Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Florida Kitchens Pty Ltd v Number One Cutting Service Pty Ltd trading as Number One Marble and Granite [2020] NSWCA 187 Hearing dates: 20 August 2020 Date of orders: 20 August 2020 Decision date: 20 August 2020 Before: Leeming JA; McCallum JA. Decision: Summons seeking leave to appeal dismissed, with costs. Catchwords: APPEALS – leave – dismissal of appeal from order for provision of security for costs – orders made against sole director and shareholder – no question of principle – leave refused Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW), s 83 Civil Procedure Act 2005 (NSW), s 56 Home Building Act 1989 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 49.4, 51.12, 51.18, 59.11 Cases Cited: Florida Kitchens Pty Ltd v Number One Cutting Service Pty Ltd [2018] NSWCATAP 281 Florida Kitchens Pty Ltd v Number One Cutting (T/S Number One Marble and Granite) [2019] NSWSC 1568 Florida Kitchens Pty Ltd v Number One Marble and Granite [2019] NSWSC 574 Ross v Lane Cove Council (2014) 86 NSWLR 34; [2014] NSWCA 50 Category: Principal judgment Parties: Florida Kitchens Pty Ltd (First applicant) Andre Elias (Second applicant) Number One Cutting Service Pty Ltd trading as Number One Marble and Granite (Respondent) Representation: Counsel: D Feller SC, S Milanovic (Applicants) S Bell (Respondent) Solicitors: Georges Elias, Cadmus Lawyers (Applicants) David Simons, SR Law (respondent) File Number(s): 2019/391421 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2019] NSWSC 1568; [2020] NSWSC 216 Date of Decision: 15 November 2019, 13 March 2020 Before: N Adams J File Number(s): 2018/391926 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: These are our reasons for ordering, immediately after the conclusion of the applicants' oral submissions, that leave be refused with costs. 2. Florida Kitchens Pty Ltd and its sole director and shareholder, Mr Andre Elias, seek leave to appeal against two decisions of the Supreme Court constituted by N Adams J. The first is the dismissal of an appeal from a decision of Harrison AsJ, ordering that Florida provide security for the costs of its appeal in the sum of $40,000. The second is an order made on 13 March 2020 that Florida and Mr Elias pay the respondent's costs on an indemnity basis. 3. The underlying dispute concerned a claim by the respondent, Number One Cutting Service Pty Ltd, for the sum of $20,130. The debt arose out of the manufacture and installation of Caesarstone benchtops and splashbacks at three building sites. Number One commenced proceedings in the Local Court seeking to recover that amount more than 4 years ago, on 1 June 2016. Florida applied for the proceeding to be transferred to NCAT, which upheld the claim on 5 December 2017 and ordered that Florida pay Number One's costs on an indemnity basis on 12 June 2018. Florida appealed to the Appeal Panel, which dismissed its appeal in 2018: Florida Kitchens Pty Ltd v Number One Cutting Service Pty Ltd [2018] NSWCATAP 281. Florida has exercised its right to appeal to the Supreme Court pursuant to s 83 of the Civil and Administrative Tribunal Act 2013 (NSW). That second appeal is confined to a question of law and is subject to the grant of leave. 4. Florida's summons seeking leave to appeal from NCAT is a remarkable document. It contains 70 grounds, while ground 1 contained 36 subgrounds. It is signed by Mr Georges Elias, solicitor. The drafter was conscious of the limited scope of Florida's appeal, in that each ground purports to be an error of law. Thus it is said that "The Appeal Panel erred in law in finding that 'the explanation of the reason for the delay is not convincing'" (ground 5), "The Appeal Panel erred in law in finding that the 'Member's intervention was appropriate and unobjectionable'" (ground 23) and "The Appeal Panel erred in law in finding that 'the Member was not required to give any weight to Mr Ferrante's evidence'" (ground 56). There is no need to reproduce or summarise the grounds in these reasons; they are reproduced by the primary judge at [15] of her first judgment over some 9 pages. It is inconceivable that there could be 70 (or 105) independent questions of law which led to the Appeal Panel dismissing Florida's appeal, and enough has been said by way of example to show that some are palpably hopeless. 5. Whether any of the grounds of appeal is viable is not something which arises on this application. Florida's appeal was filed on 20 December 2018, precisely 20 months ago. It has not been heard. Indeed, it has been dismissed. That came about because Number One applied for and has obtained orders for the provision of security for costs: Florida Kitchens Pty Ltd v Number One Marble and Granite [2019] NSWSC 574. The time for providing that security was extended, repeatedly, until noon on 6 March 2020. Even so, it was not paid. Consequently, the appeal from NCAT was dismissed, consistently with a self-executing order, originally made on 20 May 2019, and varied repeatedly, and ultimately by orders made on 21 February 2020 in this Court. 