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[2008] VSCA 122
Court of Appeal (Vic)
2008-06-26
REDLICH and DODDS-STREETON JJA
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Stay - Application for stay of orders that caveats be removed and restraining lodgement of further caveats pending determination of appeal - Respondent mortgagee's sale of land scheduled to settle - No undertaking as to damages - Whether success on appeal rendered nugatory - Whether arguable grounds of appeal - Whether special circumstances - Application refused.
PRACTICE AND PROCEDURE - Injunction - Whether serious question to be tried - Injunction refused.
PRACTICE AND PROCEDURE - Application for security for costs of appeal - Appellants' probable inability to pay costs of appeal - Whether applicant's cost estimates for employee solicitor exceeded indemnity, precluded by definition of 'legal costs' in s 1.2.1(1) of the Legal Profession Act 2004 (Vic) or otherwise excessive - Application granted.
1 I have had the advantage of reading in draft the reasons of Dodds-Streeton JA. I would make the orders she proposes in each application for the reasons she has given.
2 In this proceeding, two related summonses were heard together. By the first summons, the applicants sought, inter alia, a stay of orders that their caveats be removed from the title to land in West Melbourne, pending the hearing and determination of their appeal from the orders. They also sought to restrain the mortgagee's sale of the land pursuant to a contract of sale due to settle in September 2008.
3 By the second summons, the mortgagee of the land sought security for the costs of the appeal.
4 The first applicant, Dennis Maher, and the second applicant, Elizabeth Maher, by a summons filed 5 May 2008 seek:
The first applicant appeared principally in person, initially on his own behalf and ultimately also on behalf of the second applicant, in the circumstances set out below.
The first respondent is the Commonwealth Bank of Australia ('CBA'). The second respondent, the Registrar of Titles, did not appear or make submissions.
5 The hearing of the application was originally listed for 30 May 2008. On that day, counsel for the first applicant sought an adjournment on the ground that he had been briefed only on the previous day and had not had an opportunity to read the papers. Counsel declined an offer to stand the matter down until the afternoon, on the ground that he was briefed only to seek an adjournment and would be unable to make submissions that day. We adjourned the hearing of the applicants' summons to 13 June 2008 and, with the consent of the parties, fixed it to be heard with the CBA's related summons seeking an order that the applicants pay security for the costs of the appeal. We ordered the first applicant to file and serve written submissions by 6 June 2008. The first applicant did not comply with that order.
6 On 13 June 2008, the first applicant was represented by different counsel, who sought an adjournment of the applications on the basis of matters contained in the affidavit of the first applicant sworn 13 June 2008.
7 The first applicant there deposed that, on 30 May 2008, his previous counsel requested certain documents, including an affidavit sworn 15 April 2008, which the first applicant faxed to him on 2 June 2008. The first applicant deposed that, on 4 June 2008, he travelled to Adelaide for a family celebration. His solicitor advised him on the afternoon of 6 June 2008 that counsel had withdrawn, as he did not have all the papers. On 11 June 2008, having returned to Melbourne, the first applicant requested his solicitor to brief new counsel to seek a short adjournment, which was done at 4pm on 12 June 2008.
8 Before us, counsel for the first applicant confirmed that he had been briefed at about 4.30pm on 12 June 2008, only to seek an adjournment, and was unable to appear in relation to the substantive applications.
9 The material in support of the second application for an adjournment was, even when supplemented by explanation from the bar table, inadequate. It did not state why no timely steps were taken after 6 June 2006 to brief alternative counsel to represent the applicants in the substantive applications. The missing document, which apparently caused the first applicant's original counsel to return the brief, was not identified. As there was no adequate explanation for the repetition of an application for an adjournment, we initially refused the application and the first applicant, who is not legally qualified, proceeded in person before us for some time. Although the principal affidavits, notice of appeal and summons stated that they were prepared by the first applicant, he informed us that they were in fact prepared by other persons and he was insufficiently familiar with the contents to put his case adequately. The first applicant renewed the application for an adjournment to enable him to retain counsel. We ultimately granted a short adjournment to 18 June 2008 for that purpose.
10 On 18 June 2008, the first applicant again appeared in person. No explanation was advanced for the failure to retain counsel.
11 The applicant stated that he also represented the second applicant, his wife, who was party to both the appeal and the summons filed 5 May 2008, and was aware of the hearing. The position of Mrs Maher had hitherto been uncertain, as she was not named in the notice of appeal or the summons filed 5 May 2008 apparently drawn by the first applicant.
12 At the conclusion of the hearing on 18 June 2008, the first applicant was given leave to file and serve written submissions, which were received on 25 June 2008.
