FEDERAL COURT OF AUSTRALIA Westpac Banking Corporation v Wittenberg [2015] FCA 606 Citation: Westpac Banking Corporation v Wittenberg [2015] FCA 606 Parties: WESTPAC BANKING CORPORATION v COREY WITTENBERG WESTPAC BANKING CORPORATION v DANIELLE LAVARS LOUISE MURPHY v WESTPAC BANKING CORPORATION WILLIAM LAWSON v WESTPAC BANKING CORPORATION PAUL SMITH v WESTPAC BANKING CORPORATION STUART MOORE v WESTPAC BANKING CORPORATION LUCKY POULOS v WESTPAC BANKING CORPORATION File numbers: NSD 405 of 2015 NSD 406 of 2015 NSD 409 of 2015 NSD 410 of 2015 NSD 411 of 2015 NSD 412 of 2015 NSD 413 of 2015 Judge: PERRAM J Date of judgment: 19 June 2015 Catchwords: PRACTICE AND PROCEDURE – Security for costs – Stay of orders Legislation: Taxation Administration Act 1953 (Cth) Cases cited: Dye v Commonwealth Securities Limited [2012] FCA 992 Date of hearing: 27 May 2015 Date of last submissions: 2 June 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 53 Counsel for the Appellant in NSD 405 of 2015 Mr M Steele SC NSD 406 of 2015: Solicitor for the Appellant in Allens NSD 405 of 2015 NSD 406 of 2015: Counsel for the Respondents in Ms E Glover NSD 405 of 2015 NSD 406 of 2015: Solicitor for the Respondents in Gillis Delaney Lawyers NSD 405 of 2015 NSD 406 of 2015: Counsel for the Appellants in NSD 409 of 2015 Ms E Glover NSD 410 of 2015 NSD 411 of 2015 NSD 412 of 2015 NSD 413 of 2015: Solicitor for the Appellants in Gillis Delaney Lawyers NSD 409 of 2015 NSD 410 of 2015 NSD 411 of 2015 NSD 412 of 2015 NSD 413 of 2015: Counsel for the Respondent in Mr M Steele SC NSD 409 of 2015 NSD 410 of 2015 NSD 411 of 2015 NSD 412 of 2015 NSD 413 of 2015: Solicitor for the Respondent in Allens NSD 409 of 2015 NSD 410 of 2015 NSD 411 of 2015 NSD 412 of 2015 NSD 413 of 2015: IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 405 of 2015 BETWEEN: WESTPAC BANKING CORPORATION Applicant AND: COREY WITTENBERG Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 406 of 2015 BETWEEN: WESTPAC BANKING CORPORATION Applicant AND: DANIELLE LAVARS Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 409 of 2015 BETWEEN: LOUISE MURPHY Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 410 of 2015 BETWEEN: WILLIAM LAWSON Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 411 of 2015 BETWEEN: PAUL SMITH Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 412 of 2015 BETWEEN: STUART MOORE Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 413 of 2015 BETWEEN: LUCKY POULOS Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE OF ORDER: 19 June 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. 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 405 of 2015 BETWEEN: WESTPAC BANKING CORPORATION Applicant AND: COREY WITTENBERG Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 406 of 2015 BETWEEN: WESTPAC BANKING CORPORATION Applicant AND: DANIELLE LAVARS Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 409 of 2015 BETWEEN: LOUISE MURPHY Applicant AND: WESTPAC BANKING CORPORATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 410 of 2015 BETWEEN: WILLIAM LAWSON Applicant AND: WESTPAC BANKING CORPORATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 411 of 2015 BETWEEN: PAUL SMITH Applicant AND: WESTPAC BANKING CORPORATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 412 of 2015 BETWEEN: STUART MOORE Applicant AND: WESTPAC BANKING CORPORATION Respondent IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 413 of 2015 BETWEEN: LUCKY POULOS Applicant AND: WESTPAC BANKING CORPORATION Respondent JUDGE: PERRAM J DATE: 19 June 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1. Introduction 1 On 14 October 2014 Griffiths J gave judgment in Murphy v Westpac Banking Corporation [2014] FCA 1104. In that case, former employees of St George Bank (which afterwards merged with Westpac) complained about misrepresentations made to them by St George as to the terms of their retention incentives, their entitlement to bonuses, wrongful dismissal, whether any entitlement to redundancy pay they had should be calculated on a basis which included their bonuses and claims relating to secondment. Griffiths J heard the case, which appears to have been hard fought, over 21 hearing days and received testimony from more than 20 witnesses. 2 The outcome of the case resulted largely, albeit not entirely, in defeat for the employees although Westpac was held liable to the applicants Ms Lavars and Mr Wittenberg. 