6. Thus for the last five months, there have been no extant proceedings in the Common Law Division. There is merely the current application for leave, seeking to set aside orders for security for costs and a third party costs order derivative upon Florida's appeal. 7. However, it was common ground between the parties that, in the event that the order for security for costs was set aside, the appeal from NCAT would continue in place. It by no means follows from the prospect of setting aside the order of a superior court that its effects may be ignored. For example, it is no answer to a charge of contempt based on breach of an order of a superior court for the contemnor to say that that order was subsequently set aside: see Ross v Lane Cove Council (2014) 86 NSWLR 34; [2014] NSWCA 50 at [17] and the decisions there cited. However, it is sufficient to proceed on the basis that the parties agreed that if the order for security (including its self-executing dismissal of the appeal from NCAT) were set aside, then there was a binding agreement between the parties to reinstate the appeal from NCAT. 8. Florida appealed from the decision of the Associate Justice ordering security for costs, pursuant to UCPR r 49.4. It did so by notice of motion filed 17 June 2019. The notice of motion identified 30 grounds of appeal. The dismissal of that motion was the subject of the first decision of the primary judge. Her Honour dealt with all 30 of the grounds, at length, in a decision of 112 paragraphs occupying 38 pages, delivered promptly, 10 days after the hearing: Florida Kitchens Pty Ltd v Number One Cutting (T/S Number One Marble and Granite) [2019] NSWSC 1568. 9. The second decision of the primary judge concerned costs. It was delayed in light of Number One's flagging an application for a costs order against Mr Andre Elias. Her Honour was satisfied that Mr Andre Elias was the real driving force behind the proceedings, and was satisfied that: "the unsuccessful appeal before me is now part of a pattern of unsuccessful appeals over such a small sum of money that it was unreasonable and the person that benefits the most from this is the sole shareholder and director of Florida Kitchens which is Mr Andre Elias": at [81]. 1. Consistently with what has occurred over the last 20 months, Florida has sought leave to appeal from both decisions of N Adams J. It seeks leave to rely on a draft notice of appeal of 34 grounds. 2. It is necessary to say that if those who prosecuted the appeal from the Associate Justice and the further application for leave to appeal to this Court were aware of the requirements of the rules, those requirements have been flagrantly disregarded. Mr Feller SC, who appeared for the applicants but was only briefed in the last few days, did not seek to defend the volume of the appeal books or the number of proposed grounds of appeal, and rightly so. 3. One thousand, two hundred and seventy-five pages in the application book, occupying five folders, does not come close to complying with the obligation for the white folder to contain "any other documents (other than documents to be filed by the respondent) that are necessary for disposal of the application": UCPR r 51.12(2)(e). The draft notice of appeal is required to state "briefly, but specifically, the grounds relied on in support of the appeal": UCPR r 51.18(1)(e). The grounds sought to be relied on are neither brief nor specific. They reflect the same misguided approach which has previously been seen in the litigation in this Court, of seeking to challenge every conceivable statement in the reasons and in the process. Examples include "Adams J erred in not finding that her Honour Harrison AsJ erred in the exercise of her discretion", "Adams J erred in not finding that her Honour Harrison AsJ erred at law"; "Adams J erred in not finding that her Honour Harrison AsJ had mistaken the facts" and so on. There are also longer grounds, such as ground 6, which despite their length do not identify specific error: "Adams J erred in her findings in relation to the prospects of success of the leave application and the prospects of success of the appeal, by only attempting to narrow the issues to 2 or 3 witnesses and the quantum meruit issue, which is one of the many issues on appeal, whilst totally disregarding other important matters on appeal, such as the Appeal involving amongst other things referred to in the Summons filed on 20 December 2018, matters including errors in law, jurisdictional issues, question of public interest, denial of procedural fairness, failure to apply and comply with the terms of the applicable legislation in particular the Home Building Act 1989, lack of evidence in supporting findings, failure to take into account mandatory relevant consideration and statutory sanctions, the taking into account of irrelevant consideration, the failure to give proper and/or adequate reasons, findings and conclusions amounting to Jurisdictional error and speculations and conclusions not supported by evidence and/or contrary to the evidence." 