PPK Willoughby Pty Ltd v Baird

THE COURT: Application for leave to appeal is made from a judgment of Harrison J sitting in the Common Law Division of the Supreme Court of New South Wales (PPK Willoughby Pty Ltd v Baird [2018] NSWSC 1889) in which his Honour ordered the Plaintiff, within 28 days of the date of his order (which was 11 December 2018), to provide security for the costs of pending litigation in an amount of $400,000 in respect of the 2nd to 106th Defendants and in the amount of $850,000 in respect of the 107th and 108th Defendants. His Honour also ordered that the proceedings be stayed pending compliance by the Plaintiff with the order requiring payment of security for costs.

At the conclusion of the hearing on 12 March 2019, an order was made dismissing with costs the application for leave to appeal. What follows are the reasons of the Court for that order.

A decision to order security for costs is one pertaining to practice and procedure and, as such, is one in respect of which appellate courts have been directed to exercise particular caution in reviewing: see Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated (1981) 148 CLR 170 at 177. In that case, the members of the plurality endorsed the well-known observations of Sir Frederick Jordan in In the matter of the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 at 323:

A decision to order security for costs is not only a matter of practice and procedure but is one which involves the exercise of the Court’s discretion, at least after the Court has satisfied itself that there is reason to believe that, where the plaintiff is a corporation, it will be unable to meet the costs of a defendant if ordered to do so (Uniform Civil Procedure Rules 2005 (NSW) r 42.21(d) (UCPR)) or, in the language of s 1335 of the Corporations Act 2001 (Cth), “it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence”. The breadth of the discretion is reflected in the language used in UCPR r 42.21: “such security as the court thinks fit, in such manner as the court directs.” Considerations relevant to the exercise of that broad discretion are set out in the very well-known and frequently applied decision of Beazley J (as her Honour then was) in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196-198.

Discretionary decisions, whether in the context of substantive or procedural relief, also engage the strictures against over-ready appellate interference and the correlative need for “added restraint” associated with House v R (1936) 55 CLR 499 with the consequence that a “heavy burden” lies on an applicant seeking leave to appeal from a discretionary judgment on a question of practice or procedure: see, for example, Oswal v Burrup Fertilisers Pty Ltd (recs and mgrs apptd) [2011] FCAFC 117 at [8] and [11]; see also Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWCA 174 at [6] where the task of an applicant seeking leave to challenge such a decision was described as a “difficult” one; see also Cicek v The Estate of the Late Mark Solomon [2014] NSWCA 278 at [69]-[70]; Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 at [73]-[75]; Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; 117 ACSR 176 at [29]; Mei Zhang v Ye Cheng [2018] NSWCA 299 at [12].

Leave applications in this Court attract a general obligation on the applicant for leave to establish that there is an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; BE Financial Pty Ltd v Das [2012] NSWCA 164 at [32]-[38]; Age Co Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28].

The key reasoning underpinning the primary judge’s decision to order security for costs in the present case was contained in paras [26]-[33] of his judgment:

The first proposed ground of appeal sought to be raised by the Applicant is that the primary judge applied an incorrect principle “namely that unless a delay in the bringing of security for costs application generated a ‘consequence of significance’, that delay was (or the Court could treat it as) irrelevant to whether or not security should be ordered or, in the alternative, to whether security should be ordered for both past and future costs of the litigation.” The Draft Notice of Appeal refers in this context to paras [29]-[30] of the primary judge’s reasons which we have set out above.

This proposed ground of appeal overstates in a significant way the primary judge’s reasoning particularly in para [29] of the reasons for judgment. His Honour did not in that paragraph go so far as to say that delay was “irrelevant” or that the Court could treat it as “irrelevant” unless the bringing of a costs application generated a consequence of significance.

What his Honour said in terms was that “the fact that [the] defendant [had] delayed the bringing of an application for security for costs will be less relevant, and possibly even irrelevant, unless it can be seen to have generated or produced some consequence of significance.” (Emphasis added). His Honour’s use of the word “possibly” in the sentence quoted illustrates that he formed no final view in respect of that matter and cannot fairly be taken to have endorsed or embraced such a view. His Honour’s statement that delay will be “less relevant” unless it can be seen to generate or produce some consequence of significance is not criticised in the Draft Notice of Appeal and rightly so in our opinion.

The relative significance of delay in the making of a security for costs application and as a factor in the exercise of judicial discretion to award security for costs will inevitably vary with the facts of each case, the nature, extent and cause for any delay and the overall justice of the case. Insofar as his Honour suggested that some authorities established that delay could “possibly even [be] irrelevant, unless it can be seen to have generated or produced some consequence of significance”, we would not agree. In our opinion, delay will invariably be a relevant discretionary factor in any application for security for costs, but the degree or extent of its relevance will vary according to the circumstances of any given case along a spectrum from the slight to the extreme.

The observations made by the primary judge in para [28] of his reasons as set out above accurately record that the Plaintiff did not as a matter of fact contend that it was prejudiced in any way by the failure of the Defendants to prosecute the applications for security for costs sooner and did not make any of the kind of submissions described by his Honour and which are frequently made on security for costs applications in circumstances where there has been delay. It was perfectly appropriate for the primary judge to make reference to the absence of such submissions by the Plaintiff in resisting the order for security for costs at first instance.

