New South Wales Supreme Court CITATION : Del Bosco v Outtrim [2008] NSWSC 105 HEARING DATE(S) : 15/02/08 JUDGMENT DATE : 20 February 2008 JURISDICTION : Equity Division JUDGMENT OF : Barrett J DECISION : Appeal dismissed with costs CATCHWORDS : PROCEDURE - security for costs - appeal against order of Associate Judge that plaintiff provide security - proceedings under Property (Relationships) Act - plaintiff resident in USA - whether requirement for security will shut plaintiff out from pursuing claim - where on plaintiff's own evidence lawyers are acting on contingency basis - whether defendant responsible for depletion of plaintiff's assets - where plaintiff's financial resources came wholly from defendant's benefaction Property (Relationships) Act 1984, s 20 LEGISLATION CITED : Supreme Court Act 1970, s 75A Uniform Civil Procedure Rules 2005, Rule 42.21(1)(a) CATEGORY : Principal judgment Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 Buckley v Bennell (1974) 1 ALCR 301 House v R [1936] HCA 40; (1936) 55 CLR 499 Jazabas Pty Ltd v Haddad [2007] NSWCA 291 CASES CITED : Kenyon v Akeroyd [2007] VSCA 50 Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 National Institute for Truth Verification v Computer Voice Stress Analyser Pty Ltd [2007] FCA 736 Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344 Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 Westpac Banking Corporation v Abemond Pty Ltd (unreported, NSWSC, 3 November 1994) PARTIES : Jennifer Jean Del Bosco - Plaintiff Steven Bryce Outtrim - Defendant FILE NUMBER(S) : SC 2653/07 COUNSEL : Mr M D Broun QC - Plaintiff Mr R G Lethbridge SC - Defendant SOLICITORS : Dora A Jabbour - Plaintiff Goldsmith Lawyers - Defendant LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : 2653/07 LOWER COURT JUDICIAL OFFICER : Macready AsJ LOWER COURT DATE OF DECISION : 05/09/07 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J WEDNESDAY, 20 FEBRUARY 2008 2653/07 JENNIFER JEAN DEL BOSCO v STEVEN BRYCE OUTTRIM JUDGMENT 1 In these proceedings in which adjustment of property is sought under s 20 of the Property (Relationships) Act 1984, the plaintiff appeals against a decision of an Associate Judge that the plaintiff be ordered to provide security for costs. 2 It was accepted, for the purposes of both the hearing before the Associate Judge and the present appeal, that a relationship of the kind with which the Act is concerned subsisted between the plaintiff and the defendant for some two and a half years and that conditions of jurisdiction concerning residence in New South Wales were satisfied. It is very likely, however, that those matters will be in issue at trial. 3 On 5 September 2007, the Associate Judge ordered that the plaintiff provide security for costs in the sum of $75,000 in two amounts: first, $25,000 within 28 days from the making of the order; and, second, $50,000 on or before the day one month before the date fixed for the hearing of the trial of the proceedings. 4 By amended notice of motion filed on 8 November 2007 and heard by me on 15 February 2008, the plaintiff appealed and sought an order that the order for security for costs "be discharged or varied". The grounds of appeal stated in the amended notice of motion are: "1. The Associate Justice erred in making any order as to security for costs. 2. Alternatively, that the Associate Justice erred in fixing the security for costs in the amount of $75,000." 5 Before proceeding to consider the grounds of appeal and the submissions advanced, I should note that the appeal is, by virtue of s 75A of the Supreme Court Act 1970, by way of rehearing. There is, in the particular context, the important point that it is an appeal challenging a discretionary decision made by an Associate Judge on a matter of practice and procedure. The discretion his Honour exercised was one that fell to be exercised having regard to all the circumstances of the case. The guiding principle in appeals of this kind is stated in the judgment of Santow J in Westpac Banking Corporation v Abemond Pty Ltd (unreported, NSWSC, 3 November 1994): "In this regard there is no dispute as to the applicable principles for such a review, namely that an appeal from the Master to a single Judge is not a re-trial in any sense but an appeal. Further that upon the appeal the normal and usual principles as to review of findings of fact or exercise of discretion are applicable so that, on such an appeal, if no fresh evidence is called to warrant a departure from a Master's primary finding of fact, those findings of fact are binding on the Court hearing the appeal. This is unless those findings, or the inferences drawn from them, are so flawed as to lead to their being set aside, in the same way and with the same limitations, as the Court of Appeal would examine the exercise of a discretion by a Judge, that is to say in the manner set out in House v R (1936) 55 CLR 499 at 504 , 505." 6 The passage in House v R [1936] HCA 40; (1936) 55 CLR 499 (at CLR 504–5) thus referred to is the following passage in the judgment of Dixon, Evatt and McTiernan JJ: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." 