Mr D v Ms P

There are before me in the Court of Appeal referrals list two notices of motion in relation to an appeal sought to be brought from the decision of Simpson AJ (the primary judge) in Ms P v Mr D [2020] NSWSC 224. Before turning to the detail of those notices of motion, it is necessary to provide an overview of the proceedings and decision at first instance. I have maintained the use of pseudonyms for the same reasons as stated in the primary judgment: see at [5].

In the proceedings at first instance, Ms P claimed damages against Mr D arising from some eight separate assaults, seven of which were alleged sexual assaults. Four of the sexual assaults were admitted and the balance, although contested, were found to have taken place.

The primary judge awarded damages in the sum of $853,550 together with costs. The damages amount comprised a sum of $275,000 plus interest of $88,550 for general and aggravated damages, $40,000 for medical and associated expenses, $150,000 for past economic loss, $200,000 for future economic loss and $100,000 for exemplary damages. The amount of exemplary damages was referable only to the four assaults for which Mr D has not already been punished by reason of his incarceration: see Gray v Motor Accident Commission (1998) 196 CLR 1; [1998] HCA 70.

In relation to the award of general and aggravated damages, the primary judge at [126] recorded the acceptance by counsel for Mr D that “damages are to be awarded for the consequences of the defendant’s torts and that, whether those consequences arose out of the four admitted sexual assaults only or those four together with the four disputed incidents, the result would be the same.” As shall be seen, this concession has ramifications for Mr D’s prospects of attacking the general and aggravated damages component of the primary judgment.

Mr D is currently in gaol, having pleaded guilty on 19 August 2016 to four acts of aggravated sexual assault of Ms P in 2000 and 2001, being four of the eight assaults that form the subject matter of the proceedings before the primary judge.

In her judgment, the primary judge recorded her general impression of the evidence given by both of the parties at [20]-[21] as follows:

The primary judge’s view as to the credibility of Ms P, on the one hand, and Mr D, on the other hand, played a significant role in her assessment as to whether or not the first of the non-admitted assaults, namely one said to have occurred in 1995 or 1996, in fact occurred: see at [36]-[38] of the primary judgment.

On 18 March 2020, Ms P filed a Notice of Motion seeking an order under the Slip Rule in relation to interest on the claim for past economic loss, and for costs to be awarded on an indemnity basis by reason of having bettered pre-trial settlement offers. This Notice of Motion has not yet been determined by the primary judge.

A Notice of Intention to Appeal from her Honour’s decision was filed on 14 April 2020 and a Notice of Appeal was filed on 17 June 2020. The grounds of appeal were as follows:

One important feature of the appeal which focusses on those parts of the decision at first instance in relation to the disputed sexual assaults, damages and interest on past damages, is that it recognises that the respondent, Ms P, will still be entitled to a verdict and an amount of damages. The real issue is as to what amount. In this context, order 3 of the orders sought on the appeal seeks “[j]udgment for the Respondent in such reduced amount as the Court of Appeal thinks fit.”

Because of his incarceration, Mr D, by Notice of Motion dated 14 July 2020, has sought an order pursuant to s 4 of the Felons (Civil Proceedings) Act 1981 (NSW) (Felons Act) seeking leave nunc pro tunc to institute the appeal.

The Notice of Motion filed by Mr D is supported by a brief affidavit of his then solicitor, Mr Andrew Tiedt (Mr Tiedt), of 14 July 2020. It is understood that Mr Tiedt no longer works for Armstrong Legal, but that the firm continues to represent Mr D.

There was also before the Court a Notice of Motion filed on 14 July 2020 by Ms P, in which she seeks security for costs. An Amended Notice of Motion of 10 August 2020 seeks the following orders:

It is logical to deal with Mr D’s application for leave under the Felons Act first.

The application for leave proceeded on the basis that the lodging of an appeal amounted to the institution of “any civil proceedings in any court” within the meaning of s 4 of the Felons Act.

