Jafari v 23 Developments Pty Ltd [2019] VSCA 16

2 Following a 10 day trial involving many issues and contested facts, Elliott J dismissed all but one of Jafari's claims and found for 23 Developments on its counterclaim. The net result was a judgment in favour of 23 Developments for the sum of $219,939.59.

3 Jafari is seeking leave to appeal on a number of grounds. He has filed a written case and agreed summary of the proceedings below for the assistance of this Court. When the written cases are read together with the lengthy reasons for judgment given by Elliott J - which are 192 pages long and contain 596 paragraphs - it is clear that the proposed grounds of appeal include challenges to many of the key factual findings made by Elliott J in his reasons.

4 The respondents have already incurred significant costs, including preparing their written case and contributing to the agreed summary. Nevertheless, they will need to incur further costs in relation to the hearing of the application for leave to appeal. In these circumstances, the respondents apply for an order that Jafari provide them with security for their costs of the application for leave to appeal. The application is based on the fact that Jafari is impecunious and will not be able to pay costs if his application for leave to appeal is refused, and the contention that, while arguable, the proposed appeal lacks sufficient merit.

5 Jafari agrees that he is impecunious and will not be able to satisfy an adverse costs order against him. He contends that: his impecuniosity arises out of the respondents' conduct at issue; an order for security will stifle his proposed appeal; the proposed appeal is reasonably arguable; and, in any event, the amount sought for security is excessive.

6 The Court has a wide and unfettered discretion in deciding whether or not to grant security for a respondent's costs of a proposed appeal and, if so, in what amount. The principles were summarised by Dodds-Streeton JA (Redlich JA agreeing) in Maher v Commonwealth Bank of Australia,[1] where the discretion was described as one depending 'entirely on the circumstances of each particular case'.[2] Nevertheless, Dodds-Streeton JA gave a non-exhaustive list of matters relevant to the exercise of the discretion:

(2) the quantum of risk that a costs order would not be satisfied;

(3) whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim;

(4) whether any impecuniosity of the appellant arises out of the conduct complained of;

(5) whether there are other aspects of public interest which weigh in the balance against such an order; and

(6) whether there are any particular discretionary matters peculiar to the circumstances of the case.[3]

7 One particular discretionary matter which is sometimes referred to is the difference between an application for security for costs at first instance and on appeal. At first instance, there is a general rule that, absent other factors, an impecunious natural person who sues will not be ordered to give security for costs.[4] On an application for leave to appeal, different considerations apply, because there has already been a determination adverse to the impecunious applicant.[5] This means that, subject to other discretionary factors, security will usually be ordered against an impecunious applicant if the proposed appeal is not reasonably arguable.[6]

8 Jafari was represented at trial, and is represented on appeal, by pro bono counsel. His solicitor is acting on a no-win-no-fee basis. He concedes that he is impecunious and has been unable to satisfy any part of the judgment sum against him or the costs of obtaining that judgment.

Does Jafari's impecuniosity arise out of the respondent's conduct?

9 Jafari contends that the respondents' conduct in relation to the development project is the cause of his current state of impecuniosity. He says that if the respondents had honoured the agreements for which he contends, the project would have proceeded and he would have profited, and thus not be in his present financial situation. We do not accept that contention. The findings of the trial judge, which are not challenged, clearly show that Jafari was in grave financial difficulty before his dealings with the respondents in connection with the proposed development.[7]

Will a security for costs order stifle the proposed appeal?

10 The affidavit of the respondents' solicitor establishes that Jafari is impecunious and Jafari does not challenge that is so. The respondents contend that mere proof of impecuniosity is not sufficient to establish that an order for security for costs will stifle a claim or appeal. They rely on Botsman v Bolitho,[8] where Whelan and Niall JJA said in respect of an applicant for leave to appeal:[9]

Relevantly, where an applicant alleges that the making of an order for security would stifle or stultify the appeal, it is not sufficient for it to simply rely on its alleged impecuniosity.[10] The mere fact that the applicant is unable to provide security does not necessarily lead to the conclusion that the making of an order for security would stultify the appeal given that there may well be someone else standing behind the applicant who would satisfy any adverse costs order. Further, whether an appeal will be stultified by an order for security is a question of fact that will generally require evidence.[11]

11 Jafari seeks to distinguish that case on the basis that it concerned a class action. We note also that the case cited in Botsman - Pioneer Park - concerned an insolvent corporate plaintiff. In such cases it is not uncommon for assertions that a security for costs order would stifle the proceeding to be rejected, in the absence of evidence, because the persons standing behind the insolvent company can provide security.[12]

12 We agree that Botsman and Pioneer Park are distinguishable from this case. However, there is weight in the submission by the respondents that Jafari has not gone on oath and said that any order for security will stifle his claim. He has left the matter to inference only, arising from his insolvency. That is an unsatisfactory situation. An impecunious party seeking to resist a security for costs order on the basis it will stifle a claim or appeal should expressly depose to that fact.