13 The applicants appeal from the orders of a judge of the trial division made on 1 April 2008 that:
14 On 2 April 2008, the trial judge also ordered that the applicants pay the CBA's costs on an indemnity basis.
15 The applicants, by their summons, in substance seek: (a) a stay of execution of the judgment (including the order that the caveats be removed, the order restraining the lodgement of further caveats and the costs order) pending the hearing and determination of appeal; and (b) an injunction restraining the CBA, any prospective purchaser of the land and the Registrar of Titles from lodging dealings and instruments affecting the land.
16 The application for a stay is opposed by the CBA.
17 Rule 64.25 provides:
Stay of execution [Supreme Court Only]
64.25 Except so far as the Court of Appeal or a Judge otherwise orders -
(a) an appeal shall not operate as a stay of execution or of proceedings under the decision appealed from;
(b) no intermediate act or step shall be invalidated.
18 Rule 66.16 provides:
19 The principles governing a stay of execution of judgment pending the hearing and determination of an appeal are well established.
20 Prima facie, a successful party is entitled to the benefit of the judgment obtained below and the presumption that the judgment is correct. The applicant for a stay therefore bears the onus of demonstrating that a stay is justified.
...where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party.
22 Young CJ concluded that an applicant for a stay under Rule 66.16 must show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay.
23 The Court has a wide discretion, which is not circumscribed by rigid rules. It should take into account all the circumstances of the case.
24 In Scarborough's v Lew's Junction Stores Pty Ltd[4] (approved in Cellante), Adam J recognized that special circumstances might exist where a successful appellant would be deprived of the fruits of the appeal if a stay of execution were not granted. In such a case, the appeal might be rendered nugatory.
25 In Cellante, Young CJ stated that special circumstances would 'exist where for whatever reason, there is 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'.[5]
26 An appeal could be rendered nugatory in that sense in a variety of ways. The test could be satisfied where a defendant appeals and there is a real risk that the plaintiff would remove the proceeds of the judgment from the jurisdiction. Similarly, special circumstances may be recognised where, for example, although the respondent is solvent, the subject matter of the appeal is, in substance, irreplaceable.
27 The prospect that the appeal may be rendered nugatory must be balanced against the principle that the successful party is entitled to the fruits of the judgment. A stay should not be granted unless there is at least an arguable ground of appeal, although otherwise speculation as to the ultimate prospects of success is usually inappropriate.
28 As appears from the reasons for judgment and the affidavits filed in relation to the applications, the CBA advanced funds to one Malvyn Taylor, the registered proprietor of the land situated at 384 Spencer Street, West Melbourne (more particularly described in Certificate of Title Vol 0894, Folio 872) ('the land').
29 The CBA's advance of funds to Mr Taylor was secured by a registered first mortgage dated 14 May 1997 ('the mortgage'). Mr Taylor defaulted in payment on about 25 May 1998 and remained in default thereafter.
30 The first applicant lodged a caveat ('the first caveat') on the title to the land on 12 January 2001, claiming an equitable interest as a lessee for a period of 15 years, pursuant to a lease dated 15 March 1995.
31 The second applicant lodged a caveat ('the second caveat') claiming an estate in fee simple in the land pursuant to a contract of sale dated 18 December 1999 between Malvyn Taylor as vendor and Elizabeth Maher as purchaser.
32 The CBA, in proceeding 6023 of 2005, on 17 May 2007 obtained a default judgment against Mr Taylor for recovery of the land and a debt of $458,761. On 12 September 2007, Warren CJ granted Mr Taylor leave to defend as to part of the debt and interest in the sum of $114,767 and the order for payment of the debt was subsequently varied. The CBA recovered possession of the land by the execution of a warrant of possession on or about 29 January 2008.
33 The first applicant lodged two further caveats on 4 February 2008. The third caveat claimed an estate in fee simple by virtue of a deed of trust dated 16 November 2007 between the first applicant and the registered proprietor. The fourth caveat claimed an estate in fee simple pursuant to a contract of sale dated 16 November 2007 between the registered proprietor and the first applicant.
34 The applicants did not comply with the CBA's requests in February 2008 that the caveats be withdrawn.
35 The CBA applied, by a summons filed 5 March 2008, for the removal of the caveats pursuant to s 90(3) of the Transfer of Land Act 1958 ('Transfer of Land Act').
36 The trial judge, in accordance with Dennis Hanger Pty Ltd v Brown,[6] stated that: (a) the caveator bore the onus of establishing a serious question to be tried as to the existence of the claimed interest, and (b) if the interest were established, the Court would ordinarily not order the removal of the caveat on the basis of affidavit evidence, unless the balance of convenience favoured it.
(a) there was no evidentiary material before him in relation to the first caveat and the first applicant was, moreover, an undischarged bankrupt at the date of the claim, whose interest, if it existed, would have vested in the trustee in bankruptcy.
