FEDERAL COURT OF AUSTRALIA

Waters v Commonwealth of Australia (Australian Taxation Office) [2015] FCAFC 46

THE COURT ORDERS THAT:

1.    Leave to appeal is refused.

2.    The Applicant is to pay the costs of the Respondent.

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

REASONS FOR JUDGMENT

North J

1    I agree that leave to appeal be refused with costs. I do so for the reasons expressed by Katzmann J and, in the way discussed by her Honour, with the reasons expressed by Flick J.

Associate:

Dated:    27 March 2015

REASONS FOR JUDGMENT

FLICK J

2    In January 2014 the Applicant, Ms Natalie Waters, filed in this Court an Originating Application under the Australian Human Rights Commission Act 1986 (Cth). Ms Waters had been employed as a Graduate Taxation Officer in the Australian Taxation Office. She alleged that she there suffered discrimination contrary to the Disability Discrimination Act 1992 (Cth). Breach of contract is also alleged. Damages, including aggravated and exemplary damages, are sought.

3    A Statement of Claim was filed in January 2014 and a Defence was filed in April 2014. A Reply has also been filed. The legal and factual issues dividing the parties have thus been defined with some degree of precision. But no evidence as to the substantive factual matters to be resolved has as yet been filed.

4    Of present concern is the fate of an Interlocutory Application filed by the Commonwealth in March 2014 seeking security for costs. That Interlocutory Application was heard by Griffiths J on 14 October 2014. His Honour made orders that security in the amount of $30,000 be provided and published his reasons for doing so on 16 October 2014: Waters v Commonwealth of Australia [2014] FCA 1107.

5    The Applicant now seeks leave to appeal from his Honour’s decision.

6    The Application for leave to appeal is to be dismissed with costs.

The grant of leave to appeal – general principles

7    A decision to order security for costs is a decision in respect to a matter of practice and procedure and is an interlocutory and not a final decision. Leave to appeal is required by s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (the “Federal Court Act”).

8    The principles guiding the exercise of the discretion to grant leave are well-settled: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399. In very summary form, those principles are generally expressed in terms of the need to give consideration to:

(a)    whether in all the circumstances the judgment of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court; and

(b)    whether substantial injustice would result if leave were refused supposing the decision would be wrong.

In respect to interlocutory decisions affecting matters of practice and procedure it is further recognised that “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”: Re the Will of F B Gilbert (1946) 46 SR (NSW) 318 at 323 per Jordan CJ. The Chief Justice there went on to observe that if a “tight rein” were not so exercised 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”. Appl’d: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 per Gibbs CJ, Aickin, Wilson and Brennan JJ; National Mutual Holdings Pty Ltd v Sentry Corp (1988) 19 FCR 155 at 161 per Bowen CJ, Woodward and Lockhart JJ. The risk to the proper administration of justice is not only posed by those with “a long purse”. In respect to decisions involving the exercise of a discretionary judgment, a Court will not intervene unless there is some error of the kind identified in House v R (1936) 55 CLR 499, 10 ALJR 202. Appl’d: Welsh v Digilin Pty Ltd [2008] FCAFC 149 at [16], (2008) 250 ALR 13 at 19 per Tamberlin, Greenwood and Collier JJ.

9    An application for leave to appeal, it should be noted at the outset, is not the hearing of the appeal. The requirement to obtain “leave” is not a mere formal requirement. It is an important statutory constraint upon the ability of a party to challenge – in the present case – adverse decisions made by the primary judge in the course of readying a proceeding for hearing. An applicant seeking “leave” to appeal should not be routinely permitted to side-step that constraint by arguing his application for “leave” in the same manner as the appeal itself would be presented. In Samsung Electronics Co Ltd v Apple Inc [2013] FCAFC 138 Jacobson, Flick and Griffiths JJ thus observed:

[50]    It is also of importance to recall that applications for leave to appeal should not be transformed without good reason into de facto appeals. An application for leave should thus not be conducted as though it is a preliminary hearing of the appeal itself: Food Channel Network Pty Ltd v Television Food Network GP [2009] FCA 1446 at [26] …

In the Food Channel Network decision, Reeves J had previously observed:

[26]    … a court should be careful to avoid converting a leave application of this kind into a preliminary hearing of the appeal. I should therefore avoid making any detailed analysis of the issues raised, or expressing any concluded views on them. I consider my assessment of the issues should be more akin to the “rough and ready” approach suggested by Brennan CJ and McHugh J in Jackamarra v Krakouer (1998) 195 CLR 516 at [9].

See also: Petroulias v Federal Commissioner of Taxation [2011] FCA 795 at [45], (2011) 84 ATR 110 at 122 to 123; ACE Insurance Ltd v Trifunovski [2012] FCA 235 at [9], (2012) 291 ALR 46 at 49 per Flick J; Cash’s (Aust) Pty Ltd v Foster’s Australia Ltd [2013] FCA 695 at [5] per Davies J. Reeves J, it should be noted, was correct to observe that the approach to be adopted when considering an application for leave to appeal is “akin” to the approach suggested by Brennan CJ and McHugh J in Jackamarra. That case involved an application for an extension of time. In that context, their Honours observed:

[9]    … Unless motions to extend time for appeals are to turn into full rehearsals for those appeals, appellate courts can only assess “the merits” in a fairly rough and ready way. In most cases, that assessment will be made from the statement of the applicant's case rather than from the opposing arguments or any detailed examination of the proofs of the argument. The merits are merely one of the factors that must be considered in determining whether the discretion to extend time should be exercised ((1998) 195 CLR 516 at 522).

