New South Wales Court of Appeal CITATION: Porter v Gordian Runoff Ltd (No.3) [2005] NSWCA 377 HEARING DATE(S): 10 October 2005 JUDGMENT DATE: 10 October 2005 JUDGMENT OF: Tobias JA at 1 DECISION: (a) Order that the appeal filed by the opponent on 17 December 2003 be dismissed with costs; (b) Order that the opponent pay the first respondent's costs of the Notice of Motion filed by it on 21 September 2005 and the costs of the second respondent of the Notice of Motion filed by it on 6 July 2004 and the amended Notice of Motion filed by it on 10 October 2005 CATCHWORDS: COSTS – Order for security for costs – Dismissal of appeal for failure to comply – Dismissal for want of prosecution – Supreme Court Act 1970 s 46(1) – Supreme Court Rules 1970 Pt 51 r 24 – Uniform Civil Procedure Rules 2005 r 42.21(3) Civil Procedure Act 2005 Supreme Court Act 1970 LEGISLATION CITED: Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005 Fairey v Fairey (No 2) [2000] NSWCA 173 Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 18 CASES CITED: Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271 Porter v Gordian Runoff Ltd [2004] NSWCA 69 Porter v Gordian Runoff Ltd [2004] NSWCA 171 Robert Arthur Porter PARTIES: Gordian Runoff Ltd FILE NUMBER(S): CA 40823/03 A: In person COUNSEL: 1R: Mr Jones 2R: Mr Gruzman A: In person SOLICITORS: 1R:Ebsworth & Ebsworth 2R: Bamford Associates LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): Eq 50072/01 LOWER COURT JUDICIAL OFFICER: McClellan J IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40823/03 TOBIAS JA 10 October 2005 ROBERT ARTHUR PORTER v GORDIAN RUNOFF LTD & ANOR Judgment 1 TOBIAS JA: In 2000, Robert Arthur Porter (the opponent) was charged with breaches of the Corporations Law arising out of a transaction in which he was involved as managing director of OAMPS Limited (the second respondent). For reasons that are not presently relevant, the trial of those charges did not proceed and, in July 2002, a nolle prosequi was entered. In defending these proceedings, the opponent incurred some hundreds of thousands of dollars in costs. 2 In 2001, the opponent instituted proceedings against Gordian Runoff Ltd (formerly known as GIO Insurance) (the first respondent) and the second respondent. He claimed to be entitled to be indemnified for the costs incurred by him in defending the criminal proceedings under an insurance policy issued by the first respondent and otherwise to be indemnified by the second respondent as his employer. 3 The respondents raised many defences but central to a number of them was the allegation that the opponent by his conduct in respect of which the criminal proceedings were commenced, breached the law and improperly placed his own interests before those of his employer. 4 On 21 August 2003 McClellan J in a lengthy judgment determined that the opponent's claims should be dismissed. On 17 December 2003 the opponent then filed a Notice of Appeal with Appointment to this Court. The Notice of Appeal contained 197 grounds of appeal and occupied 28 pages together with a lengthy schedule elaborating upon the certain matters raised in those grounds. 5 Relevantly for present purposes, each of the respondents filed a Notice of Motion seeking security for their costs of defending the appeal. In a judgment delivered on 16 March 2004 (Porter v Gordian Runoff Ltd & Anor [2004] NSWCA 69), Hodgson JA ordered that the opponent "provide security for costs in the sum of $150,000 for each respondent, and that if this security is not provided within 14 days, that the appeal be stayed until such security is provided." 6 The opponent then applied to the Court of Appeal by way of Notice of Motion to discharge the order for security for costs made by Hodgson JA. This motion was heard by Sheller, Giles and Bryson JJA on 23 February 2004. On 1 July 2004, that Court refused to discharge the orders of Hodgson JA and dismissed the opponent's Notice of Motion with costs. The leading judgment was that of Bryson JA, with whom Sheller and Giles JJA agreed, see Porter v Gordian Runoff Ltd [2004] NSWCA 171. 7 On 29 July 2004 the opponent applied to the High Court of Australia for special leave to appeal against the Court of Appeal's order of 1 July 2004. On 5 August 2005 that application was dismissed with costs. At no time prior to that date, or since, has the opponent complied with the order of Hodgson JA. 8 On 6 July 2004, the second respondent filed a Notice of Motion seeking an order that the opponent's appeal as against the second respondent from the decision of McClellan J be dismissed upon the ground that the order of Hodgson JA of 16 March 2004 for the payment into court of $150,000 as security for its costs of the appeal had not been complied with. It would appear that this motion was adjourned from time to time to enable the opponent to pursue his application for special leave to the High Court. 9 The second respondent's motion to dismiss came before the Registrar of the Court of Appeal on 1 September 2005 when it was adjourned to 10 October 2005 subject to a number of directions which included a direction that any motion by the first respondent to dismiss the appeal against it be returnable on 10 October 2005, that the first respondent's evidence in support of any such motion be filed and served by 23 September 2005 and that any evidence and submissions in reply by the opponent be filed and served by 7 October 2005. 