(b) the first applicant had filed no affidavit evidence of the interest alleged to support the second caveat. No copy documents tendered by the first applicant supported the second caveat;
(c) the deed of variation of trust purporting to appoint the first applicant as trustee of an alleged Maher family trust (under the terms of which Taylor purported to hold one half of the property on trust for the second applicant) referred to the same interest relied on to support caveats previously removed by the order of Beach J, and constituted an attempt to renew those caveats in respect of the same interest, contrary to s 91(4) of the Transfer of Land Act;
(d) there was no evidence to support the alleged interest supporting the fourth caveat, which post-dated the CBA's mortgage, was not consented to by the mortgagee and was inconsistent with the interest claimed in the second caveat.
38 His Honour concluded that, in respect of each caveat, the applicants had failed to raise serious questions to be tried. They also faced the problem of the priority accorded to the registered mortgagee. The balance of convenience also favoured the removal of the caveats, as they posed an impediment to the effective marketing of the property and the applicants were apparently impecunious.
39 His Honour concluded that all four caveats should be removed. He also granted an injunction restraining the applicants from lodging further caveats.
40 In relation to the applicants' argument that the CBA could no longer exercise its rights under the mortgage because those rights had merged in the judgment for possession obtained in the matter of Commonwealth Bank of Australia v Taylor (No 2),[7] his Honour stated:
The argument misunderstands the nature of the doctrine of merger. The effect of the judgment however did not affect the existence of any cause of action based on the other rights conferred by the mortgage, in particular the right of sale.
41 His Honour ordered costs against the applicants on an indemnity basis, as there was 'an abject failure to support the caveats', despite an ample opportunity to do so, and no 'bona fide defence of the caveats'.
42 Following the judgment, the caveats were removed.
43 In the exercise of its power of sale and pursuant to s 77 of the Transfer of Land Act, the CBA, on 3 April 2008, entered a contract of sale of the land for $550,000 ('the contract of sale'). Settlement under the contract of sale was originally scheduled for 2 June 2008, but was subsequently extended to 1 September 2008. Mr Dewar, a solicitor employed by the CBA, deposed that if the settlement does not take place, the purchaser would be entitled to rescind the contract of sale. The CBA would be at risk of loss of the deposit and an action for damages.
44 By a notice of appeal dated 15 April 2008, the applicants appeal against the judgment of the trial judge on the following grounds:
- His Honour erred in finding it unnecessary to determine whether [the CBA] had the requisite locus standi to bring these proceedings in the circumstances of [the CBA] having already issued proceedings and obtained judgment upon an earlier Notice to Pay under the terms of same Mortgage relied on in these proceedings and in the earlier proceedings sought neither an order for sale or removal of caveats before sale.
2. His Honour erred in finding that the Mortgage terms relied on by [the CBA] to establish locus standi and priority had not merged with the judgment delivered on the Mortgage and an earlier Notice to Pay on 12 September 2007 in Supreme Court proceedings 6023 of 2005, by reason of the doctrine of merger in judgment.
3. His Honour erred in finding that the registration on the Certificate of Title of the Mortgage of [the CBA] was supported by a legal mortgage that had not been exhausted or rendered incapable of giving rise to new causes of action after judgment was delivered in Supreme Court proceedings 6023 of 2005.
4. His Honour erred in finding that it was not relevant to his determination of the locus standi of [the CBA] to determine whether [the CBA] could certify the sum due under its mortgage after the Supreme Court in proceedings 6023 of 2005 had reserved that question to itself.
5. His Honour erred in the exercise of his discretion as to costs to award indemnity costs in that:
(i) there were no special circumstances that would justify an award that the [appellants] pay the indemnity costs of [the CBA];
(ii) there was no affidavit evidence before his Honour in support of an award of indemnity costs;
(iii) in the circumstances of [the CBA] being self represented by employees in the preparation of an instructing upon the Summons and Motion the Order for costs to be taxed in default of agreement will give rise to confusion on the question of whether the services provided by the employee were specially remunerated and whether the employee is remitting GST for such remuneration;
(iv) There were circumstances that would tend against the making of an indemnity cost order and his Honour failed to take those circumstances into account; namely:
(a) [the CBA] had the opportunity to use an alternate, almost no cost procedure under the Transfer of Land Act to remove the subject caveats but declined to use that process;
(b) [the CBA] had the opportunity to seek a judicial Order for Sale free of encumbrances consequent upon the possession Order sought in proceeding 6023 of 2005 but elected not to do so and on one view may now be estopped from bringing further actions to remove caveats;
(c) the [appellants] are elderly pensioners who were partially represented.
45 By an affidavit in support of the appeal sworn 15 April 2008, the first applicant referred to the caveats, and stated that:
My defence includes that one half of the property was held on constructive trust for a third party.
The Commonwealth Bank of Australia were aware at the time of entering the mortgage that there were a bona fide one half interest or the property by Mrs E J Maher.
The Commonwealth Bank is estopped from claiming our equitable interests via the caveats X2T9390U, X810582T, AF626606G and AF626605J and by bypassing the decision of her Honour Warren CJ's order made 12 September created on doctrine of merger.