7 The fact that the discretionary decision is a decision on a matter of practice and procedure makes particularly pertinent the following observations of Gibbs CJ, Aickin, Wilson and Brennan JJ in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 (at CLR 177): "Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v Electronic Industries Ltd [1978] VR 431 at p 440; on the other hand, De Mestre v A D Hunter Pty Ltd (1952) 77 WN (NSW) 143 at p 146. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 , at p 323: … I am of opinion that, … there is a material difference between and exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. See also, Brambles Holdings Ltd v Trade Practices Commission 28 ALR, at p 193; Dougherty v Chandler (1946) 46 SR (NSW) 370, at p 374. It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration." 8 These principles have been frequently and consistently applied. Reference may be made to, for example, the decision of the Court of Appeal in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 where Handley JA said: "The claimant has not established that the Judge's exercise of discretion miscarried. The errors that have been identified are not material and do not vitiate his exercise of discretion. The principles in House v R (1936) 55 CLR 499, governing appellate review of the exercise of a judicial discretion, apply with special stringency in appeals, such as the present, from a discretionary judgment in a matter of practice and procedure: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Incorporated (1981) 148 CLR 170 , 176–7. In my judgment the claimant has failed to establish error and this Court is not entitled to interfere and re-exercise the discretion." 9 It is significant that, in this passage, Handley JA says that the appellate tribunal is "not entitled to interfere and re-exercise the discretion" where the appellant fails to establish error. By "error", he obviously meant error other than any which he said were "not material and do not vitiate his exercise of discretion". 10 In the present case, it is not suggested that the jurisdiction to order security for costs was not attracted. The plaintiff is, as referred to in Rule 42.21(1)(a) of the Uniform Civil Procedure Rules 2005, "ordinarily resident outside New South Wales". Her own evidence confirms that, whereas the parties spent significant time in New South Wales during the alleged relationship, the plaintiff, who is a Canadian citizen, later left Australia and went to live in the United States of America where she has resident status and is currently applying for citizenship. She remains in the United States where she has established a home and taken employment. There is no evidence that she has any intention of returning to Australia (or New South Wales). 11 The case advanced on appeal is that the Associate Judge's discretion miscarried because of failure to recognise (or give proper weight to) two important matters: first, that, because of the plaintiff's lack of funds, the making of the order had the effect of stultifying the plaintiff's ability to pursue the proceedings; and, second, that the plaintiff's lack of funds has been caused by the defendant. 12 The approach to applications of the kind that was before the Associate Judge is not, I think, controversial. Where the person commencing an action lives outside the State – and more particularly where that person lives outside Australia – the defendant against whom the action is brought stands in a position of vulnerability when it comes to the matter of enforcing any costs order that may flow from the absent plaintiff's having brought the proceedings. But countervailing considerations must be balanced. Street CJ observed in Buckley v Bennell (1974) 1 ALCR 301 at 303 in relation to analogous provisions of companies legislation: "In administering the policy laid down by the provisions of that nature, the courts have been concerned to achieve a balance between ensuring that adequatge and fair protection is provided to the other party, and avoiding injustice to impecunious companies by unnecessarily shutting them out or prejudicing them in the conduct of litigation." 13 It was said by Smithers J in Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 that the court must discover: "where, on considerations of what is just and reasonable, the balance rests between the risk of exposing an innocent defendant to the expense of defending his position and the risk of unnecessarily shutting out from relief a plaintiff whose case if litigated would result in his obtaining that relief." 14 The nature of the relevant balancing was recently referred to by French J in National Institute for Truth Verification v Computer Voice Stress Analyser Pty Ltd [2007] FCA 736 at [16]: "Orders requiring the provision of security for costs involve a balancing of the legitimate interests of the applicant, to pursue its claimed entitlement to remedies against wrongs allegedly done to it and the legitimate interests of the respondents that they not be exposed to irrecoverable loss by reason of proceedings which cause them to incur substantial expense but are ultimately unsuccessful against them. It is because the award of security involves a balancing of contending legitimate interests that the amount of the security to be provided is generally not the full amount of estimated costs." 