10    Even though more may be exposed in the written submissions filed by the opposing parties in an application for leave to appeal - such that the “merits” of any proposed Ground of Appeal may be more exposed to scrutiny than in an application for an extension of time – concurrence is nevertheless expressed with the views of Reeves J in Food Channel Network. An application for leave to appeal should not be routinely transformed into the hearing of the appeal itself. Although much must necessarily depend upon the particular circumstances of each case in which leave to appeal may be sought, there may well be many cases in which any “substantial injustice” is best exposed by reference to one or other of more generally expressed Grounds of Appeal. An indiscriminate “scatter-gun” approach on the part of an Applicant seeking leave upon each of the proposed Grounds of Appeal may well only divert attention away from the one (or a limited number of grounds) which really expose the reason why a primary judge’s decision is truly open to “sufficient doubt” to warrant leave being granted.

11    Notwithstanding the detailed written submissions which have been filed on behalf of the Applicant in the present proceeding, the many challenges to his Honour’s approach proceed in large part from a failure to properly understand what his Honour did and did not decide. Indeed, in many instances, the written and oral submissions failed to accurately state the reasons provided by his Honour. Many submissions, regrettably, mis-stated those reasons. A failure on the part of Counsel to accurately formulate submissions with attention to the reasons in fact provided, with respect, does little to assist a Court in determining whether there is any “sufficient doubt” warranting the grant of leave.

The proposed Grounds of Appeal

12    If leave to appeal were to be granted, the Appellant has identified as follows the proposed Grounds of Appeal as set forth in her Draft Notice of Appeal:

1.    The primary judge erred in characterising the matter, in an interlocutory judgment, as ‘litigation which is brought by a disgruntled former employee’, without giving the Appellant a fair opportunity to meet the accusation, and without it being put to her solicitor, Mr Coffey, and in circumstances where it is inconsistent with the Respondent's evidence to the Court including from Dr Synnott, and its solicitor Ms Trembath, and of the Australian Public Service Commission, and further erred in having regard to it in the exercise of the Court’s discretion.

2.    The primary judge erred in relying upon evidence which was objected to by the Appellant and which was struck out by his Honour.

3.    The primary judge erred in finding that the Appellant had refused to enter into an agreement with the Respondent to pay its undetermined costs, without any evidence of such refusal by her.

4.    The primary judge erred in adopting and applying a test of ‘relative impecuniosity’, and in finding that Mr Coffey ‘acknowledged as much’.

5.    The primary judge erred in holding or treating the Appellant as having a burden of proof to demonstrate why an order against her should not be made.

6.    The primary judge erred in failing to give any or proper weight to his ruling that the Appellant had a sufficiently ‘arguable case’, or to the fact that her legitimate cause was unresolved.

7.    The primary judge erred in failing to follow and apply the decision of Mortimer J in Kiefel v Victoria [2014] FCA 604, especially at [34] and [40] or to have regard to the public interest in not barring access of individuals, regardless of poverty, to the Court with legitimate complaints within jurisdiction, and to the issues raised in: Peter Hanks QC, Department of Education, Employment and Workplace Relations, Commonwealth of Australia, Safety, Rehabilitation and Compensation Act Review (2013) and of workplace bullying raised by the matter, the subject of: House of Representatives Standing Committee on Education and Employment, The Parliament of the Commonwealth of Australia, Workplace Bullying: We just want it to stop (2012).

8.    The primary judge erred in failing to have any regard to the concession of the Respondent that it had taken “no steps” to determine the quantum of any debt that might be due by the Appellant to it in respect of costs in the Supreme Court of New South Wales matter [and related interlocutory appeals], and had acted consistently with the Financial Management and Accountability Act 1997 (Cth) [repealed] which includes s 47 relating to the writing off or treating any claim as unrecoverable done prior to 1 July 2014.

9.    The primary judge erred in finding that the evidence of the Appellant that her financial position had been caused or contributed to by the conduct of the Respondent was ‘mere assertion or submission’, without the Respondent contesting or objecting to that evidence.

10.    The primary judge erred in finding that the proposed order was objectively reasonable and would not stultify the proceedings, without considering the evidence including the medical and financial evidence provided by the Appellant.

11.    The primary judge's exercise of discretion miscarried.

12.    The primary judge erred in law in holding that the Respondent is entitled to ‘protection ... for its existing and future costs’.

13    Counsel for the Applicant sought to amend this list of proposed Grounds of Appeal in order to include a further ground embracing his so-called “Constitutional” argument. Leave to amend was not opposed by Senior Counsel for the Respondent. The proposed amendment sought to mirror the terms of notices served pursuant to s 78B of the Judiciary Act 1903 (Cth).

