Hannaford v Commonwealth Bank of Australia

Court of Appeal (NSW)|2013-12-17|Before: Gleeson JA, Kirby P, Campbell J

J M White and N Mirzai (Respondent) Solicitors:

Gadens Lawyers (Respondent) File Number(s): 2013/277686 Decision under appeal Jurisdiction: 9111 Citation: Commonwealth Bank of Australia v Susan Hannaford [2013] NSWSC 1175 Date of Decision: 2013-08-22 00:00:00 Before: Campbell J File Number(s): 2010/4800

Judgment 1This is an application by the respondent, the Commonwealth Bank of Australia (the Bank), that the appellant (Mrs Hannaford), provide security for the costs of her appeal which was filed on 30 October 2013. The amount of security sought by the Bank is $64,995. 2The Bank relies upon the Court's powers pursuant to Uniform Civil Procedure Rules 2005 (UCPR) r 51.50, or alternatively r 42.21(1)(a).

Decisions below 3The Bank brought proceedings in January 2010 against Susan Hannaford Pty Ltd as first defendant, Ms Marquessa Hannaford as second defendant and Mrs Hannaford as third defendant in the Common Law Division of the Supreme Court. As against the first defendant, the Bank sought possession of certain land at 30A Beatty Street, Balgowlah and judgment for an outstanding amount loaned by the Bank to the first defendant which as at 18 December 2009 was claimed to be $5,739,976.71. The Bank's claim against the second and third defendants was in their capacity as guarantors of the loan to the first defendant. 4On 22 March 2010, the defendants filed a joint defence asserting a number of matters, including a claim that the guarantees were unjust contracts under the Contracts Review Act 1980. No particulars were provided. Also on 22 March 2010, the defendants lodged a complaint with the Financial Ombudsman Service (FOS). Nothing of substance appears to have occurred in the proceedings below until after that complaint was closed by the FOS on 4 April 2011. 5On 15 June 2011, the defendants filed a notice of motion seeking leave to amend their defence. After a number of directions hearings before Davies J, leave was given on 16 September 2011 to file amended pleadings in the form indicated by his Honour. 6On 21 September 2011, an amended defence was filed on behalf of all three defendants. It did not include any claim by Mrs Hannaford that the guarantee on which the Bank relied was an unjust contract under the Contracts Review Act. 7On 28 September 2011, the Bank's application for summary judgment against the first defendant was heard before Hidden J, and judgment was reserved. 8On 24 August 2012, Hidden J gave judgment for the Bank on an application for summary judgment for possession: Commonwealth Bank of Australia v Susan Hannaford Pty Ltd and others [2012] NSWSC 1094. 9On 5 September 2012, Hidden J gave directions for the filing and service of evidence in relation to the balance of the claims for relief against the second and third defendants. Extensions of time were subsequently granted on 29 October 2012 and 7 February 2013. It would appear that Mrs Hannaford did not comply with these directions. 10On 7 March 2013, the Bank discontinued its claim against the second defendant, Ms Hannaford. 11On 10 May 2013, Davies J dismissed a notice of motion filed by Mrs Hannaford seeking leave to file an amended cross-claim against the Bank, pleading that the contract of guarantee should be set aside as an unjust contract under the Contracts Review Act: Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 2) [2013] NSWSC 574. On the same day, Mrs Hannaford filed a notice of intention to appeal in respect of the decision of Davies J, notwithstanding that it was an interlocutory decision and leave to appeal was required to challenge that decision: s 101(2)(e) Supreme Court Act 1970. 12Subsequently on 21 August 2013, Mrs Hannaford filed a summons seeking leave to appeal against the interlocutory decision of Davies J on 10 May 2013 (leave to appeal proceedings). The address for Mrs Hannaford given in that summons was "Shop 2/2 Lee Street, Sydney NSW 2000". The evidence on this application reveals that this is a business address for Oz Travel and Backpackers Travel Work Agency. 13The proceedings against Mrs Hannaford came on for final hearing before Campbell J on 22 August 2013. On that date, counsel for Mrs Hannaford appeared on a limited basis in respect of her application to vacate the hearing date and for a stay of the proceedings, pending the outcome of her application for leave to appeal. That application was refused by Campbell J: Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 4) [2013] NSWSC 1174. 14Counsel for Mrs Hannaford then withdrew. The Bank's claim proceeded before Campbell J ex parte. His Honour gave ex tempore reasons on 22 August 2013 for upholding the Bank's claim under the guarantee and dismissing Mrs Hannaford's cross-claim: Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 5) [2013] NSWSC 1175. 15Judgment was entered in favour of the Bank against Mrs Hannaford in the sum of $4,651,041.90. Mrs Hannaford's first cross-claim was dismissed and she was ordered to pay the Bank's costs of the proceedings as agreed or assessed. 16On 17 September 2013, Mrs Hannaford filed a notice of intention to appeal in respect of the decision of Campbell J. 17On 30 October 2013, Mrs Hannaford filed a notice of appeal against the final decision of Campbell J, the interlocutory decision of Campbell J on 22 August 2013 and the earlier interlocutory decision of Davies J on 10 May 2013. The address details for Mrs Hannaford in the notice of appeal were again given as "Shop 2/2 Lee Street, Sydney NSW 2000". 18On 4 November 2013, the Bank's solicitors wrote to Mrs Hannaford at the mailing address given in the summons for leave to appeal, inviting her to consent to the dismissal of that summons. There does not appear to have been any response by Mrs Hannaford and the application for leave to appeal remains on foot. 19On 6 November 2013, the Bank's solicitors wrote to Mrs Hannaford at her mailing address listed in the notice of appeal and requested security for costs in an amount of $75,000. There being no response to this request, on 20 November 2013 the Bank filed a notice of motion seeking security for costs relying upon UCPR r 51.50. On the hearing of the application for security, the Bank filed an amended notice of motion which also sought to rely upon UCPR r 42.21(1)(a).

