "special circumstances"; 2. consideration of what may constitute special circumstances should not be fettered by some general rule of practice; 3. impecuniosity, without more, will usually be insufficient; 4. an order may be appropriate if the appeal is shown to be hopeless, unreasonable or of an harassing nature; 5. where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should usually not be made, and 6. the subject matter of the appeal, including an issue as to the liberty of the individual, or a public interest may provide a reason for not imposing a security order which would stifle the continuation of the appeal.
3. Basten JA said at [19] of Preston that "[s]ome of these factors, particularly the last two, may better be seen as influencing the exercise of the discretion, rather than as potential 'special circumstances', engaging the power". I agree. The existence of "special circumstances" is a necessary, but not necessarily sufficient, condition of the exercise of the power. When such circumstances exist, the Court then has a discretion to order security for costs, in such sum as it sees fit, taking account of all relevant matters.
4. As to the exercise of the discretion, McHugh J said the following of such a power in P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321; [1991] HCA 36, at 323: "To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed."
5. Matters established to be "special circumstances" are likely to weigh in favour of the application when considering the exercise of the discretion. Matters militating against ordering security might not be relevant to assessing whether or not special circumstances exist, but will be taken into account in exercising the discretion. Thus, for example, special circumstances may be shown to exist but the Court might decline to order security because, for example, to do so would unduly stultify the appeal, taking account of the nature of the issues at stake (as raised by the fifth and sixth factors identified above).

Are there special circumstances here?

1. The claimed special circumstances identified by the respondent are the impecuniosity of the appellants, the delinquency of the appellants in complying with court orders, and the deficiency or incompetence of the appeal.

Impecuniosity

1. The evidence relied upon by the respondent as to impecuniosity was thin. The main evidence relied upon was that the appellants had not paid the judgment debt.
2. As noted above, the judgment debt was CAD$2.1 million and A$1.55 million. A vineyard which had been mortgaged to secure the loan had been sold, reducing the amount owed by some A$2.026 million, to some A$1.698 million. The sale was completed after her Honour's decision had been handed down but prior to the making of the final orders. Senior counsel for the respondent candidly and appropriately volunteered that the final orders made below should have taken account of the proceeds of the sale. That point has significance in relation to the prospects of the appeal, which I return to below. For current purposes, it is clear that a substantial sum is still involved which has not been paid.
3. However, of itself this does not suffice to establish impecuniosity for the purposes of the application, even if one were to infer that the appellants were not capable of paying it. Rule 51.50 provides for the making of orders for security for costs. It is not there to provide security for payment of the judgment debt. The issue is whether or not the appellants are capable of paying an adverse costs order if their appeal is unsuccessful. That a party is unable to pay a large debt does not establish of itself that they are incapable of paying a much smaller sum. The security for costs sought by the respondent here is an amount of $70,923.
4. The respondent has also provided evidence that bankruptcy notices have been served on the appellants based upon the judgment debts. That does not advance matters as regards the ability of the appellants to make good on an adverse costs order.
5. The respondent had not undertaken any real estate search to establish whether or not the appellants owned any realty. Nor had the respondent's solicitors undertaken the usual course of writing to the appellants asking if they would be in a position to meet an adverse costs order and, if so, requesting some proof of that ability (eg by way of bank statements, or proof as to ownership of other assets).
6. Had the position rested there, I would have rejected the application on the basis that the respondent had failed to establish that the appellants would be unable to meet an adverse costs order. However, there was then a development in the course of the hearing.
7. Mr Brown took the main speaking role in responding to the application. Mrs Brown also spoke. After she had done so, and prompted by something she had said, I sought to clarify with Mr Brown (who had resumed making submissions) if the appellants were arguing that making an order for security for costs would stultify the appeal. In response to the question of what he said would happen to the appeal if security for costs were ordered, he said as follows: G BROWN: It will sit - you'll be making the decision on the appeal, basically, because we don't - they haven't [sic - have] ensured that we don't have the funds. They didn't pay us the wages we were promised. They have seized the wine. We started a new business with somebody else's wine and they seized them. They caused - they're hold up in a warehouse now. We filed a new suit in the Supreme Court to try and get those wines back. It had nothing to do with this case. They have at every single turn tried to bankrupt us. HIS HONOUR: All right, so just G BROWN: If they had have come and said, look, we'll give you $300,000 or $500,000 or something, go away, it would have cost them a lot less money, but it didn't - they didn't, and they won't. HIS HONOUR: So just coming back to my question and your answer. Are you indicating to me that if I were to make an order, say that you had to pay $40,000 into Court as security for their costs, you're telling me you wouldn't be able to pay that amount? G BROWN: We would not be able to, no, and they have ensured that we can't. HIS HONOUR: And so the appeal would stop. G BROWN: Exactly.
8. I asked senior counsel for the respondent whether I could and should accept this statement as fact, though it was only made from the bar table. By that stage of the hearing it had become apparent that I had some doubts about the sufficiency of the respondent's evidence on impecuniosity. Mr Newton SC embraced the implied acknowledgement of impecuniosity by Mr Brown but pointed out that the appellants could have put on evidence about stultification. When I indicated that he could take the concession of impecuniosity along with the claim of stultification, or he could take neither, he opted to take both.
9. In this context, I find that the appellants would not be able to meet an adverse costs order if unsuccessful on their appeal. That is a special circumstance, albeit one unlikely to be sufficient of itself to found an order for security for costs.
10. I also find that if I order security for costs of any significant sum then this will be likely to stultify the appeal. Several cases in this Court have held that there is an evidentiary onus on the respondent to an application for security for costs to establish that making such an order will stultify the appeal: eg Xenos v FAL Healthy Beverages Pty Ltd [2017] NSWCA 240 at [28] per Gleeson JA, and Boros v Pages Property Investments Pty Ltd [2021] NSWCA 50 at [25] per Meagher JA, and authority there cited. In the circumstances described, any such onus has been discharged.