14    It is respectfully concluded that his Honour’s reasons for decision expose no error which has any real prospects of success. The proposed Grounds of Appeal, with respect, do not expose any error of principle on the part of the primary judge of the kind identified in House v R. Those proposed Grounds of Appeal do not generate “sufficient doubt” as to the correctness of his Honour’s decision. Nor, on the evidence adduced before the primary judge, could any view be properly formed that the refusal of leave would cause “substantial injustice”. Indeed, even if leave to appeal were granted in the present case, the appeal would most probably have been dismissed.

A failure to properly understand the reasons for decision

15    Notwithstanding the detailed written submissions which have been filed on behalf of the Applicant, the many challenges to his Honour’s approach proceed in large part from a failure to understand what his Honour did and did not decide.

16    But one example is provided by the written submissions’ reliance upon his Honour’s conclusion that it was not “unreasonable for the ATO to seek some protection in respect of its existing and future costs…”. The Applicant submitted that error is exposed by ordering security for costs in respect to costs that had been incurred in litigation between the parties separate from the proceedings before his Honour. On behalf of the Applicant it is submitted that the Court has no power to “protect [the respondent] against unassessed costs in another court”. But no such error was committed. The “existing … costs” to which reference was made was clearly a reference to the “existing … costs” which were to be incurred in the current proceeding. The application for security for costs was filed in March 2014. The estimate of costs relied upon before the primary judge estimated that costs to be incurred were $83,327 (if Senior Counsel were retained) and $65,087 (excluding Senior Counsel). The itemised heads of expenses to be incurred all related to the preparation of the case for hearing subsequent to the filing of the Statement of Claim.

17    Similarly, and again contrary to the Applicant’s submissions, his Honour did not approach the exercise of his discretion by reference to some unspecified standard of “relative impecuniosity”. His Honour did indeed accept a submission advanced on behalf of the Australian Taxation Office that the Applicant was “relatively impecunious”. His Honour referred, for example, to the fact that “for the income tax years 2012 and 2013, the tax withheld from Ms Waters’ income amounted to only $1,613 and $777 respectively”. His Honour also went on to refer to the failure of the Applicant to herself adduce evidence in respect to a number of specified matters “which would have given a clearer picture as to her current financial circumstances…”. Such evidence as was adduced on behalf of the Applicant only supported an assessment that she was “relatively impecunious”. On one view of the very manner in which the application for security for costs was being resisted by the Applicant, it was her “relative impecuniosity” which it was contended on her behalf would lead to her claims being “stifled” if security were to be ordered. It was clearly open to his Honour, on any view of the case, to take into account the financial circumstances of the Applicant and such evidence as was available to him in respect to those circumstances. Contrary to the submission advanced on behalf of the Applicant, there was no impermissible reversing of any “onus of proof”.

18    Upon such limited material as was available, his Honour was also “not satisfied that the making of the order will stifle the proceedings”. The submission that “any security for costs would not only “stifle” the current proceedings in this court, but would actually “prevent” them being brought at all” was made in the affidavit filed by the Applicant’s solicitor. But, as noted by his Honour, “little, if any, weight” could be given to this evidence as it was unsupported.

19    The characterisation of the Applicant as a “disgruntled former employee” may or may not have been factually accurate. A claimant who seeks exemplary damages is, without further explanation, hardly a former employee who was content with the circumstances in which her employment ceased. But, even if erroneous, it formed no part of the reasoning of the learned primary judge.

20    These are but some of the challenges to his Honour’s reasons which are relied upon to support the application for leave to appeal. But these instances are sufficient to expose both the fundamental manner in which the Applicant has misconstrued his Honour’s reasons and the care with which his Honour approached the evidence and submissions before him.

21    No error of the kind identified in House v R is exposed by the proposed Ground of Appeal alleging a failure to apply Kiefel v State of Victoria [2014] FCA 604. That is but one of many decisions exploring the circumstances in which the discretion to award security for costs may be exercised and the difficulties inherent in seeking to draw from an individual case any principle of general application. The “contradiction” there referred to by Mortimer J may be well-founded. Of present relevance, however, is whether the discretion of the primary judge was properly informed by reference to well-recognised principles of general application. No error in his approach, with respect, is discernible.

CONCLUSIONS

22    The draft Notice of Appeal contains some 12 proposed Grounds of Appeal. Each has been separately considered. Each, with respect, fails to properly or correctly focus upon the basis upon which his Honour reached his decision. The Outline of Written Submissions filed by the Applicant in support of her application for leave to appeal has also been carefully considered.

23    Out of deference to the detail to which the Applicant’s written submissions descended, albeit to a depth obscured by a failure to properly understand his Honour’s careful analysis of the facts, much more than a “rough and ready” approach has been pursued. But any such approach does not require that detailed reasons be given in respect to each of the proposed Grounds of Appeal or each of the submissions advanced. To do so would be to convert an application for leave to appeal into a preliminary – if not a final – hearing of the appeal itself. Although reasons need not be given in respect to each of the proposed Grounds of Appeal, the “rough and ready” approach to the resolution of applications for leave to appeal should not – of course – become so “rough” that it ceases to be justice. The exercise of the discretion to refuse leave to appeal must forever remain a discretion judicially exercised by reference to the facts and circumstances of each individual case.

