The appellant had a registered lease with City of Bankstown RSL Community Club Limited (RSL Club) for five years from 16 October 2014 to 16 October 2019 of part of the Club's premises for use as a gym. CCA acquired the premises from the RSL Club on 13 September 2019. The Consent issued by the Council in response to a DA lodged by the RSL Club in July 2006 described the development which has been approved as: "Refurbishment to Existing Bass Hill RSL Club Including Internal Alterations and Construction of Health Club, Children's Play Area and Rear External Terrace".
In the underlying proceedings the appellant claimed damages of $1,176,803 for loss of pre-tax profits over the period 1 April 2020 to 30 September 2024 for CCA's alleged repudiation of a lease and equitable lease by a course of conduct from September 2019 to April 2020. A major question was whether, on the proper construction of the Consent, the development which was approved was for a use of the Land for a health club as part of the operation of the RSL Club, or rather what was approved was a refurbishment of the RSL Club and a separate and independent use of the Premises for a health club.
Although the trial lasted six days, the reasons of the primary judge are concise, occupying 35 pages. The primary judge held that the appellant was in breach of the lease because the use of the premises as a gym was ancillary to the operation of the RSL Club, and when the RSL Club closed its premises the gym could no longer operate as a gym; that the appellant could not rely on the existing use provisions; that CCA did not repudiate the lease by failing to hand over a registrable lease for six months; and that, in any event, the appellant suffered no damage.
The notice of appeal contains six grounds. The three central issues raised by the appeal are: (1) the use issue - whether the gym could continue to operate once the RSL Club closed, (2) the repudiation issue - whether CCA repudiated the lease by failing to give a registrable lease for six months, and (3) the damages issue - whether the appellant suffered any damage. Alternatively, the grounds of appeal raise an issue of frustration.
CCA relies on the power to require "sufficient security" to be given by a corporate appellant pursuant to s 1335 of the Corporations Act 2001 (Cth), which unlike Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.50(1), does not import a requirement that "special circumstances" be shown before security is ordered in the Court of Appeal: Pioneer Park Pty Ltd (in Liq) v ANZ Banking Group [2007] NSWCA 344 at [2], [22].
The appellant does not dispute that the jurisdictional ground in s 1335 is established, or that an order for the provision of security should be made. The sole issue is the quantum of security.
The parties' solicitors have provided competing estimates of their own client's actual costs of the appeal. Mr Richard Mitry gave an estimate of CCA's actual costs of $162,450 and party/party costs of $140,015, assuming both senior and junior counsel are retained and are instructed by two solicitors: himself as partner and a senior associate. His party/party costs estimate assumed recovery of 90 per cent of counsels' fees (based on rates of senior counsel at $14,000 p/day and junior counsel at $5,000 p/day) and 70 per cent of solicitors' fees (based on rates of a partner of $650 p/hour and a senior associate of $350 p/hour).
Ms Madhu Dubey provided an estimate of the appellants' costs of the appeal, including preparation of the appeal books, totalling $36,800 assuming junior counsel's rate of $400 p/hour and $4,000 p/day and her own rate of $400 p/hour.
[2]
Relevant principles
It is not in dispute that the principles are conveniently summarised by Payne JA in SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 104 at [14]:
In exercising the undoubted discretion to award security for costs, I am guided by the following principles:
1 Any order for security for costs must be crafted to avoid stultifying the appeal proceedings: Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 at [18] per Basten JA (Ipp JA and Hoeben J agreeing); McMillan v Coolah Home Base Pty Ltd [2023] NSWCA 172 at [75] per Mitchelmore JA.
2 If the Court is satisfied an award of security should be made, then it is inappropriate to fix the quantum by assessing the strength of the appellant's prospects of success: LSKF Holdings at [14] per Leeming JA; Swift v McLeary [2013] NSWCA 173 at [55]; Reddy v C&P Syndicate Pty Ltd [2013] NSWCA 425 at [34]. The discretion does not involve a preliminary hearing of the appeal: Mualim v Dzelme [2020] NSWCA 333 at [8] per Basten JA.
3 The appropriate amount of security should be assessed on a "broad brush" basis: Palermo Seafoods Pty Ltd v Lunapas Pty Ltd [2015] NSWCA 149 at [9] per Leeming JA; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 1082 at [206] per Ward CJ in Eq.
4 The Court's power is to require "sufficient security". The Court does not set out to provide a complete indemnity to a respondent in respect of their costs: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 283 at [90] per Gyles AJA; Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2014] NSWCA 417 at [163] per Emmett JA. Even where a relatively detailed and realistic estimate of actual and apprehended costs of an appeal is provided in the evidentiary material, it is the ordinary course for only a fraction of those costs to be ordered by way of security: Palermo Seafoods Pty Ltd at [8] per Leeming JA.
5 The Court is not, in any event, bound to accept a respondent's assessment of the costs likely to be incurred or recovered.
[3]
Decision
Given the limited issues raised on the appeal, the significant difference between the parties' respective estimates of their actual costs of a one-day appeal directs attention to the proportionality principle in s 60 of the Civil Procedure Act 2005 (NSW). That provision says that in any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute: April Fine Paper Macao Commercial Offshore Ltd v Moore Business Systems Australia Ltd (2009) 75 NSWLR 619; [2009] NSWSC 867 at [7]-[14]. Ultimately, the matter is very much one of impression: April Fine Paper at [31].
