HARWIN v WOOD [NO 1] SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBy ACJ 11 October 1993, 11 October 1993 [1993] NSWCA 132 PRACTICE and PROCEDURE — security of costs — earlier refusal of Mareva injunction to prevent alleged dissipation of assets — later application for security of costs on grounds of dissipation and limited assets of appellant — proof of irrevocable order on funds in hands of solicitor for the appellant — exhaustion of such funds by judgment and costs to date — held: (Kirby ACJ): (1) The refusal of the Mareva injunction, being addressed to a different issue, did not exclude the making of an order for security of costs of the appeal; (2) Special grounds for security of costs had been shown and such security should be ordered. ORDERS 1. Expedite the hearing of the appeal, category A, to the intent that the appeal will be heard within a period of approximately one month on a date to be fixed by the Registrar with due notice to the parties; 2. Order that the opponent pay as security for the costs of the appeal the sum of $5,750, such sum to be paid to the Registrar of the Court of Appeal or, if it is agreed between the solicitors for the respective parties, into a trust account jointly administered by those solicitors to abide the outcome of the appeal; and 3. Order that the opponent pay the costs of the claimants of and incidental to the motion for security of costs. Kirby ACJ This is an application for security of the costs of an appeal to this Court. I am dealing with the motion pursuant to the powers conferred on me by the SuPreme Court Act 1970, s46. The appeal has been brought by Ms Desre Clair Woods (the opponent) from an order made by McLachlan DCJ in favour of the claimants (Mr Derek Harwin and Ms Irene Harwin). The claimants were successful both before his Honour and in proceedings before an arbitrator. The claimants succeeded, both in the primary hearing and in the secondary hearing, on the referral of the hearing to McLachlan DCJ. Nevertheless, the opponent is within her rights to bring the matter by way of appeal to this Court. The appeal should be heard with expedition. So much was not contested by the claimants or the opponent. It was proved before the Court that Ms Harwin has been diagnosed as suffering from leukaemia. For this reason alone, the hearing of the appeal should be given urgent priority. The question is whether, as well, the Court should order that security should be provided for the costs of the appeal. Under the Rules of the Supreme Court applicable to the Court of Appeal, security is only ordered in respect of the costs of an appeal, upon special grounds being shown. The question is therefore whether special grounds have been shown in this case. In support of that contention, an affidavit of Mr Peter Prior, solicitor for the claimants, sworn 27 September 1993 has been read. It was read without any relevant objection. Mr Prior was not subjected to any cross examination on his affidavit. I can therefore safely assume that the matters placed before the Court by him are for present purposes accurate. 2 UNREPORTED JUDGMENTS In the affidavit it is disclosed that there had been earlier proceedings relating to the suggested dissipation by the opponent of her assets. Those proceedings were heard by Windeyer J, apparently in support of an application for a Mareva injunction directed to the opponent to prevent her further "dissipation" of the assets. In the proceedings before Windeyer J, it was demonstrated, and the opponent did not really contest, that she had paid her son Richard a sum of $35,000 said to have been owing to him. She also paid her son Glen the sum of $15,000 to help him furnish his home. This was a gift. Accordingly, within a short time the opponent had paid sums totalling $50,000 to her two sons. The opponent had also said, according to Mr Prior's unchallenged affidavit, "I would prefer to pay the solicitors before these people". "These people" referred to are the claimants. I, therefore, face a situation where a person of relatively limited assets has reduced her assets by a substantial amount and has asserted that she would rather pay others than the present claimants the judgment and costs which they have recovered and which they are presently entitled by court orders. The claimants, having succeeded both at the primary hearing before the arbitrator and in the secondary hearing before McLachlan DCJ, would naturally find the prosecution of the litigation futile if, at the end of it, they succeeded by the order of the Court but were unable to recover the amount ordered to be paid by the judgment. That amount is of the order of $39,500. So far as the judgment debt is concerned I have been informed that that is secured by an irrevocable order executed by the opponent and directed to her solicitor in the sum of $50,000. This is part of the proceeds of the sale of the