3 Everyone has now appealed. The employees, apart from Ms Lavars and Mr Wittenberg, have appealed the judgment on those matters upon which they lost and Westpac has appealed the adverse determination against it in the case of Ms Lavars and Mr Wittenberg. Ms Lavars and Mr Wittenberg have cross-appealed in Westpac's appeal in relation to some matters upon which they lost. 4 Westpac has now brought two applications. It seeks, first, a stay of the orders requiring it to pay money to Ms Lavars and Mr Wittenberg. Secondly, it seeks security for its costs in the appeals brought by the employees including the cross-appeals in its own appeal brought by Ms Lavars and Mr Wittenberg. 5 It is useful to consider these in turn. 2. The Stay Application 6 By the time Westpac's application for a stay was called on, Mr Wittenberg no longer opposed it. In those circumstances, I will order a stay of the orders in his favour. 7 This was not the case with Ms Lavars, however. Under the orders made by Griffiths J Westpac is obliged to pay her: (a) $185,288.45 together with interest of $74,473.90 (Order 1); (b) $80,000 together with interest of $32,154.81 (Order 2); and (c) her taxed costs (failing agreement) (Order 5). 8 Westpac's appeal relates only to the sums in (b) and (c). As to (c), it seeks on appeal the substitution of an indemnity costs order. In summary, Westpac does not dispute that it must now pay Ms Lavars the sum of $259,762.35 (i.e., the amount in (a)) but seeks to be relieved, for now, of the obligation to pay her a further $112,154.81 (the amount in (b)). 9 Why? Because it is concerned it will not get its money back should it win its appeal. One obvious answer to this contention is that Ms Lavars will be able to pay Westpac back at least from the $259,762.35 which it will have already paid her under Order 1. 10 Westpac says that matters are not as straightforward as that, however. It points out that its appeal on costs (i.e. (c)), if successful, will result in Ms Lavars being required to pay Westpac's costs from December 2011 onwards on an indemnity basis. The evidence suggests this will be in the vicinity of $338,103. When this is added to the $112,155 in respect of which the stay is sought (and assuming it is not granted) this will mean Ms Lavars will then be required to repay Westpac $450,258. On the other hand, Westpac itself will on this hypothesis have only paid her $259,762.35. In that circumstance, there will be a shortfall of $190,495.65. 11 This calculation leaves out of account any costs orders eventually made on the appeal. Westpac was prepared to proceed on the basis that any such costs would be approximately equivalent to any costs Ms Lavars might receive before Westpac's entitlement to indemnity costs commenced in December 2011. This appears reasonable and I will take the same course. 12 It follows from the above that Westpac's concern is that on a net basis it may still be owed $190,495.65 by Ms Lavars even if its appeal is successful and even if she returns to it the whole of any money Westpac paid her. 13 Whether this state of affairs requires that a stay should be granted largely depends on the financial position of Ms Lavars. 14 Ms Lavars did not put on any direct evidence of her financial position but Westpac did. That evidence suggests that: Ms Lavars had net cash assets of $42,000; she had once owned an apartment which was sold in 2012 for $680,000; she currently owns no real property; since 2010 she has been employed on a pre-tax salary of more than $200,000 per annum together with bonuses of between $150,000 and $200,000 in the last two years; she owes her solicitors $54,481; and she is likely to owe her solicitors a further $378,826 in presently unbilled work. 15 If Westpac's appeal is successful this will mean that Ms Lavars will have these debts: Currently owed to solicitors $54,481.00 Future costs $378,826.00 Net to be paid to Westpac after refund of amounts paid by Westpac $190,495.65 Total $623,802.65 16 This compares with her apparent net assets of $42,000. I have left out of account Ms Lavars credit card debt which is likely to be short term. 17 On this view of affairs, Ms Lavars will be unable to pay her debts as and when the fall due if Westpac's appeal succeeds. Even with a substantial after tax salary with bonuses of around $220,000, she will not be able to meet liabilities of this magnitude. 18 Of course, it is quite possible that Ms Lavars may be able to reach an accommodation with her solicitors to pay them over time and she may even be able to reach such an arrangement with Westpac. Further, whilst it is plain that she once owned an apartment worth $680,000 it is possible that there were proceeds of this sale. But there is no evidence before me about any of this. 19 Since these matters could easily have been proved by Ms Lavars and really lay in her camp, I infer that any such evidence would not have assisted her. 20 I conclude, therefore, that should Westpac's appeal succeed it is possible that Ms Lavars will be insolvent. The risk of non-repayment that Westpac points to, therefore, does exist. 