FEDERAL COURT OF AUSTRALIA

Lafferty v Waterton [2019] FCA 2049

ORDERS

THE COURT ORDERS THAT:

1.    The application for an adjournment is refused.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    On or before 7 February 2020 the appellant do provide security for the respondent's costs of the appeal by paying the amount of $30,000 into Court.

2.    The appeal is stayed until such security is paid.

3.    The parties' have liberty to apply to vary these orders, including as to the form of security to be paid.

4.    In the event of a failure to comply with order 1, the respondent has liberty to apply for the appeal to be dismissed.

5.    The respondent has liberty to apply for an amount of further security.

6.    The appellant pay the respondent's costs of this interlocutory application in an amount to be taxed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

COLVIN J:

1    On 4 December 2019 I heard the respondent's application for security for costs in this appeal. At the outset the appellant sought an adjournment. I refused that application and granted the application for security. The following reasons on those applications have been settled from the transcript.

Application for adjournment

2    In this matter there is an application for an adjournment of the application for security for costs in the appeal. The adjournment application is made by the appellant (the respondent on the application for security). The basis upon which the adjournment is sought is said to be a misunderstanding as to the nature of the listing of the hearing arising from the terms of an email communication made by my associate to the parties. The email is in the usual form provided by my Chambers when matters are listed. It states: 'The respondent's interlocutory application and a first case management hearing have been listed on 4 December 2019 at 10.15 am'.

3    It then includes, later in the email, under the heading 'Interlocutory Hearings' a list to the effect that unless otherwise ordered, various matters should be attended to by the parties, including filing affidavits and short outlines of submissions, prior to the hearing. It is said that notwithstanding the terms of that communication that it was misunderstood and it was thought that the interlocutory application was, in effect, listed only for mention today and not for hearing.

4    Nevertheless, on 3 December 2019 (that is yesterday) at just after 3.00 pm there was an electronic filing of submissions on behalf of the appellant opposing the application for security for costs. Those submissions deal with the background, they articulate the relevant issues and they identify and engage with both the grounds of appeal and the merits of the appeal. They run to some six pages and bear the name of Mr Clifford, who appears as counsel today.

5    Mr Clifford explains that the identification of himself as counsel at the end of those submissions was on the basis that he was involved in settling those submissions in conference for the purposes of these proceedings. An affidavit has also been filed in opposition to the application for security. Notwithstanding these matters he says he is not prepared to respond to the application.

6    Against the application for adjournment it is said that as the appellant is an undischarged bankrupt any order for costs thrown away would not be met and therefore would not salve the prejudice resulting from an adjournment. It is also said that the written submissions have been prepared and presented.

7    There is no basis other than what is submitted to be lack of preparation that is advanced as a need for the adjournment. So, in those circumstances, it seems to me that the application for an adjournment should be refused because there would be prejudice to the respondent who brings the application. Having regard to the terms of the submissions, and the fact that no purpose is identified as the reason for the adjournment, I am not satisfied that the appellant would be prejudiced if I allow the matter to proceed with experienced counsel who is at the bar table and who has settled submissions that deal with all the issues raised by the application.

8    For those reasons the application for an adjournment is refused.

Security for costs

9    On 14 August 2019 a sequestration order was made against the estate of Ms Susan Lafferty. The creditor's petition relied upon non-compliance with a bankruptcy notice that claimed an alleged debt of about $190,000, being the amount assessed by a registrar of the Supreme Court of Western Australia on a taxation of costs. The costs were taxed pursuant to orders made after a trial of proceedings in which Ms Lafferty made an unsuccessful claim to one third of her mother's estate. The claim was made on the basis, amongst other things, of a letter sent to Ms Lafferty by her mother. In the Supreme Court proceedings, Ms Lafferty sought an account, alternatively equitable compensation, on the basis that the letter had represented that Ms Lafferty would receive one third of her mother's estate on her death. Ms Lafferty claimed that she relied upon that representation by not bringing a claim from the deceased estate of her father when the whole of that estate passed to her mother.

10    On the hearing of the application for a sequestration order, Ms Lafferty sought to go behind the costs judgment on the basis of alleged fraud. The fraud was said to concern the circumstances in which the will of her father had been signed. The fraud was alleged to have been perpetrated by her brother, Mr Waterton, one of the defendants in the Supreme Court proceedings and the respondent to this appeal.