Security for costs of appeal 20The Court may make an order for security for costs under UCPR r 41.21(1)(a) if an appellant is "ordinarily resident outside Australia" and under r 51.50 in "special circumstances". 21It is convenient to first deal with the application under UCPR r 51.50. The application under UCPR r 41.21(1)(a) raises a disputed question of fact as to whether the appellant is ordinarily resident outside Australia.

Special circumstances 22Special circumstances must be shown before an order for security for costs of an appeal can be made under UCPR r 51.50. 23The considerations engaged by the concept of "special circumstances" were considered by this Court in Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; 60 NSWLR 143 (Beazley, Santow and Ipp JJA), and in Porter v Gordian Runoff Ltd [2004] NSWCA 171 (Bryson, Sheller and Giles JJA agreeing). 24In Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 at [18], Basten JA identified the following principles: (1) that no order for security should be made in the absence of "special circumstances"; (2) that consideration of what may constitute special circumstances should not be fettered by some general rule of practice; (3) that impecuniosity, without more, will usually be insufficient; (4) that an order may be appropriate if the appeal is shown to be hopeless, unreasonable or of an harassing nature; (5) 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; and (6) that 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. 25The last two factors, it was suggested by Basten JA, might better be seen as influencing the exercise of the discretion rather than as potential special circumstances engaging the power. 26When weighing all the circumstances of the case in the exercise of the discretion to order security for costs, it is necessary to keep in mind that the weight to be given to any circumstance depends not only on its own intrinsic persuasiveness, but upon the impact of the other circumstances which have to be weighed (see P S Chellaram & Co Ltd v China Ocean Shipping [1991] HCA 36; 102 ALR 321 at 323 per McHugh J).