21 How likely is this to occur? There are two elements to Westpac's appeal. One relates to Ms Laver's entitlement to the $112,155, the other to its entitlement to indemnity costs. The former matter I am prepared to assume is arguable. The latter involves a question of the construction of the Federal Court Rules. It too is arguable. The risk to Westpac is real. 22 On the other hand, there is no evidence before me of any pressing need on Ms Lavars' part for the money. In those circumstances, I propose to stay order 2 made by Griffiths J on 27 March 2015 in proceeding NSD 31 of 2010 pending the result in Westpac's appeal. 23 For completeness, it should be noted that Ms Lavars submitted that a portion of the $80,000 would necessarily be withheld from her by Westpac under its taxation withholding obligation as her employer. The sum involved was $39,202. In respect of this sum, Ms Lavars submitted that Westpac was not exposed to any credit risk if its appeal were successful. Westpac, on the other hand, submitted that in the circumstance that the Full Court decided Ms Lavars was not entitled to the $80,000 it would not be entitled to obtain a refund of any withholding tax it had paid from the Commissioner. 24 The provisions of Schedule 1 of the Taxation Administration Act 1953 (Cth) do not appear to provide a mechanism expressly dealing with withholding tax in the situation where a judgment for wages has been reversed. Ms Lavars did not attempt to articulate before me how Westpac might in that circumstance obtain a refund of the tax. Instead, her submission was that, regardless, the money would be a 'preserved' asset. I do not think that this assists very much. Assuming this meant that Ms Lavars could somehow access the withheld funds through the Commissioner, this would not resolve Westpac's concern. Assuming that it meant that Westpac could access such funds, it did not explain why Westpac's submission that it could not do so was wrong. I reject the argument. 3. Security for Costs of the Individual appellants 25 It is convenient to deal with the position of each appellant or cross-appellant separately. 3.1 Mr Lawson 26 The trial judge awarded Mr Lawson $45,000 plus interest but otherwise dismissed his claim. His Honour ordered Mr Lawson to pay Westpac's costs on an indemnity basis from 13 December 2011. Westpac estimates that its costs of defending Mr Lawson's appeal will be around $68,000. 27 Mr Lawson has the following current or contingent debts: approximately $524,137 in relation to Westpac's indemnity costs order; $658,798 in his own solicitors' costs of the trial which is expected to increase to $982,000 by the end of the appeal. 28 I propose to proceed on the basis that if Mr Lawson's appeal should fail he will have debts in the vicinity of $1.5 million. 29 Against this, he appears to have no financial assets or real property of any value. This is what a notice to produce issued by Westpac demonstrated on its return. It may be that Mr Lawson has other assets but he has not given any evidence of them. He is not, however, without income. It would appear that he earns about $100,000 per annum. 30 It is obvious, therefore, that should Mr Lawson's appeal fail he will be insolvent. In that circumstance, there is a real risk that he will be unable to pay Westpac's costs of the appeal if ordered to do so. It seems to me that this would, all other things being equal, be a plain case for security for costs at the trial level, let alone the appellate level: cf. Dye v Commonwealth Securities Limited [2012] FCA 992 at [27]-[28] ("Dye"). 31 Here I do not think it can be said Westpac has caused Mr Lawson's financial position. Most of the debt arises from the unsuccessful nature of Mr Lawson's proceeding thus far. Nor do I accept that Mr Lawson is relevantly impecunious in the sense that he will not be able to raise the security. In those circumstances I will order that he provide $50,000 by way of security for the costs of his appeal (being approximately 75% of the $68,000 claimed by Westpac). The security is to be provided by way of bank guarantee. 3.2 Ms Lavars 32 I have already explained Ms Lavars' financial position in the event that Westpac's appeal succeeds. Westpac now seeks security for costs in respect of her cross-appeal. That cross-appeal has been filed in response to Westpac's own appeal. I do not think it would be fair to require security to be put up in what is, in effect, a responsive cross-appeal. More so as I have stayed part of the judgment in her favour. 