10 On 21 September 2005 the first respondent filed a Notice of Motion in which it sought an order that the opponent's appeal from the decision of McClellan J be dismissed either pursuant to r 42.21(3) of the Uniform Civil Procedure Rules 2005 (the UCPR) for failure to comply with the order that the opponent provide security for costs or, alternatively, for want of prosecution pursuant to Pt 51 r 24 of the Supreme Court Rules (the SCR). 11 The Notice of Motion referred to in the preceding paragraph was supported by an affidavit of Christopher Gordon Smith (Mr Smith) sworn 21 September 2005 and filed on that date. Apart from reciting the basic history of this litigation, Mr Smith swore that the opponent had not complied with the order for the payment of $150,000 as security for the costs of the first respondent made by Hodgson JA on 26 March 2004 and had failed to respond to a letter from its solicitors to the opponent dated 23 August 2005 that he consent to the dismissal of his appeal upon the basis that he had not complied with that order. 12 The second respondent's Notice of Motion filed on 6 July 2004 and that of the first respondent filed on 21 September 2005 were referred to me by the Registrar for hearing on 10 October 2005. The respondents appeared by counsel and the opponent appeared in person. It was common ground that he had not filed any evidence or submissions as directed by the Registrar on 1 September 2005; nor had he complied with the order of Hodgson JA. He candidly informed me that he was simply unable to pay the sum of $300,000 in order to comply with that order. 13 At the commencement of the hearing before me, the second respondent sought leave to file an Amended Notice of Motion dated 23 September 2005 seeking orders in identical terms to those sought by the first respondent in its Notice of Motion filed on 21 September 2005 except that the second respondent also sought an order that its costs of the Notice of Motion and the appeal be paid on a gross costs basis pursuant to s 98(4)(c) of the Civil Procedure Act 2005. However, in its written submissions such an order for costs was abandoned. 14 The opponent submitted that the order made by Hodgson JA that he was to pay $150,000 in respect of the costs of each respondent was based upon the evidence before him as to the anticipated cost of their defending the opponent's 197 grounds of appeal. He then made application to reduce the number of his grounds of appeal to one, namely, the ground relating to an allegation of apprehended bias on the part of the primary judge. In fact the first two grounds of appeal relate to that subject matter, namely: "1. His Honour erred in failing to disqualify himself on the grounds that his conduct of the trial would have given a fair minded lay observer a reasonable apprehension that his Honour might not bring an impartial mind to the resolution of the questions he was required to decide (interlocutory judgment on 26 May 2003). Particulars The appellant refers to the submissions made on 22 May 2003. 2. His Honour should have disqualified himself on the grounds that his conduct of the trial would have given a fair minded lay observer a reasonable apprehension that his Honour might not bring an impartial mind to the resolution of the questions he was required to decide." 15 The opponent thus submitted that if he was permitted to reduce his grounds of appeal in this manner, the respondents' costs in defending the appeal would be substantially reduced to the point where it would be appropriate to discharge the order of Hodgson JA requiring the payment of $150,000 by way of security for the costs of each respondent upon the basis that the issue raised by grounds of appeal 1 and 2 could be determined in a relatively short hearing. He submitted that such a hearing would be "very short, inexpensive" and would last no more than a day. 16 The opponent further submitted that in [17] of his judgment on the application to this Court to discharge the orders of Hodgson JA, Bryson JA accepted that there was a public interest in the grounds of appeal based on the primary judge's refusal to disqualify himself on the ground of apprehended bias. In fact, [17] of Bryson JA's judgment merely sets out the contentions of then senior counsel for the opponent of which one was the public policy implication of the refusal of the primary judge to disqualify himself. 17 In [18] of his judgment Bryson JA concluded that, other than the contention that the primary judge should have disqualified himself on the ground of apprehended bias, the matters referred to by counsel were not issues in relation to which public interest was of great importance. However, in [30] his Honour did indicate that the issue of apprehended bias did give the appeal an element of public importance. He repeated this observation in [31]. However, his Honour did find that, in view of the manner in which that issue was presented to the Court on the application to discharge the orders made by Hodgson JA, the Court should take the view that the opponent's prospects of success on this issue should not be considered a significant factor. 