Secure Funding Pty Ltd v Conway [2014] NSWCA 151
The Age Company Ltd v Liu [2013] NSWCA 26
Warren v Coombes [1979] HCA 9
Source
Original judgment source is linked above.
Catchwords
Secure Funding Pty Ltd v Conway [2014] NSWCA 151
The Age Company Ltd v Liu [2013] NSWCA 26
Warren v Coombes [1979] HCA 9
Judgment (5 paragraphs)
[1]
Background
CBX2 is a company that at one stage carried on the business of purchasing, breeding and training equestrian horses. It brought proceedings in the Common Law Division against NAB. CBX2's principal claim in the proceedings, which have since been placed in the Commercial List in the Equity Division, is that Mr Blinkworth, the sole director and shareholder of CBX2, directed NAB that a cheque for $1,950,000 was to be paid into CBX2's account. CBX2 alleges that moneys were paid out of that account without authorisation and that in consequence it has suffered losses in the order of $1,980,000. CBX2 also alleges that NAB engaged in misleading and deceptive conduct and that it was in breach of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth). CBX2 claims damages in the sum of $1,838,566.80 plus interest, costs and exemplary damages.
NAB filed a motion seeking an order for security for its costs, pursuant to r 42.21 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and s 1335 of the Corporations Act 2001 (Cth). Harrison AsJ, sitting as an Associate Judge in the Common Law Division, refused that relief and ordered NAB to pay CBX2's costs of the motion (CBX2 Pty Limited v National Australia Bank (No 3) [2015] NSWSC 1555).
A party wishing to challenge a decision of an Associate Judge in any Division has alternative procedures available: see Secure Funding Pty Ltd v Stark; Secure Funding Pty Ltd v Conway [2014] NSWCA 151 at [3]-[8] (Beazley P). The party may apply to a Judge of the Supreme Court to set aside or vary a judgment or order made by the Associate Judge (Supreme Court Act 1970 (NSW) (Supreme Court Act), s 118(3)). Alternatively, the party may appeal from the judgment or order of the Associate Judge.
UCPR, r 49.4 provides that an appeal lies to the Supreme Court from any decision of an Associate Judge, except in any case where an appeal lies to the Court of Appeal. Section 104 of the Supreme Court Act states that, subject to the rules, an appeal does not lie to the Court of Appeal from a judgment or order of an Associate Judge. Supreme Court Rules 1970 (NSW), Pt 60 r 17 sets out those decisions of an Associate Judge from which an appeal lies to the Court of Appeal. An interlocutory decision, such as the dismissal of a motion seeking an order for security for costs, is not specified in Pt 60 r 17. Accordingly, an appeal from an interlocutory decision by an Associate Judge is heard by a single Judge of the Court.
An appeal from a decision of an Associate Judge to a single Judge of the Court is instituted by filing a notice of motion (UCPR, rr 49.8, 49.9). Section 101(2) of the Supreme Court Act imposes a leave requirement for appeals in certain cases, including interlocutory decisions, but that requirement only applies to appeals to the Court of Appeal. It follows that an appeal from a judgment or order of an Associate Judge to a single Judge of the Supreme Court is available as of right even if the decision appealed from is interlocutory: Royal Guardian Mortgage Management Pty Ltd v Nguyen [2012] NSWSC 769 at [29] (Adamson J).
An appeal from an Associate Judge to a single Judge of the Court is governed by s 75A of the Supreme Court Act: Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 at 420 (Cross J) cited with apparent approval in M J Sherrin Pty Ltd v Cunneed & Co Pty Ltd [1993] NSWCA 166 (Kirby P, Mahoney and Clarke JJA agreeing). Thus the appeal is by way of rehearing and the Court has the power and duties of the Court from which the appeal is brought: Supreme Court Act, s 75A(5), (6).