11    As to the fraud, and as determined by Banks-Smith J, those are matters in respect of which Mr Waterton is entitled to a presumption of innocence. They are properly treated as allegations at this point in the proceedings. Those allegations were at the heart of the response to the application for a sequestration order.

12    In deciding to make a sequestration order, Banks-Smith J found, amongst other things that:

(1)    the allegations about her father's will had been known to Ms Lafferty and her lawyers at the time of the Supreme Court proceedings;

(2)    concessions had been made by counsel for Ms Lafferty in the course of a discovery application to the effect that the circumstances of preparing and signing the will were not in issue;

(3)    the nature of the claim advanced by Ms Lafferty was not based upon any challenge to the validity of her father's will;

(4)    Ms Lafferty had been represented by Senior Counsel at the trial in the Supreme Court proceedings;

(5)    the circumstances of the failure to raise any complaint about the validity of the will indicated no mere forensic error in the Supreme Court proceedings; and

(6)    the costs judgment had arisen from the defence of proceedings in which there had been no issue about the validity of the will.

13    Ms Lafferty has brought an appeal against the making of the sequestration order in respect of her estate. The appeal raises two grounds. They allege that the primary judged erred in failing to find that (a) there was sufficient reason to go behind the judgement; and (b) there was an abuse of process, by reason that a false affidavit had been sworn in support of the application for probate of the will of Ms Lafferty's father.

14    The respondent seeks an order for security for costs of the appeal in the sum of $40,000 with liberty to apply for further security.

15    The Court has a broad an unfettered jurisdiction to grant security that is to be exercised in the interests of justice: Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) [1984] FCA 34; (1984) 2 FCR 1 at 4; Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1 at [6]; and Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 at 411.

16    The proper approach to be adopted where security is sought for the costs of an appeal against a sequestration order was recently outlined by McKerracher J in Frigger v Kitay [2019] FCA 624 (a case in which security was sought in respect of an application for an extension of time in which to appeal).

17    Those principles require there to be regard to the fact that there has been a determination by the primary judge as to the relevant issues and the consequent difficulties for the respondent to an appeal against a sequestration order in recovering costs if the appeal is unsuccessful.

18    The principal discretionary matters relied upon in support of the present application are:

(1)    the report as to the affairs of Ms Lafferty shows that she has about $7000 in available assets;

(2)    there has been no appeal lodged in the Supreme Court action;

(3)    there is no challenge to the costs judgment in the Supreme Court;

(4)    the costs judgment upon which the sequestration order was based was obtained in proceedings commenced by Ms Lafferty and it could not be said that Mr Waterton has been the cause of any impecuniosity on the part of Ms Lafferty arising through the costs judgment;

(5)    Ms Lafferty has not pursued a case as to the invalidity of her father's will;

(6)    Ms Lafferty continues to have access to legal advice and there is no basis to conclude that the order for security would stifle the appeal;

(7)    Ms Lafferty has had an opportunity to advance the arguments that she wishes to raise on appeal, and they have been dealt with in the detailed reasons by Banks-Smith J and no error has been demonstrated in that reasoning;

(8)    consequently, the appeal has no reasonable prospects;

(9)    there has been a failure to meet earlier costs orders; and

(10)    there have been no steps taken to progress the appeal and there has been a failure to comply with the timetable provided for under the Federal Court Rules 2011 (Cth) in relation to progressing the appeal.

19    Against these matters, it is said for Ms Lafferty:

(1)    Mr Waterton had a duty to disclose the alleged fraud to the Supreme Court in the course of the proceedings concerning the claim by Ms Lafferty against her mother's estate;

(2)    the fact that the alleged invalidity of Ms Lafferty's father's will was brought to the attention of the Supreme Court did not relieve Mr Waterton of his duty and obligation to inform the court of the circumstances relating to the affidavit;

(3)    there was a separate duty to inform this Court on the application for the sequestration order of the alleged fraud;

(4)    the fact that Ms Lafferty had informed this court of the matters relied upon to establish the alleged fraud did not relieve Mr Waterton of an obligation to make the same disclosure to this Court;

(5)    the application for a sequestration order was the cause of the impecuniosity of Ms Lafferty; and

(6)    if an order for security for costs is made against Ms Lafferty, it will force her to abandon the appeal, being an appeal that is not obviously frivolous or vexatious.