Parties' submissions 27The respondent submitted that the following special circumstances exist, justifying an order for security for costs of the appeal: (1)the appellant is unable to meet an order for costs made against her should her appeal be unsuccessful; (2)the appellant did not appear at the final hearing before Campbell J on 22 August 2013; (3)the appeal is of a harassing nature and the appeal grounds are hopeless; (4)the appellant is currently residing in the United States, has no assets in Australia, and has failed to fully disclose her financial position. 28The appellant accepted that her assets were insufficient to meet the costs of the appeal if her appeal was unsuccessful. It was submitted on her behalf that she has no assets in either Australia or the United States. In an affidavit sworn apparently on 16 December 2013, the appellant deposed: "I am currently accommodated by my partner who pays for my daily food, transportation, accommodation and daily needs". The appellant gave as her address in this affidavit a street address in Walnut, California and described herself as "retired". 29As to the merits of the appeal, the appellant submitted that the appeal was bona fide, and a genuine pursuit of her rights of appeal. 30The appellant's written submissions contended that an order for security would "certainly raise the prospect of the proceedings being stifled. There is a significant imbalance between the parties" (emphasis added). The appellant deposed in an affidavit of 16 December 2013, that her financial circumstances rendered her unable to provide security for costs. However, she went on to state: "In the event of a security for costs order a litigation loan would be required which may stultify an otherwise genuinely arguable and bona fide proceeding." (emphasis added) 31The appellant also contended that the application for security was oppressive and that the respondent had delayed in making the application.

Impecuniosity 32It was common ground that the appellant is impecunious. There is, on the evidence, a substantial risk that if successful, the respondent would not recover its costs of the appeal. 33Significantly, no submission was made to the effect that the respondent's conduct caused or contributed to the appellant's impecuniosity. A submission was made by counsel for the appellant that she had been required to expend funds on her defence of the proceedings below. There was no evidence to this effect. The appellant has not shown that she previously had financial resources and that the respondent's actions caused or at least materially contributed to her inability to meet an order for security: Jazabas Pty Ltd v Haddard [2007] NSWCA 291 at [94] per McClellan CJ at CL. 34It appears that the appellant can find the resources to conduct both the appeal and the separate leave to appeal proceedings: Piras v Egan [2007] NSWCA 26 at [27]. The fact that the appellant is impecunious does not of itself show that the appeal would be stultified if security were ordered: see Hastings v Hastings [2009] NSWCA 294 at [14]; Levy v Bablis [2011] NSWCA 411 at [10]. The facts relating to the appellant's financial position are peculiarly within her knowledge and she bears an evidentiary onus of establishing that any order for security would stultify her appeal, although the ultimate onus of establishing special circumstances rests on the respondent: see Marks-Isaacs v Fowler [2005] NSWCA 37 at [24] per Handley JA; Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 at 4. 35The appellant initially relied upon an affidavit sworn by her daughter, who deposed to having reviewed the appellant's financial records, and asserted that the appeal would be stultified if security was ordered. However, the appellant failed to produce the financial records said to have been reviewed by her daughter, when called upon by a notice to produce issued by the respondent. 36The appellant's own affidavit evidence did not go so far as to assert that she would be unable to obtain funding from funders, family or associates, if security were ordered to be given. There was no evidence that the person most likely to provide financial assistance, the appellant's partner, who pays for all of her living expenses, was unwilling or unable to provide funding for the appellant. 37Counsel for the appellant accepted that the submission that an order for security would stultify the appeal could not be put any higher than that there was a "prospect" that this might occur. I am not satisfied, on the evidence, that the appeal would be stultified if security in a reasonable sum was ordered to be provided.