46 The affidavit asserted that 'the appeal is meritorious' and 'my rights will be severely prejudiced if the matter is not heard and determined pursuant to Doctrine of Merger submissions as outlined before Justice Smith on 1 and 2 April 2008.'
47 By an affidavit in support of notice of appeal sworn 17 April 2008, the first applicant deposed to a resulting trust pursuant to a deed of trust, 'a declaration of trust made by the registered proprietor at the time he took a transfer of land and took a payment from the Maher Family Trust of $112,000 to purchase the land in 1995' and 'a Transfer of the portion held on trust by the registered proprietor to the current Trustee of the Maher Family Trust'.
I believe the Commonwealth Bank had no locus standi to bring the summons and originating motion below ...
...by reference to the fact that in 2005 the Commonwealth Bank had issued writ 6023 of 2005. The cause of action in that writ was that the registered proprietor of the land that is the subject of the Originating Motion below, had failed to comply with a Notice to Pay served as a consequence of its contractual rights under a mortgage registered on the land. The remedy sought in that writ by the Commonwealth Bank was possession of the land and a declaration of the debt due under the Mortgage. On 12 September 2005 judgment for possession was given to the Commonwealth Bank. In the same judgment the question of how much was due under the mortgage was not decided and was adjourned, giving leave to the registered proprietor to defend a significant portion of the sum claimed by the Commonwealth Bank.
It was my belief that the effect of the judgment was to exhaust the Commonwealth Bank's contractual rights under the registered Mortgage and I found support for my belief in the doctrine of merger in judgments.
49 By a further affidavit sworn 6 May 2008 in support of the application, the first applicant deposed the following:
(a) that when the CBA applied to remove the caveats, it was in possession of the land pursuant to an order for possession obtained in the proceeding against Mr Taylor based on a default of a Notice to Pay served in 2005;
(b) the grounds for the service of the Notice to Pay (that is, the existence and terms of a mortgage) were pleaded in the same writ (Writ number 6023 of 2005);
(c) the CBA 'accepted the benefit of the judgment in proceeding number 6023 of 2005, but ignored the limitation of the judgment. Its employee purported to be able to issue a new Notice to Pay in 2008, irrespective of the Supreme Court reserving to itself the question of how much was owed under the mortgage.'
50 The first applicant deposed to his submissions made before the trial judge and his Honour's rejection thereof.
51 In his affidavit, the first applicant alleged that the CBA committed contempt of orders of Warren CJ made in Proceeding 6023 on 12 September 2007 by purporting to rely on a new notice to pay before the amount due under the mortgage was considered by the Court.
52 The first applicant further deposed that the CBA purported to sell the land for $560,000 and claimed a total of $660,000, of which about one third was legal fees, although the CBA had 'never engaged an independent law firm'.
53 Before us, the first applicant did not dispute that the Court of Appeal on 30 November 2007 ordered that the CBA recover possession of the land and, although the registered proprietor had sought special leave to appeal to the High Court, his application currently stood abandoned, subject to his payment of costs on or before 30 June 2008.
54 It appeared that the first applicant did not dispute that the CBA had a mortgage entitling it to a payment of approximately $410,000. Rather, he contended that, in addition to the alleged effects of merger, Warren CJ's orders made on 12 September 2007 prevented the CBA from demanding a greater sum. He also argued that the CBA's sale of the land for $550,000 pursuant to notices to pay claiming $660,000 would prejudice the applicants, by permitting the CBA to absorb the entire proceeds of sale, including the excess over the sum said to be fixed on 12 September 2007, to which the applicants were entitled.
55 The applicants did not offer any undertaking as to damages in relation to the stay.
56 The affidavit sworn by the first applicant on 6 May 2008 contained the following assertions specifically directed towards a stay:
If the [CBA] can establish its claim it is already facing a loss so the delay that may be caused by waiting until the Appeal is heard will not have any significant impact.
The prejudice to me is greater than any prejudice the [CBA] may suffer.
For good reason, for the protection of the purchaser, the determination about whether the sale was valid and can support a section 78 TLA Transfer (a T2) ought to be determined before the purchaser incurs the expense of borrowing moneys and paying the balance purchase price.
57 Before us, the first applicant contended that the stay would occasion no prejudice to the CBA because the appeal was straightforward, would take no more than a day and could be heard and determined prior to the extended date of settlement of the contract of sale in September 2008.
58 The first applicant also argued that a stay was justified because the CBA had taken over the property in disregard of his rights. The appeal would be rendered nugatory without a stay, he said, as the CBA might not sell the land for its true market value and could appropriate the surplus funds to which he was entitled. The first applicant nevertheless informed the Court that he did not intend to lodge fresh caveats if a stay were granted.