24    Any appeal from his Honour’s decision would have little – if any – prospects of success. Indeed, it is respectfully concluded that his Honour’s decision was one to which a Judge of this Court – properly taking into account those matters relevant to the discretion to be exercised (and even taking into account the submissions advanced on the Applicant’s behalf in this Court) – could clearly come. His Honour clearly accepted that the Applicant has “an arguable case” and took into account those other matters relevant to the exercise of his discretion. It was not necessary in the circumstances of the present case for his Honour to go further and express any view as to the strengths of her claims. Indeed, given the fact that no evidence had been filed in the substantive hearing before his Honour, any assessment as to the substantive merits of her claims necessarily had to be assessed against the backdrop of the pleadings alone – including such matters as were admitted by the Respondent and those which were denied. Upon the limited materials available for consideration (namely the pleadings) it would have been difficult for the primary judge to have expressed any more certain a view than that the Applicant had an “arguable case”.

25    A submission that the statutory source of power to order security for costs conferred by s 56 of the Federal Court Act “impairs Chapter III of the Constitution” is without substance. The submission is that the “independence of this Court is compromised by acting as a convenient costs debt collector for the Commonwealth in relation to a different court”. An order for security is an order providing an opposing litigant with protection in respect to the costs that may be incurred in the litigation. Contrary to the Applicant’s submission, it has nothing to do with “debt collection”. The proposed Grounds of Appeal, as amended, sought to canvas this argument. The argument is without merit. An “asserted constitutional point”, it may be noted, which “is frivolous or vexatious … will not attach to the matter in which it is raised the character of a matter arising under the Constitution or involving its interpretation…”: Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [1999] FCA 1151 at [14], 95 FCR 292 at 297 per French J (as his Honour then was). In retrospect, leave to amend should have been refused.

26    It should finally be noted that Counsel for the Applicant sought leave at the very end of his oral submissions to read an affidavit sworn by the Applicant. So much of that affidavit as was ultimately relied upon served to emphasise the Applicant’s submission that she would suffer “substantial injustice” if leave to appeal was not granted. Whether the content of the affidavit could properly be characterised as “evidence” rather than “submissions” matters not; the further material, it is concluded, leads to no different conclusion.

27    It is concluded that:

1.    leave to appeal should be refused; and that

2.    costs should follow the event.

Associate:    

Dated:    27 March 2015

REASONS FOR JUDGMENT

KATZMANN J

28    I agree with Flick J that leave to appeal should be refused. I also agree generally with his Honour’s reasons and I endorse, in particular, what he said at [11] of those reasons.

29    Strictly speaking, as his Honour points out, it is unnecessary in an application for leave to appeal to undertake a detailed analysis of the merits of the proposed appeal. But the leave application was listed for hearing before a Full Court on the basis that, if leave were granted, the Court would hear the appeal. In these circumstances and in order to further illustrate why the proposed appeal enjoys insufficient prospects of success to warrant a grant of leave, I prefer to descend into greater detail than his Honour.

30    The draft grounds of appeal are extracted by Flick J at [12] of his reasons.

31    The first draft ground of appeal attacks the primary judge’s description of the applicant as “a disgruntled former employee”. Much was made of this in submissions.

32    The allegation was that in giving this description the primary judge was making an adverse credit finding contrary to the available evidence and without giving the applicant’s solicitor an opportunity to be heard on the question. The applicant’s counsel, Mr King, criticised the primary judge for what he characterised as “[a]pparent attempts to besmirch [the applicant’s] name as truculent and disgruntled” (although the word “truculent” does not appear in the judgment) and he criticised the Commonwealth for “airbrushing” these supposed attempts out of his Honour’s reasons.

33    This draft ground is baseless.

34    First, it wrongly presumes that “disgruntled” is a synonym for untruthful or unreliable. “Disgruntled” merely means dissatisfied or discontented. The Macquarie Dictionary defines it as “mildly upset, discontented”. It is not, as Mr King claimed in his submission in reply, “commercial speak for a serial ‘whinger’ and employer code for an implausible or possibly ‘dodgy’ complaint”. Moreover, it says nothing about the truthfulness or reliability of the applicant, with which credit or credibility is concerned. The insinuation in the written submissions in reply that describing the applicant in this way reflects apprehended bias should not have been made. It is inconceivable that a fair-minded hypothetical reasonable bystander might think that in doing so the primary judge might not bring (or have brought) an impartial and unprejudiced mind to the questions in dispute (Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 293–294). As the Commonwealth submitted, the description carries no pejorative connotation. To press the point after this error was pointed out, is, to say the least, an error of judgment.