Conduct of the appellant 38The requirement for special circumstances may be satisfied where the respondent is put to the cost of defending appeal proceedings, which are brought to set aside a judgment obtained in circumstances where the appellant failed to attend the hearing below in order to resist the respondent's claim: Gray v Ware Building Pty Ltd [2012] NSWCA 438 at [10]. Special circumstances may be said to exist even if the failure to attend is explained, because the appeal is, in effect, a product of the appellant's own conduct. 39In the present case, the appellant only attended the final hearing for the limited purpose of seeking, unsuccessfully, an adjournment and/or a stay of proceedings. The appellant's earlier unsuccessful attempt to amend her cross-claim on 10 May 2013 was largely the product of the appellant's own failure to comply with the Court's directions for the filing and service of affidavit evidence, as well as her failure to plead the unjust contract claim in her amended defence filed almost two years earlier on 21 September 2011. 40There is another aspect of the appellant's conduct which is also relevant. The appellant has commenced an application for leave to appeal against the interlocutory decision of Davies J on 10 May 2013, in addition to seeking to challenge that same decision in her notice of appeal against the final decision of Campbell J. 41Counsel for the appellant was unable to explain why the appellant has sought to pursue the leave to appeal application, having subsequently commenced the appeal proceedings. The respondent submitted, correctly in my view, that the leave application was redundant upon entry of the final judgment because any interlocutory order which effected the final result can be challenged in an appeal against the final judgment: Gerlach v Clifton Bricks Pty Ltd [2002] HCA 22; 209 CLR 478 at [6]; Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2006] NSWCA 259. 42By seeking to pursue the leave to appeal proceedings in addition to the notice of appeal, the appellant is causing the respondent to incur unnecessary costs. It is no answer for the appellant to assert that this duplication is not causative of additional expense, because the appellant seeks to have the leave to appeal application and this appeal heard together. It may be inferred that there is an element of harassment involved in the appellant's unnecessary pursuit of the leave to appeal proceedings.

Prospects of success 43The respondent submitted that the appeal is of a harassing nature and is hopeless. However, the respondent did not go so far as to suggest that the appeal was not otherwise bona fide. 44The grounds of appeal raise issues concerning the discretionary judgment of Davies J in refusing leave to amend the defence, and the discretionary judgment of Campbell J in refusing the adjournment and stay application. They also raise the appellant's liability on the guarantee as found by Campbell J. 45Insofar as the appeal grounds concern matters of practice and procedure, they must overcome the substantial hurdle of establishing error in House v The King [1936] HCA 40; 55 CLR 499 sense. Insofar as the appeal grounds challenge the factual finding of Campbell J, that the appellant was bound by the guarantee, the appellant faces the substantial hurdle that she did not appear at the final hearing to contend otherwise. 46Insofar as the appeal grounds assert that Campbell J fell into error in applying the principles of estoppel to preclude the appellant from relying upon arguments that were rejected by Hidden J in his Honour's decision of 24 August 2012 when granting possession of the security property to the respondent, it is clear from [25] of the judgment of Campbell J on 22 August 2012 that the argument that the appellant was bound by an issue estoppel as she was a party to the earlier judgment of Hidden J, was no more than an additional argument supporting the same ultimate conclusion by Campbell J at [22]-[24] that the appellant was bound by the guarantee. 47The appeal grounds challenging the interlocutory decision of Davies J of 10 May 2013, involve allegations of gross negligence and incompetent representation by the appellant's former lawyer. Counsel for the appellant acknowledged that these appeal grounds will need to be supported by an application for leave to adduce fresh evidence on appeal. No such application has yet been made by the appellant. It is not possible to assess the strength of the foreshadowed fresh evidence application. 48It is unnecessary and inappropriate to undertake any detailed examination of the appeal grounds and their likely prospects. It is sufficient to observe that overall, I proceed on the basis that whilst the appeal is bona fide, generally the appeal grounds appear to me to be weak.