18 More relevantly, the remarks of Bryson JA in [28], [29] and [30] of his judgment make clear that the hearing of the opponent's appeal, even if confined to Grounds 1 and 2 of his Notice of Appeal, would be a detailed and lengthy process. After referring to the submissions made by then senior counsel for the opponent before the primary judge in support of his application that his Honour disqualify himself, Bryson JA observed (at [30]) that those submissions were "not accompanied by detailed references to instances, transcript passages and specificities which it would be necessary for the Court of Appeal to have available if it were to dispose of these grounds. It is clear enough that the complaint was made, that it was made at length and that there must be a great deal of particular material to which the Court of Appeal must have regard if it were to understand the complaint and come to a conclusion on whether or not such complaint is justified." 19 It follows from the foregoing that the opponent's submission that if his appeal was confined to Grounds 1 and 2 it could be disposed of in half a day or a day is simply incorrect. The application for the primary judge to disqualify himself was made on the 45th day of the hearing, it being contended that his Honour had given every indication of prejudgment from the first day of the hearing and that, with only one exception, he had only asked questions favourable to the respondents and acted as a third cross-examiner of the opponent in all practical effect. It follows that in order to resolve the issues raised by Grounds 1 and 2 of the opponent's Notice of Appeal, it would be necessary to examine the transcript for all, if not a substantial part, of the 45 days of hearing that preceded the application to his Honour to disqualify himself. Obviously, this would take a great deal of time. 20 It follows in my opinion that the confining of the appeal to Grounds 1 and 2 as the opponent suggests, even if he in fact withdrew the other 195 grounds of appeal, would not result in a significant reduction in the length of the hearing of the appeal or in the pre-hearing preparation of the respondents in defending those grounds so as to warrant either the discharge or the variation of the order made by Hodgson JA and confirmed by the Court of Appeal. 21 I therefore turn to the Notices of Motion which have been filed by the respondents seeking the dismissal of the appeal pursuant to r 42.21(3) of the UCDR for failure of the opponent to comply with the order of Hodgson JA to provide security for costs. That rule provides as follows: "If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed." 22 Alternatively, pursuant to s 46(1) of the Supreme Court Act 1970, a judge of appeal may exercise the powers of the Court of Appeal to, inter alia, dismiss an appeal for want of prosecution or for another cause specified in the SCR. The alternative ground of dismissal relied upon by the respondents is that the appeal be dismissed for want of prosecution pursuant to Pt 51 r 24 of the SCR which is in the following terms: "Where an appellant has not done any act required to be done by or under these rules, or otherwise has not prosecuted his appeal with due diligence, the Court of Appeal may on application by any party or of its own motion: (a) order that the appeal be dismissed for want of prosecution, …" 23 The principles the Court should apply in exercising its discretion to dismiss proceedings under Pt 51 r 24 of the SCR were considered by the Court of Appeal in Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271. It was submitted that those principles were equally applicable to Pt 42.21(3) of the UCPR. 24 In Idoport at first instance ([2002] NSWSC 18), Einstein J (at [24]) accepted as correct the defendant's submission in that case that the following five factors were required to be taken into account in determining whether the Court should exercise its discretion to dismiss proceedings (at first instance) for failure to comply with an order for the payment of security for costs. Those factors were: (a) The period that has elapsed since the security was ordered; (b) The fact that the plaintiff has been on notice of the application for dismissal; (c) The seeming inability of the plaintiff to further fund the proceedings; (d) The prejudice to the defendant; and (e) The position of the Court. 25 His Honour (at [24]) accepted that those five matters were appropriate to be taken into consideration in the exercise of the relevant discretion. Nevertheless, he also acknowledged that that list was by no means exhaustive and that all the relevant circumstances were required to be taken into account including the Court's straining wherever practicable consistently with the interests of justice to avoid taking the radical step of denying a plaintiff its day in Court. The proper exercise of the Court's discretion required all relevant factors to be weighed in balance, the ultimate decision reflecting the interests of justice. 