35    Secondly, it is unarguable that the applicant is disgruntled with her former employer. After all, she is suing it for damages. In her statement of claim she makes numerous allegations of wrongdoing by the respondent and its employees. Amongst other orders she is applying for aggravated and exemplary damages, the latter because “the [r]espondent’s conduct was continuous, deliberate and in contumelious disregard of [her] rights”. What else is she if not disgruntled?

36    Thirdly, the primary judge’s remarks must be seen in context. The context was that the applicant had submitted that there were public interest considerations which militated against an order for security for costs. His Honour dealt with the submission at [64] of his reasons in a way which discloses no appealable error:

I do not consider that there are any relevant public interest considerations which point against the making of an order for security for costs. Merely because the ATO is a public authority does not mean that there is a public interest component in litigation which is brought by a disgruntled former employee. Nor do I consider that a sufficient public interest component is provided by the fact that Ms Waters raises complaints of contraventions of the Disability Discrimination Act. I consider that the subject matter of the litigation is very much in the nature of an inter partes dispute which has no appreciable public interest aspect.

37    Grounds 2-5 and also 7 relate to questions of impecuniosity, that is to say the applicant’s capacity to pay the respondent’s costs if she were to lose her case. Underlying all of them is a fundamental tension between the case put below and the case sought to be made on appeal. In this application, the applicant criticises the primary judge for various statements to the effect that there is reason to believe that she may be unable to pay the respondent’s costs. Mr King insisted that she was not impecunious. He described her as “asset rich” and “income poor”. Yet, the case she put below in opposition to an order for security was that she was a person of limited means who has been in a somewhat perilous financial situation for some time.

38    Although the applicant did not give evidence herself, her solicitor, Mr Coffey, filed an affidavit which was read in opposition to the respondent’s application. He actually described the applicant as impecunious. The heading to paragraphs 49-56 of the affidavit was:

Applicant’s impecuniosity caused by the Respondent’s conduct

39    Mr Coffey also asserted that the applicant’s gross earnings for the 2013 financial year were in the order of about $22,000 and in the previous year about $15,000. He repeatedly referred to her as being in financial difficulty, sufficient, he pointed out, to require her to seek early access to her superannuation on the basis of financial hardship. It can scarcely be an error that his Honour relied on the applicant’s own evidence. His Honour referred to that evidence at [57]:

I accept the submission by Mr Glover (who appeared for the ATO) that the evidence indicates that Ms Waters is relatively impecunious. Indeed, Mr Coffey acknowledged as much in his affidavit and, in particular, in the limited information which he gave concerning Ms Waters’ financial and employment position, as outlined above. That information included the fact that Ms Waters is currently eligible for a Pensioner Concession Card and that for the income tax years 2012 and 2013, the tax withheld from Ms Waters’ income amounted to only $1,613 and $777 respectively. It might also be noted that Ms Waters failed to adduce any evidence relating to the following matters which would have given a clearer picture as to her current financial circumstances:

(a)    the quantum of the restructured mortgage payments she is making in respect of her residence or the equity she has in that property;

(b)    the quantum of outstanding fees owed to her current solicitors;

(c)    the amount of the discounted legal fees the subject of her arrangement with her lawyers; and

(d)    the fee arrangements regarding her Counsel.

(Emphasis added.)

40    The applicant claims that the primary judge made several errors in this paragraph.

41    The first alleged error is that his Honour imposed a test of “relative impecuniosity”, when the correct test “relevant impecuniosity”.

42    This allegation must be rejected. It is tolerably clear that the expression “relative impecuniosity” was intended to reflect the effect of the evidence given by Mr Coffey. His Honour was not imposing a test. Correctly understood, “relative impecuniosity” denotes the relationship between the applicant’s financial position and her ability to pay the respondent’s costs, should she fail in the proceedings. There is, in truth, no difference between “relative” and “relevant” in this context. The “relevant impecuniosity” is the “relative impecuniosity”.

43    Secondly, the applicant alleges that the primary judge erred in holding or treating her as having a burden of proof to demonstrate why an order against her should not be made. This is the subject of draft ground 5.

44    Mr King submitted that to impose a burden is “at odds with the finding, based on the ATO’s express concession in evidence, that Ms Waters was ‘not impecunious’”. This submission was said to be supported by what his Honour said at [16] where he referred to evidence from Donna Trembath, the respondent’s solicitor, that she believed Ms Waters was not impecunious, and where he set out the basis for that belief. It is wrong to describe this as a concession by the respondent of anything and it takes Ms Trembath’s remarks out of their proper context. Ms Trembath said she did not know whether the applicant was impecunious. She merely pointed to a number of matters which suggested she was not.