Other matters 49The appellant asserted that the respondent had delayed in making the application for security for costs. This submission is rejected. The request for security was made within a week of the filing of the notice of appeal and the notice of motion was filed within approximately two weeks of the request being made. 50The appellant also asserted that the application for security was oppressive. This submission is also rejected. The respondent has incurred substantial costs in pursuing the proceedings below, which have not been paid by the appellant. Nor has the appellant paid the judgment or sought a stay. It is not oppressive for the respondent to seek security in respect of its costs of the appeal, where the appellant concedes that she would be unable to meet any order for costs if the appeal is unsuccessful. 51I accept that when exercising the discretion to order security, it is necessary to balance the interests of the appellant in seeking to pursue her appeal rights and the interests of the respondent in protecting itself against being further out of pocket. Nonetheless, I consider that the balance is firmly in favour of the respondent in the present case.

Conclusion 52In my view, special circumstances have been shown which enliven the discretion to order security for costs. Mere impecuniosity will not ordinarily justify an order for security for costs. However, there are the additional matters in this case which, in combination, are capable of constituting special circumstances. These include the appellant's failure to appear at the final hearing below; the appellant's failure to produce documents relating to her financial circumstances; the absence of evidence from the appellant that the appeal would be stultified if security were ordered; the appeal grounds are weak; the appellant's apparent ability to find the resources to conduct both the leave to appeal proceedings and the appeal proceedings; the appellant's refusal to agree to the dismissal of the leave to appeal proceedings, notwithstanding the same challenges are raised in the appeal proceedings; and the substantial risk that if successful, the respondent will not recover its costs of the appeal from the appellant. 53Weighing all the matters which arise for consideration on this application, my conclusion is that the Court ought exercise its discretion in favour of ordering security for costs.

