Kiri Te Kanawa v Leading Edge Events Australia Pty Limited & Ors [2007] NSWCA 187 | Case summary

2 August 2007 Kiri Te Kanawa v Leading Edge Events Australia Pty Limited Judgment 1 BEAZLEY JA: On 8 June 2007, Bergin J gave judgment for the plaintiff, Leading Edge Events Australia Pty Ltd, against the fourth defendant, Mittane Limited and dismissed the plaintiff's claims against all other defendants, including the first defendant, Kiri Te Kanawa. Her Honour ordered the fourth defendant to pay 65 per cent of the plaintiff's costs (order 3); and ordered that as between the plaintiff and the first defendant there be no order as to costs (order 4). 2 Her Honour also ordered that the security for the first and fourth defendants' costs that had been provided pursuant to an order of McDougall J on 8 August 2006 be discharged: (order 7). Her Honour stayed the operation of order 7 up to and including 16 July 2007: (order 9). 3 The first defendant has filed a Summons for Leave to Appeal against order 4. If leave to appeal is granted, the first defendant will argue that she is entitled to her costs of the proceedings in accordance with the usual principles and regulatory provisions that provide that costs follow the event unless the court determines that some different order should be made. It will be submitted that her Honour erred in the exercise of her discretion in making a different order. 4 In the meantime, the first defendant wishes to preserve the position in which she was in during the course of the proceedings by having the second order for security remain in place until the determination of the Summons for Leave to Appeal and, if it is granted, the appeal. She seeks an order extending the stay. The stay has been extended on an interim basis until judgment is delivered in this matter. 5 Her Honour's reasons for making the order as to costs as between the plaintiff and the first defendant are to be found in her judgment at [27]ff, especially at [29], [32] and [35]. In essence, her Honour considered that the appropriate percentage to be attributed to the first defendant in the total costs of the first and fourth defendant was 15 per cent. She then considered that the most appropriate way to reflect that proportion in the costs that were to be awarded in the proceedings was to reduce the amount of costs that the plaintiff was able to recover from the fourth defendant and to make no order as between the plaintiff and the first defendant. Her Honour had already determined that the fourth defendant should be responsible for 80 per cent of the plaintiff's costs. By reducing those costs by 15 per cent, she arrived at the percentage of costs that she ordered the fourth defendant to pay to the plaintiff. 6 Her Honour's reasons have to be understood in the context of other factors, including the relationship between the first and fourth defendant, namely that of employee and employer respectively; the trial judge's finding that notwithstanding that relationship, the fourth defendant was supine to the first defendant's wishes; and, relevantly, the fact that the first and fourth defendants had joint representation at the hearing. 7 Order 7 made by her Honour discharged the order for security relating to one of two orders for security for costs that had been made during the course of the proceedings. The plaintiff had been ordered to provide security for costs. The first order for security was in the sum of $50,000 in respect of the costs of all four defendants. The second order for security was in the sum of $250,000 in respect of the costs of the first and fourth defendants. It is the second order for security that is the subject of order 7. 8 The order that security for costs be provided in the sum of $250,000 was based upon an estimate of the first and fourth defendants' cost of the proceedings in a sum in excess of $330,000. That estimate was based on an estimate of a five day hearing together with the need for witnesses to be brought to Sydney to give evidence. The amount of $250,000 was arrived at after taking into account the "vicissitudes of assessment". The sum of $250,000 did not take into account costs that had been incurred previously when the matter was being conducted by different solicitors. However, at that point, there was already in place the existing security in the sum of $50,000 in respect of the cost of the four defendants. 9 As events turned out, the hearing took six days. Accordingly, the original assessment of $250,000 should be considered to be reasonably reliable. 10 The original security ordered in the sum of $50,000 was provided by way of a deed whereby Mr Frank Williams, a principal of the plaintiff, guaranteed the payment of the sum of $50,000 should the plaintiff be ordered to pay any of the defendants' costs in the proceedings. The guarantee was a personal guarantee and was not otherwise secured. 11 The second order for security was satisfied by a bank guarantee for the sum of $250,000 given by third parties who are personal friends of Mr Williams. 12 It was submitted on behalf of the first defendant that she has reasonable prospects of leave being granted and of the appeal being allowed. It was submitted, therefore, on the assumption that the appeal was allowed, the first defendant should not be in a worse position than she was at trial and would have been had Bergin J made a costs order in her favour. For that reason, it was submitted that the security should remain in place until the determination of the appellate process. 