Delinquency

1. The respondent submitted that the appellants had manifested delinquent conduct in complying with court orders. His written submissions stated that "[t]here is a clear reluctance on the part of the appellants to attend to the obligations of a litigant, including to comply with timetables set for the filing and service of evidence". Reference was made to the primary judgment at J [19]-[26] and [178].
2. I do not consider it appropriate in this case to give weight to what has occurred in the Court below in circumstances where the judgment of that Court is what is being appealed from, and the appropriateness of what occurred in the course of the trial appears hotly disputed by the appellants.
3. From the file in this Court it appears that the appellants have not complied with some orders relating to filing and service of submissions on the appeal, amongst other things. However, the respondent's senior counsel disavowed reliance on any delinquency in this Court, other than to note that the appellants have served multiple notices of appeal, which is not a matter of great significance. No doubt he took account of some of the explanations proffered by Mr Brown in his affidavit dated 28 April 2022 (see at [5]-[23]), which was before me on the hearing of the motion.
4. In the result, I do not consider delinquency to constitute a special circumstance.

Deficiency of appeal

1. The respondent submits that the appeal suffers from the following deficiencies: 1. The notice of appeal does not identify any error of the primary judge in any useful form. 2. The appellants seek to agitate almost all legal and factual issues raised at first instance (cf Ballard v Brookfield Australia Investments Ltd [2012] NSWCA 434 at [27]-[28] and [50]; Xenos v FAL Healthy Beverages Pty Ltd [2017] NSWCA 240 at [48]). 3. The appeal is either manifestly groundless or lacking in sufficient substance to have any realistic prospects of success (cf eg Xenos at [51]). 4. In light of these points, the appeal will involve unnecessary costs (cf Starr-Diamond v Diamond [2013] NSWCA 7 at [18]).
2. Having considered the judgment below and the notice of appeal, I consider there to be force in each of these points, which I will address in turn, subject to one important qualification.
3. As to the first point, it is not necessary to find the notice of appeal does not identify any error of the primary judge in any useful form, but there is little doubt that the notice is not expressed in a conventional or useful way, and by and large does not clearly identify findings, conclusions or decisions of the primary judge which are said to be affected by error. The version I am considering has 16 grounds expressed over 19 pages.
4. The respondent pointed to grounds 4, 6 and 7 by way of illustration. Ground 4 is as follows: 4. Judgement that the documentary evidence submitted by the defence/cross claimants meets the required standard of evidence. a. The documentary evidence that was presented and which formed the foundation of the defence's/cross claimant's case was virtually dismissed out on hand by Justice Schmidt's responses to the effect, 'not considered evidence' and 'I will put little weight on that evidence'. b. Being unfamiliar with the court system, the defence was surprised that the defence's affidavits, documentary evidence and supporting documentation could so quickly be impugned. The evidence was almost entirely corporate records and emails to the Mortgagor seeking direction, providing ongoing management and maintenance issues for direction and approval. c. Justice Schmidt's judgement comments that there should have been more 'he said, she said' evidence would have been an exercise of futility since she discarded hard records and expert witness affidavits supporting the defence's case. d. My request to call witnesses to validate the evidence or call Mr King as a witness was immediately denied by Justice Schmidt with comments about 'ambushing'. e. As every law enforcement officer knows, 'you cannot ambush a witness that is telling the truth'.
5. The ground complains about "documentary evidence" that was "submitted", but it is not clear what evidence is referred to, nor whether or not it was admitted into evidence or rejected. The ground involves a generic complaint that the evidence "could so quickly be impugned", where it not clear if this is referring to the position of the respondent, the primary judge, or both. There is no clear specification of error by the primary judge. The ground also complains about a request to call further evidence, seemingly including from the respondent himself, being denied by the primary judge as "ambushing". This complaint is not explained, and on its face appears most unlikely to have merit.