property which was owned by the opponent. Accordingly, the real risk which the claimants face is a risk in respect of their costs. Iam unconcerned with the costs before the arbitrator and the costs before the District Court. However, I have to face the question whether there is a risk that this third level of challenge to the claimants' claim would result in an order for costs which could not be recovered. It is true that such a possibility is not demonstrated with absolute clarity on the materials that have been placed before me. It is at least possible that the opponent's irrevocable order would provide a fund which could more than cover the costs of the appeal, estimated to be of the order of $5,750. On the other hand, I have been informed that the claimants' costs before the arbitrator and in the District Court are already in the order of $20,000. Upon that footing I would assume that the opponent's costs would be approximately of the same order. If, therefore, it is the opponents' preference to pay her own costs, rather than the sums owing to the claimants, there is a real possibility that further expenditures on the part of the opponent, unrestrained by any injunction issued by the Supreme Court, would effectively mean that the opponent might be unable to pay the costs of the claimants were they to succeed at the third level of litigation, ie. in the appeal. Ihave reached no concluded view as to the likely prospects of the appeal. Nor have I been addressed on the possibilities. Nor have I reached any concluded view concerning the likely further dissipation of the assets of the opponent. I take into account the fact that Windeyer J was of the opinion, in dismissing the claim for the Mareva injunction, that it was not the intention of the opponent to dissipate her remaining assets. However, the question before Windeyer J was different from the question now before me. To grant any injunction, but a Mareva URJ HARWIN v WOOD [NO 1] (Kirby ACJ) 3 injunction in particular, is a most serious step, potentially gravely disruptive to the life of the person subject to it. The order sought in this motion does not have that character or consequence. Tam simply dealing with this matter as an adjunct to an appeal which has been brought by the opponent to resist the claim of the claimants which have now been twice upheld. Having regard to the history of the matter, and the undoubted fact that substantial funds have been paid out in reduction of the opponent's assets, and the opponent's stated preference as to the way in which those assets should be expended, and having regard also to the fact that that stated preference has not been matched by any contrary evidence before this Court, nor challenged or disputed by cross examination, I have concluded that the special grounds necessary to order security for costs have been established. I have heard no argument relating to the amount of the security sought. Having regard to other like cases the amount assessed in the solicitor's affidavit appears to be reasonable. Accordingly, the orders which I make are: 1. Expedite the hearing of the appeal, category A, to the intent that the appeal will be heard within a period of approximately one month on a date to be fixed by the Registrar with due notice to the parties; 2. Order that the opponent, Desre Clair Woods, pay as security for the costs of the appeal the sum of $5,750, such sum to be paid to the Registrar of the Court of Appeal or, if it is agreed between the solicitors for the respective parties, into a trust account jointly administered by those solicitors, to abide the outcome of the appeal; 3. Order that the opponent, who has resisted the application for security, pay the costs of the claimants of and incidental to the motion for security of costs. I make no order in respect of so much of the motion as dealt separately with the issue of expedition having regard to the fact that the opponent did not oppose such an order. The Registrar will notify the parties of the first call over which will be in November. At that call over an early date for the hearing will be appointed. 1. Expedite the hearing of the appeal, category A, to the intent that the appeal will be heard within a period of approximately one month on a date to be fixed by the Registrar with due notice to the parties; 2. Order that the opponent pay as security for the costs of the appeal the sum of $5,750, such sum to be paid to the Registrar of the Court of Appeal or, if it is agreed between the solicitors for the respective parties, into a trust account jointly administered by those solicitors to abide the outcome of the appeal; and 3. Order that the opponent pay the costs of the claimants of and incidental to the motion for security of costs. Counsel for the Claimants: OJ Watt Instructed by: Peter C Prior and Co Counsel for the Opponent: WR Hodgekiss Instructed by: Karageorge and Co