Ordinarily resident outside Australia 54The purpose of ordering security for costs against an applicant "ordinarily resident outside Australia" is to create a fund within this country against which a successful respondent may enforce a judgment for costs, without having to bear the risk as to the certainty of enforcement in a foreign country and as to the time and complexity of action which might be necessary to effect enforcement: Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,422; Mothership Music Pty Ltd v Flo Rida (aka Tramar Dillard) [2012] NSWCA 344 at [12] per Meagher JA; Logue v Hansen Technologies Ltd [2003] FCA 81; 125 FCR 590 at [18] per Weinberg J. 55Ordinarily, and in the absence of countervailing considerations, the fact that the appellant is resident out of and has no assets in Australia is to be given significant weight when considering whether to order security under this rule: P S Chellaram & Co Ltd v China Ocean Shipping Co at 323. In this case, Mrs Hannaford cannot point to any such circumstances. She has no assets in Australia in which the costs order could be enforced. 56The burden of proof is on the applicant for security to show that the appellant is "ordinarily resident" out of the jurisdiction. In Logue v Hansen Technologies Ltd, Weinberg J reviewed the authorities on the meaning of the expression "ordinarily resident". His Honour concluded at [26] that the test for ordinary residence depends to a significant degree upon the state of mind of the person whose residence is in question. The issue is whether the person habitually and normally resides in the jurisdiction, and does so for a settled purpose. 57In Re Taylor; ex parte Natwest Australia Bank Ltd (1992) 37 FCR 194, Lockhart J said at [198], in the context of whether a person was ordinarily resident in Australia at the time of an act of bankruptcy: "To say that a person is ordinarily resident in Australia must mean something more than that he is resident in Australia. The word "ordinarily" connotes a comparison, a measure of degree. A person may have more than one residence, but he is not necessarily ordinarily resident in each of them. The question must be determined for the purposes of s 43 of the Act at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of "ordinary residence" for the purposes of the Act, in my opinion, connotes a place where in the ordinary course of a person's life he regularly or customarily lives. There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently." 58It was not suggested by the appellant that she had established more than one place of residence. 59The appellant relied upon the following factors in support of her contention that she is "ordinarily resident" in this country. She is an Australian citizen and an Australian passport holder. She holds a current New South Wales drivers licence and has done so since the age of 16 years. She has been a director of an Australian company for approximately 35 years from the period approximately 1976 to 2011. In 1982 the first defendant purchased the Balgowlah property which was Mrs Hannaford's family home until approximately the time of the order for possession given on 5 September 2012, although the evidence of her passport indicates that she left Australia on 18 June 2012. It will be observed that these matters largely reflect the appellant's historical connection with Australia up until she departed for the United States on 18 June 2012. 60The appellant stated in her affidavit evidence that she is not a citizen of any other country, including the United States, does not own any property in the United States or elsewhere, has no financial ties and does not currently earn any income in the United States. The explanation for her presence in the United States is that she is seeking specialised medical treatment for what is described as a heart condition. 61In the appellant's most recent affidavit of 16 December 2013, she described herself as "retired" and stated that she is supported by her partner. Mr Margolin, her former de facto partner and father of her daughter, Ms Hannaford , died in April 2012. 62The factors relied upon by the respondent as supporting the conclusion that the appellant is ordinarily resident in the United States included that: (1)according to the single page of the appellant's passport which she produced in answer to a notice to produce, she has been absent from Australia since at least 18 June 2012; (2)on 9 May 2013 the appellant swore an affidavit in the proceedings below stating that "I currently reside overseas and due to an ongoing heart condition there have been repeated admissions to hospital, in addition for medical reasons I am unable to travel back to Australia"; (3)the appellant gave as her address on her 9 May 2013 affidavit, a street address in "Walnut CA 91789", which may be taken to be a suburb of California; (4)the appellant holds a Nevada drivers licence and evidence from the Department of Motor Vehicles for the State of Nevada indicated that the residency requirements for the issue of such a licence included, but are not limited to, a person whose legal residence is in the State of Nevada or who declares himself or herself to be a resident of the State to obtain privileges not ordinarily extended to non-residence of the State, but did not include a person who is an actual tourist or a seasonal resident. 63After judgment on this application had been reserved at the conclusion of the hearing on 17 December 2013, the appellant's daughter, Ms Hannaford, sent an email communication to the Court stating that she would like to clarify a "few procedural matters" that had arisen since her affidavit of 9 December 2013. This communication was not copied to the solicitors for the respondent, nor provided with the prior leave of the Court. Ms Hannaford stated, amongst other things: "Since receiving the Notice to Produce I sought to obtain the passport records and in doing so have also been advised by my mother that she has a green card (US Permanent Resident Card). In these circumstances, I am unable to press the issue of residency any further and will leave that for the court to determine!" 64The filing of material after an application has been heard without, or outside any leave given, is wrong: Bale & Anor v Mills [2011] NSWCA 226; 81 NSWLR 498 at 514 [57]-[59] per Allsop P. 65Although the statement by Ms Hannaford is clearly contrary to the position taken by the appellant on the hearing of the application for security for costs, the Court cannot act upon it because (a) this material was provided without any leave given; (b) the statement was not verified in an affidavit; and (c) there is no evidence of any authority of Ms Marquessa Hannaford to make such an admission on behalf of the appellant. The Court informed the parties that it would ignore this communication. 66The appellant's affidavit of 9 May 2013 at [26], complained that the respondent had repeatedly failed to serve her personally with documents throughout the proceedings below. The appellant asserted that the respondent had her overseas address as reflected on bank statements issued by the respondent. She also stated that "my current overseas mailing address is listed at the top of this affidavit" being a reference to the street address in Walnut, California. 67The same street address in Walnut, California was given by the appellant in her most recent affidavit of 16 December 2013. It is not clear whether this address in Walnut, California is also the address at which the appellant currently resides. The fact that the appellant holds a Nevada drivers licence, having regard to the residency requirements to obtain such a licence, suggests that the appellant may be residing in Nevada rather than California. Whether it be Nevada or California, in my opinion, the evidence establishes that the appellant is currently resident outside Australia. The issue is whether the respondent has established that she is "ordinarily resident" outside Australia. 68The appellant gave no evidence of any address in Australia which she claimed as her place of residence. There is no evidence that she has any intention of returning to Australia. 69In my view, the length of the appellant's stay in the United States since June 2012, the fact that she is now retired and resides with her partner in either Nevada or California upon who she relies for her accommodation and living expenses, that she has obtained a Nevada's drivers licence which is subject to a residency requirement in that State, combined with the fact that she has no place of residence in Australia, no assets or financial ties to Australia and there is no evidence of any intention of returning to Australia, indicate that she is currently ordinarily resident in the United States. I conclude that there is jurisdiction to make the orders sought under UCPR r 41.21(1)(a).