3.3 Mr Moore 33 Including bills sent but which still remain unpaid and work in progress, it seems that Mr Moore owes his solicitors (or will owe them) around $458,746 if they insist on full payment. There is nothing before me to suggest that they will not do so. Westpac also has the benefit of an indemnity costs order against him which is likely to be quantified at around $404,709. On the other hand, Mr Moore appears to own a parcel of shares in Westpac valued at $912,000 together with a joint tenancy with his wife in a home at Turramurra upon which the outstanding debt is $508,000. The lender is Westpac. I think it likely that both parties were in a position to prove the value of Mr Moore's home. I propose to proceed on the basis that Mr Moore has available to him more than $100,000 in the family home. I do not think he will be unable to pay the costs of his appeal if ordered to do so assuming they amount to $39,000 as Westpac claims. I decline to order security. 3.4 Ms Murphy 34 Ms Murphy's position would appear to be that she owes (or will owe) her solicitors around $982,000 and that she owes Westpac approximately $408,367 as a result of the indemnity costs order it has obtained against her. 35 Ms Murphy currently receives $500 per week from Centrelink. She is unable to work as the result of an incapacitating illness. She presently has the primary care of a child. In addition, her elder daughter who finished school in 2013 still lives with her and Ms Murphy has been supporting her at university. The daughter is about to move to Melbourne. Ms Murphy receives little support from her ex-husband. 36 She was in receipt of workers compensation benefits in respect of her illness until 31 December 2012, when her entitlement to it expired by the effluxion of the maximum amount of time for which it can be paid. She has been permitted to access her superannuation of around $261,000 on a hardship basis. 37 Ms Murphy swore, and I accept, that if she was ordered to put up even the modest amount of security sought by Westpac ($12,000), she would be unable to do so. Effectively, it would put an end to her litigation. 38 Ordinarily, given that the matter is an appeal I would tend to downplay the significance of that fact: see Dye above. However, whilst I accept that she is unlikely to be able to satisfy any adverse costs order on appeal, I do not think that I should order security. The reasons for this are as follows: 39 Ms Murphy suffered a stress-related injury during the 2008 global financial crisis which resulted in her making a claim for workers compensation against Westpac (as the successor to St George under their merger). There were proceedings and the Workers Compensation Commission concluded that the very stressful environment in which she had worked at St George acted upon pre-existing stressors in her life in a way which ultimately incapacitated her. The details of this are somewhat personal and no benefit would be obtained in setting out precisely what happened. 40 The Workers Compensation Commission allowed the claim on the basis that the stressful working conditions had contributed to her condition. I would accept that this certainly implies that Westpac is causally connected to Ms Murphy's present absence from the workplace and resultant impecuniosity. There is a difference, however, between causation and responsibility. This matters because the system of compensation for injury in the workplace in New South Wales is largely a no-fault system. It was not necessary in order to award compensation, therefore, for the Commission to conclude that Westpac was to blame for Ms Murphy's incapacity in the sense of it having been negligent or having acted unreasonably. It was enough that the work environment contributed to her condition even if St George had done nothing inappropriate in allowing that workplace to be as it was. 41 That was the Commission's finding. More particularly, it also found that Ms Murphy suffered from two other conditions which pre-dated the events of 2008 and which made her more susceptible to the stressful workplace. The Commission did not find that St George had acted wrongfully towards Ms Murphy. Its finding was only that the workplace environment of stress had contributed to her condition. 42 What that means in this case is that Westpac, without necessarily any fault on its part, has contributed to the financial position in which Ms Murphy now finds herself. 