New South Wales Court of Appeal CITATION: Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 274 HEARING DATE(S): 27 September 2007 JUDGMENT DATE: 8 October 2007 JUDGMENT OF: Giles JA at 1; Ipp JA at 26; Basten JA at 27 DECISION: The application for discharge of the qualifying order should be dismissed with costs. CATCHWORDS: PROCEDURE - discharge of order of judge of appeal - necessity for error of law or material fact or within principles of review of discretionary decisions - COSTS - application for leave to appeal against failure to order costs in favour of applicant - whether security for costs of trial should remain in place - extent of security to remain - whether error in judge of appeal permitting reduction - on proper understanding of judge's reasons, no error. Patrick v Howorth [2002] NSWCA 285; CASES CITED: Porter v Gordian Runoff Ltd [2004] NSWCA 171; Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136. PARTIES: Kiri Te Kanawa - Claimant Leading Edge Events Australia Pty Ltd - First Opponent FILE NUMBER(S): CA 40431/07 COUNSEL: A McGrath - Claimant R W Evans - First Opponent SOLICITORS: Henry Davis York - Claimant Vizzone Ruggery & Associates, Mascot - First Opponent LOWER COURT JURISDICTION: Court of Appeal - judge sitting alone LOWER COURT FILE NUMBER(S): 40431/07 LOWER COURT JUDICIAL OFFICER: Beazley JA LOWER COURT DATE OF DECISION: 2 August 2007 LOWER COURT MEDIUM NEUTRAL CITATION: Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd & Ors [2007] NSWCA 187 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40431/07 GILES JA IPP JA BASTEN JA Monday 8 October 2007 KIRI TE KANAWA v LEADING EDGE EVENTS AUSTRALIA PTY LTD Judgment 1 Section 46(2) of the Supreme Court Act 1970 permits powers of the Court of Appeal of an interlocutory kind to be exercised by a judge of appeal. In an application for leave to appeal brought by the claimant, Beazley JA stayed the trial judge's discharge of an order for security for the costs of the trial; but her Honour made a qualifying order by which the stay ceased if security for costs in a lesser amount was provided. The claimant applied, pursuant to s 46(4), for discharge of the qualifying order. 2 The circumstances are fully set out in the reasons of Beazley JA Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd [2007] NSWCA 187. They can be sufficiently summarised for present purposes as follows. 3 The opponent brought proceedings against four defendants, the claimant being the first defendant and a company through which her services were provided being the fourth defendant. It is convenient hereafter to refer to the opponent as the plaintiff and the first and fourth defendants as such. 4 An order was made that the plaintiff provide security for the costs of all four defendants in the amount of $50,000. Security was provided in the form of a personal guarantee of Mr Frank Williams, the controller of the plaintiff (the first security). A further order was then made that the plaintiff provide security for the costs of the first and fourth defendants in the amount of $250,000. Security was provided in the form of a bank guarantee (the second security). 5 The proceedings were heard by Bergin J, who gave judgment for the plaintiff against the fourth defendant but dismissed the claims against the other defendants. Her Honour ordered that the fourth defendant pay 65 per cent of the plaintiff's costs and that as between the plaintiff and the first defendant there be no order as to costs. She ordered also that the order for provision of the second security be discharged; the intention was no doubt that the bank guarantee could be released. 6 Beazley JA said at [5]-[6] - " Her Honour's reasons for making the order as to costs as between the plaintiff and the first defendant are to be found in her judgment at [27]ff, especially at [29], [32] and [35]. In essence, her Honour considered that the appropriate percentage to be attributed to the first defendant in the total costs of the first and fourth defendant was 15 per cent. She then considered that the most appropriate way to reflect that proportion in the costs that were to be awarded in the proceedings was to reduce the amount of costs that the plaintiff was able to recover from the fourth defendant and to make no order as between the plaintiff and the first defendant. Her Honour had already determined that the fourth defendant should be responsible for 80 per cent of the plaintiff's costs. By reducing those costs by 15 per cent, she arrived at the percentage of costs that she ordered the fourth defendant to pay to the plaintiff. 6 Her Honour's reasons have to be understood in the context of other factors, including the relationship between the first and fourth defendants, namely that of employee and employer respectively; the trial judge's finding that notwithstanding that relationship, the fourth defendant was supine to the first defendant's wishes; and, relevantly, the fact that the first and fourth defendants had joint representation at the hearing." 7 The first defendant applied for leave to appeal against the order that there be no order as to costs as between the plaintiff and the first defendant. 8 In the summary of argument filed in support of the application she contended (i) that the trial judge erred in the exercise of her discretion in that there had been no sufficient basis to depart from the prima facie position that costs follow the event; (ii) that the finding that the fourth defendant was supine to the first defendant's wishes was not soundly based and in any event did not warrant departure from the prima facie position; (iii) that it had been incorrect to say that the first defendant benefited from the reduction of the fourth defendant's costs burden; and (iv) that in this respect and otherwise the separate legal personalities of the first and fourth defendants had been blurred. The summary of argument included complaint that the trial judge's course "eliminated the personal right to recovery of costs which, prima facie, [the first defendant] should have had and, further, which may well have exceeded the 15% estimate". 