Warner v Frost [1999] NSWCA 327

New South Wales Court of Appeal CITATION : Warner v Frost [1999] NSWCA 327 FILE NUMBER(S) : CA 40079/99 HEARING DATE(S) : 6 September 1999 JUDGMENT DATE : 6 September 1999

Susan Mary Frost - 1st claimant/1st respondent PARTIES : Melissa Frost (by her next friend Susan Mary Frost) - 2nd claimant/2nd respondent Donald Martin - 3rd claimant/3rd respondent Carolyn Warner - opponent/appellant JUDGMENT OF : Registrar Jupp

LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : 1143/98; 1144/98; 1145/98 LOWER COURT JUDICIAL OFFICER : Garling DCJ

COUNSEL : Mr Young for claimants/respondents Mr Motbey for opponent/appellant SOLICITORS : McDonald Johnson - claimants/respondents Papas J Attorney - opponent/appellant CATCHWORDS : security for costs DECISION : Motion dismissed; costs of motion to be costs in the appeal

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40079/99

REGISTRAR JUPP

6 September 1999 Carolyn Warner v Susan Mary Frost & Ors

JUDGMENT

1 REGISTRAR: In these proceedings a Notice of Motion has been filed by the respondents on 17 August 1999 seeking an order for security of cost of the appeal. The appeal is from a decision of Garling DCJ in favour of the respondents and against the appellant and her husband jointly. 2 It has been pointed out during the course of argument before me today that the appeal was filed out of time, albeit by only a few days. 3 A bankruptcy notice was served on the opponent/appellant on 10 March 1999. An application for a stay of the judgment was considered by Justice Fitzgerald on 19 April 1999. Justice Fitzgerald refused the appellant's application for a stay but noted that in his view the appeal was arguable. A Notice of Appeal with appointment was filed on 5 May 1999 and on 12 August 1999 the appeal was fixed for hearing on 4 November 1999. The estimate given for the hearing of the appeal is two hours. 4 The basis for the respondent's application is the admitted impecuniosity of Mrs Warner. This was disclosed in the evidence considered by Justice Fitzgerald and was also evident in an application brought in the Federal Court to set aside the bankruptcy notice. The matter that has muddied the waters slightly is that in the course of the proceedings before Justice Fitzgerald, Mrs Warner offered, as a condition of the stay that she was seeking, that she would provide $10,000 as security for cost of the appeal. As the stay was refused, the offer was not taken up. 5 The question of the current financial circumstances of Mrs Warner is open to conjecture. However, an affidavit of Mrs Warner was filed in court during the course of the hearing of the motion today and was read without objection. Paragraph 4 of that affidavit states: "My present position is that I have no funds to obtain security for cost and if I am ordered to pay security for cost, I will not be able to pursue my appeal." 6 I have been worried as to what implications can be drawn from that particular paragraph of Mrs Warners affidavit. Mr Young, during the course of argument this afternoon, has asked me to draw an inference that despite what is said there, Mrs Warner may be able to obtain funds from some other source to provide the security for cost. Unfortunately, the evidence I have seen so far does not allow me to draw such an inference. One of the matters that has to be considered on an application for security of cost is whether, if an order is made, it is likely to stifle the appeal. 7 I am sufficiently concerned that if an order for security for costs was to be made, that the appeal maybe be stifled that I am not prepared to make the order. That is the primary reason why I am refusing to make the order for security for costs. 8 In response to Mr Young's submissions, Mr Motbey, who appeared on behalf of the opponent/appellant, put three arguments as to why, in the exercise of my discretion, I should not make the order. He pointed to the delay in the filing of the motion for security. The motion for security was filed on 17 August 1999, five days after the matter had been set down for hearing, and about a month after the respondent had originally indicated to the appellant that such an application might be brought. Mr Motbey pointed to the delay from when the appeal was originally filed on 5 February 1999. In fact, the delay from when the Notice of Appeal with appointment was filed on 5 May 1999, is not, in my opinion, so significant as to be a significant factor in determining whether an order for security should be made. 9 The second point that Mr Motbey made was that the appeal would be stifled if security for costs was ordered. I have already addressed that issue. 10 The third argument that was put by Mr Motbey was that there may be no utility in making an order for security of cost because of the effect of bankruptcy law. Mr Young has submitted that the operation of bankruptcy law is probably not a significant matter which should impact on my discretion. As I have already mentioned, the principle reason why I have refused the motion is because of my fear that the appeal would be stifled. However, it appears to me that there may also be some real question as to the utility of an order for security, if, in fact, the appellant is made bankrupt after this appeal has been determined. 11 If security for cost has been provided, any payment to the respondents, in respect of that security, may constitute a preferential payment. I would not want to be seen as making an order which would be endorsing such a preferential payment. 12 This is a case where I have wavered during the course of the afternoon and, as I say, the principle issue was a question of whether I felt the matter could, or would, be stifled if an order for security was made. I have great sympathy for the respondents in this case, because there is a real likelihood that the appeal will be unsuccessful and that they will have to bear their costs of defending the appeal without recourse to the appellant. Nevertheless, the appellant is employed at the moment and is earning $40,000 a year and there is a possibility that some amounts will be available to the respondents in the course of the administration of the bankruptcy. 13 Under the circumstances, the proper order in respect of security for cost appears to me to be that the costs should follow the outcome of the appeal. I know that that probably does not give very much satisfaction to the respondents because they are costs which will probably not be recoverable in any event. However if I was to make an order that they are entitled to their costs of today, and if they are correct in their argument, they would not recover those costs anyway. 14 I propose to order that the costs of the motion be costs in the appeal. (Mr Young further addressed the Registrar in respect of the matter of costs of the motion.) 15 Mr Young has made an application for the costs of the motion based on the irregular manner in which a fairly critical affidavit of the appellant was put before the court. I have to concede that the manner in which that affidavit was put before the court was less than desirable and has contributed to the difficulty in the way the matter has proceeded today. 16 I am however in some doubt as to what the utility would be in making the order that Mr Young seeks. I am still faced with a matter where an application was made by the respondents and where the onus is on those respondents to persuade the court that special circumstances exist. I have not been persuaded that in all the circumstances of this case there are special circumstances such as to justify an order for security for costs. 17 The order for costs that I proposed, is the order I will make. Certified correct