In the present case, NAB appealed from the decision of Harrison AsJ to a single Judge of the Supreme Court. Prior to the hearing of the appeal, NAB filed a notice of motion on 6 November 2015 seeking an order that the proceedings be entered in the Commercial List in the Equity Division (Supreme Court Act, s 54; UCPR, r 45.2). McDougall J made the orders sought by NAB in its notice of motion, subject to some variations, on 20 November 2015.
NAB's appeal was heard on 10 December 2015 by McDougall J in the Commercial List. His Honour delivered judgment on 14 December 2015, indicating that he proposed to allow the appeal on the ground that the exercise of discretion by Harrison AsJ had miscarried (CBX2 Pty Ltd v National Australia Bank [2015] NSWSC 1945) (First Judgment). In a separate judgment delivered on 15 December 2015, his Honour re-exercised the discretion conferred by s 1335 of the Corporations Act and UCPR, r 42.21 and made an order that CBX2 provide security for costs (CBX2 Pty Ltd v National Australia Bank (No 2) [2015] NSWSC 1969) (Second Judgment). His Honour ordered that CBX2 provide security to cover costs incurred until the service of the parties' evidence in chief and in reply, in the sum of $250,000. His Honour also made an order staying the proceedings until security is provided.
It might be thought that, save for the exceptional case of an application for special leave to appeal to the High Court, there should be only one level of appeal from an interlocutory decision of an Associate Judge of the Court, particularly as s 104 of the Supreme Court Act precludes an appeal from such a decision directly to the Court of Appeal. However, s 101(1)(a) of the Supreme Court Act provides that, subject to the rules, an appeal lies to the Court of Appeal from any judgment or order of the Court in a Division. Section 49 of the Supreme Court Act states that all proceedings in the Court not assigned to the Court of Appeal are assigned to the Divisions of the Court. Accordingly, as the cover pages to the First and Second Judgments indicate, the orders made by McDougall J on the appeal from Harrison AsJ were orders of the Court in a Division for the purposes of s 101(1)(a) of the Supreme Court Act. Thus an appeal lies from those orders to the Court of Appeal.
CBX2 accepts that it requires leave to appeal to this Court since the orders made by McDougall J were interlocutory: Supreme Court Act, s 101(2)(e). Moreover, since the orders made by McDougall J involved matters of practice and procedure, CBX2 must show something more than that the primary judge was arguably wrong in order to obtain leave to appeal (Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46] (Campbell JA, Young and Meagher JJA agreeing)). As Bathurst CJ said in The Age Company Ltd v Liu [2013] NSWCA 26 (at [13], with the agreement of Beazley and McColl JJA), "[g]enerally speaking, it is only appropriate to grant leave in matters that involve issues of principle, questions of public importance or in circumstances where it is reasonably clear that an injustice has occurred by reason of error in the judgment, going beyond what is merely arguable". As the decision was one involving the exercise of a discretion, for an appeal to succeed it would be necessary for CBX2 to establish error of the kind identified in House v The King [1936] HCA 40; 55 CLR 499 at 505 (Dixon, Evatt and McTiernan JJ).
There is a particular need for caution where an application for leave to appeal is from orders made on appeal from a decision of the Associate Judge of the Court. It is true that CBX2 succeeded before Harrison AsJ, and that the orders made by her Honour were set aside on the appeal, but CBX2 is seeking to invoke a second level of appeal on a matter of practice and procedure. The fact is that McDougall J heard and determined an appeal as of right from interlocutory orders on a matter of practice and procedure. While no rule of universal application can be laid down, an applicant in these circumstances ordinarily faces a difficult task in persuading this Court to grant leave to file a second appeal (cf ss 56-60 of the Civil Procedure Act 2005 (NSW)).
[2]
Primary judgment
Before the primary judge, NAB challenged four aspects of the decision of Harrison AsJ: the question of possible stultification of the proceedings if security were to be granted; the causes of CBX2's impecuniosity and the financial position of the persons standing behind it (its sole director and shareholder at the time of the application being a Mr Blinkworth); Mr Blinkworth's ability to undertake liability for the costs that CBX2 might be ordered to pay; and the proper weight to be given to the asserted weakness of CBX2's claims and the "unfairness" of NAB being required to meet those claims without security.