Section 4 of that Act provides that:

A number of decisions of this Court have proceeded on the basis that the bringing of an appeal, even by a defendant in proceedings at first instance, amounts to the institution of civil proceedings (see, for example, Chen v Zhang [2009] NSWCA 202; Ford v Simes [2009] NSWCA 351 (Ford); and Clark v State of New South Wales [2018] NSWCA 13), although there may be a question whether or not a defendant who seeks to exercise a right of appeal otherwise available to him or her requires leave, even though appeal proceedings are technically fresh proceedings.

For reasons that will become clear, that question need not be decided in the present case as I am satisfied that, if leave be required, it should be given.

In the Second Reading Speech to the Felons (Civil Proceedings) Bill 1981 (NSW), the then Attorney General of New South Wales and Minister of Justice, Mr Walker, noted that the Felons Act was “designed simply to prevent persons in custody, having been convicted of a felony, from attempting to institute vexatious or frivolous actions”, and that the “important” task of “considering whether a prisoner is to be given the opportunity to come to court should be vested in the court itself and not in an anonymous official within the prisons system”: see New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 18 March 1981 at 4814.

In Potier v Attorney General in and for the State of New South Wales (2015) 89 NSWLR 284; [2015] NSWCA 129 (Potier), Leeming JA noted (at [55]) that the Felons Act “overturned an inability to sue at common law which extended at least to felons convicted of capital offences”, thereby overcoming the perceived injustice resulting from the decision in Dugan v Mirror Newspapers Limited (1978) 142 CLR 583; [1978] HCA 54.

In Potier at [1], Basten JA noted that the “practical effect” of the Felons Act was “to restrict the capacity of a specified class of persons in custody to commence civil proceedings in a court.” His Honour noted (at [3]) that the “prohibition under the Felons Act is automatic and unreviewable when the condition (being in custody for a serious indictable offence) is engaged: it continues for so long as the condition subsists.”

Section 5 of the Felons Act provides that:

With respect to s 5, in Ford at [30], Bergin CJ in Eq (with whom Tobias JA and Handley AJA agreed) noted that the “two statutory pre-requisites to the exercise of the discretion to grant leave” were that the proceedings were not an abuse of process, and that there were prima facie grounds for them. See also Potier at [57]; Roberts v Department of Justice, Corrective Services NSW [2017] NSWCATAD 310 at [10]; McKane v NSW Police and Director of Public Prosecutions (NSW) [2016] NSWLC 19 at [51].

In SW v State of New South Wales [2010] NSWSC 966 at [16], which was cited with approval by Rein J in Application of Dixon Ly [2013] NSWSC 906 at [5], Johnson J noted that the statutory gateway “ought not be an overly demanding one”. However, in Potier at [33], Meagher JA noted that the “absence of satisfaction as to either of those matters would be sufficient to make the proceeding a ‘vexatious’ one within s 6 of the Vexatious Proceedings Act”.

With respect to the requirement that there be “prima facie ground” pursuant to s 5 of the Felons Act, in Ford at [31], Bergin CJ in Eq noted that this “means no more than a ground of appeal that is arguable or not totally hopeless”. See also Application of Malcolm Huntley Potier [2012] NSWCA 222 at [17], where Allsop ACJ and Basten JA noted that:

It follows that the “prima facie” requirement in s 5 of the Felons Act represents a relatively low threshold to be satisfied on an application for leave pursuant to s 4 of that Act. Even so, Mr Hooke SC, who appeared for Ms P, submitted that this threshold had not been passed, and sought to characterise the appeal, both for the purposes of Mr D’s leave application and, more particularly, Ms P’s security for costs application, as “hopeless”.

Although Mr D’s prospects could not be regarded as strong, and he faces considerable hurdles especially in light of Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 (Fox v Percy), and Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679; [2016] HCA 22 at [43] (Robinson Helicopter), where it was said that:

Mr D has experienced legal representation and the submissions advanced before me, together with the Notice of Appeal, illustrate that the appeal is properly focussed and targeted to specific aspects of the judgment at first instance. Given the relatively low prima facie threshold and the absence of any suggestion of abuse of process, leave should be granted.