26 On appeal from the decision of Einstein J, Mason P, with the agreement of Stein and Giles JJA, rejected a submission that Einstein J had erred in the exercise of his discretion in giving weight or undue weight to the first four of the factors identified above. The President then observed (at [51]): "There is no minimum period established by legislation, rules or practice within which an application for dismissal might be made following default in compliance with an order for payment of security. No judicial discretion is uncontrolled, but it is common ground that the discretion to dismiss conferred by rule 4 is a broad one, unfettered by any express limitations … There is no written or unwritten minimum time, although I would accept that something more than a technical reduction or accidental default is required." 27 I would agree with the submission that the remarks of Einstein J and this Court in Idoport were applicable to an application to dismiss an appeal as they were to such an application with respect to proceedings at first instance. Accordingly the respondents made the following submissions as to the five factors referred to. 28 As to factor (a), the order for security for costs was made by Hodgson JA on 16 March 2004. Over 18 months has elapsed since that time. In particular, the High Court dismissed the respondent's application for special leave to appeal from the decision of this Court in refusing to discharge the orders of Hodgson JA on 5 August 2005, some two months prior to the hearing of the Notices of Motion to dismiss. It seems to me that a more than sufficient period of time has elapsed for the opponent to have complied with the order of Hodgson JA had he been able to do so. 29 As to factor (b), the second respondent filed its original Notice of Motion to dismiss the appeal for non-compliance with the order of Hodgson JA on 6 July 2004. Although the first respondent did not file its Notice of Motion until 21 September 2005,nevertheless it is clear that the opponent has been on notice for a significant time that the respondents would be seeking to dismiss the appeal in the event that there was non-compliance with the order of Hodgson JA. 30 As to factor (c), it was submitted that this was not an issue in the proceedings in that there is no doubt that the opponent is unable to pay the amount of security which was ordered or, for that matter, to fund his own costs of the appeal. Although there was no evidence of the opponent's inability to fund the appeal, he conceded that that was the case during the course of argument before me. 31 The remarks made by Einstein J in Idoport at [50] and cited by Giles JA on the appeal in that case at [93], support the conclusion that not only is the opponent bereft of funds to enable him to pay any part of the security ordered by Hodgson JA in the immediate, or even long term, future, but also that he is unable to fund his own costs of the appeal and would, no doubt, be forced into the position of appearing in person. Of itself that should not prevent the appeal from proceeding, but it is indicative of the fact that the hearing of the appeal, without the benefit of experienced counsel representing the opponent, will in all probability be more lengthy and complex, thus providing greater justification for the payment by the opponent of the security of costs ordered in respect of each respondent. 32 As to factor (d), it was submitted that the events that gave rise to the proceedings before the primary judge occurred in 1998. Even if the opponent were permitted to confine his appeal to Grounds 1 and 2 (the apprehended bias grounds), success on those grounds would necessitate a new trial which would ultimately take place at least nine years after the events in question. The prejudice to the respondents by that lapse of time in terms of the availability and memories of essential witnesses is obvious. As the first respondent submitted, the respondents have had two hard-won victories. Firstly, in succeeding before the primary judge in what was a trial of considerable length and complexity (having lasted 63 days) and, secondly, in obtaining and then defending an order for the payment by the opponent of security for costs in respect of each respondent. In this respect, there is a public interest in the termination of litigation of this type. 33 As to factor (e), the position of the Court is that this appeal has been, to adopt the expression in the first respondent's submissions, "mouldering in its lists" whilst the opponent has made two challenges to the order of Hodgson JA – in both of which he was unsuccessful. On the opponent's motion to discharge the order of Hodgson JA, Bryson JA noted (at [10]) that the opponent contended, and the respondents did not dispute, that the effect of the order for security for costs made by Hodgson JA would be that the appeal would not proceed as the opponent was not in a financial position to give the security ordered. 34 Notwithstanding that factor, the Court of Appeal dismissed the opponent's motion to discharge Hodgson JA's order. This aspect was also recognised by Hodgson JA in [43] of his judgment where he said: "I accept that the decision has very serious consequences for the appellant, financial and otherwise; and that it will be most unfortunate if an order for security prevents him pursuing his right of appeal. However, to my mind it would be unfair to permit the appeal to proceed in the circumstances I have outlined without the ordering of security. I do not think the case is of such general importance, or such merits, that the likelihood that an order of security would stifle the appeal is sufficient to justify refusal of security. To the extent that the appellant's impecuniosity was caused by the respondents, the effect of the primary judge's decision is that the relevant conduct of the respondents was justified." 35 That the appeal was likely to be stifled by the inevitable non-compliance with the order for security for costs, was also recognised by Bryson JA (at [32]) where he said: "Even though security for costs is likely to stifle the appeal, the respondents' claim for this protection is a very strong one. The appellant's prospects of success exist and must be recognised, but it must also be concluded that they have not been shown to be strong, and that the material put forward relating to the prospects of success on the ground of apprehended bias is not material on which a clear favourable view can be formed." 36 In Idoport on appeal, Mason P (at [42]) referred to the Court's power to dismiss proceedings for want of prosecution observing that a failure to pay security may be evidence thereof. Of course, if r 42.21(3) of the UCPR applies then this Court has an express discretion to order that the proceedings be dismissed on the ground of non-compliance with an order that security be paid. However, that rule applies to proceedings at first instance and Pt 51 of the SCR is still applicable to appeals in this Court. Accordingly, the question is whether this Court should exercise its discretion to dismiss the appeal under Pt 51 r 24 for want of prosecution. 37 As Mason P observed in the passage from his Honour's judgment in Idoport to which I have referred above, the failure to pay security may constitute evidence of a want of prosecution. In the circumstances of the present case, not only is the failure of the opponent to comply with the order of Hodgson JA evidence of a want of prosecution but, in the circumstances, it is powerful evidence thereof. 38 That still leaves the question of whether the Court should exercise its discretion to summarily dismiss the appeal on the basis of want of prosecution. As has been pointed out on numerous occasions, summary dismissal of an appeal brought as of right is an extreme measure. However, this is not a case where the opponent is guilty only of past defaults which have been remedied: on the contrary, his default in complying with the order of Hodgson JA is continuing and, on his own concession, will never be complied with due to his impecuniosity. 39 As Mason P pointed out in Fairey v Fairey (No 2) [2000] NSWCA 173 at [52], "The power to dismiss proceedings summarily serves the dual purposes of ensuring fairness to litigants in preserving the integrity of the judicial system. The former purpose aims essentially to protect the litigant, in this case the respondent, from the consequences of delay, be those consequences financial, impacts on litigation, psychological or otherwise. The latter purpose, namely the integrity of the judicial system, promotes the expedient resolution of cases and has some regard to the interests of litigants generally in the Court. I hasten to say that regard cannot over-reach the rights of the individual litigants to justice in their own case." 40 The present case is one where the opponent is simply unable, and will continue to be unable, to comply with the order of Hodgson JA. As I have already observed, the Court of Appeal refused to discharge his Honour's order upon the basis that to do so would constitute particular unfairness to the respondents and that this is so, as the tenor of Bryson JA's judgment also suggests, even if the appeal was confined to Grounds 1 and 2 relating to the primary judge's alleged apprehended bias. 41 Hodgson JA, as well as the Court of Appeal, clearly recognised that the making of the order for security on the one hand and the refusal to discharge it on the other would, if it was not complied with, have the effect of stifling the opponent's appeal. The latter's prospects of success with respect to Grounds 1 and 2 on the material before the Court of Appeal was not such that it could be said that his prospects of success were strong. Bryson JA specifically stated that the prospects of success on the ground of apprehended bias on the material before the Court was not such as would enable the Court to form a clear favourable view that the appeal would succeed on those grounds. 42 In the foregoing circumstances, it is clear in my opinion that I should exercise my discretion to dismiss the appeal. In view of the failure of the opponent to comply with the order of Hodgson JA, it is appropriate to protect the respondents from the financial consequences of having to defend an appeal with no prospect, if that defence is successful, of ever recovering the extensive costs of so doing which, in the circumstances to which I have referred, will be not inconsiderable. 43 Accordingly, I propose to exercise my discretion to dismiss the appeal for want of prosecution. The formal orders I make are as follows: (a) Order that the appeal filed by the opponent on 17 December 2003 be dismissed with costs. (b) Order that the opponent pay the first respondent's costs of the Notice of Motion filed by it on 21 September 2005 and the costs of the second respondent of the Notice of Motion filed by it on 6 July 2004 and the amended Notice of Motion filed by it on 10 October 2005. ********** 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.