Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Practice and procedure - Application for suspension of enforcement of judgment pending determination of appeal - Whether appeal has reasonable prospects of success - Whether special circumstances exist - Suspension order granted on condition that judgment sum paid into court or secured

Practice and procedure - Application for security for costs - Appropriate amount to be provided by way of security

Civil Judgments Enforcement Act 2004 (WA), s 15

Security for costs in sum of $12,000 to be provided

Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171

Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308

Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203

Lord v Direct Acceptance Corporation Ltd (Receiver and Manager Appointed) (In Liq) (1993) 32 NSWLR 362

Smolarek v McMaster [2006] WASCA 216

1 NEWNES JA: There are two applications before me. The appellant has applied for an order pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA) (the Act) suspending the enforcement of an order of O'Neal DCJ in the District Court that the appellant pay to the respondent the sum of $90,354.61, pending the outcome of the appeal. The respondent has applied for security for the costs of the appeal.

2 I will deal first with the application for a suspension order. It is necessary before turning to the parties' contentions on the application to set out the relevant background. The appeal has its genesis in proceedings brought by the respondent in the District Court against the appellant. In those proceedings, the respondent claimed the sum of $103,092 as hire charges owing by the appellant for accommodation units it hired from the respondent. The respondent applied for summary judgment. The application was refused by a deputy registrar of the District Court who granted the appellant unconditional leave to defend the claim. The respondent appealed to the primary judge who upheld the appeal, set aside the decision of the deputy registrar, and gave judgment for the respondent for the sum of $90,354.61.

3 The appellant now appeals against the decision of the primary judge. By the present application, it seeks an order suspending the enforcement of the judgment until further order. The appellant says that if it pays the judgment sum before the appeal is determined it is unlikely to be able to recover the money from the respondent if the appeal is successful. The application for a suspension order is supported by an affidavit of Gregory Browne, the sole director of the appellant, sworn 19 January 2011. The application is opposed by the respondent which relies upon an affidavit of a director of the respondent, Peter James Green, sworn on 4 February 2011.

4 While there are important disputes of fact, there are certain basic facts which do not appear to be in issue. The appellant provides camps for mining and exploration companies in remote parts of Western Australia. The respondent supplies transportable accommodation and service units for such camps. It is not in issue that in 2009 the appellant entered into an agreement to hire certain transportable units (the units) from the respondent. The appellant intended to use the units in providing a camp for a company which I will refer to as C, near Newman in the north-west of the state. The appellant says that, for that purpose, it relocated units it already had on hire from the respondent from a camp which had been demobilised and, in addition, it took further units on hire from the respondent. The camp was set up pursuant to a contract between the appellant and C.

5 On 20 January 2010, the respondent gave notice to the appellant terminating the hire contract on the ground that the appellant had failed to make payment of hire charges due under the hire agreement. I do not understand the appellant to dispute that, as at 20 January 2010, it was in arrears in payment of the hire charges. But the appellant says it has a defence to the claim for the hire charges by way of a set-off.

6 The appellant says that very shortly prior to 20 January 2010 (it seems a day or two) the respondent unlawfully interfered with the contract between the appellant and C by persuading C to breach the contract and instead to hire the units direct from the respondent. The appellant claims that the respondent then, on 20 January 2010, terminated its hire contract with the appellant. The appellant told C it would provide replacement units but C refused (wrongfully the appellant says) to accept any replacements. The appellant says that is consistent with C's arrangement with the respondent. C then entered into a contract to hire the units from the respondent.

7 In his affidavit Mr Browne says that, but for the respondent's wrongful interference, the appellant would have received the sum of $228,965 from C for the provision of the camp between January 2010 and demobilisation of the camp in May 2010, but it would have incurred costs of only $31,625, a loss to the appellant of $187,340 [sic, $197,340].

8 In the action, the appellant counterclaimed, or proposed to counterclaim (on the papers it is not clear whether a counterclaim had been filed), damages of $197,340 for the respondent's unlawful interference with the C contract and to set-off those damages against the amount of the hire charges it owed to the respondent.