I turn then to consider the application for security for costs.

Rule 51.50 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) relevantly provides:

What constitutes “special circumstances” pursuant to r 51.50 of the UCPR has been the subject of consideration in a number of cases: see, for example, Transglobal Capital Pty Ltd v Yolarno Pty Ltd (2004) 60 NSWLR 143; [2004] NSWCA 136; Porter v Gordian Runoff Limited [2004] NSWCA 171; Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247. In the last of these cases, Basten JA (with whom Ipp JA and Hoeben J agreed) said at [18]:

Senior Counsel for Ms P also relied in his submissions on the decisions in Ballard v Brookfield Australia Investments Ltd [2012] NSWCA 434 (Ballard), and Xenos v FAL Healthy Beverages Pty Ltd [2017] NSWCA 240 (Xenos). Those decisions share the common feature that the Appellant was an individual, and although courts are particularly cautious about ordering security for costs against individuals, security was awarded in both cases. The two cases differ, however, in that in Ballard, Mr Ballard had been an unsuccessful plaintiff whereas in Xenos, Mr Xenos had been an unsuccessful defendant at first instance.

In Pearson v Naydler [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533, Megarry V-C noted “the basic rule that a natural person who sues will not be ordered to give security for costs, however poor he is, is ancient and well-established”.

Similarly, in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [2] (Knight), Lindgren J noted the “well established disinclination of courts to order a natural person, including an impecunious one, who commences a proceeding, to provide security”. At [32], under the heading “Important that natural persons have access to the courts”, his Honour noted numerous cases where natural persons were not ordered to provide security for costs so that they, even though impecunious, could still have free access to the courts: see, for example, Gartner v Ernst & Young (No 3) [2003] FCA 1437 at [36]; Cameron’s Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53; James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442 at 445; Chang v Comcare Australia [1999] FCA 1677 at [25] (Chang); and The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 at [22].

In Knight at [33], Lindgren J outlined various exceptional circumstances which might lead to an order for a natural person to provide security, including impecuniosity and residence outside Australia; impecuniosity and lack of prospects of success; impecuniosity and failure to show that an order would stultify a proceeding; a statement of claim with serious deficiencies; inability to demonstrate that the defendants are responsible for their impecuniosity; and no matter of public interest raised.

In Chang, Mr Chang was a former employee of the Productivity Commission, who had made a number of applications to Comcare pursuant to the Safety, Rehabilitation and Compensation Act 1988 (Cth) for, inter alia, repetitive strain injury and occupational overuse syndrome. The proceedings related to two decisions of Comcare which had rejected claims by Mr Chang for compensation, with Mr Chang appealing against those decisions to the Administrative Appeals Tribunal. At [32], Moore J noted that the relevant provision (there, O 53 r 8 of the Federal Court Rules 1979 (Cth)) made it clear that it was only in special circumstances that security for costs should be ordered against a natural person. His Honour noted that such “special circumstances” existed in the proceedings before him, including the fact that Mr Chang had limited prospects of success and that the respondents would be unable to recover their costs if they succeeded.

In Morris v Hanley [2000] NSWSC 957, proceedings were commenced for breach of fiduciary duty. Young J noted (at [18]) that the fact of poverty is “just one of the factors that a Court looks at to consider the basic question of whether it would be vexatious to allow the proceedings to continue without security”. At [40], his Honour noted that the proceedings before him “which is partly brought to harass the defendants, is an extremely expensive one and may well bankrupt the defendants even if they win”. His Honour made orders that the plaintiff provide the sum of $115,000 as security for costs of the defendant, on the grounds of impecuniosity, lack of prospects of success and the large costs involved to the defendants.