59 The gravamen of the applicants' argument on appeal, as expressed in the material filed and the first applicant's oral and written submissions, was thus that the CBA lacked standing to remove the caveats, because, having once served a notice to pay under the mortgage (on which it obtained judgment for possession in proceeding number 6023) it was subsequently disentitled, by the doctrine of merger, from serving a further notice to pay or from selling the property.
60 The first applicant apparently contended that the doctrine of merger operated to destroy the CBA's first registered mortgage once judgment for possession in Proceeding 6023 was entered. Henceforth, it had only an unregistered interest in the relevant land, which precluded it from selling the land, or from selling it free of caveated interests.
61 As the trial judge observed, that argument is based on a fundamental misconception of the doctrine of merger. The cause of action against Mr Taylor related to debt and possession under a mortgage. The second cause of action related to removal of caveats lodged by a third party, albeit in relation to the same property.
62 In addition to the argument based on locus standi, the first applicant argued that the CBA was not entitled to sell the land by reason of the judgment for possession. That argument also assumed that the judgment for possession extinguished the registered mortgage and precluded reliance on s 76 of the Transfer of Land Act and the service of further notices to pay under the mortgage.
63 Ultimately, as I understood the position, the first applicant accepted that the CBA had an interest in the land but contended that it was limited to a maximum value of $410,000 by virtue of the order of Warren CJ, and that the applicants were entitled, under their claimed interests, to any surplus proceeds of sale.
64 The validity of notices to pay and the power of sale, and the extent of the CBA's entitlement to the proceeds of sale of the land, are distinct issues from, and not directly relevant to, the question of locus standi to apply to remove a caveat under s 90(3), which states that 'any person who is adversely affected by any such caveat may bring proceedings in the Court against the caveator for the removal of the caveat ... '
65 On any view, the CBA as mortgagee has an interest in the land, and could be adversely affected by the caveats, irrespective of whether it is entitled to sell the land pursuant to the contract of sale. The entitlement to sell, validity of the sale and the priority to be accorded competing interests would be relevant, if at all, to whether there were special circumstances justifying a stay. At one stage the applicants appeared to contend that their interests under the caveats would, in any event, prevail over the interest of the CBA and any purchaser therefrom. If such an argument were correct, it would mean that a stay would be unnecessary to preserve the applicants' proprietary interests in the event of their success on appeal.
66 The applicants have not instituted a proceeding in which they seek orders enjoining the sale of the land and such relief should not be sought obliquely in the context of an appeal against an order for the removal of the caveats. The applicants' arguments in relation to the invalidity of the sale are, in my opinion, misconceived in any event, and have minimal prospects of success.
67 As the caveats have already been removed, the application for a stay is futile, save to the extent that a stay might permit the applicants to lodge fresh caveats.
68 The affidavit material on which the applicants relied dealt principally with standing and misconceived legal arguments based on merger. The notice of appeal did not appear to challenge the trial judge's finding that the applicants adduced no, or no credible, evidence below in support of their alleged and, to some extent, mutually inconsistent, interests in the land, on which the caveats were based. When we raised that issue with the first applicant, he foreshadowed an application for leave to amend the notice of appeal.
69 In my view, the applicants' case on appeal appears unclear, inconsistent and unarguable. Its weakness is not, however, the sole factor relevant to the question of whether a stay should be granted. A stay would also entail prejudice to the CBA, which is party to the contract of sale originally scheduled to settle in June 2008 and now scheduled to settle in September 2008. There is no possibility that the appeal could be heard and determined prior to September 2008. The contract of sale may be rescinded and give rise to liability for damages in the event of a stay, for which the applicants offer no undertaking or other protection. Further, the applicants' material did not suggest that the claimed interests in land were of special value to them and, as I understood their case, they do not seek a stay in order to lodge fresh caveats on the land and preserve specific interests therein. Rather, a principal concern was the protection of their alleged entitlement to a proportion of the proceeds of sale, which would be compensable by an award of damages. There was nothing to suggest that the CBA would be unable to satisfy any award of damages which may be made against it.
70 The applicants also seek a stay of the order that they pay the CBA's costs on an indemnity basis. The trial judge justified that order on the basis that the applicants had not adduced evidence of the claimed interests or made any bona fide defence.
71 There is no evidence to suggest that the CBA would be unable to repay any costs it should receive pursuant to the order. The history of litigation in which the applicants have failed to satisfy costs orders (to which Mr Dewar deposed) indicates that the satisfaction of the costs order may be, in any event, unlikely.
72 In my opinion, no exceptional or special circumstances favouring the grant of a stay of execution of any of the orders made on 1 and 2 April 2008 have been established.
73 The applicants also seek an injunction restraining the registration of dealings in relation to the land against the CBA, the Registrar of Titles and a party or parties identified only as 'any prospective purchaser'.
74 The applicants have not issued a relevant proceeding. While the full basis of the underlying claim is unclear, the materials filed and the submissions made do not, in my opinion, establish a serious question to be tried.