McDougall J concluded that the decision of Harrison AsJ miscarried by reason of two crucial findings of fact made by her Honour. Those findings were, first, that Mr Blinkworth would not be able to access funds held by him in a self-managed superannuation fund in the foreseeable future (which had a credit balance of about $430,000) and, second, that Mr Blinkworth did not have access to significant financial resources. As to the first, his Honour considered that that finding could not be justified ([20]), adding that it was plainly inconsistent with the evidence and wrong ([24]). As to the second, his Honour considered that there were no financial documents that supported Mr Blinkworth's assertions and that other evidence clearly indicated that Mr Blinkworth had over the years, had access to substantial sums of money ([29]). Since Mr Blinkworth had not given evidence, it was not clear what had happened to these sums.
McDougall J also considered that evidence relevant to the question whether NAB's actions had materially contributed to Mr Blinkworth's impecuniosity had not been taken into account when the order for security was made ([35]). His Honour commented that the 'over-elaborate' way in which the claim had been made would make it more difficult, and thus more expensive, to defend ([38]).
The primary Judge said that the strength of a case may be relevant where the provision of security is resisted on the basis that the defendant's conduct caused the plaintiff's impecuniosity ([42]). However, his Honour went on to say that the Court was in no position to review the strengths and weaknesses of the parties' competing positions and that he regarded the "bare bones" of CBX2's claim as fairly arguable ([43]).
Having formed the view that the Associate Judge's decision had miscarried, it fell to his Honour to re-exercise the discretion as to whether to make an order for security for costs and, if so, in what amount. He did so in the Second Judgment. His Honour was satisfied that CBX2 would not be in a position to meet NAB's costs if ordered to do so. However, he was not satisfied that CBX2 had discharged the onus cast upon it of establishing that it was likely that the proceedings would be stultified if an order for security for costs were made ([24]). Nor did he consider the evidence as to the cause of the impecuniosity to be compelling. His Honour said (at [45]):
"Thus, when one looks at the three interrelated matters on which [Counsel for CBX2) relied to defeat the application for security, the short summary is that I am totally unsatisfied that it is likely that the making of an order for security for costs would stultify the litigation. I am totally unsatisfied of that because in my view Mr Blinkworth has been anything but full and frank in the disclosure that he has instructed his solicitor to make. I am totally unsatisfied that any real connection has been shown between the wrongs complained of and the present impecunious position of CBX2. And I am totally unsatisfied that either Mr Blinkworth or the mysterious funders from whom, apparently, he is drawing financial support for this litigation cannot continue to fund it, even if he has to make some payment by way of security for costs or if they decide to protect their apparent investment to date by doing so. In short, I am unsatisfied that any of the discretionary reasons for refusing to make the order for security, on which reliance has been placed, are made out."
His Honour concluded that no reason had been shown why an order for security should not be made and proceeded to make such an order.
[3]
Draft notice of appeal
The draft notice of appeal raises some 14 grounds of appeal. It is not necessary to set them out in these reasons. Broadly, complaint is made that the primary judge misdirected himself as to, and erred in applying, the principles applicable when reviewing an order made in the exercise of discretion on the part of Harrison AsJ on a matter of practice and procedure. His Honour is said to have erred in disturbing primary findings of fact and inferences that were binding on him. In effect, so it was argued, his Honour had conducted a retrial (see grounds 1-4).
As to the re-exercise of the relevant discretion, CBX2 maintains that his Honour erred in relation to factual findings relevant to the cause of CBX2's financial position (grounds 5 and 7) and to Mr Blinkworth's financial position and temporary incapacity (grounds 8-13). CBX2 also complains that the primary judge failed to consider properly or at all the bona fides of its claim and that it raised real issues to be tried (ground 6).