13 The plaintiff submitted that the judgment should be accepted as correct and that in any event it was unlikely that the appeal against the costs order would be successful. It was further submitted that there remained in existence the security in the sum of $50,000, which it was submitted provided adequate security in circumstances where, assuming that the costs order remained as ordered by Bergin J, the first defendant's costs were likely to be in the order of $60,000 to $70,000. In this regard, the Court was informed that although this security had been ordered in respect of the costs of all defendants, arrangements had been made with the second and third defendants in respect of the payment of their costs which was not dependent upon having recourse to the security provided under the first deed. 14 The first defendant resisted this approach. First, it was submitted that on a proper understanding of her Honour's reasons as to costs, it was not the case that the first defendant merely incurred costs in the order of 15 per cent of the total costs of the first and fourth defendants. Rather, the first defendant, in addition to the 15 per cent that she had incurred in respect of matters referable to her conduct of the proceedings, had also jointly incurred the balance of the costs. That is not my understanding of her Honour's reasons. Her Honour expressly stated at [32] that an "… appropriate percentage to be attributed to [the first defendant] in the total cost of [the fourth defendant] and [the first defendant] would be 15%." 15 Secondly, and in any event, the first defendant's challenge to order 4 is not only a challenge to the transposition of the assessment of 15 per cent of the costs to be borne by the fourth defendant. There is also a challenge to that assessment. 16 Further, it was submitted that notwithstanding the existence of the deed of guarantee given by Mr Williams for the sum of $50,000, the evidence was that Mr Williams was without assets. It followed that the security provided by that deed was worthless. 17 The determination of the first defendant's application is not without difficulty. 18 On the one hand, there is considerable merit in the submission that she should be in no different position than she was during the course of the proceedings, insofar as her costs being secured are concerned, on the assumption that she will succeed in her appeal on the question of costs. There is also merit in the submission that the security for $50,000 may prove to be illusory. 19 On the other hand, the trial judge made a finding that an appropriate award of costs in the first defendant's favour would have been in the order of 15 per cent of the costs of the joint representation that she had with the fourth defendant. No evidence was adduced by the first defendant as to the likely quantum of either her costs or the total costs that have been incurred by the first and fourth defendants. Accordingly, the only evidence before the Court is that presented on the application for security for costs before McDougall J, namely, that total costs in excess of $330,000, together with the costs already incurred after that date which were unquantified, were likely to be incurred. 20 On that material, it could be expected that the total costs of the first and fourth defendants could be in the order of $400,000. Had her Honour made an order for costs on the basis that the plaintiff pay the first defendant's costs assessed at 15 per cent of the joint costs of the first and fourth defendant, the first defendant's costs would be in the order of $60,000. 21 There is, therefore, merit in the argument that by maintaining the security in the sum of $250,000, the first defendant is in a significantly improved position than she was at trial. 22 I consider that this application should be determined on the basis that leave to appeal will be granted and that there is an arguable prospect that the appeal will be allowed. It is not necessary, in my opinion, to make any assessment of that prospect. It is sufficient to judicially notice that there is an argument available to the first defendant that her costs should not have been conflated with those of the corporate fourth defendant. In that circumstance, I am of the opinion that the first defendant should be in no worse position than she was at trial in relation to her costs being secured. 23 That does, however, bring to the fore again the difficulty to which I have already averted, namely that if an order is made extending the stay of order 7, the first defendant is arguably in a much more satisfactory position than she was at trial, in circumstances where that security was provided for the costs of the first and fourth defendants. 24 Before determining how that difficulty should be resolved, I should state that I do not think that the security provided by Mr Williams should now be considered adequate security for the first defendant's costs. There was sufficient material before the Court to indicate that Mr Williams' financial position has deteriorated since the provision of that security. 25 Having taken these various matters into account, I consider that the stay of order 7 should be extended until the determination of the Summons for Leave to Appeal, and if leave is granted, the hearing of the appeal, subject to a condition that the stay should be revoked upon the plaintiff providing alternative security by way of bank guarantee in the sum of $100,000. Should that alternative security be provided, then that security should remain in place until the determination of the appellate process. 26 Orders:

Kiri Te Kanawa v Leading Edge Events Australia Pty Limited & Ors

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Judgment (14 paragraphs)

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