45    There is an ostensible conflict in the authorities about whether it is correct to speak of a burden of proof in this area of discourse. In Equity Access Limited v Westpact Banking Corporation & Ors (1989) ATPR ¶40-972; [1989] FCA 520 (“Equity Access”) at 50,635, upon which the respondent relied, Hill J said that there was no burden “one way or the other”, citing Sir Lindsay Parkinson & Co Ltd Triplan Ltd (1973) 1 QB 609 at 626 (Lord Denning MR and Lawton LJ). On the other hand, in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [27] Lindgren J said that the onus was on the respondents who were seeking security for their costs to prove that the applicant would not be able to satisfy a costs order in their favour. More recently, in Mecrus Pty Ltd v Industrial Energy Pty Ltd [2015] FCA 103 Murphy J held that the legal burden rests on the respondent “from first to last” to persuade the Court that an order for security should be made (at [24]). He relied on Livingspring Pty Ltd v Kliger Partmers (2008) 20 VR 377 (“Livingspring”) at [21] (Maxwell P and Buchanan JA) and Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65 at [18]-[20] (Macfarlan JA) but pointed out, consistently with those cases, that there was an evidential burden on the party resisting the order to raise for consideration matters it wished the Court to take into account.

46    Ultimately, however, it is unnecessary to resolve the apparent conflict because in the present case the primary judge was not concerned with the legal onus. He was speaking of the evidential or persuasive onus. While Mr King suggested that there was not even an evidential onus upon the party against whom an order is sought, the authorities are against him. The applicant contended that she was in straitened financial circumstances owing to the respondent’s conduct. She also contended that to require her to pay security in the sum of $30,000 would stultify the proceedings. On these matters the weight of authority shows that it was for her to establish the facts that make good these contentions: see, for example, Livingspring at [22]. As the primary judge observed at [58], the matters to which he referred at (a)-(d) of [57] were matters peculiarly within her knowledge. Yet, she offered no evidence. Furthermore, the respondent had written to the applicant requesting detailed statements about her financial position over the previous three year period (including a statement of assets and liabilities, recent income tax returns and details of any loans) but the request went unanswered.

47    Mr King also argued that the primary judge made other errors in [57] of his reasons. He contended that it was wrong for his Honour to rely on the evidence that the applicant held a pensioner concession card. According to him, a pensioner concession card merely signified that the applicant had a disability; it did not indicate that she was a person of limited financial means. Mr King also argued that it was an error to rely on the amount of income tax withheld for the years 2012 and 2013.

48    It is unnecessary to deal with either of these arguments as neither is the subject of any draft ground of appeal.

49    The applicant further contended that the primary judge found evidence of impecuniosity relying only on a sentence in an affidavit from a witness for the Commonwealth which had been struck out despite the absence of a notice of contention asserting that the ruling was in error.

50    This contention, which is the subject of draft ground 2, is based on one paragraph in the primary judge’s summary of Ms Trembath’s evidence. It appears at [17] of the reasons and the contentious part is emphasised in bold:

Ms Trembath acknowledged that Ms Waters had experienced difficulty in the past in obtaining legal representation and this might be due in part to her inability to meet the high costs of legal representation.

51    In para 37 of her affidavit, after setting out reasons to believe that the applicant was not impecunious, Ms Trembath had stated:

That said, the Applicant has experienced difficulty in obtaining legal representation in the past, during the Supreme Court Proceedings, and I expect this to be at least in part a reflection on the Applicant’s ability to meet the high costs of legal representation.

…

(Emphasis added.)

52    Objection was taken to the second clause in the sentence, the objection was upheld and the respondent did not press it. It was therefore an error for his Honour to refer to it. But nothing turns on the error because it is not inconsistent with the applicant’s own evidence. Mr Coffey also said in his affidavit at [48] that the applicant was “eligible for waiver and exemption” of court fees in this Court because she held a Centrelink pensioner card.

53    Contrary to the applicant’s contention, as I have already observed it was not the only evidence to suggest that the applicant might be unable to pay the respondent’s costs.

54    In draft ground 7 the applicant contends that the primary judge erred by failing to follow and apply a decision of Mortimer J in Kiefel v Victoria [2014] FCA 604, especially at [34] and [40].

55    At [34] her Honour spoke of “[t]he potential chilling effect of requirements to provide security for costs on individual litigants” and the impact an order for security could have on an impecunious litigant’s access to justice. Her Honour said that this meant that at trial an impecunious litigant will rarely be ordered to provide security. The remarks she made at [40] were to like effect. The primary judge referred to these observations (at [42]-[43] of his reasons) and said he agreed with “the general thrust” of them. He added, however, that he did not believe that her Honour’s observation that an order for security will rarely be made against an impecunious litigant should be taken as “circumscribing the breadth of the relevant discretion”. He said there was no predisposition one way or another, noting that each case turns on its own facts and circumstances. Like Flick J, I am unable to discern any appealable error in this approach and none was identified in the applicant’s submissions. The reference to “wrong principle” in House v The King (1936) 55 CLR 499 at 505 is to a binding rule, not a guideline: Norbis v Norbis (1986) 161 CLR 513 at 520 (Mason and Deane JJ). Furthermore, the primary judge’s approach accords with the observations of French J in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 511 and endorsed by the Full Court in Madgwick v Kelly (2012) 212 FCR 1 at [6]. There is a traditional rule that impecuniosity alone will not be a bar to natural persons continuing with proceedings (at least at trial level). But, as Branson J pointed out in The Airtourer Co-operative Limited v Millicer Aircraft Industries Pty Limited [2004] FCA 1400 at [21]:

Recognition by this Court of the general rule that poverty is no bar to a litigant has not meant that the Court has proceeded on the basis that an order for security for costs can never be made against an impecunious litigant. An order for security for costs is only rarely sought against a litigant who is not impecunious. An order for security for costs made against an impecunious litigant when justified by a factor other than mere impecuniosity does not offend the general rule that poverty is no bar to a litigant. Indeed in Morris v Handley [2000] NSWSC 957 at [12] Young J pointed out that what we call applications for security for costs have their origin in ‘de-pauperisation’ applications. Such applications, it seems, were intended to result in a pauper shown to have brought a vexatious or oppressive action losing his or her entitlement to sue in forma pauperis.