1. The grounds challenging the costs order against Mr Elias follow the same pattern. There are uninformative concise grounds such as ground 20: "Adams J erred in misapplying the tests and principles set [out] in the relevant case law in relation to the payments of costs by a non party to the proceeding", and there are uninformative verbose grounds, such as ground 23, which occupies a page and a half, and states that Adams J "erred in making the following findings and observations" before reproducing a series of statements with which Mr Elias disagrees, culminating in 23(iv): "That 'As is to be inferred from the rejection of the settlement offer in this matter, the main dispute now is as to costs which clearly well exceed the amount in dispute. There has been nothing quick or cheap about these proceedings', in circumstances where firstly her Honour did not appreciate that the Application regarding security for costs was initially instigated by the Respondent and not the First Appellant, requiring the First Appellant to review the decision before her Honour, and which the First Appellant was entitled to. Secondly, the main dispute in the NCAT proceedings is not about costs only, which her Honour appears to have incorrectly found or believe[d], but in relation to errors made by NCAT relating to errors in law, jurisdictional issues, question of public interest, denial of procedural fairness, failure to apply and comply with the terms of the applicable legislation in particular the Home Building Act 1989, lack of evidence in supporting findings, failure to take into account mandatory relevant consideration and statutory sanctions, the taking into account of irrelevant consideration, the failure to give proper and/or adequate reasons, findings and conclusions amounting to Jurisdictional error and speculations and conclusions not supported by evidence and/or contrary to the evidence." 1. It is necessary to cut through the volume. The following may be said to resolve this application for leave. 2. First, the applicants maintain that their application from NCAT is in the nature of judicial review, and therefore is insusceptible to an application for security for costs. This is wrong. The form used is a "Summons seeking leave to appeal (Part 50)", the document states that it is an appeal pursuant to s 83 of the Civil and Administrative Tribunal Act and that accords with its substance. Further, it should not be thought that to the extent that this Court's supervisory jurisdiction overlaps with a right of appeal, it may be invoked by a corporate applicant with the consequences of avoiding an application for security for costs. Still further, even if proceedings in the nature of judicial review were properly available, security may be ordered in an exceptional case: UCPR 59.11. This is such a case. 3. Secondly, in relation to the costs order against Mr Elias, notwithstanding that it has attracted no fewer than 19 proposed grounds of appeal (one of which has four sub-grounds occupying more than a page), the written submissions in support were confined to three paragraphs. The first (para 24) merely states that "The questions and issues in the appeal are but not limited to the following..." and then are reproduced 13 issues drawn from the proposed notice of appeal. The second and third are best reproduced in full: "[25] The question as to whether leave should be granted in relation to the second decision, both the First and Second Applicants respectfully submit that it should be granted, as again there is an important issue of public interest and a question of the discretion being misdirected and other errors being made in the exercise of the discretion, causing substantial wrong and prejudice to the First and Second Applicants, and which needs to be addressed and rectified. [26] Apart from the matters that involve issues of misapplying the principles regarding indemnity costs and costs against non parties to the proceedings, there is a serious question of public interest/ general public importance in ensuring that such powers relating to costs orders against non parties to the proceedings are carefully considered and approached with extraordinary care and the discretionary powers are exercised with a minimal margin of errors, and with such errors not being substantial and prejudicial to the parties in the litigation as well as to non parties to the litigation, in this instance the Second Applicant, Andre Elias. In this case, injustice is reasonably clear and therefore leave should be granted to rectify such injustice." 