15 Mr Broun QC, who appeared for the plaintiff, submitted that the matters to be taken into account in a case where security is sought against a plaintiff outside the jurisdiction are those stated by Redlich JA in Kenyon v Akeroyd [2007] VSCA 50 at [10], an appeal in proceedings under the equivalent in Victoria of the Property (Relationships) Act: "In Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 it was suggested that the following matters may be relevant to an application for security for costs: the prospects of success of the appeal; the quantum of risk that a costs order would not be satisfied; whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim; whether any impecuniosity of the appellant arises out of the conduct complained of; whether there are other aspects of public interest which weigh in the balance against such an order; and whether there are any particular discretionary matters peculiar to the circumstances of the case." 16 With these principles in mind, I turn to the Associate Judge's judgment of 5 September 2007. It is clear that his Honour approached the defendant's application for security for costs on the following basis: 1. The plaintiff is a resident of the United States. 2. The defendant conceded, for the purposes of the motion, that he was "a very wealthy man". 3. According to the statement of claim, the plaintiff considers herself to have made contributions of the relevant kind as a personal assistant in the defendant's business and commercial affairs and also in his social activities, as well as domestice services of a wife. She does not, however, claim to have made any direct financial contribution. 4. During their relationship, the defendant apparently provided for the plaintiff and they continued together with her having no separate employment, apart from assisting him in his business. 5. Although the proceedings were at an early stage and no defence had been filed, there could be seen to be a dispute about the existence and duration of any de facto relationship. 6. There was also "a substantial dispute as to the likelihood of the plaintiff obtaining relief and accordingly there is a possibility that the proceedings may be disputed with the plaintiff being ordered to pay the defendant's costs". 7. The plaintiff gave no evidence of her assets and alleged she had no property in New South Wales; and "accordingly it is unlikely that any costs order could be recovered from assets in this State". The plaintiff also gave no evidence of assets in the United States. 8. The plaintiff had not given her home address or her business address in the United States, nor had she disclosed the identity of her new employer in the United States. She said that she would disclose these matters to the court on condition that the information not be made available to the defendant until such time as needed for enforcing a costs order. 9. The plaintiff was in employment in the United States as a sales representative in the automotive industry earning US$92,800 (about A$103,000) per annum exclusive of commission. 17 On the hearing of the appeal, some additional evidence was received. It went to the plaintiff's financial capacity or, more precisely, her employment in the United States and her capacity to derive income from that source. The plaintiff confirmed her base salary as being US$92,800 per annum but added that, with commissions, she expected to earn about US$11,000 to US$14,000 per month, or US$132,000 to US$168,000 (that is, about A$144,000 to A$184,000) per annum. She said that it would take her about four months to save $5,000 from her income. She does not think she could borrow $25,000. Her family are not in a position to assist financially. She maintained, on appeal, her refusal to disclose her address and the identity of her employer, except in the particular way previously proposed. 18 It is clear from the Associate Judge's judgment that he placed weight on the plaintiff's failure – and unwillingness – to disclose the location of her home and place of employment in the United States, except in the guarded way I have described; also that he placed weight on the plaintiff's having severed her ties with Australia and the absence of any indication of a capacity to meet a costs order of any significance. These were entirely relevant matters appropriately taken into account in the exercise of the relevant discretion. 19 It is submitted on behalf of the plaintiff that the Associate Judge did not give sufficient weight to the circumstance that an order for security for costs (or, at least, the order actually made) would shut out the plaintiff from bringing her claim at all. His Honour did refer to the fact that, on the plaintiff's evidence, she was employed on a salary of US$92,800 per annum, exclusive of any commission (as I have said, this is the equivalent of about A$103,000). He thus paid attention to her financial resources (which, I might say, can now be seen to be somewhat more extensive, in income expectation terms). His Honour did not refer explicity to the fact that the plaintiff had been in that employment only since July 2007, before which she had no income or financial resources, except as the defendant gave her. However, the plaintiff's evidence and her allegations generally about the relationship cannot but have have made it clear to the Associate Judge that the commencement of employment was fairly recent. 