56    Here, security was ordered not on the basis of “mere impecuniosity”. The applicant’s financial circumstances were but one factor his Honour took into account. The major factor influencing his Honour’s decision was her refusal to discuss with the Commonwealth the question of payment of its costs in the Supreme Court proceedings.

57    In ground 6 the applicant alleges that the primary judge erred in failing to give any or proper weight to his ruling that the applicant had a sufficiently arguable case or to the fact that her legitimate cause was unresolved.

58    His Honour said (at [67]) that he was prepared to accept that the applicant had an arguable case and he identified it as a consideration which weighed in her favour. This does not disclose error. Indeed, it is difficult to understand how the primary judge could be criticised for proceeding in the way that he did or how he might reasonably have proceeded differently. The proceeding was in its infancy. The pleadings had not even closed when the application for security was made and the application was heard and determined before any evidence had been filed. As Hill J observed in Equity Access at 50,636:

In the ordinary case where the hearing of the motion for security for costs takes place some considerable time prior to the hearing of the action and before the evidence has been tested, there would be difficulty in embarking upon a consideration of the prospects of success, at least in any detail.

59    Similarly, in Jazabas Pty Ltd v Haddad (2007) 65 ACSR 776; [2007] NSWCA 291 (an application for security for costs under s 1335 of the Corporations Act 2001 (Cth)) at [18] Basten JA doubted whether it was appropriate for a court to go beyond considering whether there was a bona fide and arguable claim and canvas the merits in any detail. In this respect his Honour noted the observations made in Ariss v Express Interiors Pty Ltd (In liq) [1996] 2 VR 507 at 514 (Phillips JA, Ormiston JA and Charles JA agreeing).

60    An appellate court will not disturb a discretionary judgment if it considers that insufficient weight has been given to a relevant consideration unless it “clearly” concludes that for that reason the discretion has been wrongly exercised: Lovell v Lovell (1950) 81 CLR 513 at 533 (Kitto J). As Aickin J explained in Gronow v Gronow (1979) 144 CLR 513 at 537, it is “a mistake to suppose that a conclusion that the trial judge has given inadequate or excessive weight to some factors is in itself a sufficient basis for an appellate court to substitute its own discretion for that of the trial judge”.

61    Draft grounds 8 and 12 relate to the primary judge’s treatment of outstanding costs orders in earlier proceedings in the Supreme Court of New South Wales (“Supreme Court proceedings”). In those proceedings Barr AJ struck out the applicant’s second amended statement of claim. The applicant applied to the Court of Appeal for leave to appeal. That application was dismissed. She then sought special leave from the High Court, which dismissed her application on the papers. At each point costs were awarded against her and in favour of the respondent. By the conclusion of those proceedings the respondent estimated its total costs on a party-party basis to be between $109,981 and $146,642. The primary judge considered (at [48]) that the most significant factor in favour of an order for security for costs was that there were three costs orders against her and in favour of the respondent “which have not been paid and in respect of which Ms Waters has refused meaningfully to engage”.

62    Each of these draft grounds rests on a misconception.

63    Contrary to what is alleged in draft ground 8, the primary judge did have regard to the fact that the respondent had not taken any steps to have its costs in the Supreme Court proceedings assessed. He did not, however, consider it significant. In draft ground 12 the applicant alleges that the primary judge erred in holding that the respondent was entitled to protection for its existing and future costs. In his submissions, Mr King took issue with the proposition that it was entitled to protection in respect of its existing costs, in the mistaken belief that this was a reference to the costs in the Supreme Court proceedings. The misconceptions that underpin both these draft grounds are put to rest on a careful reading of his Honour’s reasons, in particular what his Honour said at [55].

I consider that the relevant issue here is not whether a debt immediately arises upon a Court making a costs order, as opposed to after costs have been assessed, but rather, the reasonableness of Ms Waters’ refusal to enter into discussions with the ATO with a view to agreeing an amount and thereby obviating the need for those costs to be assessed. Having regard to Ms Waters’ refusal to engage in any such discussions and that the costs remain unpaid, I do not consider that it is unreasonable of the ATO to seek security for costs in respect of the current proceedings with a view to protecting its position on costs in these proceedings. Ms Waters’ past conduct is a relevant consideration in the particular circumstances of the current case.