1. Nothing more was said in support in writing. In oral submissions, Mr Feller was critical of her Honour's failure to recuse herself. However, he did not dispute the accuracy of what her Honour recorded at [20] of her reasons, namely, a diffident submission ("it may not now be appropriate for her Honour to determine this application for costs due to a perception of apprehended bias, lack of impartiality and potential prejudice" without any basis articulated). He also accepted that there was no error in what her Honour said at [65]: "[I]t is important to have regard to what it is that is left for me to determine in this matter. I have already judged the substantive proceedings. I found that the appeal from Harrison AsJ had no merit. What I am now being asked to determine is the relevant costs order ancillary to those proceedings. It seems to me that it would be highly unusual for a judicial officer who had already determined a matter to not by then have some views as to the conduct of the proceedings." 1. Mr Feller also maintained that there were important issues of principle concerning the circumstances when a third party costs order should be made, especially by the primary judge after adverse findings had been recorded. That is so. However, in our view, this is a clear case for such an order. 2. Turning to the appeal insofar as it turned on the order for security for costs, Mr Feller first directed attention to what was said to have been an erroneous finding by Harrison AsJ about the number of costs orders. Although her Honour referred to there being two orders in NCAT in favour of Number One and one in favour of Florida, in fact there was only one in NCAT. Nothing turns on this. The order in favour of Florida was for the costs thrown away by an amendment in the Local Court. The order in favour of Number One was for the costs of the entire proceedings, on an indemnity basis. The latter must dwarf the former, notwithstanding that Florida wrote to Number One stating that its costs thrown away were in excess of $29,000. The Associate Justice correctly pointed out that the costs had been miscalculated, including the entirety of Florida's costs at that point rather than those thrown away. Further, it is obvious that nothing like that amount could properly have been incurred by way of recoverable party party costs in defending a money claim for $20,130 in the Local Court. In her reasons, N Adams J noted the error and said that nothing turned on it. Mr Feller did not disagree. 3. Mr Feller was critical of the reasons of both the Associate Justice and N Adams J to the effect that the appeal from NCAT was at best weak. At first, he said that in light of the number of grounds of appeal and the limitations on time, it would be invidious to go through them all. That is so, but the drafter's prolixity cannot be invoked to avoid the need to articulate how error is said to be made out. When some of the palpably hopeless grounds were pointed out, and he was asked to identify a less unpromising ground of appeal, Mr Feller fastened upon grounds 44-46. These were as follows: "44. The Appeal Panel erred in law in finding that s 92(4) of the Home Building Act 1989, was not applicable in the case. 45. The Appeal Panel erred in law in finding that 'there were three independent contracts for the performance of three different jobs'. 46. The Appeal Panel erred in law in finding that there were multiple contracts, and each contract was for less than $ 20,000.00, and therefore no requirement to obtain Home Warranty Insurance." 1. Those grounds relate to the fact that Number One performed work at three different sites, and according to the Appeal Panel, pursuant to three separate contracts. Florida challenges that conclusion, with a view to engaging the Home Building Act. But whether the Appeal Panel was right or wrong in concluding that there were three separate contracts, it is a question of fact, not law. Grounds 44-46 are hopeless, because they cannot give rise to an error of law. 2. Mr Feller did not identify any other aspect of the proposed underlying appeal from NCAT which was said to command significant prospects of success. 