Contrary to CCA's submission, the fact that the amount claimed as security is about 10 per cent of the appellant's claim for damages, is not determinative of whether the security sought is proportionate to the importance and complexity of the subject matter in dispute. As indicated, there are limited issues on appeal. Nor is the disparity between the parties' estimate of their own actual costs (CCA estimate of $162,450 and the appellant's estimate of $36,800) explicable on the basis as suggested by CCA that its estimate assumes the cost of retaining senior counsel in addition to junior counsel, whereas the appellant's estimate of its costs assumes briefing only junior counsel.
It is apparent that Mr Mitry's estimate of CCA's actual costs does not have regard to the proportionality principle. His estimate involves an element of duplication in the assumed time for CCA's solicitors (both a partner and senior associate) and counsel to undertake several tasks. The duplication is both at (1) the solicitor level where it is assumed that two solicitors will undertake the same tasks, such as (i) considering the appellant's submissions and chronology, (ii) the preparation of CCA's submissions, (iii) preparing for the appeal hearing, and (iv) instructing counsel at the hearing of the appeal which is excessive in an appeal of the present nature, particularly as CCA has now briefed senior counsel to appear on the appeal; and (2) between solicitors and counsel where it is assumed that each will undertake (at least in part) the same tasks.
There is a further element of duplication in the estimated time for the two counsel retained by CCA to undertake the same tasks, relevantly, 1 day for each to review the brief for appeal (especially when junior counsel appeared at trial), 2 days for each to review the appeal books, appellant's submissions and chronology, and 2.5 days for senior counsel and 3 days for junior counsel to prepare written submissions for the hearing, notwithstanding that the brief on hearing (1 day) assuming 10 hours work by each counsel includes a significant amount of preparation time, when the court time is 4.5 hours.
That is not to say that it is unreasonable for CCA to brief senior counsel, even though the appeal is one that could readily be conducted by junior counsel, as occurred at trial, or to express any view about the reasonableness of the rates charged by the counsel retained by CCA. Those are matters for CCA to decide in its own best interests in defending the appeal. However, it does not follow that the appellant should be required to provide security in an amount that provides a complete indemnity for CCA's estimated party/party costs.
Having read the judgment below, reviewed the grounds of appeal and considered the parties' statement of the issues on appeal, the estimate of CCA's actual costs for a one-day appeal is excessive in the context of a claim for security for costs. A more appropriate estimate would involve the following assumptions: (i) senior counsel's preparation time (including settling written submissions) of 2 days, noting that the written submissions can be expected to be drafted by junior counsel, (ii) junior counsel's preparation time (including drafting written submissions) of 2.5 days, especially taking into account that junior counsel appeared at trial, and (iii) one solicitor (a senior associate) instructing counsel on the hearing of the appeal (6 hours) and a further 4 hours general preparation. Applying CCA's rates for counsel and a senior associate gives an estimate of CCA's actual costs of the one-day appeal of about $63,120.
Ordinarily, 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). Applying the respective discounts stated by Mr Mitry (see [9] above) for the likely assessment of party/party costs would give a figure of $56,020. Obviously that figure may be higher or lower on an actual assessment of costs. The assumption by Mr Mitry of recovery on an assessment of costs of 90 per cent of two counsel fees, although not challenged by the appellant, is generous in a case like the present with limited issues. As indicated, ultimately the determination of an amount of security is very much a matter of impression and the Court adopts a broad-brush approach.
In my view, a reasonable and appropriate amount to be required to be provided by the appellant as security for costs is $50,000, which should be paid into court by the appellant in two tranches: (i) $35,000 by 22 October 2024, and (ii) $15,000 by 15 November 2024.
Although CCA has slightly bettered the amount offered by the appellant, the appellant has had the greater success overall in resisting CCA's inordinate claim for security for a one-day appeal. The costs of the motion should be each parties' costs in the cause.
[4]
Orders
Accordingly, the Court makes the following orders:
1. The appellant provide security for costs of $50,000 in the following tranches:
1. $35,000 to be paid by 22 October 2024; and
2. $15,000 to be paid by 15 November 2024.
1. The security to be paid into Court.
2. The proceedings be stayed in the event of non-compliance with order (1) above.
3. The costs of the motion filed 7 August 2024 be each parties' costs in the cause.
[5]
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: 15 October 2024
GLEESON JA: Application is made by the respondent (CCA) for security for costs of an appeal by Interslice Pty Ltd from a judgment of Richmond J dismissing its claim for damages for alleged repudiation and termination of a lease and equitable lease of premises at Hector Street, Bass Hill which were used as a commercial gymnasium: Interslice Pty Ltd v CCA Investments - Bass Hill Pty Ltd (No 2) [2024] NSWSC 481. The appeal has been listed for hearing for one day on 16 December 2024.
By its notice of motion filed 6 September 2024 CCA sought security in the amount of $140,015. In written submissions, CCA sought security in the amount of $129,815, which excluded its claim for security in respect of the costs to date, costs of its motion and court appearances. The appellant offered to provide security of $45,000 to be paid in tranches. The appeal is listed for a one-day hearing on 16 December 2024. The appellant says that the amount sought by CCA is neither reasonable nor proportionate to the costs of an appeal with limited issues.