9 The primary judge did not accept that the appellant had an arguable counterclaim. His Honour found that the appellant was not in a position to replace the units once the hire contract was terminated by the respondent so the appellant would have been in breach of its contract with C. He further concluded that, in any event, C would not have accepted replacement units from the appellant because of the disruption that that would have caused to the camp. In addition, his Honour was not persuaded there was any evidence that the respondent had interfered with the C contract. The primary judge held that the respondent was entitled to summary judgment on its claim.

10 In light of his finding that the counterclaim was without merit, it was unnecessary for his Honour to go on to consider whether the alleged counterclaim was arguably capable of giving rise to a set-off and he did not consider it.

11 His Honour found that the appellant was entitled to a deduction from the amount claimed of the unused portion of the monthly rental at the date of termination and concluded that the respondent was entitled to judgment in the sum of $90,354.61 and costs. The costs were subsequently taxed and allowed at $10,169.22.

12 The appellant appeals against the decision on three grounds. The grounds of appeal as currently framed require some amendment to put them in a proper form. But as presently constituted they are, in substance, that the primary judge erred in concluding that the appellant had no arguable defence by way of a set-off arising from the counterclaim, in that his Honour erred in finding:

(a) that the appellant was not in a position to replace the units upon termination of the hire contract by the respondent;

(b) that upon the termination of the hire contract and repossession of the units by the respondent, the appellant would have been in breach of its contract with C;

(c) there was no evidence that the respondent had interfered with the appellant's contract with C.

13 Under s 15 of the Act, a person against whom a judgment is given may apply for an order suspending the enforcement of the judgment. The court may only make such an order if there are special circumstances that justify it doing so: s 15(3).

14 The general principles applicable to an application under s 15 are not materially different from those which applied to an application for a stay of execution before the introduction of the Act: see Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 [3]; Smolarek v McMaster [2006] WASCA 216 [33]. Those principles were summarised by Murray and Parker JJ in Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308, as follows:

• The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
• It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
• It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
• The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
• If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
• If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted [9].

15 While those principles provide guidance in the exercise of the discretion, they are not inflexible or exhaustive, and at all times the ultimate question must be whether there are special circumstances which justify the court suspending the enforcement of the judgment.

The disposition of the application for a suspension order

16 The respondent contended, in effect, that the appeal had no prospect of success. It says the appellant does not have a defence to the respondent's claim. The primary judge correctly found that the counterclaim is without merit and, in any event, it is clear that no set-off is available. At best, the appellant has a separate and entirely distinct counterclaim which does not have any bearing on the respondent's entitlement to recover the outstanding hire charges. There is no reason why the respondent should be prevented from enforcing the judgment in its favour.

17 The appellant, on the other hand, submitted that special circumstances exist which justify a suspension order. The appellant contended that the counterclaim was clearly arguable and it was also arguable that it was entitled to set-off the damages it counterclaimed by way of a defence to the respondent's claim. If the enforcement of the judgment was not suspended, the judgment sum, once paid to the respondent, would be irrecoverable and if the appeal was successful the set-off would have been lost.

18 On the necessarily limited material before me, there would seem to be significant difficulties in the appellant's path in establishing that it has an arguable defence to the respondent's claim.

19 In the first place, on the affidavit material the appellant's claim would appear to be built on quite slender foundations. As the evidence currently stands, the allegation of wrongful interference appears to be based solely upon an inference the appellant says should be drawn from the statement in the respondent's notice of termination that the transportable units were to remain on site for C's use, and a telephone conversation on 21 January 2010 between Mr Browne, of the appellant, and a representative of C in which C refused the appellant's proposal to provide replacement transportable units. In addition, whether or not C was in fact in breach of its contract with the appellant in refusing to accept replacement units must depend upon a consideration of the terms of the contract between C and the appellant. The contract was not before me. I note, however, that from what I was told from the bar table, it appears that it was a monthly contract, terminable on one month's notice. For present purposes, I accept, however, that it is arguable the primary judge erred in making a finding that the appellant was not in a position to provide replacement units and that, upon the termination of the contract with the respondent, the appellant would inevitably have been in breach of its contract with C.

