Elskaf v GIO General Limited

SACKVILLE AJA: In this matter the respondent to an appeal filed a motion seeking an order for security for its costs of the appeal. The appellant was served with GIO’s notice of motion and the supporting affidavits but did not appear at the hearing.

At the conclusion of the hearing I made the following orders:

I indicated that reasons for those orders would be provided. These are the reasons.

The appeal is from a decision entering a verdict and judgment for the respondent (GIO) in proceedings instituted by the appellant. [1] In those proceedings, the appellant claimed the sum of $185,000 from GIO under an insurance policy. This sum was the agreed value of a Ferrari motor vehicle (Vehicle) covered by the policy. On the appellant’s case, the Vehicle sustained “non-repairable damage” when it was driven into flood waters and the cabin was inundated to a level higher than the inner doorsill (this being the standard for a so-called “statutory write-off”).

The primary Judge stated that the factual issue to be determined was whether or not the appellant had persuaded her on the evidence that it was more likely than not that the water inundated the cabin of the Vehicle to a point above the doorsill. [2] Her Honour found that the appellant’s evidence was “wholly unreliable” and that part of his account was “inherently unbelievable”. [3] Her Honour accepted expert evidence adduced by GIO to the effect that the water never rose to the level claimed by the appellant. [4] Since the appellant abandoned an alternative claim for the cost of repairs to the Vehicle, the primary Judge gave judgment for GIO.

The notice of motion originally filed by the respondent seeking an order for security for costs identified the relevant rule as UCPR r 42.21. In fact the relevant rule is UCPR r 51.50, which provides as follows:

UCPR r 42.21 provides that the Court may order security for costs on the application of a defendant in specified circumstances. None of those circumstances applies in the present case.

The principles governing the concept of “special circumstances” in r 51.50(1) were summarised in Preston v Harbour Pacific Underwriting Management Pty Ltd [5] as follows:

Mr Hanna, who appeared for GIO on the application, ultimately relied on two matters as establishing “special circumstances” for the purposes of r 51.50(1):

The evidence reveals that an assets forfeiture order and unexplained wealth orders have been made pursuant to the Criminal Assets Recovery Act 1990 (NSW) (Recovery Act) against the appellant on the application of the New South Wales Crime Commission. [6] Orders have also been made pursuant to s 10B of the Recovery Act for the New South Wales Trustee and Guardian to take control of certain property of the appellant subject to earlier orders. [7] The value of this property apparently exceeds $625,000. In addition, it appears that orders have been made against the appellant forfeiting property to the value of $450,000.

Impecuniosity of itself is not sufficient to constitute special circumstances within r 51.50(1), but it may do so when combined with other factors. [8] The present appellant may or may not be impecunious but the evidence establishes that GIO is at serious risk, in the absence of an order for security for costs, of being unable to recover any costs order made in its favour. The appellant has not adduced any evidence that an order for security would stultify the appeal. [9]

The notice of appeal challenges the primary Judge’s findings of fact, including the credit-based findings adverse to the appellant. The only substantive basis for challenging the findings that can be discerned from the grounds of appeal is that there was a delay of eleven months between the hearing and the delivery of judgment. [10]

The grounds identified in the notice of appeal do not necessarily demonstrate that the appeal is hopeless, but they suggest that it has very low prospects of success. The failure of the appellant to appear and oppose the respondent’s application did nothing to dispel that impression.

In these circumstances I was satisfied that the respondent had shown “special circumstances” warranting the making of an order for security for costs. The affidavit from the appellant’s solicitor suggested that the order should require the appellant to provide security in the amount of $24,000. In the absence of particulars supporting that estimate I considered that the orders should require the appellant to pay the sum of $15,000 as security for the costs of the appeal.