Court of Appeal Supreme Court New South Wales Medium Neutral Citation: PRATT v ASHTON [2012] NSWCA 313 Hearing dates: 24 September 2012 Decision date: 28 September 2012 Before: HOEBEN JA Decision: The respondent's motion for security for costs is dismissed. Respondent is to pay the appellant's costs of the motion. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: Security for costs - claim by former mistress of deceased against estate - whether impecuniosity of appellant established - whether matters raised on appeal arguable - special circumstances not established - application dismissed. Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Ashton v Pratt (No 2) [2012] NSWSC 3 Devries v Australian National Railways Commission [1993] HCA 78; 177 CLR 472 Fox v Percy [2003] HCA 22; 214 CLR 118 Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 Category: Interlocutory applications Parties: Madison Ashton - Appellant Jeanne Pratt - Respondent Representation: Counsel: Mr R Newtown - Appellant Mr M Henry -Respondent Solicitors: David Legal - Appellant Arnold Block Leibler - Respondent File Number(s): 2012/42742 Decision under appeal Citation: [2012] NSWSC 3 Date of Decision: 2012-01-16 00:00:00 Before: Brereton J File Number(s): 2012/42742 Judgment 1HIS HONOUR: Nature of application The respondent, by motion filed 12 June 2012, seeks the following orders: (1)The appellant provide security for the respondent's costs of the appeal in the amount of $95,850 (or such other amount as the Court considers appropriate) by payment into court or bank guarantee in a form acceptable to the Registrar within 14 days of the date of this order pursuant to r 50.8 or 51.50 of the Uniform Civil Procedure Rules 2005 (NSW). (2)If the appellant fails to comply with order 1, the appeal is stayed. (3)The appellant is to pay the respondent's costs of this application. (4)Such further or other orders as the Court considers appropriate. Factual background 2The proceedings, the subject of the appeal, were heard before Brereton J between 12 and 15 September 2011. His Honour delivered his judgment on 16 January 2012. The appellant was unsuccessful in those proceedings (Ashton v Pratt (No 2) [2012] NSWSC 3). 3The proceedings before Brereton J were somewhat novel. This can be seen from the opening paragraph of his Honour's judgment which conveniently sets out in summary form the background to the claim, and the questions which had to be decided. "1Between about 1995 and 1997, the plaintiff Madison Ashton provided what are euphemistically called escort services to the late Richard Pratt, a married man of exceptional wealth, from time to time, for reward. This came to an end when Ms Ashton married a third party in April 1997. Following the breakdown of her marriage, and of a subsequent de facto relationship, contact between Ms Ashton and Mr Pratt resumed in October 2003. Ms Ashton contends that in a conversation between them in November 2003, Mr Pratt promised her that, in consideration of her not returning to the escort industry but providing services (non-exclusively) to him as his mistress on occasions when he was in Sydney (which was typically one and sometimes two nights per week), he would settle $2.5 million upon trust for each of her two children, pay her an allowance of $500,000 per annum, and in addition pay her $36,000 per annum for her rental accommodation and $30,000 per annum for travel expenses in connection with her proposed business. Ms Ashton now sues Mr Pratt's widow, as the executor of his estate, on those promises, in contract and alternatively equitable estoppel. The main issues are: (1)Whether (as a matter of fact) Mr Pratt made the alleged promises; (2)If so: (a)whether the promises were sufficiently certain to amount to a contract; (b)whether they were intended to create legal relations; and (c)whether they are unenforceable for public policy reasons; (3)If not enforceable in contract, whether the promises are enforceable by way of equitable estoppel; and (4)Whether Ms Ashton's claims are not maintainable by reason of having been previously compromised and released, in February 2005 or November 2005." 4At trial, Questions 1 and 2(a) were decided in favour of the appellant and Questions 2(b), 2(c), 3 and 4 were decided in favour of the respondent. Submissions 5Both sides accepted that for an order for security for costs to be made against the appellant, the respondent had to show that "special circumstances" existed. 6Both sides agreed that the current state of the law is that set out in Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 where Basten JA (with whom Ipp JA and Hoeben J agreed) summarised the principles derived from the cases as follows: "(1)No order for security should be made in the absence of "special circumstances"; (2)Consideration of what may constitute "special circumstances" should not be fettered by some general rule of practice; (3)Impecuniosity, without more, will usually be insufficient. (4)An order may be appropriate if the appeal is shown to be hopeless, unreasonable or of an harassing nature; (5)Where a bona fide and reasonably arguable appeal would be stifled by an order for security, such an order should usually not be made, and (6)The subject matter of the appeal, including an issue as to the liberty of the individual, or a public interest may provide a reason for not imposing a security order which would stifle the continuation of the appeal." 7The matters relied upon by the respondent to establish special circumstances were as follows: (i)It was most unlikely that the appellant would be able to satisfy an order for costs, since she appeared to have no assets, and had conceded that she was impecunious. (ii)The appeal lacked reasonable prospects of success and was therefore hopeless in the relevant sense. (iii)It was most unlikely that the appellant would be able to satisfy the costs order made by the trial judge. (Without any detail being provided, the respondent assessed those costs at approximately $1 million.) (iv)There had been default on the part of the appellant in failing to file and serve her written submissions in support of the appeal within the time limit specified by the Court. (It was common ground that those written submissions had now been filed and served.) 