20    As to the alleged stultification of the appeal, the affidavit of Ms Lafferty deposed to an intention to now apply to revoke the grant of probate of her father's will which was granted in 2004. In that context, Ms Lafferty has deposed as follows:

I believe that [Mr Waterton] commenced bankruptcy proceedings against me in an effort to stifle any further proceedings that I was likely to institute in relation to my late father's estate of which he was the sole executor.

If [Mr Waterton's] true objective was to recover his unpaid costs, he would have instituted enforcement proceedings against me in respect of the costs judgment rather than issuing bankruptcy proceedings.

I also believe that [Mr Waterton] has made this application for security for costs with the object of stifling my Appeal.

21    Those statements made by affidavit really have the character of no more than assertion. What is not stated in the affidavit is any evidence to the effect that an order for security for costs could not be met. In that regard, it is relevant that Ms Lafferty has solicitors on the record who act on her behalf in the appeal and experienced counsel appeared to oppose the application for security for costs. Therefore, at least as matters currently stand, any impecuniosity on the part of Ms Lafferty has not deprived her of legal representation in the proceedings to date.

22    It is put by counsel for Ms Lafferty that the availability of legal representation is a separate matter to being able to meet any order that might be made for security for costs. That may be so, but what is absent is any evidence upon which to base a conclusion that any security order could not be met.

23    The nature of the authorities in this area is such that reaching a conclusion on these applications involves making an assessment of what the interests of justice require in the particular circumstances of this case.

24    I accept the submissions advanced for Mr Waterton and for that reason will order security. Contrary to submissions advanced for Ms Lafferty, the matters concerning the grant of probate did not underpin the Supreme Court proceedings. In order to succeed on the appeal, it has to be demonstrated that the matters relating to the affidavit by which probate of Ms Lafferty's father's will was obtained are matters that might impugn the foundation for the costs judgment obtained consequent upon the Supreme Court proceedings. Other than the general submissions to the effect that there was some obligation to disclose matters in the course of those proceedings, the submissions advanced do not articulate how there is a connection between matters relating to the grant of probate of Ms Lafferty's father's will and the integrity of the judgment and decision made by the proceedings in the Supreme Court. Therefore, it has not been shown that there is substantial merit in the appeal.

25    In those circumstances, it seems to me that it is appropriate for weight to be given to the determination made by Banks-Smith J and this is an instance where principles of the kind outlined in the decision in Frigger v Kitay apply. That is to say, absent it being shown that there is substantial merit in the appeal, there is a real risk of injustice consequent upon the appeal being unsuccessful and there being an inability on the part of the respondent to recover any award for costs. On the evidence, Ms Lafferty has failed to meet previous costs orders obtained by Mr Waterton. This is an instance where Ms Lafferty has had the Supreme Court proceedings and also the proceedings before Banks-Smith J in order to advance matters which might support a claim that there is not integrity in the judgment of the court which then led to the costs determination. Her claims have not been successful.

26    So, having regard to the fact that we are now at the point of the appeal process, it is significant that this is not a case where on the face of the submissions it could be said that there is substantial merit in the appeal. Further, for reasons that I have already given, it has not been established that an award of security would lead to the appeal being stifled and there is a risk that further costs orders against Ms Lafferty would not be met. So in those circumstances, I am satisfied that it is appropriate for an order to be made for security.

27    A draft bill has been provided estimating likely costs that might be recovered if the appeal was unsuccessful and an order for costs was obtained by Mr Waterton. They estimate recoverable costs as being in the order of $55,000. Recognising that an order for security should not provide a full indemnity, I consider that the amount for which security is sought to be provided is on the high side of reasonable provision. Neither party made detailed submissions as to the quantum. That reflects the nature of the assessments that need to be made on applications of this kind which are necessarily broad-brush in character. It seems to me that the appropriate amount for security, having regard to the nature of the issues raised in the appeal, is the amount of $30,000. I will make orders reflecting that position.

Associate:

Dated:    9 December 2019