Under r 51.50 of the Uniform Civil Procedure Rules 2005 (NSW), the New South Wales Court of Appeal may, in “special circumstances”, order that such security as the Court of Appeal thinks fit be given for costs of an appeal.
In Xenos v FAL Healthy Beverages Pty Ltd [2017] NSWCA 240, Gleeson JA, sitting as a single justice of the New South Wales Court of Appeal, was satisfied that the respondents to the appeal had shown special circumstances which enlivened the Court’s discretion to order security for costs under r 51.50, and ordered security for the costs of the appeal.
His Honour indicated (at [19]-[23]) that the following legal principles were applicable in the context of r 51.50:
- Special circumstances were required to be shown before an order for security for costs of an appeal could be made under r 51.50.
- The considerations engaged by the concept of “special circumstances” had been considered by the Court of Appeal in Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2004] NSWCA 136; (2004) 60 NSWLR 143, and in Porter v Gordian Runoff Ltd [2004] NSWCA 171.
- In Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 (“Preston”) at [18], Basten JA (Ipp JA and Hoeben J agreeing) had identified the following principles from those cases:
- no order for security should be made in the absence of “special circumstances”;
- consideration of what might constitute special circumstances should not be fettered by some general rule of practice;
- impecuniosity, without more, would usually be insufficient;
- an order might be appropriate if the appeal was shown to be hopeless, unreasonable or of an harassing nature;
- 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
- the subject matter of the appeal, including an issue as to the liberty of the individual, or a public interest might provide a reason for not imposing a security order which would stifle the continuation of the appeal.
- Basten JA in Preston at [19] had suggested that the last two factors might better be seen as being relevant to the exercise of the discretion rather than as potential “special circumstances”.
- When weighing all the circumstances of the case in the exercise of the discretion, it was necessary to keep in mind that the weight to be given to any circumstance depended not only on its own intrinsic persuasiveness, but upon the impact of the other circumstances which had to be weighed: P S Chellaram & Co Ltd v China Ocean Shipping [1991] HCA 36 at [7]; (1991) 102 ALR 321 at 323.
The background to the case before Gleeson JA was that, in the court below, the appellant had been found to have breached his duties as director and officer owing to the respondent companies by improperly authorising payments in respect of a large number of transactions and had been ordered to pay to the respondents an amount exceeding $1 million plus costs. After the appellant appealed against the judgment, the respondents brought an application seeking that the appellant provide security for costs of the appeal under r 51.50. The appellant did not file and serve any evidence in response to the application and there was no appearance by or on his behalf at the hearing of the application.
Gleeson JA was satisfied, having regard to evidence put forward by the respondents about the financial position of the appellant, that the appellant was impecunious or of very limited means in the sense that he was not in a position to pay the judgment debt and costs of the proceedings at first instance, or any costs order, if the appeal was unsuccessful but accepted that impecuniosity alone was not sufficient to constitute special circumstances. However, his Honour went on to say that impecuniosity could constitute special circumstances when combined with other factors (at [27]). His Honour also said that the appellant bore an evidentiary onus of establishing that any order for security would stultify his appeal, although the ultimate onus establishing special circumstances rested on the respondents. His Honour considered that, given the absence of evidence from the appellant in response to the application, the appellant had not shown that the appeal would be stultified if security were ordered (at [28]).
His Honour then went on to consider a number of circumstances which, taken together, the respondents claimed constituted special circumstances justifying an order for security for costs of the appeal. His Honour concluded (at [51]) that he was satisfied that special circumstances had been shown which enlivened the discretion to order security for costs under r 51.50. His Honour said that, while mere impecuniosity would not ordinarily justify an order for security for costs, there were additional matters in the case which, in combination, were capable of constituting special circumstances including:
- the appellant’s very weak prospects of success in the appeal;
- the raising by the appellant of new points on appeal which were not taken at trial;
- the wide ranging scope of the issues sought to be agitated by the appellant on the appeal;
- the absence of evidence that the appeal would be stultified if security were ordered; and
- the substantial risk that the respondents, if successful, would not recover their costs of the appeal from the appellant.
In addition, his Honour took into account the appellant’s apparent willingness and ability to fund his own costs of the appeal in circumstances where there was a substantial risk that, if successful, the respondents would be deprived of costs (at [52]).
In the result, his Honour ordered that the appellant provide security for costs in the sum of $65,000 by payment into court, or in such other form of security as might be agreed between the parties, and stayed the proceedings pending the provision of such security.