20 It is clear that the Associate Judge turned his mind to the question of the plaintiff's financial capacity, but it does not appear how, from that point, his Honour fixed upon the order actually made, that is, that security of $25,000 be provided within 28 days and that a further $50,000 be provided one month before the scheduled hearing date. In an immediate sense, however, it is plain that the only burden his Honour saw fit to impose upon the plaintiff was with respect to security for the first instalment of $25,000. Thereafter, it was contemplated that pre-trial preparations would continue – in particular, that the defendant would file his defence and evidence – and that security for the second instalment should become due only at the point where potentially significant expenses of the trial itself were about to be incurred. 21 The decision was, in essence, that a plaintiff with an annual income of the equivalent of A$103,000 should provide security – and I emphasise that security only is required – of $25,000 as a condition of the progressing of the proceedings to the eve of trial. In the light of the further evidence now available, it can be seen that that decision was, in reality, a decision in relation to a person with an annual income in the range of about $144,000 to $184,000 in Australian currency. It was no doubt envisaged that, as the matter progressed trowards trial, the strengths of the parties' respective contentions would become much clearer and that, at the future point, security in the sum of a further $50,000 should be given to cover the trial itself – assuming that the plaintiff had not, by then, succeeded in an attempt to have the original security for costs regime varied, for example, by showing such a pronounced possibility of a result in her favour that the prospects of an order for costs against her were seen to be small. 22 It is necessary, at this point, to refer to a point of particular importance that was emphasised by Basten JA in Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344 at [51], namely, that proof of lack of funds is not of itself proof that an order for security for costs will stultify the proceedings. Stultification must be proved in its own right. In many cases, an immediate plaintiff's impecuniosity will be seen to be offset by the fact that persons of financial substance stand behind him or her, so that funds are available from the real plaintiffs. 23 In the present case, the plaintiff's own evidence is: "My legal representatives and financial advisers in Sydney have agreed to act for me on a contingency basis, which is the only means by which I could conduct these proceedings." 24 A finding of inability to pursue her case thus simply cannot flow from evidence of the plaintiff's limited financial resources. 25 I am not persuaded that, in respect of the stultification potential of the order made, the Associate Judge proceeded on some wrong principle, failed to take into account some relevant matter, took into account some irrelevant matter or otherwise fell into error of the kind referred to in House v R (above). 26 I turn briefly to the second matter on which the plaintiff relies, namely, the contention that the defendant was responsible for the plaintiff's lack of means. To succeed in making this complaint relevant, the plaintiff would have to show two things: first, that she had previously had financial resources; and, second, that the defendant's actions caused or at least materially contributed to an inability to meet an order for security: Jazabas Pty Ltd v Haddad [2007] NSWCA 291 at [94] per McClellan CJ at CL. 27 Those requirements are not met in this case. The statement of claim makes it clear that the plaintiff went into the alleged relationship without financial resources of any significance (indeed, that the defendant paid US$20,000 to clear the plaintiff's debts and also met loan repayments on her car). She was in the same position at the conclusion and it appears that she continued to receive some financial support from the defendant after they parted. The defendant chose to give the plaintiff money (including by access to his credit card accounts) and to provide her with other material comforts for a period, but the unavailability, after that period ended, of the benefits that were gratuitously provided by the defendant at his discretion cannot be characterised as a reduction in the plaintiff's own financial resources. A hope or expectation that financial favours will be forthcoming is not a financial resource that can be regarded as destroyed by the benefactor's decision not to bestow the contemplated benefaction. 28 In the result, therefore, I am of the opinion that the plaintiff has not shown that the the decision that led to the order of 5 September 2007 is affected by error of the kind warranting appellate intervention, having regard, in particular, to the "special stringency" with which the principles concerning such intervention are to be applied where the appeal concerns a discretionary matter of practice and procedure. 29 The appeal is dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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