75 In my opinion, the application for the injunction should be refused.
76 All applications made by the applicants' summons filed on 5 May 2008 should be refused.
CBA's application for security for costs of the appeal
78 Rule 64.24(2) of the Supreme Court Rules provides:
The Court of Appeal may in special circumstances make an order that security be given for the costs of an appeal.
79 In Rowan v Australian Associated Motor Insurers Ltd,[8] Fullagar J (with whom Marks J concurred) stated:
I do not think that this court should or even could lay down in advance what does or does not constitute special circumstances, and I think that the scope of the rule is of the character indicated by Rich J in King v Commercial Bank of Aust [1920] HCA 62; (1920) 28 CLR 289 at 292, where his Honour said of s 35 of the High Court Procedure Act, "No rules can be formulated in advance by any judge as to how the discretion shall be exercised. It depends entirely on the circumstances of each particular case".
80 In Equity Access Ltd v Westpac Banking Corporation,[9] the following matters were identified as relevant to the exercise of the discretion:
b. the quantum of risk that a costs order would not be satisfied;
c. whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim;
d. whether any impecuniosity of the appellant arises out of the conduct complained of;
e. whether there are other aspects of public interest which weigh in the balance against such an order; and
f. whether there are any particular discretionary matters peculiar to the circumstances of the case.
81 The probable inability of an appellant to pay the respondent's costs should an appeal be unsuccessful has been held to constitute 'special circumstances' which will justify an order under Rule 64.24(2) that the appellant give security for the costs of the respondent.[10] In Mobilia v Voudiotis ('Mobilia'),[11] Batt JA (with whom Eames JA agreed) stated:
The Court's discretionary power to order that security for costs be given for the costs of an appeal is conditioned in r 64.24(2) upon there being "special circumstances". The probable inability of an appellant to meet an order for the respondent's costs of an appeal is a special circumstance: Scerri v Northam Holdings Pty Ltd. Such probability is amply established here ... The Court's discretion is therefore enlivened....
82 Mr Dewar, a solicitor employed by the CBA, in the office of A J Mullumby, Solicitor, Victoria (the solicitor for the CBA) deposed to a number of proceedings in which costs have been ordered against the first applicant, but remain unpaid. In Federal Court Proceeding VID204 of 2001, an order for costs (taxed on 24 July 2006 in the sum of $57,603) against the first applicant has not been paid, and all avenues of appeal are exhausted. The first applicant made an unsuccessful application in the Federal Magistrates Court to set aside a Bankruptcy Notice filed by the CBA in relation to those costs. An appeal in that matter stands dismissed, due to the first applicant's failure to provide security for costs by 14 March 2005.
83 Mr Dewar deposed to various other proceedings involving the first applicant, including a Federal Magistrates Court proceeding concerning a creditors' petition against him, in which he failed to comply with orders that he file an affidavit as to his financial circumstances and refused, on 7 June 2007, to submit to cross-examination as to his financial circumstances. Further, the first applicant sought leave to file a draft proposed Further Amended Statement of Claim in a County Court proceeding, which refers to his bankruptcy from 1991 to 1999, his unemployment from 1991 onwards, his receipt of an aged pension since 2006 and his inability to afford full legal representation in various proceedings. Mr Dewar also deposed to a further Bankruptcy Notice the CBA served on the first applicant on 19 December 2007, the dismissal of the first applicant's application to set it aside and the first applicant's subsequent application to set aside the order dismissing the application.
84 Mr Dewar deposed to a number of other costs orders made against the first applicant in various proceedings, which have not been satisfied.
85 In particular, a creditors' petition against the first applicant has been extended and remains to be determined, while the first applicant has sought leave to appeal against a related costs order. Mr Dewar deposed that his inquiries indicated that real property owned by the first applicant is encumbered. He observed that, according to one of the caveats, the first applicant held his alleged interest as a trustee.
86 Mr Dewar further deposed to the caveat previously lodged on the land by the second applicant, which Beach J ordered to be removed in 2000. the second applicant was ordered to pay costs of over $14,000 in relation to that matter, which were not paid. Further, Mr Dewar's enquiries indicated that real property held in the second applicant's name was encumbered.
87 He deposed to his belief that the applicants joined together with Mr Taylor to frustrate the CBA's sale of the property and that their appeal is unmeritorious.
88 Mr Dewar also deposed to his belief that the first applicant would be unable to satisfy an order for the CBA's costs of the appeal, estimated by a costs consultant, Ms Smyth, at $20,724. He deposed that he had received no response to letters to the applicants dated 12 May 2008 requesting security for costs.
89 Mr Dewar deposed to a Federal Court proceeding in which the first applicant sued the CBA and others, claiming entitlement to possession of the land under a lease from Mr Taylor, unlawful interference by the CBA with the land and a wrongful proposal by the CBA to sell the land. The CBA counterclaimed for possession. On 2 February 2004, Finkelstein J dismissed the first applicant's claim and on 5 February 2008 ordered that the CBA recover possession of the land.
90 By an affidavit sworn 29 May 2008, the first applicant deposed that the affidavit of the costs consultant, Ms Smyth, was not served on him. He further deposed that the CBA was 'a self-represented litigant', using the services of a corporate legal practitioner, apparently in support of a contention that the CBA was not entitled to claim security for costs. He also relied, in that context, on the definition of 'legal costs' in s 1.2.1(1) of the Legal Profession Act 2004, which states:
...legal costs means amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest.
91 The first applicant complained that the CBA's costs estimates included an unjustifiable component of GST. He also deposed that he had responded to Mr Dewar's letter seeking security for costs, and exhibited a copy of his reply, which asserted that, as Mr Dewar was an employee of the CBA, its legal costs did not extend to his work. The letter also complained that the CBA's claimed legal costs of the appeal were excessive and unreasonable.
92 Before us, the first applicant amplified his assertion that the costs should not be awarded in relation to the work of an employee solicitor on the basis of the indemnity principle expressed in Cachia v Hanes[12] and the definition of 'legal costs' in the Legal Profession Act 2004.
93 In written submissions filed on 25 June 2008, the applicants amplified their arguments that the provisions of the Legal Profession Act 2004 precluded the billing of the CBA for the provision of legal services by its employee solicitor (either directly or through the law practice of A J Mullumby), in support of an contention that there was no relevant evidence of the quantum of the CBA's costs of the appeal.
94 The first applicant sought leave to cross-examine the costs consultant, Ms Smyth, in relation to the definition of legal costs and whether her cost estimates applied to an employee solicitor.
95 Ms Smyth's affidavit stated a belief that Mr Dewar had the conduct of the matter on behalf of the CBA and it may be inferred that her relevant costs estimates were referable to work to be performed by him. The first applicant's proposed cross-examination otherwise related to legal principles. We refused leave to cross-examine.
96 The first applicant's assertion that the legal work of an employee of the CBA may not be charged for and taxed on the same basis as that of an independent solicitor performing comparable work do not appear soundly based. Section 24 of the Supreme Court Act 1986, the source of the Court's power to award costs, relevantly states:
(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
97 That power has been construed in accordance with the established principle that a solicitor who practices as an employee of the Crown, a statutory authority or a corporation, is entitled to have his or her work taxed on the same basis as that of an independent solicitor exercising comparable skills in the performance of comparable work.
98 The principle recognised in Cachia v Hanes[13] that costs are ordinarily awarded as an indemnity for costs actually incurred is flexible and has co-existed with the recognition that costs for the services of an employee solicitor could be allowed on a basis comparable to the costs which would have been incurred and allowed on taxation for an independent solicitor.
99 In Blackall v Trotter,[14] the Full Court of the Supreme Court of Victoria rejected the view that costs would not be awarded to a successful party if that party were not liable for costs because it was represented by an employee or a person it was otherwise not obliged to pay.
100 That approach has been consistently confirmed by recent Australian and English authority.[15]
102 In Commonwealth Bank of Australia v Hattersley[18] ('Hattersley'), Davies AJ acknowledged that some authorities disregarded the possibility that an assessment on the usual basis might result in a profit, as the indemnity principle could be 'carried too far' and must be reasonably understood and applied, whereas other authorities held that a party objecting to the allowance of the usual costs could be permitted to prove that it would exceed an indemnity.
103 Davies AJ considered that that courts should be slow to embark on the exercise of determining whether a costs order for employee solicitors included an element of profit, as the expense of such calculations could prove unjustifiable.
104 A contention that the definition of 'legal costs' in the Legal Profession Act 2004 operates to modify the power to award 'costs' in the Supreme Court Act 1986 or to exclude the principle that a party may recover costs for the work of an employee solicitor appears unpersuasive. Although the Supreme Court's power and discretion to award costs under the Supreme Court Act 1986 may be expressly excluded by another instrument, the definition of 'legal costs' in the Legal Profession Act 2004 does not, in my opinion, have that effect.
105 Sub-section 1.2.1(1) of the Legal Profession Act 2004, which contains the definition of 'legal costs' commences with 'In this Act...'. It appears to limit the definition to the context of the Legal Profession Act 2004 and does not indicate an intention to restrict the Court's power to make costs orders or to define what may constitute costs the subject of that power.
106 It is, in any event, unnecessary for the purposes of this application to determine the question of the effect, if any, of the definition of 'legal costs' or other provisions of the Legal Profession Act 2004 on the traditional principle expressed in Hattersley, or the extent to which the costs estimated by Ms Smyth for the CBA's employee solicitor might exceed a strict indemnity.
107 It is clear that the CBA has incurred, and necessarily will incur, disbursements and counsel's fees in relation to the appeal even if it uses, and continues to use, the services of an employee solicitor. There is no cogent evidence to suggest that Ms Smyth's estimation of its costs of the appeal is excessive. The quantum of any security for such costs is, however, a matter within the discretion of the Court.
108 By a second affidavit sworn 29 May 2008, the first applicant asserted that his failure to receive Ms Smyth's affidavit within the time prescribed by the Rules was due to Mr Dewar's withholding information as 'a delaying tactic' and, in consequence, Ms Smyth's affidavit and Mr Dewar's affidavits of 21 May and 27 May 2008 were inadmissible. The late service of Ms Smyth's affidavit, if established, is a minor procedural matter. Given the adjournments granted to the first applicant, it can have had no substantive effect.
109 The evidence of the applicants' asset position and financial circumstances demonstrates their probable inability to satisfy any order for costs which may be made against them. The history of failure to satisfy many successive costs orders fortifies that conclusion. Their case on appeal appears both weak and unmeritorious. The history of the litigation, including the applications for adjournment, justifies serious concerns as to the bona fides of the applicants' claim.
110 In my opinion, there are special circumstances which justify an order that the applicants should give security for the costs of the appeal.
[2] Ibid[1991] VicRp 99; , [1991] 2 VR 653, 655.
[3] Re Middle Harbour Investments (in liq) (Unreported, New South Wales Court of Appeal, Mahoney JA, 15 December 1976).
[5] Cellante and Ors v G Kallis Industries Pty Ltd [1991] VicRp 99; [1991] 2 VR 653, 657 (Young CJ).
[7] Commonwealth Bank of Australia (CBA) v Taylor (No 2) [2008] VSC 5.
[8] (Unreported, Supreme Court of Victoria, Full Court, Fullagar and Marks JJ, 16 December 1988).
[10] See Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSCA 66; [2004] 9 VR 382. The position is different in the High Court, the Federal Court and the New South Wales Supreme Court, where the Court places less emphasis on the impecuniosity of the appellant in considering whether to order security for the costs of the respondent (See Williams Civil Procedure, 164.24.80-162.4.85).
[15] In Commonwealth Bank of Australia v Hattersley [2001] NSWCA 60, Davies AJ said at [11]:
In a case where an employed solicitor is involved, the traditional approach has been to award costs on a bases comparable to the costs which would have been incurred and allowed on taxation had an independent solicitor been engaged. The assumption has been made that, in an ordinary case, the indemnity principle will not be infringed by taking this approach.
There is a point of principle behind the approach enunciated in all these cases. It is that employed solicitors are not to be treated as second-class professionals. Lawyers are entitled to practice in their profession in a number of ways, one of which is to be a legal officer in a corporation which engages in commercial activities...
Practitioners who choose to carry on their profession as an employee of the Crown, of a statutory authority or of a corporation are entitled to have their work assessed on the same basis as that of independent solicitors exercising comparable skills in the performance of comparable work. It is not the manner in which the practitioner carries on his or her profession which counts, it is the nature of the work, the time spent and the skill, care and responsibility involved.
His Honour followed English authority, including Re Eastwood, decd [1975] Ch 112 (in which, the Court of Appeal determined that the legal costs of an employee were recoverable as though they were the incurred by external solicitors) and London Scottish Benefit Society v Chorley (1884) 13 QBD 872.
In Bank of Western Australia Ltd v O'Neill (Unreported, Supreme Court of Western Australia, White J, 22 January 1999), White J followed that authority and summarised the relevant principles as follows:
[T]he proper method of taxation of a bill of costs in such a case [where the solicitor is an employee of the party] was to deal with it 'as though it were the bill of an independent solicitor, assessing accordingly the reasonable and fair amount of a discretionary item such as this, having regard to all the circumstances of the case.' It was held that that was a sensible and practical process providing an assurance that the costs so awarded are at a proper level equivalent to that which would apply by way of an indemnity in respect of the costs of independent solicitors. Speaking generally, there was no onus upon a party represented by its own legal department to produce figures to demonstrate that the cost actually incurred would equate with a figure properly attributable to the litigation which would be not less than the figure of reasonable costs to be allowed in the case of the use of an independent solicitor.
The Full Federal Court accepted Re Eastwood in Ly v Jenkins [2001] FCA 1640 at [160] stating:
So far as concerns claims for the reimbursement of the costs of actual legal services, the fact that they were provided by salaried legal staff of a corporation, and their assistants, does not prevent their recovery as costs in proceedings.
The proper method is to treat the bill of costs as if it were the bill of an independent solicitor, and assess whether it is reasonable and fair.
[16] Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154, [100].
[17] Commonwealth Bank of Australia v Hattersley [2001] NSWCA 60, [11].
Maher & Anor
Commonwealth Bank of Australia & Anor [2008] VSCA 122
(1920) 28 CLR 289
(1994) 179 CLR 403
(2001) 51 NSWLR 333