13 In these circumstances however, having regard to Jafari's long history of impecuniosity arising from earlier proposals to develop the subject properties, as outlined in the respondents' solicitor's affidavit, the possibility that the proposed appeal might be stifled should be given weight.

14 Senior counsel for the respondents acknowledged that the proposed appeal is arguable as against 23 Developments.[13] Notwithstanding this acknowledgment, the respondents contend that the strength of the proposed appeal must be assessed in the exercise of the Court's discretion, and that the prospect of success of appeals concerning factual findings are lower than where an arguable point of law is put forward.[14]

15 The Court's assessment of the merits is limited by the nature of a security for costs application, which occurs before the hearing of the application for leave to appeal. This is especially so where, as here, the proposed appeal challenges many factual findings made after a 10 day trial and the Court does not yet have all the necessary materials before it. In these circumstances, the Court adopts a broad brush approach to its assessment of the merits of the proposed appeal, and is careful not to express a considered view as to whether leave to appeal should be granted.

16 We have heard brief argument this morning as to the strength of the proposed appeal grounds. The rival contentions were necessarily confined to the four corners of Elliott J's reasons, as we do not have the relevant evidence at trial before us. On that limited basis, we are satisfied that the proposed appeal is reasonably arguable. However, the proposed appeal suffers from the obvious difficulty that this Court's review of Elliott J's factual findings must be undertaken in accordance with the principles stated by the High Court in Robinson Helicopter Company Inc v McDermott.[15] Although an appeal court is required to conduct a 'real review' of the evidence given at first instance and of the trial judge's reasons for judgment in determining factual questions, an appeal court should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by 'incontrovertible facts or uncontested testimony', or they are 'glaringly improbable' or 'contrary to compelling inferences'.[16]

17 In all the circumstances, we are satisfied that an order for security for costs should be made. The question remains as to the amount to be ordered.

18 In fixing the amount of security to be ordered, we have taken account of all the above factors together with the following further factors:

(1) the fact that most of the necessary work by the respondents has already been done;

(2) the lateness of the application for security. While the application was preceded by a letter demanding security, the respondents could not, given the circumstances outlined in the respondents' solicitor's affidavit, have expected that Jafari would agree to give security in any amount. In these circumstances, the prior demand for security does not provide a good explanation for why the application was made late;

(3) the lack of any detailed estimate of the respondents' solicitors' costs. The evidence is of assertion only.

19 Doing the best we can in all the circumstances, the Court will make an order that Jafari provide a modest amount as security for the respondents' costs of the proposed appeal, in the sum of $35,000.

KOUROSH JAFARI (on his own behalf and as trustee of the essence unit trust)

63 BUCKLEY STREET PTY LTD (IN LIQUIDATION) (ACN 099 836 361)

[1] [2008] VSCA 122.

[4] Pearson v Naydler [1977] 1 WLR 899, 902; James v ANZ Banking Group Ltd (1985) 9 FCR 442, 445.

[5] Lawrance v Commonwealth [2008] FCA 417 [44].

[6] Ibid [47], citing Tait v Bindal People [2002] FCA 322.

[8] [2018] VSCA 111.

[9] Ibid [39] (citations in original).

[10] Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344; (2007) 65 ACSR 383, 396 [51] (Basten JA) ('Pioneer Park').

[12] Ibid, citing Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCA 34; (1984) 2 FCR 1, 4.

[13] The respondents' written case contends that the proposed appeal against Pizarro is hopeless. However, no oral submissions were directed at this issue. As the respondents are jointly represented, we do not consider this distinction between the respective positions of the respondents further for the purposes of this application.

[14] The respondents referred to Commonwealth Bank of Australia v Eise (1991) 6 ASR 1, 2-3 (Young CJ).

[15] [2016] HCA 22; (2016) 331 ALR 550.

[16] Ibid 558-9 [43] (citations omitted).