Li v The Herald and Weekly Times Ltd & Anor [2008] VSCA 201

2 Secondly, the appellants seek a variation of the order which we made on 17 September 2008, requiring them to give additional security for the respondents' costs of the appeal in the sum of $45,000. The appellants seek a reduction in the amount of the further security to $10,500. That application is opposed.

3 At the beginning of the hearing, counsel for the appellants made oral application for a stay of the order made by the trial judge, that they pay the defendants' (now respondents') costs of the proceeding, which have been taxed in the sum of $367,832.86. That application is also opposed. We deal first with the security for costs application, noting that it was not suggested by either side that the Court lacked power to make the order which was sought.

Application to reduce the amount of the further security for costs

4 As already mentioned, on 17 September 2008 the Court ordered that the appellants pay the sum of $45,000 by way of security for the respondents' costs of the appeal. This amount was additional to an amount of $25,000, ordered to be paid by Nettle and Redlich JJA on 25 July 2007. On each occasion, detailed reasons were given for the orders made, and it is unnecessary to repeat what was then said.

5 The hearing of the appeal has been set down for 27 and 28 October this year. The order of 17 September required the additional security to be paid within 14 days, and it was ordered that, failing the making of the payment, the appeal be stayed. Liberty to apply was reserved, pursuant to which the present application was made.

6 The basis of the application to have the amount of security reduced is that the appellants have been able in the limited time to raise only the sum of $10,500. The first appellant, Ms Li, has sworn an affidavit in which she describes her financial position and her inability to obtain additional funding assistance from the sources relied on to fund the initial payment of $25,000. She has, however, received approval for an additional advance on her credit card facility to a limit of $10,500. Her family and friends have already provided $10,000 to fund the legal costs of the appeal. We were told that Ms Li made a contractual commitment to her solicitors to pay that amount on account of legal expenses to be incurred.

7 Although Ms Li's affidavit stated that she would find it "extremely difficult to raise [$45,000] under any circumstances", in answer to a question from the Court her counsel indicated, on two separate occasions, that she would be able to raise the full amount of $45,000 given additional time. On counsel's instructions, this was likely to take another six months.

8 As Ashley JA said on the last occasion, the respondents could have applied much earlier for an order that additional security be provided. In the event, however, we concluded that it was appropriate that the appellants be ordered to pay the additional amount of $45,000 notwithstanding the respondents' delay in applying. We accept that it has not been possible for the appellants to raise the full amount in the time since the order was made but we are not persuaded that the respondents' delay - previously taken into account - justifies a reduction in the amount of security ordered to be paid. Instead, we will extend the time for the provision of the further security.

9 Different considerations might have come into play had it been suggested that the appellants had no prospect of raising more than the proffered amount of $10,500. But, as we have said, that is not the appellants' stated position. Their inability to obtain sufficient funding to this point will have the consequence that the hearing date of 27 - 28 October must be vacated, but we do not regard a deferment of the hearing for six months or thereabouts as such a significant prejudice to the appellants as to justify a reduction in the amount of the security which we ordered on the last occasion.

10 Subject to variation of the order for additional security, to require it to be paid on or before 30 April 2009, the application for variation will be refused.

11 As Ashley JA noted recently in Narain v Euroasia (Pacific) Pty Ltd,[1] this Court has said - now on several occasions - that -

The foreshadowed making of a bankruptcy order, by its effect upon the ability of an appellant to prosecute an appeal, and by its reputational impact, may have the effect of rendering the appeal nugatory and so constitute special circumstances justifying a stay on execution.[2]

This may be seen as an instance of what Young CJ referred to in Gellante v G Kallis Industries Pty Ltd[3], as "a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed."

12 The respondents have served a bankruptcy notice on Ms Li in respect of the judgment debt for the costs of the proceeding at trial. We were told that an unsuccessful application had already been made on her behalf to extend the time for compliance with that notice. An appeal from the refusal of that extension was due to be heard in the Federal Magistrates' Court the day after the hearing of the present applications.

13 When asked why it was necessary for the respondents to take this step at this time, counsel for the respondents said that their concern was to establish an act of bankruptcy by Ms Li (which would be constituted by her non-compliance with the bankruptcy notice) at the earliest opportunity, for the purposes of the "relation back" provisions of the Bankruptcy Act. In the course of the hearing, Ashley JA enquired whether the respondents would be prepared to give an undertaking that, once an act of bankruptcy was committed, they would not proceed with a creditor's petition until the appeal had been heard and determined. On instructions, counsel indicated that such an undertaking would be given but on the condition that Ms Li abandoned her attempts to extend the time for compliance with the bankruptcy notice. The court indicated that a conditional undertaking of that kind was not acceptable.

14 That remains our view. Consistently with the approach of this Court in recent times, we would regard the prospect of a sequestration order against Ms Li as constituting special circumstances which would justify a stay of execution. We would refrain from granting a stay only if the respondents were prepared to undertake that, once an act of bankruptcy had been committed, they would not proceed with a creditor's petition pending the hearing and determination of Ms Li's appeal. The necessity for the undertaking seems to us to be reinforced by the fact that Ms Li will over the forthcoming months be having to obtain the additional funds required to meet the security order. Were she to be made bankrupt in the meantime, that would almost certainly destroy her ability to raise any additional funds.

[1] [2008] VSCA 195.

[2] Ibid [21] citing Orrong Strategies Pty Ltd v Village Roadshow Limited [2007] VSCA 320; see also Chen v Chan (Unreported, Supreme Court of Victoria, Court of Appeal, Maxwell P & Dodds-Streeton JA, 21 December 2007).

[3] [1991] VicRp 99; [1991] 2 VR 653, 657.