Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Workplace Safety Australia Pty Ltd v Simple OHS Solutions Pty Ltd [2014] NSWCA 55 Hearing dates: 10 March 2014 Decision date: 10 March 2014 Before: Basten JA Decision: 1. Pursuant to the Corporations Act 2001, s 1335, Workplace Safety Australia Pty Ltd provide security for Simple OHS Solutions Pty Ltd's costs of the proceedings in this Court in an amount of $40,000. 2. Workplace Safety Australia Pty Ltd is to take no further steps in the proceedings until such time as the security is provided, except with respect to the application for a stay of the judgment and orders the subject of the appeal. 3. The costs of the motion be Simple OHS Solutions Pty Ltd's costs in the appeal. 4. Liberty to apply on 3 days' notice in respect of the execution of these orders. [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: PRACTICE AND PROCEDURE - application for security for costs of appeal - whether appellant had shown security would stultify appeal - whether appellant able to meet costs if unsuccessful on appeal - whether liability to pay judgment debt part of assessment of likely ability to pay costs - Corporations Act 2001 (Cth), s 1335 Legislation Cited: Corporations Act 2001 (Cth), s 1335 Cases Cited: Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; 20 VR 377 Category: Procedural and other rulings Parties: Workplace Safety Australia Pty Ltd (Appellant) Simple OHS Solutions Pty Ltd (Respondent) Representation: Counsel: Ms Z Steggall (Appellant) Mr L Corbett (Respondent) Solicitors: Von Muenster (Appellant) Cara Marasco & Co (Respondent) File Number(s): CA 2013/382673 Decision under appeal Jurisdiction: 9111 Citation: [2013] NSWSC 1936 Date of Decision: 2013-12-11 00:00:00 Before: Rein J File Number(s): SC 2012/106183 Judgment 1BASTEN JA: In this matter there is an application for security for costs pending an appeal. The respondent, Simple OHS Solution Pty Ltd, obtained a judgment in the Equity Division in an amount of a little under $250,000: Workplace Safety Australia Pty Limited v Simple OHS Solutions Pty Limited [2013] NSWSC 1936 (Rein J). 2The appellant, Workplace Safety Australia Pty Ltd, challenges that judgment. It does so on the basis of a number of grounds which need not be set out or considered. So far as they are relevant to the question of security, it is accepted on both sides that the appeal is not frivolous or vexatious and that it has arguable prospects of success. 3So far as the appellant's financial position is concerned, there are in evidence a number of accounts which show that the appellant has a turnover of approximately $1 million a year, being almost entirely income from professional fees. It has traded profitably, at least for the last two years, and its profitability is if anything slightly higher last year than the year before. Nevertheless the annual profit for the last two years would only just be sufficient to cover the judgment debt. Further, although the company has operated profitably, its balance sheet as at the end of last year revealed net assets of less than half of the judgment debt. 4The appellant relies on an affidavit which was prepared, not for this motion, but for an application for a stay which is not listed before me and has yet to be heard. I am also informed from the Bar table, although it is not clear from the evidence as to the precise terms on which an order is sought, that an application has been made for payment of the judgment debt by instalments. Depending upon whether that application is successful and whether the instalments are such as would be met from the available funds of the company, the company may be able to meet its obligations by paying the debt out of its current resources. The evidence does not reveal much about the manner in which the appellant operates. It is not known if it has a floating charge over its assets to allow it to fund its operations, or what other basis it relies on for its ongoing business. 5The respondent says that the appellant should be ordered to pay an amount on account of the costs of the proposed appeal on the ground that there is no certainty that, absent such security, the company would be able to meet an adverse costs order. It is true that it would be able to meet an adverse costs order on the basis of its current financial circumstances; however, it would only be subject to an adverse costs order if it were unsuccessful on the appeal, in which case it would bear the liability for the judgment debt of almost $250,000. 6The power conferred by s 1335 of the Corporations Act 2001 (Cth) may be exercised, in the case of an appeal, if the court is satisfied "by credible testimony that there is reason to believe that the [appellant] corporation will be unable to pay the costs of the [respondent] if successful in ... [resisting the appeal]". As explained in Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; 20 VR 377 at [14]-[15], there is no reason to expand or paraphrase the statutory language. It provides an undemanding threshold to the exercise of the power. In the present case the Court is satisfied that the appellant would be unable to meet the costs of the respondent in the event that the appellant were unsuccessful in this Court. Accordingly the threshold test under s 1335 of the Corporations Act has been met. 7The question remains whether in the exercise of the Court's discretion, security should be ordered. The balance of convenience turns on the question whether an order for payment of security would stifle what is an apparently legitimate and arguable appeal. However, it is not submitted that an order for payment of costs would have that effect. It may be that if a stay is not provided in relation to the outstanding judgment debt, such a result may follow, but only if the appellant were unable to raise funds from persons standing to benefit from its success. 8There is an evidential burden on the appellant to demonstrate that the proposed security would prevent the appeal proceeding. If the company lacks funds, it may be necessary for those who stand to benefit from the company's success to show that they also are impecunious. However, no case has been made which would militate against an order in favour of the respondent for payment for security on this ground. So far as the respondent's position is concerned, the usual considerations weigh in its favour, namely it has been brought into this Court by the appellant; it has a judgment debt which is, on its face, to be treated as a liability of the appellant to be met in due course. Given the relatively fine margins by which the appellant operates, it is reasonable for the respondent to fear that it may not be able to obtain payment of its costs, if it were successful in this Court. Accordingly, an order should be made. 9It is necessary to consider an appropriate amount. The application is supported by an affidavit of Mr La Cava, the solicitor for the first and second respondents. He has carried out some calculations of the likely costs of the proceedings in this Court and has estimated solicitor and client costs of defending the appeal at not less than $58,000. That estimate may be accepted. On the basis that the respondent would obtain three-quarters of that amount or a little less, he has prepared a figure with respect to the party and party costs of both the trial and the appeal. For this purpose, the costs of the trial may be disregarded. Approximately two-thirds of the estimated costs of the appeal would be an amount of $40,000 and security should be provided in that amount. 10The Court orders: 1. Pursuant to the Corporations Act 2001, s 1335, Workplace Safety Australia Pty Ltd provide security for Simple OHS Solutions Pty Ltd's costs of the proceedings in this Court in an amount of $40,000. 2. Workplace Safety Australia Pty Ltd is to take no further steps in the proceedings until such time as the security is provided, except with respect to the application for a stay of the judgment and orders the subject of the appeal. 3. The costs of the motion be Simple OHS Solutions Pty Ltd's costs in the appeal. 4. Liberty to apply on 3 days' notice in respect of the execution of these orders. ********** Amendments 18 March 2014 - Amending "able" to "unable" in penultimate sentence. Amended paragraphs: [6] 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: 18 March 2014