New South Wales Court of Appeal CITATION : McWilliam v Penthouse Publications [1999] NSWCA 2 FILE NUMBER(S) : CA 40506/98 HEARING DATE(S) : 12/10/98 JUDGMENT DATE : 21 January 1999 Anthony Charles Badham Jackson (1st claimant/2nd respondent) PARTIES : Ernest Ormond Butler Thomas & ors trading as Norton Smith (2nd claimants/3rd respondents) Bruce Scott McWilliam (1st opponent/appellant) Peter Bruce McWilliam (2nd opponent/appellant) JUDGMENT OF : Registrar Jupp LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : 13527/88 LOWER COURT JUDICIAL OFFICER : Maconachie AJ COUNSEL : claimants - Ms Oakley opponents - Mr Graham and Mr Hodgekiss SOLICITORS : claimants - Minter Ellison, Lawyers opponents - no solicitors instructed CATCHWORDS : security for costs DECISION : Motion in so far as it seeks security for costs dismissed; 1/3 of the costs of the motion to be claimants' costs of the appeal, 2/3 of the costs of the motion to be appellants' costs of the appeal 7 THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40506/98 REGISTRAR JUPP Thursday 21 January 1999 BRUCE SCOTT McWILLIAM & ANOR v PENTHOUSE PUBLICATIONS LIMITED (LONDON, UNITED KINGDOM) & ORS JUDGMENT (on application for security for costs) 1. REGISTRAR: On 14 August 1998 the 2nd and 3rd respondents, Mr Jackson and Norton Smith, Solicitors, filed a motion which sought, firstly, to strike out the appeal in so far as it had been brought by Bruce McWilliam (senior) and secondly, for security for costs of the appeal. That motion was adjourned several times by consent and eventually heard on 12 October 1998. 2. The appeal was originally filed on 14 July 1998 by Monte Gildea, Solicitor. The Notice of Appeal nominated 3 appellants being Bruce McWilliam Snr, Bruce Scott McWilliam and Peter Bruce McWilliam. There were 6 respondents. 3. On 4 August 1998 Monte Gildea filed a notice of ceasing to act for the appellants. 4. During the hearing of the motion I ordered that the appeal, in so far as it had been brought by Bruce McWilliam (Senior) was to be struck-out. I made this order on the basis that Mr McWilliam (senior) had died prior to the appeal being filed. (See Marshall v DG Sundin & Co Pty Ltd (1989) 16 NSWLR 463 and Darrington v Caldbeck (1990) 20 NSWLR 212). I noted that the order was not to prejudice any application that the legal personal representative of the estate may make to be added as a party to the appeal, and I also directed that the widow of Mr McWilliam (senior) be advised of the order. 5. At the hearing of the motion, originally Mr Graham sought only to appear on behalf of Bruce Scott McWilliam. Ms Oakley, who appeared for the claimants opposed this and I agreed that there would be difficulties if the remaining appellants were not jointly represented. A Notice of Address for Service of the two remaining appellants was eventually filed in Court. This document, signed by Bruce Scott McWilliam on his own behalf and as attorney for Peter Bruce McWilliam, nominated Flat 2, 52 Mona Road, Darling Point as the address for service. Mr Graham and Mr Hodgekiss of counsel thereafter appeared to defend the motion for the two remaining appellants. 6. The appeal is from a decision of Maconachie AJ given on 17 June 1998. The proceedings were heard over several days during May and June 1998. The proceedings in the Common Law Division had been brought by the McWilliams (Bruce senior and junior, and Peter). They were the directors and shareholders of ADM Franchise Pty Limited (ADM), a printing and publishing company. In May 1979 ADM entered an agreement with Penthouse Publications Limited (PPL) by which a license was granted to ADM to allow it to publish the Australian edition of Penthouse. 7. On 30 August 1982 a notice was served on ADM at its registered office, which PPL asserted terminated its agreement with ADM. On the same day PPL entered the business premises of ADM and seized many of its assets. PPL asserted this was done in accordance with the terms of the agreement after prior notice. The McWilliams argued that the agreement had not been validly terminated and that the seizure of the goods was an illegal act, and that the defendants/respondents had conspired in respect of that illegal act. The McWilliams also argued that winding up proceedings brought by PPL were brought with the intention of frustrating injunction proceedings brought by ADM. Maconachie AJ entered judgment for each of the defendants/respondents. 8. The motion in so far as it claims security for costs is brought on 3 main bases: · the appellants have not been frank about where they reside and one of the appellants resides outside the jurisdiction; · the appellants are impecunious; and · the low prospects of the appeal. 