3. There was no error in the conclusion that the underlying appeal was, at best, weak. 4. Mr Feller said that there were material errors of fact in the conclusion that Florida was lacking in funds. In part, this was an inference from Florida's failure to supply financial statements on request, and its response to a subpoena, being a single A4 page with very large bold letters: "NO PROPER SERVICE NO CONDUCT MONEY NO DOCUMENTS" 1. Mr Feller invited that response to be understood as Florida choosing not to comply because of an absence of conduct money, which was not of itself capable of supporting the ultimate conclusion. He accepted that there was no evidence of this. 2. Further, Mr Feller criticised a finding by the Associate Justice that "[w]hile there is no evidence of Florida Kitchens' assets, it has paid the verdict moneys and the filing fee in this Court. However, it appears that they were not paid by Florida Kitchens but by an unidentified third party". He pointed to evidence that the money ordered by NCAT was paid from Florida's own bank statement. It is not clear whether this was pointed out to the Associate Justice in terms, in the mass of paper tendered before her Honour. But in any event, there was an abundance of evidence to the effect that Florida was not disclosing its financial position, and, importantly, bearing in mind that the question for present purposes is whether to grant leave, there is the fact that Florida has still not provided the security which was long ago ordered. 3. There is a more profound difficulty with that part of the application which concerns security for costs of the appeal from NCAT. When the application for leave was filed, the appeal from NCAT remained extant (because of Florida's extensions of time). That is no longer so. Even so, in light of the parties' agreement, the question is not wholly academic. 4. However, it remains necessary to identify the right at stake. Florida has been required to provide security for costs of an appeal. The security may be called upon by Number One if, but only if, Number One obtains a costs order in its favour in the appeal. 5. If Florida's appeal were to fail, it is likely that the Supreme Court would order that Florida pay Number One's costs of the appeal. In that event, Number One would be entitled to use the $40,000 provided by way of security to discharge its party-party costs of the appeal, rather than having to enforce a costs order in the usual way as an unsecured creditor. In the event that Florida were not otherwise able to pay those costs, or the processes of execution would lead to delay and further cost, the position of Number One would be, to that extent, improved. 6. On the other hand, if Florida's appeal were to succeed, it is likely that there will be no order that Florida pay Number One's costs of the appeal. In that case, Florida would be entitled to the return of the security. The only prejudice to Florida would be the loss of the opportunity to use the funds provided by way of security for so long as Florida's appeal remains undetermined. There is no evidence of any such prejudice. 7. Thus, not only is this a question of practice and procedure, in respect of which this Court should be reluctant to intervene, but it is also about the difference between Number One being a (perhaps partially) secured creditor, as opposed to an unsecured creditor, in the event that Florida's underlying appeal from NCAT fails. 8. This is a singularly unpromising vehicle for a grant of leave to appeal. 9. It should not be necessary to say so, but each of Mr Sasha Milanovic, a barrister admitted more than two decades ago, Mr Georges Elias, solicitor, Mr Andre Elias and Florida has at all times been under a statutory obligation to assist the court to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The real issues in this litigation for the last two years have been whether there are one of more errors of law in the Appeal Panel's dismissal of Florida's appeal against NCAT's determination that it pay Number's One's invoice for $20,130. It is difficult to reconcile the course of the litigation over the last two years with compliance with s 56 of the Civil Procedure Act. 10. There is no question of principle, no public importance, nor any clear error, in making orders (a) on an indemnity basis and (b) extending to Florida's sole director and shareholder. Indeed, so far as may be seen, both decisions of the primary judge were plainly correct. If within the 105 proposed grounds of appeal some one or more were made out, the question would arise as to the re-exercise of the discretion to order security for costs, and to make a costs order against Mr Elias. The present is one of the clearest cases for security for costs we have encountered, and is a paradigm example of when a third party costs order is appropriate. 11. At the conclusion of the hearing, we rejected an application by Number One for an indemnity costs order. That application was put on one basis only, namely, that the appeal was at all times hopeless, and the litigation had continued for years in NCAT and in this Court. There is force in that submission. However, insofar as Mr Elias is concerned, he was the subject of an order made against him personally in March of this year, as a consequence of Number One's application for a third party costs order. While we would not grant leave to appeal from that order, which we consider to be correct, we would not accede to the submission that the application for leave was so hopeless that it warranted an indemnity costs order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 August 2020