Finally, ground 14 asserts that his Honour was in error in making the costs order in NAB's favour and that the appropriate and proper order was that costs be costs in the cause.
NAB opposes the grant of leave and submits that the proposed grounds of appeal do not identify any error that would warrant the grant of leave.
[4]
Determination
As the primary Judge observed, there was no significant dispute as to the nature of an appeal from an Associate Judge to a Judge of the Court (First Judgment at [2]). In any event, there is no error of principle apparent in the manner in which his Honour approached the appeal. At [2], his Honour noted that, pursuant to s 75A(5) of the Supreme Court Act, the appeal was one by way of re-hearing. Contrary to a submission made on behalf of CBX2, his Honour recognised that where an appeal is from a discretionary judgment, the general principles as to restraint on appellate intervention stated in House v The King are applicable. In short, his Honour approached the appeal on the basis of the correct principles.
Insofar as ground 2 asserts an error in disturbing the primary findings of fact made and inferences drawn by Harrison AsJ, the primary Judge concluded that the evidence did not support the two factual findings that were critical to the Associate Judge's conclusion that an order for security would stultify the proceedings. Those findings were not credibility based and the primary Judge assessed the challenge to them on the basis of the principles stated in Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551 (Gibbs ACJ, Jacobs and Murphy JJ). In making that assessment, his Honour took into account the obvious difficulty confronting CBX2, namely that Mr Blinkworth, whose ability to fund the proceedings was central to the dispute, chose not to give evidence.
Mr McQuillen, who appeared for CBX2, submitted that McDougall J had failed to appreciate that the appeal was governed by the principles stated in House v The King, despite his Honour expressly referring to that case. Mr McQuillen's own submissions seemed to overlook that House v The King explicitly recognises that an exercise of discretion may miscarry if the court mistakes the facts upon which the exercise of discretion is based. McDougall J did not make the error Mr McQuillen attributed to him.
Mr McQuillen also submitted that his Honour impermissibly considered the merits of CBX2's claim. However, as we have noted, his Honour expressly recognised that "the Court is no position to undertake even a cursory review of the strengths and weaknesses of the parties' competing positions" and therefore it was appropriate to proceed on the basis that the "bare bones of the claim … may be fairly arguable" (First Judgment at [39]-[43]). There can be no legitimate criticism of this approach.
Mr McQuillen made other criticisms of the factual findings made by the primary Judge. None of these criticisms appears to have substance. In particular, his Honour's conclusion as to the cause of the deterioration in CBX2's financial position by 30 June 2007 was based on a review of CBX2's accounts. His Honour's assessment of the significance of matters such as the manner in which documents had been produced, the absence of explanation for the moneys paid into Mr Blinkworth's accounts over the years, and the fact that evidence as to Mr Blinkworth's position was given not by him but by his solicitor on instructions, has not been shown to involve error.
None of the other matters identified by Mr McQuillen raises any issue of principle. Nor has CBX2 established that it would suffer any substantial injustice if leave to appeal is refused (In re the Will of FB Gilbert (deceased) (1946) 46 SR (NSW) 318 at 323; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 at 177).
For these reasons, the Court dismissed the application for leave to appeal and ordered CBX2 to pay NAB's costs of the application.
[5]
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Decision last updated: 18 April 2016
Parties
Applicant/Plaintiff:
CBX2 Pty Limited
Respondent/Defendant:
National Australia Bank Limited
Legislation Cited (7)
Anti-Money Laundering and Counter Terrorism Financing Act 2006(Cth)
Solicitors:
Sullivan Fernan Lawyers (Applicant)
Corrs Chambers Westgarth (Respondent)
File Number(s): CA 2016/00010227
Decision under appeal Court or tribunal: Supreme Court of New South Wales
Jurisdiction: Equity - Commercial List
Citation: [2015] NSWSC 1969
Date of Decision: 15 December 2015
Before: McDougall J
File Number(s): 2014/00243692