In Tran v The Commonwealth [2009] FCA 921, Jagot J noted that, although courts are reluctant to order that an impecunious applicant, being a natural person, provide security where the effect would be to stifle that person’s access to the courts, “where such a person has already obtained access to a court, and has received a decision dismissing the claim, the position is different”: at [5]. This “difference” was explained by Spender J in Tait v Bindal People [2002] FCA 322 at [3] (Tait), with his Honour noting:

Tait was referred to with approval by Hoeben JA (as his Honour then was) in Starr-Diamond v Diamond [2013] NSWCA 7 at [19], and Ballard at [18].

The Court had before it, on the application for security for costs, an affidavit of Ms P’s solicitor, Mr Clayton Long (Mr Long) sworn 14 July 2020, and an affidavit of Mr D’s solicitor, Mr Tiedt sworn on 5 August 2020.

The Court also had the significant benefit of clear written submissions in relation to the question of security from Mr Hooke and Mr Grey, on behalf of Ms P, and from Mr Glissan on behalf of Mr D.

Mr Long’s evidence, apart from setting out details in relation to the quantum of security sought, referred to the fact that there was no stay of execution of judgment, that no payment had been made in respect of it, and that inquiries made as to payment had not elicited responses. Mr Hooke drew upon this evidence as one of the matters which demonstrated special circumstances. This argument, to my mind, was partly answered by the fact that there remains outstanding the Notice of Motion in relation to interest and indemnity costs (see [8] above), and there has evidently been no attempt to agree an amount as to costs payable, no doubt in part because of the outstanding issue regarding indemnity costs.

Mr Tiedt’s evidence went principally to Mr D’s assets and financial position. In short, that evidence was to the effect that Mr D has net equity in the order of $300,000 in a currently untenanted property on the north coast of New South Wales, which is estimated as having a value of between approximately $510,000 and $540,000, and a sixth interest in a unit trust said to have a net asset position of between approximately $910,000 and $1,160,000. There was also evidence that Mr D had received the benefit of financial support from both his sister and his parents, although this support was by way of loan rather than gift and hence amounted to an indebtedness.

In support of his argument that special circumstances existed warranting the award of security for costs, Mr Hooke placed particular emphasis on the fact that, on any view, a significant component of the damages awarded will remain, and that none of the damages awarded by the primary judge have been paid. He also placed great emphasis on what he described as the “hopelessness” of Mr D’s case on appeal.

It is, of course, neither possible nor desirable to make a detailed analysis of an appellant’s prospects of success on an appeal in the context of the determination of an application for security for costs. That having been said, some analysis must be undertaken for the purposes of the “special circumstances” calculus that the authorities indicate should be undertaken. In this context, two particular points should be made.

First, given the fact that four of the sexual assaults were admitted and in light of the concession referred to at [4] above, Mr D must have negligible prospects of reducing the amount of general and aggravated damages awarded which, together with interest, amounts to about $350,000.

Given the evidence that was led in relation to Mr D’s asset position, even if Mr D were to succeed in reducing or eliminating the exemplary damages component of the award and reducing the economic loss component of the award, any reduced judgment is likely still to be for a very significant amount, in Ms P’s favour. If she is successful in resisting the appeal (which is the assumption upon which all security for costs applications must be made), it is inevitable that she will be left out of pocket in respect of costs.

Secondly, the attack on the award of exemplary damages depends in large measure on attacking the primary judge’s liability findings, especially in the context of the first sexual assault upon which the primary judge placed particular emphasis in her award of exemplary damages: see [7] above and [152] of the primary judgment. It will be recalled that her Honour’s finding in this regard was strongly based on her assessment of the evidence of Ms P and Mr D in relation to this incident, and her strong preference for the evidence of Ms P.

I have already referred at [27] above to the serious hurdles Mr D will face which are presented by the decisions in Fox v Percy and Robinson Helicopter. Although, as outlined by Mr Glissan, Mr D has arguments that are capable of being put in this regard, the nature of the primary judge’s finding is such that the challenge to the liability finding and quantum, based on or flowing from that finding, will be difficult to overcome. Mr D’s prospects do not appear to me to be strong, and this difficulty is compounded when regard is had to the discretionary aspects of an assessment of damages.