6. Ground 6 starts by seeking "[j]udgement that the photographic evidence supported by expert evidence and the video cameraman be admitted as meeting evidentiary standards". Again, it is not entirely clear if the complaint is about rejection of the tender of evidence, or lack of credence given to evidence adduced. Her Honour's judgment refers to a video: eg J [190] and [195]. The ground then suggests that the primary judge "grossly mis-paraphrased the Riverpines Vineyard property appraisal done by Smith Property Group", then refers to J [197]. That complaint is at least understandable, but the ground goes on to refer to material relating to the state of the vineyard, without indicating whether or not that material was in evidence below.
7. Ground 7 states, in part: 7. Judgment that the expert witnesses who submitted evidence can be accepted as meeting the evidentiary requirements. 7.1 Dr. Geoffrey P. Brown - 12 years as an organic viticulturalist 11 prior years in sheep/cattle farming and a multi-disciplined engineer with project management and sustainable farming experience 7.2 Mr. Wayne Riley - independent expert witness with 20 years general farming and 7 years viticulture experience - former contractor to plaintiffs (respondents) 7.3 Mr. Daniel Riley Independent witness - 2 years viticulture. 7.4 Independent witness Smith Property Group and the detailed appraisal submitted in evidence
8. The complaint seems to be that not enough weight was given to the evidence of the witnesses identified. But no particular findings, conclusions or decisions are identified as being in error as a result.
9. These three grounds are illustrative of the sorts of problems that arise with the whole notice of appeal.
10. The respondent's second point is that the appellants seek to agitate almost all legal and factual issues raised at first instance. Given the nature of the notice of appeal, it is rather difficult to tell exactly what is in issue. But there is no doubt that a great many things are. The notice of appeal has the flavour of attempting to rerun the whole case, supplemented by further evidence (see below).
11. The respondent's third point is that the appeal is either manifestly groundless or lacking in sufficient substance to have any realistic prospects of success. It is important to bear in mind the difficulty of reaching clear conclusions about prospects at this stage of an appeal, where no written submissions have been filed. Nevertheless, the judgment of the primary judge is long, detailed, and appears to analyse the numerous issues raised with some care and without immediately obvious error.
12. It is also worth noting that the primary judge concluded at J [108] that "Mr Brown's evidence must be approached with some caution and on issues which must be determined, may not be accepted without corroboration". Such findings tend to be difficult to overturn on appeal: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[31]. As illustrated by the appeal grounds referred to above, it seems that a significant part of the appeal will turn on issues of evidence and weight.
13. Further, the appellants have filed a motion seeking to adduce further evidence on the appeal pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW). Relying on such evidence seems to be an important part of the case that they seek to make in this Court. That motion lists 17 types of material. It suffices to refer to the first two by way of illustration. They are "evidence of other offers for the purchase of Riverpines Vineyard property" and evidence "demonstrating the absence of disease in the Riverpines Vineyard prior to the Browns being fired". These go to matters at issue in the hearing below, which were the subject of evidence. It is difficult to see how the material in question in these categories (which was in evidence before me) could be post-hearing evidence and, as such, would not be received unless "special grounds" were shown: s 75A(8)-(9). It currently appears to me that, to a significant extent, the appellants are seeking to answer issues raised in the judgment by adducing further evidence that was available to them at the hearing below. That is unlikely to meet with success: cf eg Norris v Routley [2016] NSWCA 367 at [28]-[45]; Searle v Commonwealth of Australia (2019) 100 NSWLR 55; [2019] NSWCA 127 at [169]-[186].
14. The theme of wishing to run a new and broadened case is also manifest in ground 10.4 of the notice of appeal, for example, relating to the calculation of the mortgage debt. It refers to certain evidence, then states that "[h]ad we known the evidence would be dismissed by Justice Schmidt, the defence would have included (the now attached) exchange with Ms McDonald (and the deposit paid) and could have subpoenaed further evidence from the warehouses storing the wines and in whose name that wine is stored". Wishing that further evidence might have been called in light of the decision reached by a judge is an affliction suffered by many litigants. It is not appellable error.
15. In his affidavit of 28 April 2022 Mr Brown sought to respond to criticisms made of the notice of appeal, and the prospects of success, by the respondent. I do not consider that that response advances matters greatly.
16. In these circumstances, my preliminary view - sufficient for current purposes - is that the appeal has low prospects of success, leaving aside the point addressed below.
17. The respondent's fourth point is that in light of the other points, the appeal will involve unnecessary costs. I accept that submission. Even if there is some meritorious ground or grounds within the lengthy notice of appeal, it is likely that considerable time and resources will need to be expended by the respondent to have to grapple with responding to all the grounds raised.
18. I make some allowance for the facts that the appellants, who are not lawyers, are representing themselves and appear to be struggling to engage with the nature and demands of the legal system. However, they are seeking to pursue an appeal and ultimately must work within the legal framework applicable to such a proceeding. As Applegarth J stated in Mbuzi v Hall [2010] QSC 359 at [27]: A court is entitled to extend some latitude to a self-represented litigant who is not familiar with the forms and procedure, providing in doing so injustice and prejudice is not occasioned to other parties, and also provided the court is able to achieve a just and expeditious resolution of the real issues of the proceeding at a minimum of expense. A self-represented litigant should not be permitted to disregard rules and to conduct litigation in a manner which is unjust to other parties and contrary to the interests of justice.
19. In my view, with one important caveat, the respondent has made out special circumstances by reference to the four points addressed under this sub-heading.
20. The caveat relates to the concession made by senior counsel for the respondent at the start of his oral submissions, namely, that the orders made by the primary judge on 2 September 2021 do not correctly record the amounts owed by the appellants, because they do not take account of the fact that the vineyard which had been security for the loan had already been sold. Ms McDonald, the solicitor for the respondent, gives evidence that the sale was completed on 25 August 2021, upon which the respondent received the net proceeds of the sale. Ms McDonald indicates that the amount still outstanding after the sale was some $1.698 million. But the orders subsequently made on 2 September 2021 record that the amount owed by the appellants was CAD$2.1 million and A$1.55 million, being a total amount of some A$3.7 million.
21. Thus, as I understand the position, at the date the orders were made they were incorrect. It appears that the need to take account of the sale of the vineyard was simply overlooked by all concerned. No-one was suggesting it should not be taken into account. The primary judge noted at J [12] that "[i]t appears there has as yet been no accounting for the sale, which Mr King accepted was his obligation" (note also J [71]). The judgment debt of some A$3.7 million has seemingly been used as the basis for bankruptcy notices being issued to each of the appellants.
22. It may be that this point is a matter capable of being addressed by applying to the primary judge. But that is not an issue for me to address here. It also may be that the point has limited practical significance, as any attempt by the respondent to enforce the judgment would have to take account of the amount still outstanding. The fact remains that senior counsel for the applicant conceded that the orders contained an "irregularity" which "really affects the judgment for the principal amount".
23. This point does not seem to be raised in terms in the notice of appeal. The orders sought in the notice appear to be directed to the appellants' cross-claim below, whereas the debt claim arose in the primary claim of the respondent. However, ground 10 in the notice is headed "Mortgage debt calculation", and raises some allegations that "the debt calculated amount must account for" various enumerated matters. The failure to account for the sale of the vineyard is not mentioned there. That being said, in light of the concession made on behalf of the respondent, there is a real chance that the appellants will seek to include it if the error is not corrected first.

Exercise of the discretion

1. I consider that special circumstances are made out here, enlivening the discretion. Those circumstances, outlined above, weigh in favour of ordering security. Two factors weigh against: stultification of the appeal and the issue to do with the "irregularity" in the orders.
2. As to the former, as noted above, in Preston v Harbour Pacific Underwriting Management Pty Ltd, at [18], Basten JA stated that "where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should usually not be made". I accept that if likely stultification is established then that is a significant factor militating against ordering security for costs. But it is not necessarily definitive.
3. It has also been suggested, reasonably, that the risk of stifling proceedings is of less significance in appeal proceedings where there has already been a judicial finding adverse to the person against whom security is sought: eg Starr-Diamond v Diamond at [19] per Hoeben JA; Boros at [25] per Meagher JA. That being said, this point must be kept in perspective, given the holding in Transglobal Capital Pty Ltd v Yolarno Pty Ltd that there can be no general rule that impecuniosity of itself will suffice to amount to special circumstances in applications for security in this Court.
4. Here, it has not been suggested that there is any other person who stands to benefit from the proceedings, in which case evidence might have been expected as to the financial position of that person: cf Zakka v Elias t/as Cadmus Lawyers [2012] NSWCA 277 at [6] per Macfarlan JA.
5. In the somewhat unusual evidentiary circumstances described above, I accept that if I ordered an amount of even, say, $40,000 security for costs then the likely effect is that the appellants will not be able to pursue their appeal. That is a significant factor militating against ordering security. f
6. Were analysis to end there then exercise of the discretion might have been finely balanced. I do not doubt that the claims made by the appellants are brought bona fide, in the sense that they believe they have suffered an injustice which they seek to correct on appeal. But that does not mean that they have real prospects of success, leaving aside the irregularity identified on behalf of the respondent. The characteristics of an appeal may render it unjust to the respondent not to order security, even if the practical effect is to bring the appeal to a halt: note Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 at 313-314.
7. However, there is then the second factor militating against ordering security. The respondent has conceded there is a problem with the orders made below. In those circumstances, even allowing for the fact that that problem does not seem clearly to be raised by the notice of appeal, I do not consider it just to order security, with the likely effect of bringing an end to the appeal.
8. I note that if the issue with the orders below was to be addressed, the respondent would not be precluded from making a further application for security for costs.

Order

1. The respondent's application for security for costs will be dismissed with costs.

Amendments 20 May 2022 - Cover sheet amended - Decision under appeal. 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: 20 May 2022