9. The affidavit evidence in support of the application was an affidavit of Elissa Dai Baxter sworn 7 October 1998. This notes in paragraph 5 that the notice of appeal does not include the residential addresses of the appellants. This is in breach of the rules to the extent that the prescribed form requires the disclosure of a residential address. The affidavit appears to be slightly confused in paragraphs 4 and 6 in that it refers to the wrong appellant brother. Bruce (Jnr) and Peter appear to have been transposed. In any event Mr Graham conceded that Peter Bruce McWilliam was not a resident of Australia and that he resided in Honolulu, Hawaii. So far as Bruce Scott McWilliam is concerned no evidence was led that he was not a resident of New South Wales. Mr Graham advised me that his instructions were that Bruce Scott McWilliam lived at 2/52 Mona Road Darling Point, this being the same address nominated as the address for service. This advice was not contested. That address is the home address of the widow of Bruce McWilliam (senior). Although I have no sworn evidence that Bruce (junior) lives at that address, Mr Graham also advised me that Bruce (junior) gave evidence that that was his residential address in the proceedings before Maconachie AJ. Other than the apparent oversight in not including the residential addresses of the appellants in the notice of appeal, there does not appear to me to be any evidence to raise a doubt that Bruce (junior) does not reside with his mother at Darling Point. 10. Although there are 2 appellants in this case, provided they are jointly represented at the hearing of the appeal, the time taken to conduct the appeal and the costs of the appeal ought to be the same as if only one of the appellants was pursuing the appeal. If the appeal is unsuccessful both appellants will be jointly and severally liable for the costs of the appeal. There does not appear to me to be any justification for making an order for security for costs, which would essentially be an order against both appellants, because one of the appellants resides outside the jurisdiction. The appellant that resides within the jurisdiction should not be placed in a worse position, vis a vis a security for costs application, simply because a co-appellant resides outside the jurisdiction. To the extent that there are 2 appellants rather than one, a successful respondent has the advantage of being able to pursue both or either of the appellants for its costs. See Uptown Sydney developments Corp Pty Ltd v Bank of New Zealand (no1) (1993) 11 ACSR 300 11. The evidence suggests that both appellants are impecunious and will have difficulties in meeting a costs order against them if the appeal fails. I note that Mr Graham conceded that a case had been made out that both appellants were impecunious. 12. So far as the prospects of the appeal are concerned, the evidence of Elissa Dai Baxter is that the solicitors and senior and junior counsel of the 2nd and 3rd respondents have formed a view that the appellants "have little chance of succeeding on the appeal." Ms Oakley submitted that Judgment in this case was largely determined on findings of fact and that the grounds of appeal largely challenge those findings of fact. She also submitted that to the extent that those findings of fact were based on adverse findings as to the credit of Bruce Scott McWilliam, the appeal is unlikely to succeed. It was also noted by Ms Oakley that the trial Judge had found (albeit briefly) that the appellants did not have standing to sue. She asserted that this also constituted a special circumstance which should be taken into account. 13. Mr Graham made submissions that despite the apparent difficulty of the appeal, this was a bona fide arguable appeal. I agree with this assessment. I have read Maconachie AJ's judgment and considered the grounds of appeal. Although Maconachie AJ has made findings of fact which are partly based on the rejection of the evidence of Bruce Scott McWilliam, this appears to be a case where there was documentary evidence which had to be considered and reconciled against the version of events put by the parties. Although Maconachie AJ found that none of the documentary evidence corroborated the version of events put by Bruce Scott McWilliam, this finding of itself does not necessarily mean that the appeal is hopeless. It seems to me that the status of the "demand" made on 20 January 1982 is open to argument. If that "demand" was not an effective demand pursuant to the agreement between the parties, then the notice served on 30 August 1982 would not have been effective and the agreement would not have been terminated. Under those circumstances the seizure of the goods on 30 August 1982 would have been illegal and the possibility of a conspiracy is made out. It seems unlikely to me that the finding that the agreement was not varied as a result of the June 1980 London meeting will be overturned. It also appears a difficult task to establish that there was an intention to harm the plaintiff/appellants rather than ADM. 14. Ground 20 of the Notice of Appeal asserts that certain documents should have been admitted into evidence and Ground 21 argues that the trial judge should have given a higher weight to the failure of any of the defendants/respondents to give evidence in the proceedings. In proceedings that ran 15 days, and without seeing the documents that the appellants say should have been admitted, it is difficult to assess how likely these grounds are to be successful, however these grounds appear to be very arguable. 