Discretionary matters 70In determining whether it is appropriate to make an order that the appellant provide security for costs, the Court may have regard to the non-exhaustive list of matters set out in subparagraph (1A) of r 42.21, together with such other matters as it considers relevant. The Court is not to make an order for security for costs against a natural person merely on account of his or her impecuniosity: UCPR r 42.21(1B). 71I have already considered many of the factors referred to in UCPR r 42 21(1A) in relation to the special circumstances requirement in UCPR r 51.50. These include the prospects of success of the appeal, the genuineness of the appeal, the impecuniosity of the appellant, whether the appellant's impecuniosity is attributable to the respondent's conduct, whether an order for security for costs would stifle the appeal, and the timing of the application for security for costs. 72As to the other matters referred to in (1A) of UCPR r 42.21, I do not consider that the appeal involves a matter of public importance. It is relevant that the respondent has already obtained a judgment against the appellant and no application has been made to stay the enforcement of that judgment; there are no assets of the appellant in Australia against which a costs order on appeal would be enforceable; and it may be accepted that the respondent would face difficulties in seeking to enforce a judgment for costs in the United States. 73Weighing the matters which arise for consideration under UCPR 42.21, I would similarly conclude as under UCPR 51.50, that the discretion should be exercised in favour of an order for security.

Quantum and appropriate orders 74In terms of quantum, the respondent seeks an amount of $64,995 based on the estimate of Mr Sherrard, the respondent's solicitor. This estimate was challenged by the appellant who relied upon a report from Mr Glen Walter, a cost assessor. He opined that security in the sum of $21,850 would be adequate. 75Mr Walter's report was admitted over the respondent's objection on the grounds that it was late, and of little probative value because of the failure to state the basis for his opinion in [16] that the total allowance for work by the respondent's solicitors was "manifestly and unreasonably excessive", without stating the basis for that opinion. I have considered Mr Walter's report. In my view, very little weight can be given to his opinion in [16] as it is stated in conclusionary terms only. 76There are three main areas of dispute in terms of the estimate of quantum. The first relates to the estimate of solicitors' time to prepare and attend at the hearing of the appeal. The respondent's solicitors' estimate of partner and solicitor time was a total of 103 hours, comprising 29 hours for a partner and 74 hours for an employed solicitor. This estimate was broken down into various stages of work in relation to the preparation and hearing of the appeal. Mr Walter's estimate was a total of 35 hours, comprising a partner for 8 hours and an employed solicitor for 27 hours. As already noted, Mr Walter did not attempt to break down his total estimate for solicitors' time between the various steps to be taken in the preparation and conduct of the appeal. For this reason, his opinion is of no real assistance. 77Nonetheless, I consider that some of the respondent's estimates ought to be discounted. This is for two reasons. First, the respondent's estimate included amounts in respect of various procedural steps, which assumed future disputes with the appellant relating to the contents of the appeal book, the necessity for additional directions hearings and additional solicitors' correspondence with the respondent and counsel relating to such disputes. Security is not required to be provided, in my view, in respect of anticipated disputes. If a significant problem in relation to the need for additional work arises in the future, then an application for additional security can be made, if appropriate. 78Secondly, I consider that there is some element of duplication in the estimated time for the respondent's solicitors (both a partner and solicitor) to consider the appellant's submissions and chronology (total 12 hours) and also to assist in the preparation of the respondent's submissions (total 17 hours). The total solicitor's time for preparing for the appeal hearing (total of 17 hours) also appears to me to be a little on the high side. 79Next there was a dispute as to the estimated time in respect of work by the respondent's counsel. The respondent's solicitors' estimate was a total of 74 hours giving a total of $25,900, whereas Mr Walter estimated a total of 18 hours, plus a brief on hearing fee, giving a total of $9,520. In my view, a reasonable estimate is somewhere between those two figures, but closer to the respondent's estimate. There is some element of duplication in the respondent's estimate of counsel's time involved in considering the appellant's submissions and chronology and also preparing the respondent's submissions. 80There is also an element of duplication in the estimate of one day for counsel's time in reviewing and considering appeal books and the estimate of one day for preparing for the appeal hearing itself. 81The third area of difference related to an estimate of $2,300 for photocopying, courier charges and sundries. Mr Walter expressed the opinion that this estimate was not reasonable because the appellant had the responsibility of preparation and service of the appeal books, including copies for the respondent's counsel and that sundry expenses may not reasonably be recoverable on a party/party basis in any event. Undoubtedly, some of these costs are likely to be recoverable by the respondent, if successful, on a party/party basis. The respondent's estimate has not been shown to be unreasonable.