9 In the draft notice of appeal the first defendant sought an order that, in lieu of the costs order made by the trial judge, there be an order that the plaintiff pay the first defendant's costs of the proceedings. In the summary of argument, however, this was put as an order that the plaintiff pay the first defendant's costs of its claims against her. 10 Together with her application for leave to appeal the first defendant filed an application for a stay of the discharge of the order for provision of the second security. The purpose was clear enough. If leave to appeal were granted and the appeal were successful, she wished to be able to have recourse to the second security in order to recover the costs to which she would then be entitled. 11 The determination of the first defendant's application, as I have indicated, was effectively that the security in the amount of $250,000 should remain, but could be replaced by security for a lesser amount. The lesser amount was $100,000. 12 The first security was material to the first defendant's recovery of costs. Beazley JA considered that it should be left out of consideration in the light of Mr Williams' financial position. This was not in contest before us. 13 The dispositive paragraphs of her Honour's reasons were otherwise- "17 The determination of the first defendant's application is not without difficulty. 18 On the one hand, there is considerable merit in the submission that she should be in no different position than she was during the course of the proceedings, insofar as her costs being secured are concerned, on the assumption that she will succeed in her appeal on the question of costs. ... 19 On the other hand, the trial judge made a finding that an appropriate award of costs in the first defendant's favour would have been in the order of 15 per cent of the costs of the joint representation that she had with the fourth defendant. No evidence was adduced by the first defendant as to the likely quantum of either her costs or the total costs that have been incurred by the first and fourth defendants. Accordingly, the only evidence before the Court is that presented on the application for security for costs before McDougall J, namely, that total costs in excess of $330,000, together with the costs already incurred after that date which were unquantified, were likely to be incurred. 20 On that material, it could be expected that the total costs of the first and fourth defendants could be in the order of $400,000. Had her Honour made an order for costs on the basis that the plaintiff pay the first defendant's costs assessed at 15 per cent of the joint costs of the first and fourth defendant, the first defendant's costs would be in the order of $60,000. 21 There is, therefore, merit in the argument that by maintaining the security in the sum of $250,000, the first defendant is in a significantly improved position than she was at trial. 22 I consider that this application should be determined on the basis that leave to appeal will be granted and that there is an arguable prospect that the appeal will be allowed. It is not necessary, in my opinion, to make any assessment of that prospect. It is sufficient to judicially notice that there is an argument available to the first defendant that her costs should not have been conflated with those of the corporate fourth defendant. In that circumstance, I am of the opinion that the first defendant should be in no worse position than she was at trial in relation to her costs being secured. 23 That does, however, bring to the fore again the difficulty to which I have already averted, namely that if an order is made extending the stay of order 7, the first defendant is arguably in a much more satisfactory position than she was at trial, in circumstances where that security was provided for the costs of the first and fourth defendants. … 25 Having taken these various matters into account, I consider that the stay of order 7 should be extended until the determination of the Summons for Leave to Appeal, and if leave is granted, the hearing of the appeal, subject to a condition that the stay should be revoked upon the plaintiff providing alternative security by way of bank guarantee in the sum of $100,000. Should that alternative security be provided, then that security should remain in place until the determination of the appellate process." 14 The nature of an application under s 46(4) to discharge an order of a judge of appeal has relatively recently been restated in Patrick v Howorth [2002] NSWCA 285, Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136 and Porter v Gordian Runoff Ltd [2004] NSWCA 171. In the last of these cases Bryson JA, with whom Sheller JA and I agreed, summarized the matter at [4] - "An application to discharge an order is not an appeal and it is not a rehearing de novo: a sufficient ground must be shown upon which the order should be discharged, otherwise the order will stand. The restatement made in Patrick v. Howorth [2002] NSWCA 285 by Heydon JA at para [10] shows that an order will not ordinarily be discharged unless the decision turns on an error of law, a material error of fact or, in so far as it is discretionary, a ground within the principles governing review of discretionary decisions in House v. The King (1936) 55 CLR 499." 15 In her written submissions the first defendant submitted that Beazley JA failed to take account of a material consideration, took into account an irrelevant consideration and was plainly wrong. The argument for these errors began that, while observing that the first defendant challenged the assessment of her costs at 15 per cent of the total costs, her Honour had not taken the challenge into account; she had therefore wrongly "capped" the first defendant's success in an appeal, which she treated as having arguable prospects of success, because costs greater than 15 per cent of the total costs might be recoverable. Given the challenge, it was said, the 15 per cent assessment was an irrelevant consideration, and led to failure properly to take account of the material consideration, recognized as such, that the first defendant should be in no worse position than she was at trial. Because the first defendant might no longer have access to security in the amount of $250,000, but only access to security in the amount of $100,000, the decision was plainly wrong. 