43 Ordinarily, when the argument is raised that the impecuniosity of a party has been caused by the conduct of the opposing party this is in the context of that being the allegation made in the very litigation in question. But it does not seem that this is a necessary feature of the principle. A more likely explanation for it as a matter of principle is that a party ought not to be able to benefit from the consequences of its own wrongful conduct. In this case, that principle is awkward to apply for it is difficult to say that Westpac has been guilty of any wrongful conduct. 44 By itself, I would not therefore accept that this matter ought to prevent Westpac obtaining an order for security for the costs of its appeal. However, I also accept that if even a modest order for security is made it will have the effect of stifling the litigation and I would not order security as long as the proposed appeal had some merit. I say that accepting as I do the stricter environment implied by Dye. Westpac submitted that the appeals, in general, lacked merit. It pointed to the fact that many of the contentions now raised related to matters of fact. But this does not mean that the appeals necessarily lack merit. A party is entitled to contend that errors of fact have occurred. No doubt there are limits on an appellate court's capacity to review facts but this does not entail that appeals about factual matters generally lack merit. 45 I have come to the conclusion that given Ms Murphy's rather extreme and tenuous circumstances her proceedings should be permitted to go forward. I have taken into account in reaching that conclusion that the amount of security sought is only $12,000 and, whilst this is not a trivial sum, it is modest in the overall scheme of this litigation. 3.5 Mr Poulos 46 The evidence suggests that Mr Poulos does owe, or will owe, his solicitors $368,923. In addition, he is most likely liable to Westpac for $365,565 on account of the indemnity costs order made in Westpac's favour by Griffiths J. In addition, if his appeal fails he is likely to owe Westpac a further $24,000. In the event that his appeal fails his likely exposure will be around $800,000. 47 As against that Mr Poulos has an investment account with $510,000 in it and a house at Sylvania which is subject to an unspecified mortgage. He is presently the general manager for WA Retail for Alinta Energy on a salary of $302,000. Although Mr Poulos will certainly be financially distressed if his appeal is unsuccessful, I am not satisfied that he will be unable to pay any adverse costs order. With his salary it seems to me he could readily raise any shortfall. In those circumstances, I do not propose to order any security. 3.6 Mr Smith 48 It seems that Mr Smith is likely to be indebted to Westpac for its trial costs to the extent of around $500,000 and to his own solicitors, following any appeal, to around $900,000. Westpac's costs of any appeal are said to be around $60,000. I proceed on the basis that if Mr Smith loses his appeal he will have debts of around $1.5 million. 49 Against that it would seem Mr Smith is not employed but conducts some sort of business in share and currency trading on his own account. He also owns jointly with his wife a house at Mosman upon which there is owing $949,000 but whose value I do not know. 50 It seems to me that there is a significant risk that Mr Smith will not be able to meet any adverse costs order should his appeal fail. Whilst I assume in his favour that his appeal has reasonable prospects, I am not satisfied that he ought not to put up security. The amount sought by Westpac is $60,000. He has chosen not to put evidence before the Court as to the profitability or otherwise of his business activities. In circumstances where he would appear to be unable to meet an adverse costs order I am not prepared to hold Westpac out of a security order on the chance that his business might actually be profitable. I will order security in the amount of $45,000 by way of bank guarantee. 3.7 Mr Wittenberg 51 It is not substantially in dispute that Mr Wittenberg will not be able to meet an adverse costs order. Instead it was submitted that Mr Wittenberg was in the same position as Ms Murphy, i.e., that his undisputed unemployment and impecuniosity was the result of a workplace injury. 52 I was taken to no evidence to make good this contention which has, therefore, not been proved before this Court. However, Mr Wittenberg has cross-appealed in Westpac's appeal. For the reasons I have given in the case of Ms Murphy, I do not think it would be appropriate to order security for costs on the cross-appeal. 4. Orders 53 The parties are to bring in short minutes of order giving effect to these reasons within seven days hereof. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 19 June 2015