In the course of oral argument on the leave application, when pressed to point to any evidence of prejudice, senior counsel for the Applicant pointed to evidence led at first instance that legal costs of $362,910.25 had been incurred since the time at which he contended the Defendants could or should have become aware of the Plaintiff’s impecuniosity. But the incurring of legal costs for the purposes of preparation of evidence will not axiomatically or presumptively be prejudicial and there will generally be no basis to infer from that fact alone that such costs would not have been incurred had the Plaintiff been on notice of the Defendant’s intention to seek security for costs, that is to say, prejudice by reason of the incurring of legal costs is not a matter that may be inferred per se from that fact alone.

In its submissions in support of the application for leave to appeal and in an attempt to isolate an issue of principle that may attract a grant of such leave, the Applicant made reference to the decision of this Court in Green v CGU Insurance Limited [2008] NSWCA 148; 67 ACSR 105 (Green) and, in particular the judgment of Hodgson JA (with whom Campbell JA agreed) at [57]. In that paragraph Hodgson JA said as follows:

The Applicant also makes reference to the decision of the Western Australian Court of Appeal in Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 at [23] (Christou) where Newnes JA (with whom Murphy JA agreed) said, applying Green:

In our opinion, there is no necessary tension between these passages and the observations by the primary judge in the present case in paras [28]-[30] of his reasons. When read in the context of the argument that had been put in Green, Hodgson JA was accepting the uncontroversial submission that prejudice may, in certain circumstances, be inferred with the corollary that it is not necessary, in order for prejudice to be demonstrated, that the plaintiff prove “exactly” what it would have done had the application been made earlier. His Honour of course went on to observe that, if the plaintiff does in fact prove that it would not have gone ahead with the proceedings if an application for security for costs had been brought earlier, that would be a very powerful consideration against the grant of security. What the primary judge was saying in para [28] of his reasons for judgment in the present case was simply that the Plaintiff had not done that in resisting the application for security for costs. That was correct as a matter of fact and was not irrelevant. It might also be observed that the primary judge in Green had made a strikingly similar observation (as recorded in Hodgson JA’s judgment at [12]), and that Hodgson JA (at [58]) saw no error in the primary judge’s approach concerning delay.

In relation to the observation in Christou that “prejudice will generally be regarded as inherent in substantial delay”, it is plain from Newnes JA’s use of the word “generally” that his Honour was not intending to suggest that substantial delay is presumptively prejudicial, in the same way that we do not read Hodgson JA’s observation in the final sentence of para [57] in Green as establishing any presumption of prejudice from the incurring of substantial legal costs.

Even if (which we do not accept) there were some tension between this Court’s decision in Green and the observations by the primary judge in para [29] of the decision from which leave to appeal is sought, we do not consider that the interests of justice would require the grant of leave as we are of the clear view that any appeal would be highly unlikely to succeed.

A second aspect of the Applicant’s argument in relation to its application for leave to appeal is really to the effect that the delay in making the application for security for costs was so gross that the discretion exercised in favour of the Respondents miscarried. We do not consider that there was delay, let alone gross delay in circumstances where the Plaintiff’s impecuniosity only occurred at an advanced stage of the proceeding and the applications for security for costs were made within a relatively short period of time from the Defendants’ actually becoming aware of the Plaintiff’s impecuniosity through evidence filed by the Plaintiff for the purposes of the final hearing. Senior counsel for the Applicant did not contend that there was any principle or authority in support of the proposition that time, for the purposes of measuring delay, should commence to run from the date upon which the applicant for security could or should have been aware of a plaintiff’s impecuniosity, as opposed to the date upon which the applicant actually became aware of that impecuniosity. There is no apparent error in the primary judge’s assessment of the extent or significance of any delay, and the interests of justice do not require or justify the grant of leave to appeal.

In the language of the authorities collected at para [5] above, no issue of principle, question of public importance or any “reasonably clear” injustice has been demonstrated so as to attract a grant of leave to appeal. In this latter context, the Applicant has not established that it would suffer any substantial injustice if leave were not granted: CBX2 Pty Ltd v National Australia Bank Ltd [2016] NSWCA 79 at [29]. Indeed, we see no injustice whatsoever in the grant of security for costs in the present case. Neither at first instance nor on this application was there any suggestion that the orders for security for costs would stultify or stifle the litigation, and even if that were the effect of the orders, that would not be determinative: Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [91]-[96].

Nor is this a case where there is any suggestion that the conduct impugned in the principal proceedings was in any way causative of the impecuniosity of the Applicant for leave to appeal. The impecuniosity was caused by what the primary judge referred to as the Plaintiff’s “business model”, namely withdrawing the proceeds of sale of various properties that had been developed from the company’s accounts over time. That was the prerogative of the Plaintiff’s directors but it does not generate an injustice that should result in either the Plaintiff being free to conduct expensive commercial litigation insulated from the risks of an adverse costs order or the Defendants being deprived of the security which the primary judge, in the exercise of his discretion, saw fit to order.

For all of the above reasons, we refused leave to appeal with costs.