16 In oral submissions the argument was more varied. The core submission was that, although stating that the first defendant "should be in no worse position than she was at trial in relation to her costs being secured" (at [22]), Beazley JA had put her in a worse position; the result at odds with her Honour's expressed intention revealed error. 17 In my opinion, the submission is founded on an incorrect understanding of Beazley JA's reasons. When her Honour referred to the first defendant being in no worse position than she was at trial, she did not mean the position of having access to security in the amount of $250,000 regardless of the costs recoverable. Had that been meant, the consideration of the likely order of the first defendant's costs, which underpinned the "difficulty" of the first defendant being in an improved position if the second security was maintained, would have mattered not; indeed, there would have been no question at all of the first defendant being in an improved position. I accept that the path to her Honour's conclusion is not explicit, but in my opinion her Honour meant the position of being able to recover the costs awarded in her favour out of the second security. That led to an inquiry into the amount of the costs which she might have occasion to recover if she succeeded in an appeal and obtained (as the notice of appeal sought) an order for her costs of the trial; hence arrival at $60,000 as the amount of the costs on the assumption of the 15 per cent assessed by the trial judge, and the $60,000 was increased to $100,000 in recognition of the challenge to the 15 per cent. 18 These steps, particularly the last, are not spelled out, but it would be wrong to attribute to her Honour the basic inconsistency on which the first defendant's submission was founded when the reasons can be understood in the manner I have describe. So understood, there was no error in the regard paid to the 15 per cent assessment, a possible increase in which was recognized in the increase from $60,000; nor was there error in failing to have proper regard to, or arriving at a result at odds with, the first defendant's position at trial. 19 The first defendant's argument was at times put in other ways. 20 First, it was suggested that an order should have been made whereby the first defendant could recover all the costs incurred in the joint defence of the proceedings by the first and fourth defendants, because the first defendant was liable to the joint solicitors (and presumably any experts or others) for all the costs; thus any security less than the full $250,000 would inevitably be insufficient, and there was error in leaving the first defendant with less security. 21 However, the first defendant was not to be awarded costs simply because she had undertaken responsibility to the solicitors (and any others). The trial judge correctly sought to arrive, by the 15 per cent, at the costs referable to the first defendant's defence of the proceedings as against her. The percentage could be debated, although an order as sought in the draft notice of appeal would leave the debate for a costs assessor. The first defendant's summary of argument did not go further than that the first defendant's "personal right to recovery of costs … may well have exceeded the 15% estimate". Beazley JA was left to make an allowance for the prospect that a costs assessor would come to an amount greater than 15 per cent of the total party/party costs, and no error has been shown in the necessarily impressionistic uplift to $100,000. 22 Secondly, Beazley JA took the total costs of the first and fourth defendants at $400,000. The first defendant submitted that in the hearing before her Honour the plaintiff conceded that the total costs were $600,000, and that her Honour erred in acting upon the wrong figure. Although it was not fully articulated, perhaps because on the first defendant's principal argument the figure did not matter, the point was that 15 per cent of $600,000 rather than $400,000, proportionally uplifted in recognition of the challenge to the 15 per cent, was $150,000, and that the error meant that the first defendant was deprived of replacement security for $150,000 rather than $100,000. 23 The transcript records (30 July 2007, p 4) that Beazley JA asked, "Is there affidavit evidence before me as to the likely quantum of costs if, for example, that 15% is correct?" Counsel for the plaintiff answered that there was not, but added that some evidence before the trial judge "showed that the solicitor and client costs for both parties, that's [the fourth defendant] and [the first defendant], including disbursements, were of the order of $600,000". Counsel said that that would have to be reduced because some of the work was done for the fourth defendant "and there would be a further reduction for party/party costs ... ". 24 Beazley JA had asked about evidence and at [19] specifically acted only on evidence. Counsel for the first defendant did not supplement the evidence or ask that her Honour act upon the gratuitous reference to costs of $600,000. It was not a concession in the sense of something upon which her Honour should have acted. Further, the relevant figure was that which represented party/party costs, which as was pointed out would be less than the $600,000. There may be other reasons, but these are sufficient to negate the error ascribed to her Honour. 25 In my opinion, ground has not been shown for discharge of the qualifying order. The application for its discharge should be dismissed with costs. 26 IPP JA: I agree with Giles JA. 27 BASTEN JA: I agree with Giles JA. ********** 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.