64    Mr King also submitted that the primary judge erred in finding that the applicant refused to pay any of the costs due to the respondent in the Supreme Court proceedings. But his Honour made no such finding. All he found was that she had refused to engage in discussions and that she did not pay. Both those conclusions were open on the evidence.

65    While those costs had never been assessed, there was evidence that the respondent had written to the applicant on more than one occasion asking her to pay the costs, providing an estimate of what the costs were and inviting her to enter into discussions with a view to reaching an agreement. The applicant only replied to the first letter. That was in August 2012. Then she asserted it was premature to negotiate costs as she intended to appeal. After she had exhausted all her appeal rights, however, she did not then indicate a willingness to negotiate and, when the respondent wrote again inviting her to do so, the invitation was met with silence.

66    Mr King also submitted that any refusal to pay costs in the Supreme Court proceedings was irrelevant to the question of whether security for costs should be ordered in the current proceedings. But one of the matters appropriate for consideration in an application for security for costs is whether there are any particular discretionary matters peculiar to the circumstances of the cases: Equity Access at 50,635; Dye v Commonwealth Securities Ltd [2012] FCA 992 at [26] (Emmett J). This was such a matter. The applicant’s failure or refusal to enter into discussions with the respondent about payment of its costs in the Supreme Court proceedings was far from irrelevant to the question of whether this Court should require her to put up security for the respondent’s costs in the present proceedings, particularly after the High Court dismissed her application for special leave. It could signify an inability or an unwillingness to pay. The weight to be attached to this circumstance was entirely a matter for his Honour.

67    The applicant’s contention in draft ground 9 should also be rejected. Although it is not clear from the applicant’s written submissions, it seems to be based on what the primary judge said at [59] of his reasons:

[A]s I observed in Ninan [Ninan v St George Bank Ltd [2012] FCA 905; (2012) 294 ALR 190] at [37], an applicant who wishes to resist security for costs on the basis that there is causal connection between his or her impecuniosity and the respondent’s conduct needs to substantiate that claim by appropriate evidentiary material and not mere assertion or submission. In my view, Ms Waters has not discharged her onus of establishing that her relative impecuniosity was caused by the ATO’s conduct in circumstances where:

(a)    it is now over nine years since the relevant alleged events occurred;

(b)    Ms Waters resigned from the ATO on 19 November 2004, but then returned to work in the private sector on 5 November 2007;

(c)    she is well qualified and she does not assert that her psychiatric illness prevents her from being employed; and

(d)    in her statement of claim in the proceedings, Ms Waters pleads that her illness prevented her from working for only three of the ten years which have now elapsed since the conduct of which she complains occurred.

68    None of the matters listed here is said to be incorrect. There is no appealable error in his Honour’s reasons. In his submissions in reply, Mr King referred to what his Honour said [60]-[63] but his Honour was not concerned there with the question of whether the respondent had caused or contributed to the applicant’s financial position. He was there considering the question of whether an order for security would stultify the proceeding. It is to that question I turn next.

69    In draft ground 10 the applicant seeks to impugn the primary judge’s finding that the order the respondent sought was both objectively reasonable and would not stultify the proceeding. She alleges that was an error “without considering the evidence including the medical and financial evidence” she offered.

70    The primary judge plainly considered the financial evidence. The problem for the applicant was that there was not enough of it to persuade him that an order would have the effect of stultifying the proceeding. His Honour referred to her failure to call evidence about either the equity she had in her apartment (purchased for $250,000 in 2003 and secured at that time with a mortgage of $200,000), the amount of the restructured mortgage payments that Mr Coffey said she was making on the property, the amount of legal fees outstanding to her current solicitors and the fee arrangements she had with counsel. Mr King drew attention to the transfer and the mortgage both of which were signed 11 years before the hearing. It is impossible to understand what significance could be attached to them in the circumstances. The proposition that the applicant would have to sell her apartment to pay the $30,000 sought in security was not supported by the evidence. Since it was for the applicant to show why an order for security for costs would stultify the proceeding and she elected not to put the full financial picture to the Court, it is unsurprising the primary judge came to the conclusion that he did.

71    In the footnotes contained in his written submissions Mr King directed the Court to aspects of the medical evidence without explaining the relationship between the evidence and his draft grounds. In the body of his submissions Mr King pointed to one report which contained observations that the applicant was courteous and cooperative. That is hardly to the point. In oral argument Mr King submitted that all the doctors agreed that the applicant’s disability was caused by “workplace conduct”. Assuming this to be correct, it is difficult to discern any logical connection between the submission and the proposition with which this draft ground is concerned, that is, the reasonableness or otherwise of an order for security and the prospect that it would stultify the proceeding. To the extent that the submission might have been advanced in support of the argument as to the merits of the applicant’s case, I would simply repeat what I said at 32 above in relation to draft ground 6.

72    Draft ground 11 is conclusory and was not given any separate attention in the submissions by either party.

73    As the primary judge noted at [36], the decision as to whether to order security for costs is a broad discretionary decision. There is no sound basis for concluding that in the present case the discretion miscarried. It follows that, even if leave to appeal were granted, I would have dismissed the appeal.

Associate:

Dated:    27 March 2015