20 Secondly, there is the question of whether the appellant would be entitled to set-off the damages claimed (if made out) against the arrears of rent. It does not appear to be at all clear that an equitable set-off would arise. That is because, put broadly, it is not clear that the appellant's claim directly relates to or impeaches the respondent's claim: see, for instance, Lord v Direct Acceptance Corporation Ltd (Receiver and Manager Appointed) (In Liq) (1993) 32 NSWLR 362, 367; and generally Meagher RP, Heydon JD & Leeming MJ, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (4th ed, 2002), 37-045. Moreover, the contract between the appellant and the respondent contains a provision (cl 7(f)) which arguably precludes reliance by the appellant on a set-off. But having said that, these are not matters which it is appropriate to attempt to resolve on an application of this nature.

21 In the end, while I have reservations about the merits of the appeal, for the purposes of this application I am not prepared to conclude that the appeal is without any merit.

22 In support of the appellant's application for a suspension order, Mr Browne says in his affidavit that he has grave concerns that the respondent would be unable to repay the judgment sum if the appeal were successful. He refers to conversations he says he has had with Mr Green of the respondent which indicate that the respondent is in financial difficulties. The relevant gist of each of those conversations, as described by Mr Browne, is denied by Mr Green in his affidavit. Mr Green further denies that the respondent is in financial difficulty but produces no financial information to support that contention. He says, instead, that he and his co-director also own and operate another company, Site Projects Group Pty Ltd (Site Projects), and that Site Projects and the respondent had a combined income of some $3 million for the period 1 July 2010 to 2 February 2011. Mr Green does not, however, indicate the respective interest each company had in that income. Nor does he refer to their expenses or say what assets they have. While Mr Green annexes some bank statements to his affidavit, they are bank statements of Site Projects. In relation to the financial position of the respondent, Mr Green's affidavit is perhaps more significant for what it does not say than what it does say.

23 I am satisfied there is a real risk that if the judgment sum was paid to the respondent it would not be recoverable by the appellant if the appellant were to become entitled to recover it following success on the appeal. The respondent, on the other hand, points to evidence that the appellant is itself in financial difficulty and says that delay in payment of the judgment sum may result in any funds that are available to meet the debt being dissipated before the appeal is disposed of. There is no evidence from the appellant as to its financial position and its concession that the respondent is entitled to an order for security for costs supports the respondent's concerns.

24 I am satisfied that for the purposes of s 15 of the Act, special circumstances exist. I would not, however, grant an unconditional suspension order. The proper course, it seems to me, is to require as a condition of the suspension order that the money be paid into court or otherwise secured pending the determination of the appeal. I would therefore grant a suspension order until the determination of the appeal, subject to the appellant paying into court or otherwise providing security for the amount of the judgment sum and the taxed costs in the District Court. I will hear the parties on the precise form of the orders.

25 The appellant conceded that the respondent was entitled to an order for security for costs, the only issue being the amount of the security to be provided. The respondent sought the sum of $20,000. A draft bill of costs in the total sum of $30,000 was annexed to an affidavit of Mr Green.

26 The appellant submitted that the sum of $20,000 was excessive. The matter had already been argued twice below, all the relevant material was on affidavit, and the grounds of appeal were relatively confined. The appellant's counsel suggested that, based on the costs incurred below, a figure of $5,000 was appropriate.

27 There are no hard and fast principles to be applied in determining the appropriate amount to be provided by way of security for costs. While it is clear that the amount of the security to be provided must be related to the costs likely to be incurred by the respondent on the appeal, in ordering security for costs the court does not endeavour to give a complete and certain indemnity to the respondent: Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171, 175. The amount of security involves an exercise of discretion and is to be determined by what the court considers just in the circumstances. The factors to be taken into account in the exercise of the discretion will depend upon the particular circumstances of the case and, whilst the amount of the respondent's likely taxed costs is ordinarily a primary consideration, in exercising its discretion the court is not confined to the question of the amount of those costs.

28 The appeal raises a relatively confined point based on limited affidavit evidence. On the basis of the material before me, I consider that a sum of $20,000 exceeds a reasonable amount for security for costs. Having regard to the nature of the appeal, in my view an appropriate amount in the present case is $12,000.

29 I would order that the appellant provide security for the respondent's costs of the appeal in the sum of $12,000. In the absence of agreement between the parties that the security is to be provided in some other manner, that sum must be paid into court within a time which I will fix and in the meantime the appeal will be stayed. There will be liberty to apply, on seven days written notice, to vary the amount or form of security should circumstances change.