Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2010] VSCA 218

2 On 18 February 2010 Croft J gave judgment for the respondent and dismissed the appellant's claim. On 26 March 2010 the appellant filed a summons seeking leave to appeal out of time against the whole of the judgment and a subsequent order as to costs made on 12 March 2010. On 18 June 2010 this Court made orders extending the time for filing a notice of appeal until 25 June 2010. On that day the appellant filed a notice of appeal against the whole of the judgment and the costs orders.

3 On 30 June 2010 the respondent filed an application by summons in this Court seeking that the appellant's notice of appeal be struck out for inter alia failing to comply with Rule 64.05(1)(b) and that the appellant be required to provide security for the respondent's anticipated costs of the appeal in the amount of $63,000.00. The appellant then failed to file its notice of proposed contents of appeal book by 2 July 2010 in accordance with Rule 64.08(1). Consequently the appeal is currently deemed to be abandoned pursuant to Rule 64.16(1)(a) of the Supreme Court (General Civil Procedure) Rules. The appellant now seeks an order under Rule 64.16(2)(a) of the Rules that its appeal be reinstated. That application is opposed by the respondent.

4 The dispute between the appellant and the respondent arises out of the exercise of the right of re-entry by the respondent to premises leased by the appellant as a consequence of the non-payment of rent by the appellant. The re-entry terminated the lease. The appellant originally sought a declaration that the respondent was not entitled to exercise the right of re-entry for non-payment of rent without first serving a notice on the appellant as required by the lease. Byrne J determined the preliminary question in favour of the appellant. On appeal to this Court, that decision was reversed, it being determined that the respondent as landlord had a right of re-entry which could be exercised without complying with the notice provisions of the lease.

5 The primary issue at the trial which then followed was whether the respondent's exercise of its legal right to re-enter could be characterised as unconscionable, such as to give rise to an entitlement to equitable relief. The appellant claimed that the respondent's conduct in undertaking refurbishment works in the Waverley Gardens Shopping Centre in which the leased premises were located caused or materially contributed to the appellant's inability to pay the rent by affecting the flow of customers to the appellant's business. Croft J held that the appellant had failed to establish that the respondent had contributed to the appellant's financial circumstances and accordingly dismissed the appellant's claim and gave judgment for the respondent.

6 The Court's discretion to reinstate an appeal under 64.16.2(a) is as broad, wide and deep as the circumstances demand. As Tadgell J observed in Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd:[1]

If upon the material before it, the Court perceives that it would be unjust to an appellant that an appeal should be taken to be abandoned despite non-compliance with the relevant Rules, it may exercise a discretion in favour of the appellant. In considering where the justice of the case lies, the Court must weigh up the extent to which the appellant will be prejudiced to leaving the appeal to stand as though abandoned and any prejudice to the respondent to the appeal by ordering that it not be taken to be abandoned. This process thus calls for some consideration of the merits of the proposed appeal.

Ordinarily an appeal on foot should be allowed to run its course to hearing and determination unless it is so devoid of merit that it would be futile to extend time.[2]

7 In a case in which it is concluded that the prospects of success appear to be poor and the appellant is impecunious the fact that the respondent to the appeal will be required to give security for costs may also be a relevant consideration.

8 The solicitor for the appellant has deposed by affidavit that the failure to file a notice of proposed contents of appeal book within the prescribed time was the result of oversight on his part. The appellant thus admits that it should not be shut out of its appeal because of its solicitor's negligence.

9 The respondent opposes the reinstatement application for three reasons. Firstly, the respondent submits that the appellant's appeal is hopeless. That submission cannot be sustained.

10 The first ground of appeal in the appellant's notice of appeal is that his Honour erred in failing to find that the respondent's conduct of undertaking refurbishment works had caused or materially contributed to its poor financial position with the consequence that the appellant was unable to pay the rent due under the lease. On the first application for an extension of time on 18 June 2010, Ashley JA and Emerton AJA in their joint reasons stated that:

The matter is sufficiently cloudy at least on the facts, if not the law, as to make it proper that there be a ventilation of the issues by an appeal.

11 In the event that the Court hearing the appeal concluded that it should have been found that the respondent had contributed to the appellant's financial position, the question would arise whether the appellant was entitled to equitable relief. Counsel for the respondent, Mr Styring, contended that the appellant has failed to demonstrate how unconscionability by reference to any well developed principle of equity would be engaged. He further submitted, in an attractively formulated argument, that even if the appellant was entitled to a general compensatory remedy, the appellant by the admission of its Director did not have a viable business at the time the respondent went into possession, hence, it had no financial position which should be restored.

12 The present hearing does not permit anything more than a superficial consideration of the appellant's prospects of establishing that his Honour erred in his findings of fact and that the conduct of the respondent contributed to the appellant's circumstances such as to give rise to equitable relief or that the appellant was entitled to compensation in equity. Notwithstanding the difficulties identified by the respondent, we cannot say that the appeal is so lacking in merit as to constitute the exceptional circumstances which would warrant this Court refusing an application to reinstate. The appellant should not on that ground be denied the opportunity to have its appeal determined after a full hearing.

13 Secondly the respondent submitted it would be pointless for the Court to reinstate the appeal as in the event that the respondent's application for security of costs is granted, which the respondent submitted was inevitable, the appellant has conceded that it will be financially unable to continue with the appeal. We would reject that submission. Were security for costs to be ordered and the appellant unable to comply with such an order, the consequence would be that the appeal would be stayed. But the potential inability of the appellant to make security is not germane to the antecedent question whether the appeal should be reinstated.

14 Finally the respondent submits that sufficient indulgence has been given to the appellant over time to justify withholding any further indulgence. The respondent points to the fact that the appellant has continually failed to comply with deadlines imposed by the Court or the Rules and has provided a table as to the history of the appellant's non-compliance. The table reveals that the appellant was out of time in filing and serving the affidavit in support of the application for an extension of time for leave to appeal; in filing the outline of submissions in support of that application; in filing the notice of the proposed contents of the appeal book, in filing the affidavit in opposition to the respondent's present applications for security for costs and to strike out the notice of appeal; in filing the outline of submissions in opposition to the respondent's applications; and in filing its outline of submissions in support of the application for reinstatement.

15 Accepting that the appellant's history of non-compliance with the Rules and orders of this Court as to procedural matters is a relevant factor weighing against the exercise of the discretion to reinstate the appeal, it appears that much of the non-compliance is the fault of the appellant's solicitor. While the respondent is entitled to insist on adherence to the Rules and times laid down by the Court, the appellant's history of serving and filing documents out of time does not appear to us to be the result of any conscious decision by it to disregard the orders of the Court, such that its conduct should be viewed as blameworthy so as to justify the Court shutting the appellant out from proceeding with its appeal. This is so where the responsibility for the repeated failure to comply appears to lie with the appellant's solicitor. We do not consider the appellant should be punished for the mistakes made on the part of its solicitor.

16 Accordingly, there being no identified prejudice to the respondent other than its continued exposure to the appeal, we are prepared to reinstate the appellant's appeal pursuant to Rule 64.16(2)(a). We would accordingly order that the appeal not be taken to be abandoned.

17 The respondent submits that the appellant's notice of appeal filed 25 June should be struck out by reason of:

(1) the failure to comply with the 'clear instruction' given by this Court on 18 June 2010 about the content of the appellant's proposed notice of appeal

(2) the inclusion of grounds that are 'plainly hopeless'

(3) non-compliance with r 64.05(1)(b) of the Rules.

18 The strike out application was at least in part motived by certain observations made by this Court about the proposed grounds of appeal on the previous reinstatement application on 18 June 2010. In the course of granting the appellant an extension of time in which to apply for leave to appeal, it was said in the joint reasons the Court was 'resolutely opposed to the notice of appeal that was drafted by the appellant.'

As we perceive it, there are but two questions necessary. The first of them is along these lines: that the judge should not have found that the conduct relied upon by the applicant did not in fact cause or materially contribute to the applicant's failure to pay rent on 1 November and 1 December 1993 and 1 January 1994. Short particulars could be given of that proposition, no doubt addressed to the matters relied upon by the applicant below.

The second question should be along these lines: if all or some of the conduct relied upon by the applicant did cause or materially contribute to the applicant's failure to pay rent, was the exercise by the respondent of its legal right to re-enter unconscientious in the eyes of equity such as to give an entitlement to equitable relief?

Now obviously we do not draft the documents for the parties. But you should keep closely in mind Mr Selimi, that if anything remotely like the grounds of appeal that were an exhibit to your instructor's affidavit found their way onto the Court file, the prospect of them being struck out would be very great.

20 It appears that in the notice of appeal thereafter filed, the appellant did include in Ground 1 the first question that had been identified in the joint reasons. However the remaining grounds on the notice of appeal appear to be a reconfiguration of the grounds that were included in the draft notice before the Court on 18 June 2010, albeit with some amendment.

21 The Court has the power to strike out a notice of appeal as part of its inherent jurisdiction to control its proceedings. However, the Court will not strike out grounds in a notice of appeal unless on their face they are plainly so devoid of merit as to render an appeal on that basis hopeless. The Court's discretion to make the order sought is one which should be exercised with exceptional caution.[3]

22 The respondent has addressed argument to each of the proposed grounds in some detail in order to demonstrate that the appeal is in its submission hopeless. The respondent also challenged the clarity of the grounds of appeal under Rule 64.05(1)(b). It is said that the grounds of appeal remain in part confusing, somewhat repetitious, and lacking in specificity. For example, the appellant has not clearly identified, it is said, how the trial judge erred in his conclusion that the respondent had not contributed to the appellant's financial position.

23 We do not consider it possible or appropriate to engage in an examination of the merits of each of the grounds of appeal in the current hearing. Although the requirements of Rule 64.05(1) may not have been complied with, that would not ordinarily justify dismissing the appeal without giving the appellant an opportunity to mend its hand.[4] Here, the appellant has technically already had that opportunity. It has received a warning about the dangers of proceeding with grounds resembling those in the previous draft notice of appeal and has chosen to proceed with the present grounds. Given that on the previous reinstatement application the Court expressed the view, which we have also reached, that it cannot be said that the appeal is foredoomed to fail, the choice we face is either to uphold the strike-out application and require the grounds to be redrawn in accordance with the Rules having further regard to the observations made on the previous occasion, or to allow the appeal to proceed on the present grounds. As we have no confidence that any further opportunity to amend the grounds is likely to be productive, we are disposed to allow the appeal to proceed on the present grounds. However the appellant must recognise that if it is unsuccessful on the hearing of the appeal on grounds which have already attracted the Court's stern criticism, it may expose itself to a more draconian order for costs by reason of its persistence with grounds of appeal that may be found to be without any merit.

24 We turn then to the application for security for costs. The respondent seeks security for its anticipated costs of the appeal from the appellant in the amount of $63,000.00. In Equity Access Ltd v Westpac Banking Corporation,[5] the following matters were identified as relevant to the exercise of the discretion to order security for costs:

(a) the prospects of success of the appeal

(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.

25 We have earlier discussed the appeal's prospects of success. It is clear that there is a very real risk that the appellant will be unable to pay the respondent's costs if it is unsuccessful on appeal. The appellant concedes that it is impecunious and that it would be unable to meet the respondent's costs in the event that its appeal was unsuccessful. The appellant contends that the respondent's unconscionable conduct has been a material and substantial cause of its current state of insolvency. As was recognised in Equity Access Ltd v Westpac Banking Corporation, if accepted, that is a relevant consideration in the exercise of the discretion to grant security for costs. A claim that the plaintiff's impecuniosity was the immediate consequence of the defendant's conduct, the subject of the litigation, is a powerful consideration at first instance. But by the time of an appeal there will have been, as in the present case, a finding adverse to the appellant at first instance. The appellant here asks the Court to assume the fact which the appellant seeks to overturn on the appeal, namely that the respondent through its conduct in refurbishing the shopping centre was responsible for the appellant's financial troubles. There may be cases where the appellant is able to so persuasively demonstrate that the finding at first instance was wrong, that on appeal the Court may disregard the initial adverse finding when considering whether security for costs should be ordered. But that is not the present case.

26 The voluminous affidavit of the appellant's Director which was filed in opposition to these applications did little to advance the appellant's position. It is almost entirely made up of his assertions as to the cause of the appellant's impecunious state. Those questions were decided on the facts as presented at trial. The Director's assertions and his beliefs which covered some 244 paragraphs are almost entirely of no relevance to the appeal. Moreover, it does contain gratuitously offensive and scandalous material. It is unsatisfactory that the appellant's solicitor on the record took no step to ensure that only relevant and proper material was contained within the affidavit. He appeared to exercise no control over what it was that his client tendered to the Court, and thereby failed in his responsibility to the Court. We trust that such events will not occur again. That said, this is not the occasion to entertain any application that the respondent may wish to make to have matters excised from the affidavit.

27 Finally the appellant submits that we should have regard to the fact that its parlous financial position would prevent it from providing security and would thus stifle reasonably arguable claims. There are two answers to this contention. First, the enquiry here is whether it has been demonstrated that the appeal is reasonably arguable. As we have said, the appellant seeks to reverse findings of fact and seeks a form of equitable relief that was viewed at first instance as unsupportable in principle or by authority, so that the merit of the appeal is attended by very substantial doubt.

28 Second, the respondent was required to demonstrate, not just that it lacked the resources to meet the order itself, but also that those who stood behind the respondent and who would benefit from the litigation lacked those resources.[6] An application was made to adjourn the proceedings, presumably to determine whether affidavits could be filed by those who in fact stand behind the appellant and who would seek to benefit from a successful appeal. We were not disposed to grant that adjournment. The obligation was clear. If such material was available it was essential that it be filed in opposition to the application for security for costs.

29 We are not persuaded that an order for security for costs should be viewed as stifling a reasonably arguable claim.

30 For these reasons we would order that the appellant provide security for the respondent's anticipated costs of the appeal.

[1] [1995] VicRp 9; [1995] 1 VR 150, 152.

[2] See Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516, [66]; Jorgenson v Slater & Gordon Pty Ltd [2009] VSCA 39.

[3] Black v Rafa Pastoral Pty Ltd [2009] VSCA 295, [17].

[4] Fletcher Constructions Australia Ltd v Lines Macfarlane & Marshall Pty Ltd [2000] VSCA 158.

[5] (1989) ATPR 40-972; applied by this court in Maher v Commonwealth Bank of Australia [2008] VSCA 122.

[6] Security for Costs: S Colbran, 253 [14.26]; Ariss & Anor v Express Interiors Pty Ltd (In Liquidation) [1996] 2 VR 507, 570.