Basis of costs assessment 82Ordinarily, party/party, not solicitor and own client costs, provide the proper guidance as to the amount of security for costs: Australian Granodiorite Ltd v Devex Ltd (NSWCA, Kirby P, 18 July 1991, unreported). In this case, the respondent seeks security assessed on the basis of the respondent's estimated actual costs. The respondent pointed to a contractual provision in the guarantee (cl 5) that it was entitled to our "reasonable expenses of enforcing this guarantee". 83It is well established that a mortgagee may rely upon its contractual entitlement to costs so as to claim an order, other than on a party/party basis: Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 per Beazley JA at [12] (Hodgson and Ipp JJA agreeing). Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the Court will take such provision into account, but is not bound to give effect to any contractual provision as to costs: Kyabram Property Investments Pty Ltd v Murray; Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 at [8]. 84In Commonwealth Bank of Australia v Usalj [2010] NSWSC 1105 at [11]-[13], McDougall J considered a clause of a guarantee which appears to be in the very same terms as the clause relied upon by the respondent in this case. In that case, his Honour thought that the reference to "reasonable expenses" was intended to comprehend costs on the ordinary basis and that if the Bank wished to draw to the attention of the guarantors that it was looking to be fully indemnified for all expenses incurred by it in taking enforcement action, it could have done so by clear and express words. Ultimately, his Honour refrained from deciding whether the clause in that case was limited to costs on an ordinary basis as there was no contradictor, but he expressed the view that he was not satisfied that it went beyond the ordinary basis for costs. 85The construction of cl 5 of the guarantee received scant attention in the parties' submissions and I do not consider it appropriate to decide this question of construction on the present application. I prefer to proceed on the basis of the general principle that security is not required to be provided on a full indemnity basis. 86In my view, a fair and appropriate amount having regard to the estimated length of the appeal (of one day) and the foreshadowed application by the appellant to seek leave to adduce fresh evidence on appeal, would be $40,000. I propose to order that the appellant provide security for costs of the appeal in the sum of $40,000 by payment into court. The appellant requested six to eight weeks to comply with any order for security. I propose to allow six weeks in view of the Court vacation. The proceedings will be stayed pending the provision of such security. The appellant is to pay the respondent's cost of the motion. 87The orders of the Court will be that: (1)The appellant provide within 42 days, security in the sum of $40,000 for the respondent's costs of the appeal by payment into court. (2)The appeal be stayed until such security is provided. (3)The appellant to pay the respondent's costs of the motion.

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: 08 January 2014

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Judgment (17 paragraphs)

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Cases Cited (25)

Cited By (6)