FEDERAL COURT OF AUSTRALIA Nati v Bunt (No 2) [2013] FCA 325 Citation: Nati v Bunt (No 2) [2013] FCA 325 Appeal from: Bunt v Nati [2012] FCA 1089 Parties: ROBERT NATI and YING JIA DAI v GREGORY JOHN BUNT File number: NSD 1690 of 2012 Judge: PERRAM J Date of judgment: 11 April 2013 Catchwords: SECURITY FOR COSTS – Whether security for costs on appeal should be awarded – Prospects of success of appellants – Impecuniosity – Stifling of proceedings Legislation: Bankruptcy Act 1966 (Cth) s 40(1)(g) Federal Court of Australia Act 1976 (Cth) s 56(1) Cases cited: Bunt v Nati [2012] FCA 1089 Dye v Commonwealth Securities Limited [2012] FCA 992 Nati v Bunt [2013] FCA 159 Date of hearing: 5 April 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Counsel for the Appellants: Ms S Haddad Solicitor for the Appellants: Shijing Zhang Lawyers Counsel for the Respondent: Mr M Condon SC Solicitor for the Respondent: Price & Company IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1690 of 2012 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: ROBERT NATI First Appellant YING JIA DAI Second Appellant AND: GREGORY JOHN BUNT Respondent JUDGE: PERRAM J DATE OF ORDER: 11 APRIL 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 56(1) of the Federal Court of Australia Act 1976 (Cth) the appellants pay $20,000 for security for costs by way of bank guarantee or cash deposit within seven days. 2. If order 1 is not satisfied the appeal be stayed until further order. 3. The costs of the present application be borne by the appellants. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1690 of 2012 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA BETWEEN: ROBERT NATI First Appellant YING JIA DAI Second Appellant AND: GREGORY JOHN BUNT Respondent JUDGE: PERRAM J DATE: 11 APRIL 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 29 April 2013 a Full Court will hear Messrs Nati and Dai's appeal from judgments given against them by Emmett J on 6 September 2012: Bunt v Nati [2012] FCA 1089. The judgments were for $573,809.02. Messrs Nati and Dai filed their appeal on 31 October 2012. On 20 March 2013 Mr Bunt filed an amended interlocutory application seeking security for his costs of the appeal in the sum of $28,250 by way of bank guarantee or cash deposit. 2 Section 56(1) of the Federal Court of Australia Act 1976 (Cth) authorises the Court or a Judge 'to give security for the payment of costs which may be awarded against him or her' and this power extends to appeals of the kind brought by Messrs Nati and Dai. In this case, Mr Bunt issued Messrs Nati and Dai with bankruptcy notices based upon the judgment given by Emmett J which were served on 17 January 2013 and which required payment within 21 days. They failed to comply with these notices on or around 9 February 2013 as a consequence of which they have each committed an act of bankruptcy: Bankruptcy Act 1966 (Cth) s 40(1)(g). The commission of those acts of bankruptcy enlivens the possibility of both men being made bankrupt on the presentation by Mr Bunt of a bankruptcy petition to a court with bankruptcy jurisdiction. Such a petition was filed on 25 February 2013, so I was told, but has not been served. 3 It is, in part, because of that state of affairs that Mr Bunt, for whom Mr Condon SC appeared, contends that there is a risk that any costs order made in his favour by the Full Court may go unsatisfied. Property searches by Mr Bunt's solicitors revealed that Mr Nati owned land at Ryde upon which a loan of $100,000 was secured together with a mortgage securing an unspecified debt to Westpac Banking Corporation ('Westpac'). Mr Dai has a 49% interest in a property at Drummoyne also the subject of a mortgage to Westpac. A request dated 25 January 2013 by Mr Bunt's solicitors for details of any assets owned by the appellants went unanswered. In the circumstances, I infer that Messrs Nati and Dai may not be able to meet some or all of the costs awarded against them in the appeal in the event that the appeal fails. In any event, this was not in dispute. 4 Mr Bunt says that he should have his security for that reason; because the appeal deals in substance with questions of fact which have been determined in his favour at a full trial already; and, because the grounds of appeal disclosed are weak. 5 For Messrs Nati and Dai it is said that the appeal is arguable; that they are impecunious; that their impecuniosity arises from the judgments given by Emmett J; and, that there has been such delay by Mr Bunt in the making of his application for security for costs that it should not be awarded. 6 An important concession was made on behalf of Messrs Nati and Dai and this was that the making of the security order would not stultify the appeal. This appeared in an affidavit of Mr Zhang which was read on their behalf and also by their counsel who repeated the same concession during argument. 7 Despite this concession, it was argued on their behalf that their impecuniosity was a reason for not making an order for security. I do not think this submission should be accepted. It is true that there are many statements, particularly at trial level, to the effect that security should not be ordered against impecunious parties but this is because ordering security against people who cannot pay generally stifles the pursuit of the proceedings. 8 In this case, Messrs Nati and Dai are effectively submitting that they are impecunious but nevertheless if security be ordered they will still be able to pursue the appeal. 9 In that circumstance, I am not satisfied that their impecuniosity would prevent an order for security being made. In the context of an appeal the proposition is stronger for, in such a case, the successful respondent has the benefit of having had his claims examined by a trial judge and found to be correct. As Emmett J recently observed in Dye v Commonwealth Securities Limited [2012] FCA 992 at [27] 'An insolvent party will not be excluded from an appeal, but if he cannot find security, he may be prevented from taking his opponent from one court to another'. 