8In relation to the appellant's impecuniosity, the respondent relied upon correspondence between her solicitors and those of the appellant. By letter dated 9 May 2012, the respondent foreshadowed an application for security for costs in relation to the appeal and invited the appellant to: "(1)Explain how she proposes to meet my client's costs of the appeal. (2)Indicate whether she is willing to provide security for those costs; and (3)Indicate whether her costs of the appeal (and the first instance proceedings) are being met by a third party and, if so, the identity of that party and whether that party intends to and has the financial capacity to, meet my client's costs." 9By letter dated 18 may 2012 the appellant's solicitors responded: "We are instructed Ms Ashton is a person with a substantial earning capacity. However, for us to give you a more precise answer would you please forward an estimate of your client's likely costs on the appeal broken down into solicitor's fees and other categories of disbursements." 10The solicitors for the respondent provided a detailed estimate of their costs of the appeal. The solicitors for the appellant, by letter dated 30 May 2012, said nothing further about the financial position of the appellant but challenged the existence of "special circumstances", such as would justify a successful application for security for costs by the respondent. 11The respondent's solicitors conducted a real property search in New South Wales under the two names known to have been used by the appellant. That search disclosed that there was no real property registered under either of those names. In answer to a Notice to Produce, the appellant produced copies of her taxation returns for the years ended 30 June 2010 and 30 June 2011. Those taxation returns showed gross earnings of $xxx and $xxx respectively for those tax years. 12The respondent submitted that the appellant's failure to provide the information requested in the letter of 9 May, together with the results of the real property search and the information contained in the tax returns, demonstrated that the appellant is impecunious and will not be able to pay the respondent's costs of the appeal if she is unsuccessful. 13I do not agree. The failure to provide the requested information about her financial circumstances would allow an inference of impecuniosity to be drawn, but certainly does not compel such an inference. The real property search is inconclusive. The appellant may well have real property under another name, or through a corporate vehicle, and the search was restricted to New South Wales. Moreover, the inquiries made by the respondent provide no information as to non-real estate assets which the appellant might possess. The tax returns show earnings which are modest but certainly in respect of 2011, not insubstantial. Finally, the appellant has not admitted in terms that she is impecunious. 14I am not satisfied on the material before me that the appellant is impecunious and will not be able to pay the respondent's costs of the appeal if she is unsuccessful. 15In relation to whether the appeal has reasonable prospects of success, the respondent did not canvas all of the matters raised in the appeal, but focused on the trial judge's finding that the appellant's claims were not maintainable because in February 2005 she accepted $100,000 and a motor vehicle in full and final settlement of her claims. The respondent submitted that there was no real prospect of that finding being overturned on appeal and it provided a complete answer to all of the appellant's claims. 16This finding by the trial judge was based on his interpretation of an exchange of emails between the appellant and a representative of Mr Pratt. It was also based on his Honour's rejection of a conversation which the appellant said took place between her and Mr Pratt at the time of the emails to the effect that she was to disregard the emails and that he would continue to make payments to her. 17The respondent submitted that the trial judge's finding in relation to the conversation was a demeanour based finding and was most unlikely to be overturned (Devries v Australian National Railways Commission [1993] HCA 78; 177 CLR 472 at 479 and Fox v Percy [2003] HCA 22; 214 CLR 118 at 127). 18Similarly, the respondent submitted that the meaning of the emails was clear and unequivocal and that a fair reading of them fully supported the finding of the trial judge. 19The appellant challenged his Honour's rejection of the explanatory conversation because the reasons for rejecting it were inherently improbable and that they were in part based upon telephone records which were incomplete. 20In relation to the emails themselves, the appellant submitted that they clearly did not constitute an agreement but at best, on one interpretation, provided some evidence of an agreement, the terms of which were otherwise unknown. The appellant also challenged the finality of the agreement found by the trial judge and in particular, the failure by the trial judge to take into account the effect of such an agreement on her children who were thereby to be deprived of a potential $5 million benefit. 21While there is force in the submissions by the respondent, I do not find that the appellant's appeal, on the issues specifically raised by the respondent, is unarguable and in that sense is hopeless. This aspect of the first instance judgment cannot be looked at in isolation, but has to be looked at against the background of the whole of the relationship between the appellant and Mr Pratt and the other factual findings made by his Honour, which have also been challenged in the appeal. 22The respondent's submissions as to the non-payment of the costs of the trial and the delay in providing written submissions on appeal, do not take the matter much further and certainly do not either on their own, or together with other matters, constitute special circumstances in this case. The costs of the trial have not yet been assessed and the reason for the delay in providing written submissions was a difficulty encountered by counsel, not something for which the appellant was personally responsible. 23It follows from the above, that I am not satisfied that the appellant will not able to pay the respondent's costs of the appeal, should she be unsuccessful, and I am not satisfied that the appeal is unarguable and therefore hopeless in the sense set out in the authorities. Accordingly, the respondent's application fails and it should pay the appellant's costs. Order 24The respondent's motion for security for costs is dismissed and the respondent is to pay the appellant's costs of the motion. ********** 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. Decision last updated: 28 September 2012