15. The standing of the appellants to sue, also appears to me to be arguable. Maconachie AJ deals with this issue in 4 lines of his judgment (page 61). The fact that the matter was not disposed of summarily, suggests to me that the standing of the appellants was and remains an open issue. It is difficult to assess how valid that finding is without knowing the basis the appellants argued that they had standing to sue. I note that Maconachie AJ refers to the submissions put by Mr Hodgekiss that the plaintiffs were harmed in their interests as directors, shareholder, creditors and guarantors of ADM. Mr Graham stated that it was also put that the plaintiffs were harmed as beneficiaries of a trust and that Maconachie AJ's Judgment does not deal with this argument. 16. Security for costs for appeals in the Court of Appeal is only ordered in special circumstances. (Part 51 rule 16 SCR). The question then is whether the combination of factors in this case constitutes special circumstances. As I have noted above the places of residence of the appellants does not appear to justify an order for security for costs. The issue then is reduced to whether the impecuniosity of the appellants together with the low prospects of the appeal succeeding and the finding of no standing, constitute special circumstances. 17. While I would agree with the claimant that this will be an appeal that will be difficult to win, I do not classify this as an appeal that is manifestly misconceived and hopeless (Lall v 53-55 Hall Street Pty Limited [1978] 1 NSWLR 310). There has been no delay in bringing the appeal and the grounds of appeal are properly drawn and arguable. As I have noted above the standing of the appellants to sue is a ground of appeal, and in light of the brief consideration of this issue in the judgment, it appears to be an open issue. 18. That leaves the issue of the impecuniosity of the appellants. No evidence to contradict the apparent impecuniosity was led. There appears to be a concession that both the appellants are impecunious. As has been noted in Abdurahaman v Field (unreported NSW Court of Appeal 4 March 1986) and Lall v 53-55 Hall Street Pty Limited impecuniosity is not usually of itself sufficient to establish special circumstances. This policy is followed for obvious reasons. Many appellants are not wealthy and appeals often follow lengthy and expensive hearings for which appellants are liable to pay costs. If orders for security for costs were made in each of these cases, the ultimate result would be a frustration of many genuine appeals. The Court, so far as possible, attempts to ensure that there is equal access to justice. The Court is cautious to ensure that genuine appeals are not frustrated by the impecuniosity of potential litigants. There is nothing to suggest that this appeal should not be determined on its merits. The appellants, if they can succeed on the appeal, and on any remitted hearing, would be entitled to substantial damages. If an order for security for costs was to be made in this case it would very likely have the result that the appeal would not proceed. There is no evidence that either of the appellants would be able to provide security for costs from some source other than their own assets. Under those circumstances it appears to me to be an appropriate case to refuse the order for security for costs. (see Kennedy v McGeechan (1978) 1 NSWLR 314 at 315) 19. The question that I must now consider is what order for costs is appropriate. The claimants were successful on the first part of the motion to the extent that Bruce McWilliam Snr has been removed from the proceedings, but have been unsuccessful in so far as they sought security for costs. It may well have been that the motion would not have been brought if Bruce McWilliam senior had not been improperly joined as a party and the other appellants had indicated proper residential addresses and an address for service. These were issues that were properly brought to the Court's attention. The motion also brought to the remaining appellants' attention the necessity to be jointly represented on the appeal. The motion did not proceed as smoothly as it should have because the appellants were not originally in a position to accept joint representation. Nevertheless the substantive part of the motion, which ultimately took most of the time was the application for security for costs. But for events which occurred during the hearing of the motion, the outcome of the motion for security may have been different. I am also mindful that the appeal will probably be unsuccessful. It appears appropriate that the costs of this motion should at least in part abide the outcome of the appeal. On balance I think the most appropriate order to make is that 1/3 of the costs of the motion be claimants' (2nd and 3rd respondents) costs of the appeal, recoverable if they obtain an order for costs of the appeal in their favour and that 2/3 of the costs of the motion be appellants' costs of the appeal, recoverable if the appeal is successful and an order for costs is made in favour of the appellants.. 20. The formal orders that I make then are: a) that the motion filed by the 2nd and 3rd respondents on 14 August 1998, in so far as it seeks security for costs be dismissed; and b) 1/3 of the costs of the motion be claimants' (2nd and 3rd respondents) costs of the appeal, and 2/3 of the costs of the motion be appellants' costs of the appeal. Certified Correct Steve Jupp, Registrar Court of Appeal Date: 21 January 1999 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.