10 Be that as it may, security can nevertheless be declined where the appeal is brought in good faith and on substantial questions of law: Dye at [27]. This was submitted to be the case on behalf of Messrs Nati and Dai. 11 What of this appeal's prospects? Mr Condon SC submitted that the appeal was an appeal about facts. In principle, I think this is correct. The case is a simple one. Mr Bunt alleges, and Emmett J found, that Messrs Nati and Dai agreed to sell him for $750,000 20% of the share capital in Rowa Australia Pty Limited (i.e. 10% each). Mr Bunt paid the $750,000 but he alleges, and his Honour found, that he did not receive the 20% share capital from Messrs Nati and Dai. Accordingly, his Honour concluded there had been a total failure of consideration and gave judgment for Mr Bunt in the sum of the money he had advanced. 12 The trial judge rejected Messrs Nati and Dai's defence that the agreement had been varied so as to allow Mr Bunt's 20% to be received as an allotment of capital in Rowa rather than as a transfer of a corresponding number of shares held by Messrs Nati and Dai. There was evidence which supported this defence: in particular ASIC registers record such an allotment as having occurred in 2004 but his Honour found that these documents were prepared in April 2008 and did not reflect reality – no such allotment had occurred. 13 In their appeal, Messrs Nati and Bunt take issue with his Honour's conclusion about this. They also complain that his Honour made Mr Dai give evidence of what had occurred at a particular meeting in English even though his English was not good. His Honour did this, notwithstanding the presence of a translator who was present to assist Mr Dai, because the meeting in question had been conducted in English. Messrs Nati and Dai say that this insistence that Mr Dai give his evidence in English raises a real legal question about the fairness of the trial process. 14 It is difficult to assess the prospects of this appeal. It is true that most of it is factual but I am not sure that Messrs Nati and Dai face perhaps the same hurdles as confronted Ms Dye in Dye. I assess the appeal as being neither hopeless nor strong. In the end, I regard its as a neutral matter. 15 Messrs Nati and Dai next submitted that the application should be dismissed because there had been delay in its bringing. The chronology of events is as follows: The appeal was filed on 31 October 2012. The grounds advanced at that time were undeveloped and protean. They did not suggest the presence of a substantive appeal; On 2 January 2013 Mr Bunt issued Messrs Nati and Dai with bankruptcy notices requiring payment of the debt within 21 days of service of the notices; On 17 January 2013 the notices were served; On 25 January 2013 Mr Bunt's solicitors wrote to Messrs Nati and Dai (who were then representing themselves) taking issue with the adequacy of their notice of appeal, foreshadowing an application for security for costs and requesting details of their assets. No response was received to this letter; On 9 February 2013 Messrs Nati and Dai failed to comply with the notices and committed an act of bankruptcy; On 27 February 2013 Messrs Nati and Dai filed an amended notice of appeal raising better drafted grounds and which indicated the presence of lawyers; and On 1 March 2013 I heard and dismissed an application by Messrs Nati and Dai to restrain the commencement of bankruptcy proceedings: see Nati v Bunt [2013] FCA 159. 16 It was then on 20 March 2013 that the present application was made. The appeal is listed for hearing on 29 April 2013 and I heard this application last Friday, 5 April 2013. 17 I do not perceive any relevant delay. There was no failure to comply with the bankruptcy notice until 9 February 2013. Until then there was no substantive reason to think that Messrs Nati and Dai would not be able to meet any adverse costs order. 18 Given the unpromising nature of the original notice of appeal, it was reasonable to assume through most of February that Messrs Nati and Dai's appeal was going nowhere and that expenditure of funds upon its preparation might be to send good money after bad. On 27 February 2013 when the amended notice of appeal was served it became obvious that Messrs Nati and Dai now had representation and this calculus had changed. It was, however, within three weeks of this that the present application was made. Part of that time consisted of a period during which Messrs Nati and Bunt were considering whether to pursue a ground of appeal in which they sought to rely upon the incompetence of counsel. This ground would have expanded the appeal very substantially. Ultimately it was not pursued. In those circumstances, there was no relevant delay. 19 It was also submitted on the appellants' behalf that their impecuniousity had been caused by Mr Bunt. I do not accept this. If it mattered, their impecuniousity is caused by the judgment debts against them. This is not a case where it is alleged that a party's wrongful act has depleted another party of his or her assets. Mr Bunt has done no more, on the trial judge's findings, than ask for his money back. 20 I think an order for security for costs should be made. Whilst accepting the impecuniosity of the appellants it is not suggested that the making of the order will stifle the litigation. 21 Mr Price has given evidence that an appropriate figure is $28,250 based on his experience as a litigator. This is based on future costs of $7,200 for solicitors' costs and $31,950 for counsel's costs for a pre-taxation figure of $37,650 of which Mr Price believes he would recover $28,250 on taxation. 22 I propose to order security in the sum of $20,000 by way of bank guarantee or cash deposit. If there is any dispute about the terms on which this is to occur I will resolve it in Chambers. That said, the form suggested by Mr Bunt is not, on its face, without merit. Such security is to be proved within seven days failing which the proceedings be stayed until further orders. Mr Bunt should have his costs of the present application. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 11 April 2013