In relation to a potential challenge to the assessment of economic loss, given the evidence to which I was referred in the course of the hearing which grounded the award of this head of damages, whilst there may be some prospects of reducing this aspect of the award, my provisional assessment is that any challenge would be likely to fail or, if it succeeded, would not result in any substantial reduction in the award of this component of the damages.

Further, Ms P submitted, with reference to Ballard, that the appellant sought to agitate most, if not all, legal and factual issues raised at first instance, which was a factor in Ballard which contributed to a finding of special circumstances. However, in my opinion, such a factor is not as applicable to a finding of special circumstances in the current proceedings, especially when considering the considerable differences in the length of the proceedings between Ballard and the present case, with the former running for some 93 days.

I do not accept the submission made by Mr Glissan that, were an order for security to be made, the appeal would be stultified. This is particularly so in circumstances where there was evidence before the Court that Mr D had previously received the benefit of financial support from both his sister and his parents, where his principal asset (his house) is said currently to be untenanted (and thus not generating a stream of income), and where he was evidently able to retain counsel and solicitors both during the course of the four day trial at first instance in September 2019 (when he was incarcerated) and has been able to continue that representation for the purpose, at least, of resisting the security sought.

For all of the above reasons, a case of special circumstances has, to my mind, been made out.

Whilst I am prepared in what I consider to be the special circumstances of the present case to order security for costs, I am not prepared to order it in the amount of $70,000 as sought on behalf of Ms P. The estimate is based on an assumption that 6 days of preparation time will be required by senior and junior counsel, in addition to allowance for a 1 day hearing, together with 3 days of preparation by a solicitor. As per the affidavit of Mr Long, such costs are estimated to be in the order of $87,000, with counsel submitting that Ms P will be entitled to recover 80% of those costs on a party/party basis, thus seeking $70,000 as security.

Mr Hooke appeared in the proceedings at first instance which ran for some four days between 23-26 September 2019. His junior on the Notice of Motion, Mr Grey, appeared on one of the days of the hearing. This matter is not irrelevant when it comes to an assessment by Mr Long in his affidavit of the amount of time that will be required by senior and junior counsel for the preparation of the hearing of the appeal and the quantum of security sought in consequence of that assessment.

In circumstances where Mr Hooke argued the matter at first instance and, in his submissions before me going to the strength or, as he put it, the weakness of Mr D’s appeal, displayed a mastery of the facts and detail of the case, I consider that an allowance for 6 days of preparation by senior and junior counsel is, in the circumstances, excessive, and that 3 days by each represents a more realistic and, in my opinion, still generous allowance. This is especially so since there are likely to have been detailed written submissions at first instance, together with close evidentiary references which will be able to be drawn upon in the preparation of appeal submissions.

Further, it must be recalled that, in ordering security for costs, the Court does not set out to give a complete and certain indemnity: see, for example, Brundza v Robbie & Co (1952) 88 CLR 171 at 175; [1952] HCA 49; This Morning Pty Ltd v Melhem [2018] NSWSC 1460 at [33]; Elip Pty Ltd v Arch Finance Pty Ltd [2020] NSWSC 752 at [78]; and Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd (2014) 103 ACSR 201; [2014] NSWCA 417 at [163].

Taking these matters into account, and bearing in mind that the Appellant is an individual in respect of whom security would not normally be ordered, I would order that security be ordered in the sum of $25,000.

Given Mr D’s present incarceration and the practical difficulties that can affect means of communication and the giving of instructions in that context, I would allow a greater period of time for security to be posted than is contemplated in the Amended Notice of Motion. Further, if not provided by way of charge over his residential property, I would permit the security to be posted in two tranches: $15,000 by 15 September 2020, and $10,000 at the time of filing by Mr D of written submissions in support of his appeal. Structured in that way, the legal expenses to which Ms P will be exposed will be minimised pending the posting of the amount of security ordered.

Accordingly the orders I would make are as follows: