FEDERAL COURT OF AUSTRALIA
Augusta Ventures Limited v Mt Arthur Coal Pty Limited [2020] FCAFC 194
ORDERS
Applicant | ||
AND: | MT ARTHUR COAL PTY LIMITED (ACN 000 181 902) Respondent | |
DATE OF ORDER: | 10 NOVEMBER 2020 |
THE COURT ORDERS THAT:
1. Leave to appeal against the orders of the Court on 28 October 2019 be granted in the form of the draft notice of appeal relevantly exhibited to the affidavit of Neill Curtis Brennan dated 8 November 2019.
2. The said draft notice of appeal stand as if filed.
3. The appeal be allowed.
4. The orders of the Court on 28 October 2019 be set aside and in lieu thereof it be ordered that the interlocutory application for security for costs be dismissed with costs.
5. The respondent pay the applicant’s costs of the application for leave to appeal and of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1852 of 2019 | ||
| ||
BETWEEN: | AUGUSTA VENTURES LIMITED Applicant | |
AND: | MT ARTHUR COAL PTY LIMITED (ACN 000 181 902) First Respondent READY WORKFORCE (A DIVISION OF CHANDLER MACLEOD) PTY LTD (ACN 088 288 037) Second Respondent CHANDLER MACLEOD GROUP LIMITED (ACN 090 555 052) Third Respondent | |
JUDGES: | ALLSOP CJ, MIDDLETON AND WHITE JJ |
DATE OF ORDER: | 10 NOVEMBER 2020 |
THE COURT ORDERS THAT:
1. Leave to appeal against the orders of the Court on 28 October 2019 be granted in the form of the draft notice of appeal relevantly exhibited to the affidavit of Neill Curtis Brennan dated 8 November 2019.
2. The said draft notice of appeal stand as if filed.
3. The appeal be allowed.
4. The orders of the Court on 28 October 2019 be set aside and in lieu thereof it be ordered that the interlocutory application for security for costs be dismissed with costs.
5. The respondents pay the applicant’s costs of the application for leave to appeal and of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ALLSOP CJ:
1 These are applications for leave to appeal and appeals should leave be granted against orders made by the primary judge for security for costs to be provided by Augusta Ventures Limited (AVL) for the respondents’ costs in two group proceedings brought by Mr Simon Turner under Part IVA of the Federal Court of Australia Act 1976 (Cth) (the Act).
2 For the reasons that follow I would grant leave to appeal, allow the appeal and set aside the orders made by the primary judge. My disagreement with the learned primary judge’s careful, thoughtful and nuanced reasons is narrow and one of characterisation of the circumstances in the application of principle.
3 AVL is the litigation funder providing financial support for the two group proceedings. It does so as part of its ordinary commercial operations. AVL is a foreign company domiciled in England which carries on world-wide business of litigation funding for commercial profit. The funding agreement provides for a rate of 25% commission in addition to cost reimbursements from any relevant judgment or settlement obtained by or entered into with Mr Turner or group members who have bound themselves to the funding arrangement. The agreement provides for AVL to pay any security for costs ordered to be paid by Mr Turner or by it. In respect of this contingency and more generally, AVL has entered into insurance arrangements with two entities, PartnerRe Island Insurance DAC and Hiscox Insurance Company Limited, whereby AVL is covered for any costs it must pay in the litigation on behalf of itself or Mr Turner.
4 The position of AVL easily raises to the mind the question: Why should a foreign commercial entity, being a professional litigation funder, not provide security for the respondents’ legal costs in litigation it stands behind and promotes, and from which it hopes to profit? That is an entirely legitimate question and the sentiment behind it has been an informing consideration in the approach of the courts to applications for security for costs.
5 The underlying proceedings were described by the primary judge at [7]–[10] of his reasons:
7 The first proceeding is ACD 46 of 2018, Turner v Tesa Mining (NSW) Pty Limited (TESA proceeding). Mr Turner commenced the TESA proceeding, on behalf of persons who: (a) worked at the Mount Arthur Coal Mine and who were employed by the first and/or second respondent, at any time during the period 7 December 2012 to 27 September 2014; (b) were covered by the TESA Group – Enterprise Agreement 2012 (TESA agreement); (c) worked in accordance with the “Mine Roster” as alleged in the pleadings; and (d) were treated as casual employees by the first and/or second respondent.
8 It is alleged that the group members were engaged as “other than casual” employees within the meaning of s 86 of the FW Act, with some being permanent full time employees, and others being permanent part time employees within the meaning of the TESA agreement. Mr Turner further alleges that on or about 22 June 2014, the second respondent succeeded the first respondent as the employer of the employees at the mine. It is then said that in September 2014, the employees’ employment was terminated on the grounds of redundancy, and the respondents failed to provide the employees with any entitlements provided for in the TESA agreement. Orders are sought that the respondents are liable to pay the employees compensation in respect of the loss suffered because the entitlements were not paid, and pecuniary penalties.
9 The second proceeding is ACD 47 of 2018, Turner v Ready Workforce (A Division of Chandler Macleod) Pty Ltd (Chandler Macleod proceeding). Mr Turner commenced the Chandler Macleod proceeding on behalf of persons who: (a) were employed by the first respondent to work at the Mount Arthur Coal Mine at any time in the six years prior to 19 December 2018; and (b) were either “coal mining employees” within the meaning of the Black Coal Mining Industry Award 2010 (Award) at any time in that period before 10 June 2015; and/or were a party to and bound by the Chandler Macleod Northern District of NSW Black Coal Mining Agreement 2015 (Chandler Macleod agreement) at any time during the period 11 June 2015 and 19 December 2018; and (c) during the course of such employment, worked in accordance with the “roster system” alleged in the pleadings; (d) and during the course of such employment the first respondent described and treated them for the purpose of the Chandler Macleod agreement as casual employees.
10 Mr Turner claims that the manner in which he was employed, including how he was allocated on the roster system, meant that he was a full time employee for the purposes of the Chandler Macleod agreement, and the Award. Mr Turner further claims that during the course of his employment, he was not provided with all of his entitlements, including accident pay entitlements. In addition, Mr Turner claims that the third respondent made representations that the employees were casual employees, and were not entitled to any entitlements, amounting to misleading representations about the workplace rights of the employees. Orders are sought for compensation, and pecuniary penalties.
6 The interlocutory applications for security for costs before the primary judge in the two proceedings were in different form. In ACD47/2018, the respondents sought security for their costs relevantly in the following terms:
1. Pursuant to s56 of the Federal Court of Australia Act 1976 (FCA) and/or s33ZF of the FCA and/or rule 19.01 of the Federal Court Rules 2011, Augusta Ventures Limited (AVL) provide security in tranches for the First and Third Respondents’ costs of this proceeding in the aggregate amount of $1,100,000, or such other sum as the Court may determine (Security Sum).
[The method of the provision of security was set out in 2.]
3. In the event that the Security Sum is not provided in accordance with Orders 1 or 2 above:
(a) the proceeding as against the First and Third Respondents is dismissed; or
(b) alternatively, the proceeding against the First and Third Respondents be stayed until such time as the Security Sum is provided or until the proceeding is dismissed; and
4. Orders 1 to 3 above are made without prejudice to the First and Third Respondents’ right to seek an order from the Court that the Applicant and/or AVL provide further security for their costs.
7 In ACD46/2018, the respondents sought security for their costs relevantly in the following terms:
1. Pursuant to sections 23 and/or 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCA):
(a) the Applicant’s litigation funder, Augusta Ventures Limited (CN 06687054) (AVL) provide security for the Third Respondent’s costs of and incidental to the proceedings in the aggregated sum of $1,000,000 (or in the sum that the Court thinks fit) (Security);
[The method of security was then set out in (b)]
(c) in the event that the Security is not provided by the date and in the manner specified in orders (b)(i) or (b)(ii), the proceedings be:
(i) stayed on and from the date until AVL provides the Security in accordance with orders 1(a) and 1(b); and
(ii) if the Court further so orders, dismissed as against the Third Respondent.
2. In the alternative to orders 1(a), 1(b) and 1(c), pursuant to section 56 of the FCA and rule 19.01 of the Federal Court Rules 2011:
(a) the Applicant provide security for the Third Respondent’s costs of and incidental to the proceedings in the aggregated sum of $1,000,000 (or in the sum that the Court thinks fit) by causing AVL to provide an unconditional bank guarantee from an Australian trading bank, or in such other form agreed by the parties (Security).
[The method of provision of security was then set out in (b)]
(c) in the event that the Security is not provided by the date and in the manner specified in orders (b)(i) or (b)(ii), the proceedings be:
(i) stayed on and from that date until the Applicant provides the Security in accordance with orders 2(a) and 2(b); and
(ii) if the Court further so orders, dismissed as against the Third Respondent.
8 A number of matters about these interlocutory applications are worthy of note. First, there was reliance upon ss 23, 33ZF and 56 of the Act and r 19.01 of the Rules. Secondly, the persons against whom the orders to provide security were directed were, initially, both AVL and Mr Turner. Thirdly, upon any failure to provide the security (irrespective of the direction of the order against AVL) orders were sought for the stay or dismissal of Mr Turner’s proceeding.
9 The alternative order against Mr Turner to provide the security was abandoned. That led to an implicit abandonment of reliance upon s 56 of the Act. The primary judge noted that the “target” of the applications was AVL. His Honour made some comments at [16] of the reasons about the funding agreement in that respect, as follows:
Here the relevant funding agreement provides that subject to an application for a common fund order (which has been foreshadowed by Mr Turner), as things presently stand, the Funder is entitled to receive in consideration for funding the proceedings, the greater of: (a) 25% of the claim proceeds; or (b) an amount equal to three times the “Claimant’s Share of the Project Costs to the extent those costs form part of the Deployed Credit”. It is unnecessary for me [to] dwell in the detail of how the second of these alternatives is calculated, other than to note that part of the definition of “Project Costs” includes the “costs involved in the provision of any security for costs” and if “such costs are paid they form part of the Deployed Credit”. Further, also included in the definition of Project Costs (a concept very widely defined), are the costs incurred in obtaining “any Adverse Costs Insurance Premium”: see Augusta Funding Agreement at 9.
10 The primary judge rejected the argument that the Court had no power to order AVL, as the funder, to provide security for costs of the respondents for which it (AVL), not Mr Turner as applicant, may be responsible. His Honour considered it appropriate to make an order that AVL provide security. The terms of the orders made were as follows:
1. Subject to Augusta Ventures Limited (AVL) filing an application for leave to appeal from these orders by 4 pm on 8 November 2019, AVL is to provide security for the respondents’ costs by serving on the respondents Deeds of Indemnity in the form of Annexure A and Annexure B to be executed by PartnerRe Ireland Insurance DAC (PartnerRe Ireland) and Hiscox Insurance Company Limited (Hiscox Insurance) respectively, in the respondents’ favour and in the following tranches:
(a) Deeds of Indemnity totalling the amount of:
(i) $1,000,000 in favour of the third respondent in proceeding number ACD46 of 2018 and the second respondent in proceeding number ACD47 of 2018;
(ii) $550,000 in favour of the first and third respondents in proceeding number ACD47 of 2018,
to be provided 28 days after the dismissal of the application for leave to appeal or after the determination of the appeal (if leave is granted) by the Full Court of the Federal Court;
(b) Deeds of Indemnity totalling the amount of:
(i) $1,000,000 in favour of the third respondent in proceeding number ACD46 of 2018 and the second respondent in proceeding number ACD47 of 2018;
(ii) $550,000 in favour of the first and third respondents in proceeding number ACD47 of 2018,
to be provided 45 days prior to the first day fixed for the final hearing of the proceedings.
2. By 15 November 2019, AVL is to provide written confirmation from PartnerRe Ireland and Hiscox Insurance to the respondents that in the event that AVL’s application for leave to appeal or appeal (if leave is granted) is dismissed, PartnerRe Ireland and Hiscox Insurance agree to enter into the Deeds of Indemnity in the form of Annexure A and Annexure B respectively.
3. By the same date that AVL provides security in accordance with order 1(a), AVL pay $50,000 into the Federal Court of Australia to be retained as further security in relation to the respondents’ costs of enforcing the Deeds of Indemnity.
11 It is to be noted that nothing concerned with the consequences of non-provision of the security was dealt with. That can be explained by the anticipation that AVL would provide the security, subject to any appeal. I do not take it, however, that the order was made other than on the basis of the rights of the respondents to the consequential orders claimed in the interlocutory applications that in default of provision of security the proceedings be stayed or dismissed. That is, the order was made in the context of the threat of such consequences should provision not be made.
12 The problem at the heart of the interlocutory applications is the disconformity in the circumstances between the party against whom an otherwise conventional species of interlocutory order is sought and made, and the essential character of that order that inheres in it by reference to the consequences of non-compliance. That disconformity is brought about by s 570 of the Fair Work Act 2009 (Cth) (FW Act). By reason of that provision Mr Turner (and indeed each respondent) as a party to the proceedings may only be ordered to pay costs in the circumstances set out in that section:
570 Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.
13 There is no suggestion that the claim of Mr Turner or the group is brought other than reasonably or is brought without reasonable cause. The interlocutory applications were not brought to secure the costs (if any) for which Mr Turner might be liable if the circumstances in s 570(2) obtain.
14 Before analysing the approach of the primary judge, it is appropriate to set out my fundamental difficulty with the orders made by the primary judge, because the difficulty that I have is at the heart of the arguments about both power and discretion.
15 An order of security for costs is, in its essential and usual character, an order compliance with which is a condition of the relevant proceeding not being stayed or dismissed. See the observations (albeit in a very different context) of Priestley JA in Rajski v Computer Manufacture & Design Pty Ltd [1983] 2 NSWLR 122 at 129 and also Moffitt P in the same case at 128, both cited with approval by the Court of Appeal in Partington v Pacific Link Housing Ltd [2013] NSWCA 259 at [59]. That was the form in which the applications here were brought. Sections of Acts or provisions in Rules (such as s 56 of the Act) may speak in terms of an applicant or an appellant being “ordered to give security” but, unless the case was extraordinary and the terms of the order were clear, failure to comply with the order does not lead to contempt or to enforcement of a money judgment. It is not an order to be obeyed in that sense. Rather, if the order in its terms is not complied with and the security is not paid or given, the relevant proceeding may be dismissed or stayed. That is important, indeed central, to recognise here, both in considering whether the order should have been made and the power to make the order. It is the point around which my disagreement with the primary judge and with the submissions of the respondents turns.
16 Mr Turner, the applicant, was a worker in a coal mine. He claims on his own behalf and on behalf of other workers at the coal mine in group proceedings under Pt IVA of the Act that he and they have not been paid or received wages and entitlements from his and their employer (the respondents) by being wrongly characterised and classified as “casual” employees, when, it is said, they were in fact full time permanent employees. The entitlements are critical to Mr Turner, personally, because he was injured in a workplace accident and he survives on statutory workers compensation payments. He is not entitled to award-based accident-pay benefits because he was classified as a casual employee. He lives in straightened circumstances. Mr Turner relies on recent decisions of the Full Court of this Court that have dealt with the issues in employment relationships (also in the mining industry) that will be said to give a foundation to the claim: WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 378 ALR 585 and WorkPac Pty Ltd v Skene [2018] FCAFC 131; 264 FCR 536.
17 Mr Turner has chosen to enter the funding agreement with AVL in order to underwrite the substantial costs that he may have to bear to vindicate what he asserts are his and the group members’ legitimate workplace rights. The vindication that he seeks is both compensatory and penal. Civil penalties are sought to vindicate the public interest in encouraging compliance with the law by deterring contravention. That choice is one for him, and perhaps others, to make. But it can be accepted as commercially likely that AVL’s interest in participation in the litigious venture is generated by the group nature of the proceeding and not Mr Turner’s personal claim (except to the extent that its strength or weakness may reflect on the strength or weakness of the claims of the group members). Thus, it may be reasonably posited that Mr Turner would not be able to obtain the funding assistance of AVL were it not for the fact that he was prepared to be the lead applicant in a group proceeding under Pt IVA of the Act. To the extent that such considerations may have an element of conjecture about them, they can be replaced with a broader consideration: It is entirely a matter for Mr Turner and those otherwise interested in the vindication of the workplace rights of him and of other coal mine workers to choose the mechanism of funding that appears commercially, and otherwise, appropriate and satisfactory to him and them in order that his and their rights (and to a degree the public interest) might be vindicated under Pt IVA of the Act and under the FW Act, if they are correct in their contentions. The claim is substantial and affects a significant number of workers; it concerns one of the fault lines of the organisation of labour in Australia: casual or permanent employee (along with, though not relevant here, employee or independent contractor). The respondents to the proceedings are the owner and operator of the coal mine and the labour hire company that provided the labour force for the mine. It is unnecessary to unravel the employment relationships created by the corporate organisation beyond what I have said.
18 So, it must be asked: What are the costs of the respondents for which security must be provided? Apart from any contingency under s 570(2) (for which contingency the order was not sought or made) the answer is the costs of the respondents that AVL, as a third party standing to benefit from the proceedings, may be ordered to pay if the proceedings are unsuccessful. AVL, not being a party to either proceeding, is not protected by s 570(1).
19 The circumstances in which a third party may be ordered to pay the costs of a party to litigation have been considered in a number of cases, in particular Knight v F.P. Special Assets Limited [1992] HCA 28; 174 CLR 178. The primary judge carefully analysed that body of jurisprudence. It is sufficient for present purposes to say that I am prepared to assume that a commercial funder in the position of AVL, which funds and underwrites for profit litigation and stands to benefit by any success, may be liable to pay the successful respondents’ costs if the case is unsuccessful.
20 The difficulty that I have is any proposition that that potential future liability is a sufficient reason to order security for costs, because of the disconformity to which I have referred. The order can be, as it was, directed in name to AVL as the funder, and as the person who (on this hypothesis) may be liable for the costs (in respect of which the security is granted). But the order is in substance a condition, or the threat of a condition, being imposed on Mr Turner’s right to proceed with a bona fide claim, or his right to proceed under Pt IVA of the Act, against the respondents which he (and perhaps others) has (and perhaps have) decided in his (and their) own interests to fund in this way, and in respect of which proceedings (as a party, along with the respondents as parties), subject to circumstances in s 570(2), he is not liable for the respondents’ costs, and they are not responsible for his.
21 What if AVL refused or for some reason failed to put up the security? As an order in the nature of security for costs, the usual remedy for, or in consequence of, its non-fulfilment would be to stay or dismiss Mr Turner’s proceeding. That was the consequence sought in the interlocutory applications and the context of the making of the orders. Such an outcome could not possibly be just. It may be that other orders (not claimed in the interlocutory applications, but mentioned in argument) could be fashioned against AVL in connection with the conduct of the suit that removed or impeded AVL’s capacity to profit from the funding of the proceeding, perhaps by “declassing” the proceeding, if AVL did not provide the security. Such orders would necessarily affect how AVL participates in the litigation, which it does pursuant to a contract with Mr Turner, freely bargained for and entered into, and would necessarily affect the position of Mr Turner and group members, and their capacity to vindicate their own rights and, to a degree, the public interest.
22 Another way of exposing the difficulty is revealed by varying the terms of the order from one that simply orders AVL to provide security for the respondents’ costs in a particular way to a more traditional form, indeed as sought in the interlocutory applications and as discussed in argument. If one recognises that the substantive nature of the order is the imposition of a condition, or the threat of a condition, upon the otherwise unimpeded progress of the proceeding one can craft an order that reveals its immanent difficulties: That unless security in satisfactory form in $X amount is paid or given by the funder by Y date to secure any award of costs against the funder in favour of the respondents, the proceeding brought by the applicant be stayed or dismissed, or there be some other order by way of nominated consequence, whether de-classing the proceeding, or otherwise, that impedes the funder’s participation in the applicant’s proceeding or its capacity to profit from funding the proceeding. So to express the order would reveal in its terms the visitation of the consequences of non-compliance by the funder upon the applicant who is a party who cannot (relevantly) be ordered to pay costs and who, nevertheless, will have his proceeding either stayed, dismissed, impeded, or affected by the funder failing to fulfil the condition. If such consequences could or would not be ordered by the court an order for security could be described as no order at all: James v Australia and New Zealand Banking Group Ltd [1985] FCA 539; 9 FCR 442 at 446. I do not mean to suggest that an order for the provision of security must always be framed by reference to designated consequences in advance. Sometimes security is ordered and in default of provision the court will consider what course to take. But, in essence, in its conventional form as requested here, the order is made against, or in the context of, the threat of the affectation (by stay or dismissal usually) of the relevant proceeding.
23 I do not see how, as a matter of principle, this difficulty is answered by pointing to an obligation in the funding agreement upon AVL to pay any security ordered, or the willingness of AVL (properly) to comply with that obligation. That provision, and the proper willingness to comply with it, is predicated on the order being one the power for which is properly sourced and that is properly made. AVL plainly does not wish to provide the security since it is the applicant in the present applications. Orders of the Court are not requests. They are not made because a person has indicated a willingness to obey. Their nature, consequences and justification for being made are to be assessed by reference to both non-compliance and compliance: cf James v Australia and New Zealand Banking Group Ltd 9 FCR at 446. Further, there was no suggestion that the respondents are somehow entitled to take the benefit of the provision in the funding agreement dealing with the question. If no stay or dismissal of Mr Turner’s proceeding would be ordered should AVL not comply with the order because such interference with Mr Turner’s proceedings for such a reason would be unjust, and if any interference in the constitution of the group proceeding, or in the ability of the funder to perform its contractual obligations under the funding agreement and take the commercial benefit from so doing would be unjustified how, as a matter of principle, can the order be justified? It cannot be that security can be ordered against a funder in these circumstances if there is a provision in the funding agreement requiring the funder to give security if so ordered, but not if there is not and the funder is not so obliged.
24 The respondents submit that these kinds of consideration are to be analysed through the prism of asking whether the making of the order would stultify the proceeding, not by reference to ascertaining the principled basis for the making of the order. I deal with this submission later in these reasons.
25 It can be accepted that such considerations as I have outlined have not prevented security being ordered in other group proceedings not affected by s 570 of the FW Act commenced by an individual when there is a litigation funder. In such cases, however, whether the order to provide security is made against the applicant or the funder, the applicant is potentially liable for costs and his or her claim is brought in conjunction with a funder who can be seen to stand to gain commercial profit from a form of commercial venture of litigation. The cases discussed by the primary judge reveal this. The presence of a commercial litigation funder can be seen in the cases to be relevant to variation of the usual principle that a natural person within the jurisdiction, however poor he or she may be, will not be ordered to give security for costs, at least at first instance. There is, or may be, no injustice in staying a natural person applicant’s proceeding if the funder, or the applicant backed by the funder, will not provide security for the costs for which the applicant (and perhaps the funder) will be liable if the proceeding is lost and from which venture the funder, as a non-party, hopes to gain. In such cases, the protection is for the respondent for its costs against the applicant party and there may be seen, in any particular case, to be just reason why a professional funder seeking to use the legal system for commercial profit should provide security. In such a case, there is a just conformity between the making of the order and the consequences of the failure of the condition if there is not compliance with the order.
26 But where the FW Act provides that no party is to be liable for costs, except in circumstances where he, she or it has behaved in a manner worthy of criticism, it would appear wrong to stay, dismiss, or by some order against the funder otherwise impede, a party’s ex facie bona fide action, invoking Pt IVA of the Act, seeking to vindicate workplace rights by reason of a failure of a third party to provide security for costs, for which the party will not and cannot be responsible. If it be wrong to stay, dismiss or otherwise impede the proceeding, I do not see the basis of threatening to do the same by an order in the character of a condition on the proceeding going forward unimpeded.
27 Any such conclusion would say nothing about two other propositions. First, it is another matter entirely whether the third party funder might be liable for costs (or at least some proportion of them) should the proceeding be unsuccessful. Secondly, if the circumstances revealed that the applicant in the proceeding under the FW Act could be seen not to be a “real party” in any of the senses discussed in Knight 174 CLR at 186–193 and that the funder or another was the real party, it might be just to order the applicant to provide security, or subject to the question of power, the order might be directed to the “real” party, being the funder or other person, and the proceedings might be stayed in default of compliance. If, for example, the circumstances were properly to be characterised as the litigation funder or another seeking to use the applicant and the proceeding as a mere vehicle for an attempt to extract fees or commission from the conduct of the litigation in a no-costs jurisdiction it might well be just to stay or to threaten to stay the nominal party’s action for the failure of the funder or the other to provide security, notwithstanding the presence of s 570. There may be other less extreme circumstances in the context of FW Act litigation which justify the kinds of consequences to which I have referred: that is a stay of the proceeding, declassing the proceeding, or taking a step as would prevent or impede the funder obtaining the commercial benefit of performance of the funding agreement and so interfere with the performance of the applicant’s contract unless security be provided, but I have difficulty in envisaging them.
28 Against these considerations, I turn to the application for leave to appeal and the appeal.
Leave to appeal
29 The importance of the question raised by the appeal alone justifies the grant of leave. In addition there is in my view sufficient doubt about the correctness of the approach of the primary judge to warrant the grant of leave, and it cannot be said that there is no prejudice to AVL if the decision stands. I would grant leave to appeal.
The appeal
The primary judgment
Relevance of commercial funders to the question of security for costs
30 At [20]–[41] of the reasons, the primary judge discussed the question of costs being awarded against funders. His Honour began his discussion by reference to the relevance of the existence of a funder to the question whether security would be ordered against a party, in circumstances where, were the action “unfunded”, security would ordinarily not be ordered. His Honour referred to Chartspike Pty Ltd v Chahoud [2001] NSWSC 585 at [5] (Young CJ in Eq); Green (as liquidator of Arimco Mining Pty Ltd v CGU Insurance Ltd [2008] NSWCA 148; 67 ACSR 105 at 120–121 [51], 122 [61] (Hodgson JA), 128–129 [85]–[88] (Campbell JA) and 127 [80] (Basten JA); Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 745 at [21] (Rares J); Ballard v Brookfield Australia Investments Ltd [2013] NSWCA 82 at [59]–[60] (Ward JA); Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 at [34] (Gleeson J); and Domino’s Pizza Enterprises Limited v Precision Tracking Pty Ltd (No 2) [2017] FCA 211 at [75] (Robertson J).
31 These cases reflect the willingness of the courts to consider as a factor in favour of an order for security for costs, the presence of a litigation funder, including in circumstances where, ordinarily, security would not be awarded against an impecunious individual at first instance, the general rule being that a natural person who sues will not be ordered to give security, however poor he or she may be. As Hodgson JA said in Green 67 ACSR at 120 [51]: “a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings … is a person whose interest is solely to make a commercial profit from funding the litigation”. Further, Hodgson JA said the following at 67 ACSR 122 [61]:
I think it is right that the court should be concerned to ensure that a litigation funder, involved in the litigation purely for commercial profit, should not be able to avoid responsibility for costs if the litigation fails, or be in a position where there may be obstacles in the way of a successful defendant obtaining costs from such a funder.
32 The primary judge, at [26], linked these developments to the “broader, well-known principle relevant to stultification” in Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCA 34; 2 FCR 1 at 4, where it was said by the Court that it is for the company seeking to resist the order for security “to raise the issue of the impecuniosity of those whom the litigation will benefit”.
33 It should be said at this point that no issue arises as to the correctness of the above cases. They were all cases where security was ordered against the moving party, whether applicant or appellant. It can be accepted that in circumstances where the moving party may be liable for costs should an action be unsuccessful, courts will be prepared to require the provision of security by an individual party where the proceedings are funded by a commercial litigation funder, even if without such a supporting commercial funder, security would not be ordered against the party.
The liability of a funder to pay costs
34 The primary judge then turned (at [27]–[41]) to a consideration of the circumstances where a funder will be held liable to pay costs if funded litigation is unsuccessful, absent an agreement to do so (whether in the funding agreement or upon an undertaking to the court), by reason of a discretionary power to award costs against a third party.
35 After noting that in the absence of a power to order costs against a third party (as was the case in New South Wales when Jeffrey & Katauskas Pty Limited v SST Consulting Pty Ltd [2009] HCA 43; 239 CLR 75 was decided) the primary judge commenced with Knight v F.P. Special Assets Limited [1992] HCA 28; 174 CLR 178, and the application of the principles in that case to funded litigation. The primary judge noted that in Gore v Justice Corporation Pty Ltd [2002] FCAFC 83; 119 FCR 429, this Court (O’Loughlin, Whitlam and Marshall JJ) made an order for costs against a non-party funder. The ability to do so was stated by the New South Wales Court of Appeal in Fostif Pty Limited v Campbell’s Cash and Carry Pty Limited [2005] NSWCA 83; 63 NSWLR 203 at 230 [120]. Similar statements of the liability of commercial funders for adverse costs were made by the Privy Council in Dymocks Franchise System (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 at 2815–2816 [25] (on appeal from New Zealand).
36 The primary judge, at [37], expressed necessary caution in making determinative statements of principle in matters of practice and procedure. His Honour went on, drawing on his undoubted experience, to describe (at [38]) the common arrangements for the commercially funded “class action” by reference to what he had said in Perera v GetSwift Limited [2018] FCA 732; 263 FCR 1 at 11 [17]:
…(t)he superficial answer was simply as a means by which a proceeding governed by Part IVA of the Act could be conducted to the benefit of group members, the funder and the solicitors. A more complex answer was provided by the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147; (2009) 180 FCR 11, where the majority (Sundberg and Dowsett JJ) found that the bilateral (or, with the solicitors, trilateral) arrangements pursuant to which these funded class actions were conducted were unregistered managed investment schemes for the purposes of the Corporations Act 2001 (Cth). A majority of the Full Court held that the class action (or, more particularly, the scheme constituted by the agreements which allowed the class action to be funded and maintained) had the following characteristics: (a) the promises given by the group members and the funder were ‘money’s worth’ contributed for the purposes of the litigation funding arrangement made in return for their acquiring rights to share in any judgment sum, and the benefit of the funder’s promises to meet legal costs; (b) the opportunity to prosecute a claim, with virtually no exposure to any costs or outgoings in the event of failure, was a benefit accruing to group members produced as a result of all parties carrying out their obligations under the scheme and that a successful prosecution of those claims would yield financial benefits to group members, the funder and, indirectly, the solicitors; (c) the pooling of contributions, which was effected by the group members making their individual promises available for the purposes and benefit of the scheme and, ultimately, for the funder’s benefit; (d) the litigation funding arrangement was a common enterprise in that there was a shared purpose of pursuing group members’ claims successfully that would then benefit the group members, the funder and the solicitors.
37 Viewing such litigation as a common enterprise, his Honour said at [39]–[41]:
39 If the arrangements are of this type, and the common enterprise founders, as a matter of principle, there is something to be said for the notion that justice should ordinarily require that the costs of a successful party occasioned by the litigation, should be borne by those who were seeking a reward from the success of the common enterprise. But any such principle cannot be right at this level of generality
40 For a start, some participants in the common enterprise, group members, have a specific statutory protection contained in s 43(1A) of the Act, preventing them from being subject to an adverse costs order subject to identified exceptions. Moreover, in most cases, where there is a costs indemnity given to a party by a funder, this will mean it is unnecessary to make an order against both the party with the benefit of the indemnity and the funder. What makes this case unusual, is that in a “no costs” jurisdiction, the statutory protection against adverse costs usually only enjoyed by a group member extends (absent identified exceptions) to the funded party to the proceeding by reason of s 570 of the FW Act. As a matter of principle, however, there does not appear to me to be any reason why these specific statutory protections are of broader application or assume decisive importance. The issue here can be summed up as being whether the co-venturer who has provided the funds for the common enterprise in the hope of securing a reward upon success, should ordinarily be required to pay adverse costs, if the common enterprise fails?
41 Despite the caution I express above about being too definitive as to the likely exercise of a broad and fact dependent discretion, it seems to me that when: (a) there is funded litigation which can be characterised as a common enterprise; and (b) there is a statutory fetter on making an award of costs against the funded party (or an award of costs against the funded party will be inutile); and (c) according to usual costs principles an award of costs should otherwise be made in favour of a successful party, then there is no reason in principle why an adverse costs order should not be made directly against the funder of the unsuccessful funded litigation. This reflects the characterisation of the position by the Privy Council in Dymocks that the funder is not so much facilitating access to justice by the funded party as itself gaining access to justice for its own purposes.
The English position on security for costs against funders
38 Turning once again to security for costs against funders, at [43]–[46] of the reasons, the primary judge referred to the English position where there was express power to order security for costs against someone other than the claimant (r 25.14 of the Civil Procedure Rules 1998 (UK)), and discussed cases where that provision had been applied: Wall v Royal Bank of Scotland Plc [2016] EWHC 2460 (Comm); [2017] 4 WLR 2; Premier Motorauctions Ltd (in liq) v PricewaterhouseCoopers LLP [2017] EWCA Civ 1872; [2018] 1 WLR 2955; and Bailey v GlaxoSmithKline UK Limited [2017] EWHC 3195 (QB); [2018] 4 WLR 7.
Power
39 The primary judge then turned to the question of power at [47]–[69]. He began by noting that the absence of a provision of the kind in England was not for want of suggestion, having been considered by a committee of judges under the auspices of the Council of Chief Justices of Australia and New Zealand.
40 At [48]–[55], the primary judge dealt with the argument that s 56 of the Act was exclusive and exhaustive of the Court’s power to order security based on the reasons of Olney J in Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 423; 36 FCR 297. He rejected that argument at [55]:
The ratio in Thunderdome Racetiming is best seen as being that s 56 restricted the power of the Court to ordering security for costs against an applicant only (at 309) but, if it is seen as authority for the proposition that there is a want of power to award security in the Court other than pursuant to s 56 or another statutory provision or rule specifically referred to in sub-s (5), then this is a conclusion that I would respectfully regard as being plainly wrong.
41 At [56]–[58], the primary judge referred to the implied power of the Court to order security. What follows should be understood in the context of the terms of s 5(2) of the Act: “The Court is a superior court of record and is a court of law and equity.” At [56]–[58], the primary judge said:
56 This Court, like all superior courts, has a very broad power in relation to all aspects of costs. Leaving aside implied powers to which I will return below at [65], as s 5(2) of the Act provides, this Court is a court of law and equity. There was a long established jurisdiction in Chancery to deal with all issues as to costs on a discretionary basis based on principles of conscience: see Colbran, S E, Security for Costs (1st Edition, Longman Professional, 1993) at [3.1].
57 Although the discretion to award security for costs in equity might initially have simply depended upon broad notions of conscience, as was explained by Colbran at [3.3]-[3.6]:
At the close of the 19th century the discretion to order security for costs in equity had become fettered. What emerged were distinct categories of case in which security for costs would be ordered. The categories included where the plaintiff:
(a) was resident abroad;
(b) was a nominal plaintiff;
(c) was the next friend of an infant or married women; or
(d) misdescribed their residence.
Special rules also emerged in relation to privileged persons, actions in ejectment, certiorari, Joint Stock Companies, and as to the amount, form and timing of security for costs.
The period ending 1862 also involved numerous changes in the structure and operation of the Court of Chancery. The jurisdiction to order security for costs in the Court of Chancery was generally exercised by Masters in Ordinary who reported to the court, which at first comprised only the Lord Chancellor; and later from the eighteenth century, the Master of the Rolls; then from 1813, the Vice-Chancellor of England also; and from 1842, the three Vice-Chancellors. The office of Master in Ordinary was abolished in 1852.
In the preceding year the Chancery Act, 1851 (U.K.) [13 & 14 Vict., c. 15] practically terminated the sitting of the Lord Chancellor at first instance and the scheme of the Master in Chancery Abolition Act, 1852 (U.K.) (15 & 16 Vict., c. 80] was to place the chamber business of the Court of Chancery, formerly done by the Masters and the six clerks, directly in the hands of the Master of the Rolls and the Vice-Chancellors as the Chancery Judges of first instance, and of their respective chief and junior clerks. In 1877, the Chief Clerks obtained the title of ‘Masters of the Supreme Court’.
(citations omitted)
58 What seems to be the position is that immediately prior to procedural fusion in the United Kingdom, applications for security for costs were being dealt with both at common law and in equity by reference to a relatively rigid approach to fixed categories of cases and the first statutory category introduced by the Companies Act 1862 (UK): see Delaney, J, Security for Costs (LawBook Co, 1989) at 7. Hence the position at law and in equity was not substantively different.
42 I interpolate at this point that the origin of the power to make orders for security for costs in suitable circumstances being the inherent jurisdiction of courts to control their own procedures can be accepted and is supported by what was stated in C. T. Bowring & Co (Insurance) Ltd v Corsi Partners Ltd [1994] 2 Lloyd’s Rep 567 at 570 (Dillon LJ), at 576 (Millett LJ) and 582 (Sir Michael Kerr), cited with approval by the Privy Council in GFN SA v Liquidators of Bancredit Cayman Limited (in Official Liquidation) [2009] UKPC 39 at [10]–[12]. In GFN (SA) Lord Scott, on behalf of the Privy Council, made clear that the power of the courts to order security for costs did not originate in statute, but rather as part of the inherent jurisdiction of courts to control their proceedings: [2009] UKPC 39 at [13].
43 The primary judge made this historical source or origin relevant at [59], saying:
The contention that the equitable jurisdiction to award security as ancillary to the equitable discretion to order that a successful party’s costs be paid (being Chancery’s response to the concern that a person should not suffer loss as a result of having to assert or defend his or her rights) has wholly withered on the vine or is no longer capable of development, is an intuitively unattractive one. But this largely academic question need not detain us, because any implied power at law to order security is not materially different and, in any event, Mt Arthur Coal relies upon the powers contained in ss 23 and 33ZF of the Act for the making of the orders for security for costs against the Funder.
44 At [60]–[63], the primary judge dealt with ss 23 and 33ZF(1) as follows:
60 Section 23 of the Act is in the following terms:
23 Making of orders and issue of writs
The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
61 As the Full Court observed in Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 231, there is nothing in s 23 to “indicate an intention of the Parliament to circumscribe the power of the Federal Court”. The Court’s power extends to the making of orders that are “appropriate to the protection and enforcement of the right or subject-matter in issue” in the proceeding: Blairgowrie Trading Ltd v Allco Finance Group Ltd (in liq) [2015] FCA 811; (2015) 325 ALR 539 at 559 [105] citing Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 621.
62 Section 33ZF(1) of the Act is in the following terms:
33ZF General power of Court to make orders
(1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
63 Any suggestion ss 23 or 33ZF cannot be used to award security against a non-party because a specific provision (being s 56) provides for an award against a party is unpersuasive. The restriction on the affirmative grant of power by s 56 to a certain condition (that the order be made against a party), does not necessarily imply a negative, that is, that other powers cannot be called in aid to order security against a non-party. The logical consequence of this submission would be that the Court could never make any orders for security against a non-party even where it was thought appropriate to do so in the interests of justice or it was thought necessary for the proper function of the Court. This submission cannot be accepted for a number of reasons.
45 The primary judge then, at [64]–[65], dealt in more detail with why s 33ZF was a sufficient source of power. First, in [64] he rejected the proposition that s 56 conferred the only power to take the relevant action: cf Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50; 228 CLR 566 at 589 [59]. Secondly, in [65] his Honour expressed s 33ZF in terms that this Court did in Westpac Banking Corporation v Lenthall [2019] FCAFC 34; 366 ALR 136 at 158 [86]:
… is the widest possible power that extends to all procedures appropriate or necessary to deal with the matter on a just basis … Having that wide character from its words, context and purpose, the injunction against reading down statutory powers given to courts, absent clear indication in terms or context … is of particular force.
(citations omitted)
46 Then, at [66], the primary judge further explained why s 23 was a source of power:
Thirdly, leaving aside s 33ZF, there is nothing about the text or context of s 56 generally, which leads me to conclude that the implied power of the Court should be confined so as [to] preclude an order for security against a non-party. This Court has all the powers expressly or by implication conferred by the Act and such powers are as incidental and necessary to the exercise of the power so conferred: see Jackson v Sterling Industries Ltd at 630. Although initially sourced differently, the implied powers conferred on this Court are no less than the inherent power of a court of unlimited or general jurisdiction and the implied power carries with it all that is necessary for the proper function of the Court: see Jackson v Sterling Industries Ltd at 619; see also VTAG v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 91; (2005) 141 FCR 291 at 296 [30]; Remington Products Australia Pty Ltd v Energizer Australia Pty Ltd [2008] FCAFC 47; (2008) 246 ALR 113 at 116 [20]. In this regard, as was made clear in Pelechowski v Registrar, Court of Appeal (NSW) [1999] HCA 19; (1999) 198 CLR 435 at 452 [51] (Gaudron, Gummow and Callinan JJ), the term “necessary” in this context is to be understood as identifying the power to make orders which are reasonably required or legally ancillary and does not have the meaning of “essential”. Although the Full Court (Dowsett, Kenny and Edelman JJ) in Commissioner of Taxation (Cth) v Vasiliades [2016] FCAFC 170, (2016) 344 ALR 558, did not definitively decide what other sources of power did exist for security for costs orders other than s 56, Kenny and Edelman JJ at 578 [70] referred to the fact that this Court enjoyed general judicature system powers: see also 577-578 [66]-[69]. I do not consider the implied power as to ordering security for costs in this Court to be different to that enjoyed by the High Court (see Merribee Pastoral Industries Pty Limited v Australia and New Zealand Banking Group Limited [1998] HCA 41; (1998) 193 CLR 502 at 510-511 [18] (Kirby J)) or any less than the inherent power to order security enjoyed by the Supreme Court of New South Wales (Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 at 447-448 (Holland J)).
47 At [67], the primary judge said that nothing in the FW Act, including s 570:
… qualifies or confines any statutory or non-statutory power of the Court to order security for costs against a non-party.
Discretion
48 Having concluded that the Court had power, the primary judge tuned to discretion. At [70]–[73] the primary judge dealt with discretion generally in the context of proceedings under Pt IVA, and to his and the Full Court’s decisions in Abbott v Zoetis Australia Pty Ltd (No 2) [2019] FCA 462; 369 ALR 512 and Zoetis Australia Pty Ltd v Abbott [2019] FCAFC 153. At [71], the primary judge made clear that had the proceedings before him not been commercially funded, security would not have been ordered, saying:
… but it is worth noting that if this had been an unfunded class action where group members were bearing the costs, or if the solicitors were working on a speculative basis, I do not consider that any proper exercise of discretion could have led to award security for costs against the applicant (even though non-parties, in the form of group members, were attempting to obtain a financial benefit out of the class action). For the reasons I discussed at length in Abbott, such a course would undermine the central purpose of Pt IVA proceedings of facilitating access to justice. Nor, in a class action seeking relief such as the present, could I conceive of circumstances where security would be awarded against an industrial organisation even if such an organisation provided assistance to its members in maintaining the litigation.
49 The crucial consideration was the commercial funding by AVL, his Honour saying at [72]:
But the present funded class actions for financial reward tied to the fruits of the litigation are different. Before I come to the critical factors stressed by the parties as relevant to the exercise of the discretion to award security, it is appropriate to remark that other than it being accepted that the applicant has an arguable case and the Funder was located overseas, some factors which commonly receive consideration on security for costs applications (such as the applicant’s resources) do not assume any present importance.
50 Then at [74]–[86], the primary judge dealt with what he perceived as the two primary arguments going to discretion, which he described at [73]:
(1) that it would be inappropriate to award security in a “no costs” jurisdiction such as proceedings in relation to a matter arising under the FW Act (Nature of Jurisdiction Contention); and
(2) it would be inequitable to award security where the Funder, putting up security, is unlikely to be able to recover costs against the respondent should the litigation be successful (Asymmetry Contention).
51 As the primary judge stated at [74], central to the argument of Mr Turner (and AVL) was the “inappropriateness” of ordering security in a “no costs” jurisdiction. His Honour referred, at [75]–[76], to the caution in applying the discretion in s 570(2): Liu v Stephen Grubits and Associates [2019] FCAFC 24; 284 IR 475; Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6]; and Bywater v Appco Group Australia Pty Ltd [2019] FCA 799 at [5]–[7] and [11].
52 The primary judge saw this “highly important policy consideration” as affected by the presence of a commercial funder; saying at [77]–[78]:
77 I have said enough to illustrate that this highly important policy consideration central to the operation of s 570, does not apply with equal force in the present circumstances. The legislature should be taken as having put in place a protection preventing the usual cost-shifting rules applying against a party. This legislative choice has had the effect of safeguarding the ability of an applicant, a person often with a modest claim facing the spectre of an intimidating inequality of arms, to bring an action freed from the vexation that an adverse costs order could mean financial ruination. There is no compelling textual or contextual argument which would suggest that this protection should be somehow extended to non-party funders who are using these claims to their perceived commercial advantage.
78 I do not consider the fact that this matter is within what is commonly described as a “no costs” jurisdiction from the perspective of the parties, is a powerful reason to decline an award of security against a funder if it was otherwise appropriate.
53 If I may interpolate at this point: The matter is not just one of a non-party not benefiting from s 570. Even if the form of the order be directed to the non-party, the consequence of non-provision affects the party. I will return to this consideration in due course in explaining why I disagree with [78].
54 The primary judge saw the Asymmetry Contention as the most powerful argument against ordering security against the funder. The apparent asymmetric unfairness was dealt with at [80]:
… On balance, however, I do not consider that it is decisive. The legislature has calibrated the scope of the general prohibition on the award of costs to parties, not to non-parties. Irrespective of whether the reality that a costs order may be made against the Funder was not fully appreciated in this case, this is not to the point. If funders are aware that they are liable for an adverse costs order and may be required to put up security, then no doubt this will be an integer factored by the market into the price of the provision of litigation funding services in matters of this type. If the Court was to proceed by way of making a common fund order, this would obviously be a highly relevant consideration in approving the terms of such an order and also in approving any settlement, which allowed amounts for commission to be deducted from a settlement at a particular rate. Accordingly, on close analysis, I do not think the unfairness suggested by the asymmetry is anything like as significant as might initially be thought to be the case.
55 At [81]–[86] the primary judge dealt with a number of other discretionary considerations. First, the fact that AVL was outside the jurisdiction was important though his Honour recognised it to be a “very substantial litigation funder with an impressive funding history”.
56 Secondly, the primary judge recognised that the cost of providing the security would ultimately be borne by group members, “like all funding costs”, saying at [82]:
… This is a factor which weighs in the balance against the making of an order, but seems to me to be an inevitable consequence of the way the litigation has been funded and is part of the bargain accepted by the group members in the funding agreement.
57 Thirdly, the primary judge considered Mr Turner’s straightened circumstances, in particular his inability to work after a workplace injury and the lack of an award-based accident-pay benefit because he was a casual, and said at [83]:
… As a result of his inability to work, Mr Turner cannot afford to pay substantial legal costs. Even accepting this evidence as to Mr Turner’s predicament, and further accepting that it was allegedly brought about by the respondents, this is not to the point. If Mr Turner maintained his individual claim he would be entitled to the benefit of s 570. But he is acting in part in a representative capacity and his impecuniosity does not provide a shield behind which the Funder can shelter.
58 Fourthly, though the primary judge took nothing from the rate of commission, his Honour said at [84]:
… what is notable is that part of the consideration provided in exchange for the promises the Funder has received, includes an obligation to provide funds for security for costs if ordered.
59 In further dealing with the evidence of the funder’s managing director, the primary judge said at [85]:
… Of course, this evidence (which I accept) must be looked at in the context that if one has regard to the funding agreement objectively, the obligation to provide security if ordered, was an important part of the bargain struck. If it turns out the Funder has not adequately factored that risk into the price it has contracted to charge, this does not seem to me to be something which should be of particular concern to the Court unless I was affirmatively satisfied that: (a) funding would be withdrawn from Mr Turner and group members; and (b) there was going to be a stultification of the claims of the applicant and group members as a result. It suffices to note that I am not satisfied on the present state of the evidence that stultification will occur if security was granted.
60 Fifthly, the primary judge considered the “macro” question of the effect on the funding of “industrial” class actions generally, if security were to be awarded. His Honour said that this was not a “compelling concern”, saying the following at [86]:
… One suspects that funders will act in an economically rational way and the price of funding, like the price of most financial products, is a function of risk. There [are] a number of ways that industrial class actions may be able to be brought. One is with the assistance of industrial organisations. Another is by solicitors acting on a “no win, no fee” basis or, potentially at least, by a form of contingency payment common fund order of the type I discussed in Klemweb Nominees Pty Ltd v BHP Group Ltd [2019] FCAFC 107; (2019) 369 ALR 583 at 608-611 [121]-[130] (although security issues of the type presently discussed would potentially arise in this last circumstance). Even assuming that third party litigation funding is as desirable a method of facilitating industrial class actions as these other modes, there is nothing about the history of third party litigation funding in this country which would suggest that it would not be available if a reward commensurate with risk was available.
The notices of appeal and disposition of the appeal
61 The draft notices of appeal were in the same terms. Each appeal raised the question of power (grounds 1 and 2) and discretion (grounds 3 to 6).
Discretion
62 I will deal with the question of discretion first. I do so because the aspects of discretion, which appear to me to be determinative, illuminate the question of power. The power question was approached simply by asking whether one could order security for costs against AVL using, necessarily because of the terms of s 56, either or both s 23 and/or s 33ZF. But, as I have sought to explain, to describe the order as one for security for costs against the non-party funder is to deflect attention from the fact that it is an order by way of imposition of condition, or threat of imposition of condition, upon the applicant’s proceeding going forward, dependent upon security being provided by the funder for its contingent and prospective liability for the respondents’ costs. As the first respondent, Mount Arthur Coal, submitted, the order is properly characterised as the identification of a condition on which a stay of proceedings may be granted, as an incident of the court’s general power to control its own proceedings, that is the proceedings before it. The order directly concerns the applicant’s proceeding, just as it would if the order was against Mr Turner and was to the effect that the proceeding would be stayed or dismissed or declassed or otherwise affected unless he (Mr Turner) caused his contracting counterparty, AVL, to provide security for the respondents’ costs that may be awarded against AVL.
63 Grounds 3 and 4 focused on the legitimacy of the findings at [40], [41] and [69] that there was a prospect of an adverse costs order against AVL if the proceedings were unsuccessful. Grounds 3 and 4 were in the following terms:
3. The primary judge erred in holding that:
a. when (a) there is funded litigation which can be characterised as a common enterprise, (b) there is a statutory fetter on making an award of costs against the funded party (or an award of costs against a funded party will be inutile) and (c) according to usual costs principles an award of costs should otherwise be made in favour of a successful party, then there is no reason in principle why an adverse costs order should not be made directly against the funder of the unsuccessful funded litigation: [2019] FCA 1644 at [41];
b. the “statutory fetter” imposed by s 570 of the Fair Work Act 2009 (Cth) (FWA) on ordering costs against an applicant was a factor which would support the making of a costs order against the Appellant if the proceedings were unsuccessful: [2019] FCA 1644 at [41];
c. a “usual costs principle” that “an award of costs should ... be made in favour of a successful party” would support the making of a costs order against the Appellant if the proceedings were unsuccessful: [2019] FCA 1644 at [41];
d. the statutory protection against adverse costs orders enjoyed by parties in proceedings to which s 570 of the FWA applies would not be a factor which would or could make it inappropriate to order costs against the Appellant if the proceedings were unsuccessful: [2019] FCA 1644 at [40]; and
e. accordingly, there was a prospect of an adverse costs order being made against the Appellant if the proceedings were unsuccessful: [2019] FCA 1644 at [69].
4. The primary judge ought to have held that, unless the requirements of s 570 of the FWA for ordering costs against the applicant were met, it could not be, or was unlikely to be, appropriate to order costs against the Appellant, even if the proceedings were unsuccessful.
64 AVL submitted that the existence and operation of s 570 could not be put to one side, as they were in [40] and [41] of the reasons. The reasoning in [30]–[35] of the reasons and the existence of a basis for awarding costs against non-party funders were not challenged; but the cases to which the primary judge referred were said to be cases where costs followed the event. Section 570, it was submitted, wrought a change. The Parliamentary policy was said to be clear: Except in the circumstances in s 570(2) parties are not liable for costs and there was said to be no principled basis for identifying the commercial funder as the only person in the litigation with a costs exposure.
65 I do not accept these arguments. The principled basis for the availability of an adverse costs order against the funder in FW Act litigation can be drawn from the terms of s 570, the control by the Court of its own processes to prevent injustice, and the fact that the funding activity not only facilitates access to justice for the applicant, but is an independent use of the court system for commercial profit by the funder (here a foreign company). The funder is at least a real participant in the litigation (a “real party” in the sense discussed in Knight v F.P. Special Assets), even if it is not the only so-called “real party” to the litigation.
66 The policy of s 570 is to be gleaned from its terms: It is the parties to the litigation who are to bear their own costs and not bear the risk of the costs of each other, circumscribed by s 570(2). It says nothing of others: Ashby v Slipper (No 3) [2015] FCAFC 9; 317 ALR 623 at 634–635 [82] and Yirra Pty Ltd v Summerton [2009] FCAFC 50; 176 FCR 219 at 249 [155]–[157]. I agree with what White J has said in his Honour’s reasons about the purpose of s 570.
67 I do not consider the primary judge’s characterisation of the “common venture” to be inapt, to the extent that it is directed to a relevant subject, and as long as it is not taken too far into an inappropriate field of analysis or characterisation. The appropriateness of the characterisation depends on the question being asked to which the characterisation is said to be relevant. That extent reaches at least to the legitimacy of the proposition that it is open to consider that a commercial funder may be held liable for costs for unsuccessful litigation in which it had a commercial interest in propounding and influencing and in which it was a co-adventurer with others, in circumstances where because of impecuniosity, or rule, or otherwise, the applicant cannot, or is not required to, pay costs. For that purpose, not much can be taken from the adjective “common”. The funder, for its own commercial reasons is prepared to invest capital in the propounding of litigation for its own commercial ends. The characterisation of the litigation as a “common venture” for such question reflects an apt focal length of attention to the question whether a funder should be at risk as to costs from its activity in promoting and influencing litigation from which it plans, as part of its business, to profit.
68 The injustice to a successful respondent of not being able to seek proper costs against such a person, where statute does not prevent it, is within the court’s power to prevent or remedy by order, as part of its control of its own processes. The lack of reciprocity in liability for costs between funder and respondent is not a factor to shield the funder: It is aware of s 570, but nevertheless, it promotes the litigation for its own commercial benefit. Such considerations undoubtedly inform the exercise of power in s 43. The protection of the court’s procedures includes proper protection of parties brought to the court and put to the expense of successfully defending proceedings.
69 The characterisation of the litigation of a “common venture” or as a “commercial venture” does not, however, reflect an apt focal length of attention to the question of an order that the funder provides security for such costs. The essential character of an order for security (whatever its particular form or terms might be) is as I have discussed at [15] above. Thus, the correct focus of attention is not to the appropriateness of the prospective contingent liability of the funder for the costs of the respondents, but the appropriateness of the stay, dismissal or other affectation of the proceedings commenced by the applicant, or the threat of such, should security not be given. Thus, the position of Mr Turner and group members requires attention. The degree of commonality of interests of funder, applicant, solicitors and group members (legitimately described for some purposes as a “common venture”) should not disguise or camouflage the important reality and public policy of Pt IVA of the Act, s 570 of the FW Act and the legitimacy of litigation funding; Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; 229 CLR 386. Litigants such as Mr Turner should be free to negotiate such arrangements as they see fit with litigation funders or others to vindicate their rights. They should not have their important litigation to vindicate their rights subject to the threat of stay, dismissal or other affectation because of their funder’s potential exposure for costs, when they are not liable for costs.
70 It is at this point that grounds 5 and 6 become relevant:
5. The primary judge erred in:
a. holding that for s 570 of the FWA to provide sufficient reason for declining to order security for costs against the Appellant there would need to be a “compelling textual or contextual argument” that the protection it provided against adverse costs orders “somehow extended to non-party funders”: [2019] FCA 1644 at [77];
b. holding that it would not be inequitable to order security for costs against the Appellant in circumstances where:
i. there existed an asymmetry in the costs regime, in that the applicant was unlikely to be able to obtain an order for costs against the respondents if he was successful in the proceedings; and
ii. the costs of providing security for costs would ultimately be borne by the applicant (and group members) as part of “the price of the provision of litigation funding services”: [2019] FCA 1644 at [79]-[80]; and
c. ordering security for costs against the Appellant notwithstanding that:
i. the making of such an order would reduce the availability and/or increase the price of litigation funding for industrial class actions;
ii. impose on litigation funding for industrial class actions an impost not imposed on other forms of financial assistance for such class actions, including that provided by industrial organisations and by solicitors acting on a “no win, no fee” basis: [2019] FCA 1644 at [85]-[86].
6. The primary judge ought to have declined to order security for costs against AVL.
71 These considerations in grounds 5 and 6 reflect a proper focus on the importance of s 570 in relation to the ordering of security. It is one thing not to see s 570 as necessarily preventing an order for costs being made against a commercial funder interested in the litigation for its own interests; but it is quite another to impose an order upon that third party of a character that imposes, or threatens to impose, a necessary condition on the free exercise of the rights of the applicant and on the rights of group members. The asymmetry upon which grounds 5 and 6 focus prevents, in the ordinary course, and certainly on the facts here, the making of an order the essence of which involves the threat or condition to stay, dismiss, impede or affect the applicant’s and the group members’ rights.
72 I do not consider this to be properly analysed as a question of practical stultification. It is a question of the proper basis for an order that directly conditions, or threatens to condition, a party’s right to proceed with his, her or its proceeding. The basis provided by the primary judge and the submissions of the respondents is the commonality of interests in the common venture of which Mr Turner can be seen to be part. If, notwithstanding the common venture, stultification may occur a question of discretion whether to make the orders would then, on this hypothesis, arise; if such is not likely (as it is not here) the question of withholding the order because of stultification will not arise. Thus here, because of the contractual provision in the funding agreement and the willingness of AVL to fulfil its obligations, no question of stultification is said to arise.
73 I respectfully disagree. To make an order that conditions, or threatens to condition, Mr Turner’s rights and the group member’s rights and position because of a prospective liability of AVL for costs, when they are (relevantly) free of any such responsibility demands a link of legal responsibility for AVL’s position, which in my view is absent. The characterisation (legitimately for some other purposes) of a common venture is not adequate for this purpose. Mr Turner is an applicant. He has commenced litigation that is covered by s 570. He has been able to do that by arranging a funding agreement with AVL which involves the interests of group members for it to be likely commercially viable for AVL. It is not for him to play some part in securing what are or might be the costs of the respondents for which the funder might be responsible. He is not for these purposes a joint or common venturer with AVL; he is a litigant seeking to vindicate what he perceives to be his rights against the respondents, and, to a degree, the public interest. The rights of the respondents, in due course if they are successful, to an order for costs against AVL does not entitle them to condition, or to threaten to condition, Mr Turner’s proceedings to secure obligations of another which he does not share. This is the nub of my disagreement with the primary judge and the nub of the appeal.
74 That is not to say, subject to the question of power to which I will come, that there may not be such legal and factual conformance between or among the interests of an applicant in litigation under the FW Act and the funder and perhaps others that may make it just to use the threat of stay, dismissal, or affectation of the applicant’s proceedings and of rights of the group members to require the funder to put up security to protect its investment. No such facts exist here. As I have said earlier, orders for security for costs are not requests; they are not made only if the subject of the order has otherwise privately agreed to provide security, if ordered. For the order to be valid, there must be a principled basis to do what was sought in the interlocutory applications: to dismiss or stay, or to threaten to dismiss or stay, Mr Turner’s application, or to do what was suggested in argument: to declass the proceeding, or otherwise impede the funder’s profitmaking in the “venture”, if the security were not provided. If there is no principled basis for doing any of this, there is no principled basis to make the order for a provision of security, given its essential character as sought to be utilised by the respondents here.
Power
75 Grounds 1 and 2 of the notice of appeal were in the following terms:
1. The primary judge erred in holding, contrary to Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297, that the Court had power to order security for costs against a non-party pursuant to ss 23 or 33ZF of the Federal Court of Australia Act 1976 (Cth) (Act) or the Court’s implied power: [2019] FCA 1644 at [55], [59], [63]-[66], [68], [69].
2. The primary judge ought to have held that the Court did not have power to order security for costs against the Appellant.
76 Section 56 is in the following terms:
(1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.
(2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.
(3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.
(4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.
(5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.
77 Section 23 of the Act is in the following terms:
The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate.
78 Section 33ZF is in the following terms:
(1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding.
(2) Subsection (1) does not limit the operation of section 22.
79 Section 56 was in similar terms in its original form in 1976. Amendments have been made but have been minor.
80 The argument based on Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 423; 36 FCR 297, Anthony Hordern & Sons Limited v Amalgamated Clothing & Allied Trades Union of Australia (1932) 47 CLR 1 at 7, and Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50; 228 CLR 566 at 589 [59] was that s 56 was a comprehensive and exhaustive source of the Court’s power to order security for costs, denying therefore the general power that might be found within s 23 or s 33ZF of the Act or the implied power (if that is to be conceptualised separately from s 23) to make such orders.
81 The difficulty with sustaining the argument becomes apparent when one appreciates the true nature of the order for security. It is a condition of not staying proceedings (thus a threat to stay proceedings) exercised in the protection of the Court’s processes which include not permitting injustice to be done by the invocation of the Court’s jurisdiction and power.
82 That a section of the new Act in 1976 (s 56) would expressly seek to cover the topic in the manner it did, not leaving matters to some, perhaps debatable, conception of inherent (now recognised as implied) power of a new statutory court can be readily understood. For a court of common law and equity this important power in the day-to-day conduct of litigation was provided for expressly, although it is to be noted that only the power to dismiss is referred to, not the power to stay. Its subject was the ordering of security between parties to litigation. Its subject was not the control of the Court’s processes and the general overriding power of the court to stay proceedings. Such a power was part of the power described by Moffitt P in Rajski [1983] 2 NSWLR at 128:
The general or overriding power of the court to order a stay of proceedings is a power, the boundaries of which have not been precisely defined.
83 If it be just and appropriate to stay, dismiss or otherwise condition or affect a proceeding, or to threaten to do so, by reason of considerations, including the question of liability for costs, that attend the conduct or position of a third party, such is not a subject to which s 56 was directed. The argument thus fails at the outset. Section 56 concerns the provision of governing security for costs between parties. It is unnecessary and inappropriate to survey what parts of any implied power of the Court, especially one so broad and important as staying proceedings in furtherance of the just control of litigation before the Court, may have been limited by the express provision for security for costs in s 56. Such questions should be resolved by the application of principle to the facts in question to solve a concrete legal problem: Livingstone v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 448 (Kitto J). For present purposes it is sufficient to say that nothing in s 56 (whether by its terms or necessary intendment) can be taken as inhibiting the Court’s power to stay proceedings before the Court in the exercise of its control of litigation before it, if, in the circumstances, it were just and appropriate to do so, including by reference to considerations concerning the exposure of a funder of the litigation to costs.
84 That power exists within the wide terms of, and power provided for by, s 23: Commissioner of Taxation v Vasiliades [2016] FCAFC 170; 344 ALR 558 at 576–578 [60]–[70]. I do not see, however, how the circumstances here would justify it. Therefore the order for provision of security was not properly made.
85 It should be noted that the character of the underlying action as, in part, penal was not put to the primary judge as a relevant factor in the exercise of his discretion. Though I have referred to that matter in these reasons, I would not take it into account in identifying any error on the part of his Honour. A matter not put to a judge as relevant to the exercise of discretion should not, ordinarily, and at least in the absence of its being legally mandatory or jurisdictional, be used to create error in the approach of the judge: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [83]. My views remain unaltered by the absence of that aspect of the matter.
86 Three final comments might be made. First, if the result is to leave respondents in the position of having to enforce judgments for costs in FW Act litigation in the foreign domicile of the funder, that is the result of an absence of regulatory law providing for the proper capitalisation, or presence of funds in Australia, of funders if they are to be permitted to participate in funding litigation in this country. Secondly, if what is sought to be done by judicial power is to require a foreign party to bring assets into the jurisdiction to satisfy any judgment against it including one for costs, such order not being one linked to the power to order security for costs, clear statutory authority would be required. That was not the character of the order sought or made here. Thirdly, though no party raised it, in circumstances where a foreign party which is both reputable and financially substantial is called upon to give security, it may be that modern principles of transnational litigation need to be considered: see for example the ALI/UNIDROIT Principles of Transnational Civil Procedure (Cambridge University Press, 2004) r 32.9 and R-32C at pp 149-150. For instance, in some circumstances, it might be appropriate to limit security to the additional anticipated costs of enforcement of a judgment in the foreign domicile of the party.
Orders
87 The orders I would make in each application are that leave to appeal against the orders of the Court on 28 October 2019 be granted in the form of the draft notice of appeal relevantly exhibited to the affidavit of Neill Curtis Brennan dated 8 November 2019; the said draft notice of appeal stand as if filed; the appeal be allowed; the orders of the Court on 28 October 2019 be set aside and in lieu thereof it be ordered that the interlocutory application for security for costs be dismissed with costs; and the respondents pay the applicant’s costs of the application for leave to appeal and of the appeal.
I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop. |
Associate:
Dated: 10 November 2020
REASONS FOR JUDGMENT
MIDDLETON J:
88 I have had the considerable advantage of reading the draft reasons for judgment of Allsop CJ and White J.
89 I agree with the orders they propose, and with the reasons of Allsop CJ. I also agree with the reasons of White J on the purpose of s 570 of the Fair Work Act 2009 (Cth).
90 There is one matter essential to my agreement with the draft reasons of and orders proposed by Allsop CJ: implicit in the actual order made by the primary judge was the threat that in default of the provision of security the proceedings would be stayed or dismissed. On this basis, the consequences of non-compliance with the security order would be directly visited upon Mr Simon Turner, the applicant, by preventing his proceeding from continuing.
91 The central issue in this appeal thus involves the determination of the essential character of an order for security for costs. As Allsop CJ recognised, an order for security for costs is one whose character involves the consequence that, in normal circumstances, if the security is not provided, then the relevant proceeding may be dismissed or stayed.
I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Middleton. |
Associate:
Dated: 10 November 2020
REASONS FOR JUDGMENT
WHITE J:
92 The circumstances of the two applications for leave to appeal, and the appeals if leave is granted, are set out in the reasons of the Chief Justice.
93 I respectfully agree that leave should be granted on each application, that each appeal should be allowed, and that the orders proposed by the Chief Justice should be made. I agree generally with his Honour’s reasons but add the following in relation to the issue of the discretion.
Background
94 In the first action (ACD46/2018 – Turner v TESA Mining (NSW) Pty Ltd), the applicant (Mr Turner) makes claims for himself and on behalf of others who worked at the Mt Arthur Coal Mine in New South Wales in the period between 7 December 2012 and 27 September 2014. The respondents to the first action are TESA Mining (NSW) Pty Ltd, the TESA Group Pty Ltd and Mt Arthur Coal Pty Limited.
95 In the second action (ACD47/2018 – Turner v Ready Workforce (A Division of Chandler Macleod) Pty Ltd), Mr Turner makes claims for himself and on behalf of others who were employed by Chandler MacLeod Pty Ltd at the Mt Arthur Coal Mine in the period of six years before 19 December 2018. The respondents to the second proceedings are Ready Workforce (A Division of Chandler MacLeod) Pty Ltd, Mt Arthur Coal Pty Limited and Chandler MacLeod Group Ltd.
96 Each proceeding makes claims in respect of workers employed to work at the Mt Arthur Coal Mine by labour hire companies and arise out of the classification of those workers as “casual employees” for the purpose of identifying their remuneration and service related entitlements. Mr Turner and the group members claim that their classification as casuals was incorrect and, consequently, that they were underpaid by their employers. They allege that their employers thereby contravened provisions in the FW Act, including provisions containing National Employment Standards.
97 Mr Turner and the group members claim declaratory relief pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act), orders under s 545 of the FW Act with respect to the asserted underpayment of their wages and other entitlements, orders under s 545 of the FW Act for payment of compensation in respect of the losses resulting from the asserted contraventions, and the imposition of pecuniary penalties under s 546 of the FW Act.
98 It is not necessary to note the various provisions in the FW Act, the industrial award or the enterprise agreements on which the group members’ claims in each proceeding are based but it is pertinent to note that s 323(1) of the FW Act requires an employer to pay an employee amounts payable to the employee in relation to the performance of work in full (subject to some exceptions which are presently immaterial) and at least monthly. As is noted by the authors of Creighton & Stewart’s Labour Law, Sixth Edition, The Federation Press at [15.59]:
Once an employee has accrued wages, the employer is obliged to make the payment. If the wages are due under an award, enterprise agreement or statute, then, in the absence of any provision to the contrary, this obligation is absolute in character.
Section 570 of the FW Act
99 Section 570 provides:
570 Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.
100 Section 570 operates as a qualification on the general discretion with respect to costs vested in the Court by s 43(1) of the FCA Act: Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; (2015) 229 FCR 221 at [140]. Section 43(1) makes it plain by stipulating that the Court’s power with respect to costs is subject to s 570. Instead of the usual rule that costs will follow the event, s 570 provides that parties in proceedings in relation to matters arising under the FW Act are not, in the absence of some form of unsatisfactory conduct, to be required to pay the costs of another party.
101 As was noted by Jessup and Tracey JJ in Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) [2012] FCAFC 103; (2012) 203 FCR 430 at [3], s 570 is the current iteration of provisions which, since 1973, have restricted the making of costs orders under Commonwealth industrial relations legislation. From 1904 when the Conciliation and Arbitration Act was first enacted until 1947, s 38(i) precluded the Court of Conciliation and Arbitration from making orders for the payment of the costs of any counsel, solicitor or agent. Between 1947 and 1973, the Court of Conciliation and Arbitration and later the Commonwealth Industrial Court did have power, subject to some qualifications, to make orders for the payment of costs which included legal costs. The provisions which were the predecessors of s 570 commenced, relevantly, with s 197A of the Conciliation and Arbitration Act 1904 (Cth) which was inserted into that Act by s 47 of the Conciliation and Arbitration Act 1973 (Cth), was continued in s 347 of the Industrial Relations Act 1988 (Cth), was retained with some modifications when that Act was renamed the Workplace Relations Act 1996 (Cth) (WR Act), and became s 824 of the WR Act following the extensive amendments affected by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth). The precise terms of the predecessors of s 570, and of s 570 itself, have varied, but the underlying effect has, in substance, been the same.
102 The object sought to be achieved by s 570 is plain. It is the same as the object of s 347 of the WR Act as described by the Full Court (Black CJ, Tamberlin and Sundberg JJ) in Commonwealth of Australia v Construction, Forestry, Mining and Energy Union [2003] FCAFC 115; (2003) 129 FCR 271:
[10] … The object that s 347(1) seeks to achieve is plain enough: it is to give effect to a policy choice about the controversial issue of whether costs should ordinarily follow the event or whether they should ordinarily be borne by the party incurring them. As Northrop J said of its predecessor, s 197A of the Conciliation and Arbitration Act 1904 (Cth), in Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 at 272 (Australian Industrial Court):
“The policy of s. 197A of the Act is clear. It is designed to free parties from the risk of having to pay the costs of an opposing party. At the same time the section provides a protection to parties defending proceedings which have been instituted vexatiously or without reasonable cause. This protection is in the form of conferring a power on the court to order costs against a party who, in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a court.”
103 The evident legislative policy is that persons who seek by legal proceedings to vindicate rights or to obtain relief under the FW Act should be able to do so without exposing themselves to the risk of having to pay the costs of another party in the event that they are unsuccessful. So much was made express by the Minister in the Second Reading Speech for the introduction of s 197A into the Conciliation and Arbitration Act in 1973:
This is part of our policy of bringing the courts to the people, of overcoming the deterrent which often prevents a person from seeking to right a wrong because of the burden of costs he might incur where his argument has failed to carry the day … The possibility of having costs awarded against an applicant discourages the use of the courts as a means of settling disputes.
104 The limitation on the power to award costs in industrial proceedings has been retained despite a recognition from time to time that it is capable of producing unfairness. In Poulos v Waltons Stores (Interstate) Ltd (1986) 68 ALR 537, each of Smithers J (at 537), Keely J (at 541) and Gray J (at 544), referred to the injustice of a claimant who was successful in his wage claim being unable to recover his costs. Keely J said, at 541:
I also agree with Gray J that the absence of a power to order costs against the respondent would lead to an injustice in a case in which an employer declined to pay award wages, in the knowledge that the enforcement of an employee’s entitlement would involve him or her in expense greater than the amount of wages in question … In my opinion it is desirable that the attention of the Attorney-General be drawn to this matter with a view to a possible reconsideration by the Commonwealth Parliament of the effect of section 197A on proceedings such as these …
105 Nevertheless, the Report of the Committee of Review of the Australian Industrial Relations Law and Systems in 1985 (the Hancock Report) had recommended the retention of the limitation and, as noted, a counterpart has been included in the industrial legislation since 1973.
106 It is also appropriate to note that the Parliament has not sought to limit the effect of s 570 in the same way as it has with respect to the costs of unfair dismissal proceedings under Pt 3-2 of the FW Act. Section 400A in that Part allows for costs orders against parties in circumstances which, broadly speaking, are similar to those to which s 570(2) refers, but s 401 provides expressly for circumstances in which a costs order may be made against a party’s lawyer or paid agent. Section 404 permits the procedural rules of the Fair Work Commission (the FWC) to provide for the furnishing of security for the payment of costs “in relation to matters arising under this Part”. It is pertinent, to my mind, that Div 4 of Pt 4-2 of the FW Act, in which s 570 is located, contains no counterpart.
107 It is important not to lose sight of legislative policy which underpins s 570. This can easily occur if one characterises it as being no more than a statutory fetter on the making of the usual order for costs. It is that, but it also reflects an attempt to address the underlying inequality of position commonly experienced by applicants in litigation for the enforcement of industrial entitlements.
108 It was uncontentious that the two proceedings commenced by Mr Turner are proceedings “in relation to a matter arising under” the FW Act for the purposes of s 570 of that Act.
The funding agreement
109 It is appropriate next to refer to the “Augusta Funding Agreement” into which AVL entered with Mr Turner on 24 January 2018. AVL has also entered into agreements in the same terms with a number of group members. As I understand it, AVL intends to enter into an agreement in the same form with any other person who wishes to be part of the class action, although that may not necessarily be the case as Recital G to Mr Turner’s Funding Agreement contains an acknowledgment by him that AVL may provide funding to other claimants on different terms.
110 At the time of the hearing before the primary Judge and at the time of the primary judgment, it was contemplated that Mr Turner would bring an application for a “common fund order” (a CFO). That was because both events occurred before the High Court delivered judgment on 4 December 2019 in BMW Australia Ltd v Brewster [2019] HCA 45; (2019) 374 ALR 627, in which it held that this Court does not have power to make a CFO.
111 Putting the possibility of a CFO to one side, the Funding Agreement entitles AVL, in consideration of its funding of the claims by claimants, to reimbursement of its costs and to a commission. That commission will be the greater of 25% of the “claim proceeds” or an amount equal to three times the “Claimant’s Share of the Project Costs to the extent that those costs form part of the Deployed Credit”. The Funding Agreement does provide for circumstances in which the percentage commission under the first of these alternatives and the multiple under the second may be lower in some circumstances, but on my understanding, that is no longer practically possible.
112 The term “Project Costs” is defined in cl 1 of the Funding Agreement to include 10 different forms of costs and expenses which AVL may incur in the provision of its litigation funding under the agreement. Relevantly for present purposes, it includes the amount of any “Adverse Costs Order”, any “Adverse Costs Insurance Premium” and the costs involved in the provision of any security for costs. If AVL pays an adverse costs order or the costs involved in the provision of security for costs, they become part of the “Deployed Credit” for the purposes of the determination of the second limb in the definition of the commission to which AVL is entitled.
113 The effect is that AVL is entitled as part of its remuneration to be reimbursed by each claimant that claimant’s pro rata share of the costs it incurs in providing security for costs and any “Adverse Costs Order” it satisfies. On the second alternative for the calculation of the commission, this may be a pro rata share of a multiple of the amounts provided by way of security. It can be inferred that account has been taken of the same liability in the fixation of the fixed commission of 25%.
114 The consequence is that, if the two applications succeed at least in part, it is Mr Turner and the group members who will bear the burden of the provision of the security. If the two applications are wholly unsuccessful, it is AVL which will bear the whole of the costs associated with the provision of the security.
The reasons of the primary Judge
115 The primary Judge acknowledged that the policy consideration to which I have referred is “highly important”: Turner v Tesa Mining (NSW) Pty Limited [2019] FCA 1644 at [77]. His Honour noted the role of s 570 in facilitating access to justice, at [75]-[76], and referred in this respect to passages from his own judgment in Bywater v Appco Group Australia Pty Ltd [2019] FCA 799:
[5] The predecessor provision of s 570 of the FW Act (s 824 of the Workplace Relations Act 1996 (Cth) (WR Act)) was considered by another Full Court (Tamberlin, Gyles and Gilmour JJ) in Construction, Forestry, Mining and Energy Unit v Clarke [2008] FCAFC 143 at [29]; (2008) 170 FCR 574 at 582 [29], where it was observed that:
Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise a discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best.
[6] The caution was reflected by Bromberg J in Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6], where his Honour observed that “this Court ought be very careful indeed to exercise the discretion provided by s 570(2) and should not do so other than in a clear case”. His Honour then went on to note that the “limited discretion conferred on the Court by that subsection ought not to become the basis for arguments about costs in relation to any and every transgression in the conduct of a case”.
[7] His Honour’s remarks in Saxena, and those of the Full Court in Clarke, are based on the notion that there is a clear legislative intent that the Fair Work jurisdiction be primarily a “no costs” jurisdiction, unless a statutory threshold of unreasonable litigious conduct is demonstrated. The reason reflects a longstanding, underlying legislative intention to ensure access to justice in relation to Fair Work-type matters.
116 The Judge then noted, at [76], that s 570 serves to ensure access to justice by allowing persons to bring claims in various courts exercising Federal jurisdiction, including claims which may be modest, citing Liu v Stephen Grubits & Associates [2019] FCAFC 24.
117 The manner in which his Honour took account of s 570 is evident in the following passages. First, the Judge cited, at [76], a passage from [11] in his judgment in Bywater in support of the view that the matters bearing on the exercise of the discretion to order an applicant who has behaved unreasonably, to pay the costs of another party, may have less force when the proceedings are funded by a commercial litigation funder:
… the considerations which give rise to caution in awarding costs even where a pre-condition exists (evident from Saxena) and which incidentally serve to facilitate access to justice, seem to me to be signally important when it comes to usual inter partes litigation in this jurisdiction, including litigation maintained by industrial organisations. They also have real force when one is dealing with a Fair Work representative proceeding funded out of the resources of the applicant and group members, or one which is conducted on a speculative basis. These considerations seem to me to have less force, however, when one is dealing with a Fair Work representative proceeding, which is funded by a litigation funder seeking to use the processes of the Court in order to conduct an enterprise to derive a profit.
118 The Judge then continued:
[77] I have said enough to illustrate that this highly important policy consideration central to the operation of s 570 does not apply with equal force in the present circumstances. The legislature should be taken as having put in place a protection preventing the usual cost-shifting rules applying against a party. This legislative choice has had the effect of safeguarding the ability of an applicant, a person often with a modest claim facing the spectre of an intimidating inequality of arms, to bring an action freed from the vexation that an adverse costs order could mean financial ruination. There is no compelling textual or contextual argument which would suggest that this protection should be somehow extended to non-party funders who are using these claims to their perceived commercial advantage.
[78] I do not consider the fact that this matter is within what is commonly described as a “no costs” jurisdiction from the perspective of the parties, is a powerful reason to decline an award of security against a funder if it was otherwise appropriate.
(Emphasis in [77] in the original; emphasis in [78] added)
119 The Judge then addressed the contention of AVL (“the Asymmetry Contention”) that it would be inequitable to award security in a context in which the funder who provides the security is unlikely to be able to recover costs against the respondent should the litigation be successful.
120 The Judge said of the Asymmetry Contention:
[79] A more refined argument was that it would be inequitable to award security against the Funder in circumstances where the usual cost-shifting rules do not apply because the applicant, Mr Turner, is unlikely to be able to obtain an order for costs against the respondents if he was successful. Similarly, if the matter was to proceed to a secondary or tertiary round of hearings, given that the claims of the group members would also be matters arising under the FW Act, the group members, even if successful upon a determination of their individual claims, would not ordinarily be entitled to obtain a costs order. Hence, an asymmetry exists. If the proceedings are unsuccessful against the respondents then an order for costs may be made against the Funder, but the converse does not apply.
[80] This seems to me to be the most powerful argument against ordering security against funders when the cost-shifting rules do not apply. On balance, however, I do not consider that it is decisive. The legislature has calibrated the scope of the general prohibition on the award of costs to parties, not to non-parties. Irrespective of whether the reality that a costs order may be made against the Funder was not fully appreciated in this case, this is not to the point. If funders are aware that they are liable for an adverse costs order and may be required to put up security, then no doubt this will be an integer factored by the market into the price of the provision of litigation funding services in matters of this type … Accordingly, on close analysis, I do not think the unfairness suggested by the asymmetry is anything like as significant as might initially be thought to be the case.
(Emphasis in the original)
121 The Judge then addressed other matters bearing on the discretion, including:
(a) that AVL is not located within the jurisdiction, at [81];
(b) that AVL is a substantial litigation funder, at [81];
(c) that in the event that an order for security is made, the cost of providing that security will ultimately be borne by the group members, like all funding costs. His Honour said at [82]:
… This is a factor which weighs in the balance against the making of an order, but seems to me to be an inevitable consequence of the way the litigation has been funded and is part of the bargain accepted by the group members in the funding agreement.
(d) Mr Turner’s acknowledged impecuniosity. In respect of this, the Judge said that Mr Turner is acting in a representative capacity and “his impecuniosity does not provide a shield behind which [AVL] can shelter”, at [83];
(e) the commission arrangement contained in the funding agreement between AVL and Mr Turner. In respect of this, the Judge said, at [84]:
[T]he commerciality of the contractual rate does not seem to me to be presently material; what is notable is that part of the consideration provided in exchange for the promises [AVL] has received, includes an obligation to provide funds for security for costs if ordered.
(f) the obligation of AVL to provide security, if ordered, was an important part of the bargain it had struck with Mr Turner, at [85]. However, his Honour said that this “does not seem to me to be something which should be of particular concern to the Court unless I was affirmatively satisfied that: (a) funding would be withdrawn from Mr Turner and group members; and (b) there was going to be a stultification of the claims of the applicant and group members as a result”. (Emphasis in the original);
(g) in making the decision to fund the class actions, AVL had taken into account that industrial relations is traditionally a “no costs” jurisdiction, at [85]; and
(h) the “macro” consideration, namely, the potential effect on the willingness of litigation funders to fund industrial class actions in the future was not a reason militating against the exercise of the discretion, at [86].
122 Earlier, the Judge had referred to:
(a) authorities indicating the readiness of courts to order the provision of security for costs in litigation funded by a commercial litigation funder, at [21]-[26]. These included Chartspike Pty Ltd v Chahoud [2001] NSWSC 585 at [5]; Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148, (2008) 67 ACSR 105 at [51]; Canberra Residential Developments Pty Ltd v Brendas [2009] FCA 745 at [21]; Ballard v Brookfield Australia Investments Ltd [2013] NSWCA 82 at [59]-[60]; Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 at [34]; and Domino’s Pizza Enterprises Ltd v Precision Tracking Pty Ltd (No 2) [2017] FCA 211 at [75]; and
(b) authorities in which litigation funders had been found liable to pay the costs of the successful party when funded litigation has failed, at [27]-[35]. These included Gore v Justice Corporation [2002] FCAFC 83; (2002) 119 FCR 429 and Dymocks Franchise System (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39, [2004] 1WLR 2807 at [25].
123 The Judge characterised the pursuit by group members, the commercial funder and indirectly the solicitors for an applicant of commercially funded litigation as a “common enterprise” at [39]-[40]. In doing so, his Honour referred, at [38], to his own judgment in Perera v GetSwift Limited [2018] FCA 732; (2018) 263 FCR 1 at [17]:
But how should these arrangements, pursuant to which these funded proceedings were brought, be characterised? The superficial answer was simply as a means by which a proceeding governed by Part IVA of the Act could be conducted to the benefit of group members, the funder and the solicitors. A more complex answer was provided by the Full Court in Brookfield Multiplex Ltd v International Litigation Funding Partners Pty Ltd [2009] FCAFC 147; (2009) 180 FCR 11, where the majority (Sundberg and Dowsett JJ) found that the bilateral (or, with the solicitors, trilateral) arrangements pursuant to which these funded class actions were conducted were unregistered managed investment schemes for the purposes of the Corporations Act 2001 (Cth). A majority of the Full Court held that the class action (or, more particularly, the scheme constituted by the agreements which allowed the class action to be funded and maintained) had the following characteristics: (a) the promises given by the group members and the funder were ‘money’s worth’ contributed for the purposes of the litigation funding arrangement made in return for their acquiring rights to share in any judgment sum, and the benefit of the funder’s promises to meet legal costs; (b) the opportunity to prosecute a claim, with virtually no exposure to any costs or outgoings in the event of failure, was a benefit accruing to group members produced as a result of all parties carrying out their obligations under the scheme and that a successful prosecution of those claims would yield financial benefits to group members, the funder and, indirectly, the solicitors; (c) the pooling of contributions, which was effected by the group members making their individual promises available for the purposes and benefit of the scheme and, ultimately, for the funder’s benefit; (d) the litigation funding arrangement was a common enterprise in that there was a shared purpose of pursuing group members’ claims successfully that would then benefit the group members, the funder and the solicitors.
(Emphasis added)
124 The Judge then reasoned as follows:
[40] … As a matter of principle, however, there does not appear to me to be any reason why these specific statutory protections [s 43(1A) of the FCA Act and s 570] are of broader application or assume decisive importance. The issue here can be summed up as being whether the co-venturer who has provided the funds for the common enterprise in the hope of securing a reward upon success, should ordinarily be required to pay adverse costs, if the common enterprise fails?
[41] Despite the caution I express above about being too definitive as to the likely exercise of a broad and fact dependent discretion, it seems to me that when: (a) there is funded litigation which can be characterised as a common enterprise; and (b) there is a statutory fetter on making an award of costs against the funded party (or an award of costs against the funded party will be inutile); and (c) according to usual costs principles an award of costs should otherwise be made in favour of a successful party, then there is no reason in principle why an adverse costs order should not be made directly against the funder of the unsuccessful funded litigation. This reflects the characterisation of the position by the Privy Council in Dymocks that the funder is not so much facilitating access to justice by the funded party as itself gaining access to justice for its own purposes.
(Emphasis added)
125 As is apparent, in these passages the Judge was addressing the antecedent question concerning the appropriateness of a commercial litigation funder being required to pay the costs of a successful respondent.
Consideration
126 In my view, a number of implications of present relevance can be drawn from the statutory context of the FW Act, from s 570, and from the rationale which underpins s 570.
127 First, and perhaps most obviously, the circumstances (if any) in which an applicant in proceedings in relation to a matter under the FW Act should be ordered to provide security for a respondent’s costs are likely to be exceptional. An applicant should not ordinarily be required to provide security for costs which, in the absence of unsatisfactory conduct on his or her part, will never be payable.
128 Secondly, care should be exercised to ensure that both the terms and rationale of s 570 are not undermined by requiring persons other than the applicant to provide security for a respondent’s costs in a proceeding to which s 570 applies. That would obviously be the case if an order was made that the applicant’s proceeding be stayed or dismissed if the ordered security is not provided. It could hardly be appropriate for a court to order a stay of proceedings until some person other than the applicant has provided security for a respondent’s costs. Related to this is the consideration, explained in the reasons of the Chief Justice, that an order for the provision of security is not like other orders of the Court for payment of a monetary sum. They are not enforceable in the manner of a monetary judgment. Such orders are instead made in the control of the conduct of litigation in the Court. It is rare for an order for security to be made unless accompanied by some consequence in the proceeding.
129 Thirdly, the policy rationale for s 570 and its effect should not be undermined by indirect means, for example, by an order for the provision of security by a person other than the applicant when it is the applicant who will bear the burden of the provision of the security. The Court should not allow, let alone assist, a respondent to bring about indirectly a situation which would not be permissible by direct means.
130 Section 570 also gives rise to other implications which are not presently relevant. For example, the costs which a party is required by s 570 to bear personally should not be capable of recovery as a component of damages in a second action brought by that party: Anderson v Bowles [1951] HCA 61, (1951) 84 CLR 310 at 323; Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWCA 217, (2008) 72 NSWLR 559 at [48]-[49].
131 In my respectful opinion, the primary Judge overlooked the first three matters to which I have just referred. Paragraphs [77]-[80] of the Judge’s reasons indicate that his Honour exercised the discretion by considering the justice of ordering a litigation funder to provide security as a freestanding matter, that is, by reference to AVL’s role in the respective proceedings and by reference to its commercial interest. The Judge did not have regard to the impact on Mr Turner and the group members of the order that AVL provide security and did not have regard to the implications to be drawn from s 570 identified above.
132 Contrary to the view stated in the final sentence of [77] of the Judge’s reasons, in my respectful opinion the true question was not whether the “protection” afforded by s 570 should “be somehow extended to non-party funders”. It was instead whether effect could be given to the usual principles on which security is ordered while at the same time preserving the protection s 570 afforded to Mr Turner and respecting its underlying rationale. This required attention to be given to the impact on the beneficiaries of the protection afforded by s 570 of an order that AVL provide security. Respectfully, his Honour did not engage in that exercise.
133 In so far as the Judge said, in [78], that the “no costs” character of the jurisdiction was not powerful reason to decline an award of security against a funder if it was otherwise appropriate, I respectfully disagree. The implications to be drawn from s 570, its statutory context and from the rationale to which I have referred were matters which should have been given prominence in the exercise of discretion.
134 I also consider, with respect, that the Judge did not consider the effect on Mr Turner and the group members of having, in effect, to fund AVL’s provision of the security in the proceedings. On the contrary, his Honour seemed to think it acceptable that this was a matter which a litigation funder should factor into the price for the provision of the litigation funding services – see [80]. In this respect, it is apparent that the Judge did not have regard to the third of the implications to which I referred above. The force of this point is underlined when it is remembered that AVL is likely to propose the same terms for any further persons who wish to become group members. That is to say, it is likely that such persons will be able to become a member of the group only if they accept a pro rata share of the responsibility for the funding of the security ordered to be provided by AVL. The quantum of such a share cannot be known presently but it seems unlikely to be a negligible amount. In this way, the Judge’s order imposes an impediment on their ability to pursue the claimed entitlements in the class action. Accordingly, I consider, with respect, that this too was an error which caused the exercise of the discretion as to whether to order security to miscarry.
135 These matters indicate by themselves that this Court should re-exercise the discretion to order the provision of security.
136 The character of the claims being pursued by the applicant should also be kept steadily in mind. A claim for wages in respect of work performed does not ordinarily have the same speculative or contingent quality of many Pt IVA actions. Neither of the present two actions is “a piece of commercial litigation”, to adopt the description of Allsop CJ and Middleton J in Madgwick v Kelly [2013] FCAFC 61; (2013) 212 FCR 1 at [77] in respect of litigation commenced by investors whose investments made with anticipated taxation advantages had proved unsuccessful.
137 In my respectful opinion, the characterisation of the pursuit by a worker, with the assistance of funding by a commercial litigation funder, of an asserted entitlement to wages in respect of the performance by the worker of work as “a common enterprise” does not seem apt. From the worker’s perspective, the proceeding is the pursuit of a claim for basic industrial entitlements. The circumstance that the worker has to finance the pursuit of those entitlements by entering into a funding agreement with a commercial litigation funder does not, at least ordinarily, alter that perspective. There is no indication that the funding agreement entered into by Mr Turner was intended to have that effect.
138 There is another feature of the applicant’s proceedings which was not raised at first instance for consideration by the primary Judge. That is that Mr Turner seeks the imposition of civil penalties in respect of the alleged contraventions of civil remedy provisions in the FW Act. This serves to differentiate these proceedings from most Pt IVA actions.
139 It is recognised that civil penalty provisions serve to facilitate the enforcement of regulatory regimes. Their purpose is “primarily, if not wholly, protective in promoting the public interest in compliance” with the regulatory regime: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (The Agreed Penalties Case) [2015] HCA 46; (2015) 258 CLR 482 at [16] and [55]. That is no less so in respect of the civil penalty regime in the FW Act, even though, unlike some statutes containing civil penalty regimes, the FW Act permits entities other than regulators, including individuals and registered organisations, to commence proceedings seeking the imposition of such penalties (s 539).
140 As was noted by the plurality in The Agreed Penalties Case at [59], “there is a public interest in the imposition of civil penalties as opposed to the purely private interests which are in issue in many civil proceedings”. One reason why that is so is that the principal, if not only, purpose of the imposition of civil penalties is deterrence, both specific and general: The Agreed Penalties Case at [55], endorsing the statement of French J in Trade Practices Commission v CSR Ltd [1991] ATPR 41-076 at 52,152. It is said that the object of a civil penalty is “to attempt to put a price on contraventions that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act”: ibid. See also Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The Non-Indemnification Personal Payment Case) [2018] HCA 3; (2018) 262 CLR 157 at [87], per Keane, Nettle and Gordon JJ. Civil penalties seek to achieve the object of deterrence by the imposition of a form of punishment: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113; (2017) 254 FCR 68 at [99].
141 A court imposing a pecuniary penalty under the FW Act may order that the penalty, or part of it, be paid to the Commonwealth, a particular organisation or to a particular person (s 546(3)). Accordingly, it is possible that any civil penalties which may be imposed in the present litigation would be ordered to be paid, in whole or in part, to the Commonwealth. An order to that effect may serve to underline the public interest nature of part of the litigation.
142 The public interest of the litigation may be a factor bearing upon the exercise of the discretion to order security. Such a principle was recognised by Northrop J (albeit in a different context) in Jet Corporation of Australia Pty Ltd v Petres Pty Ltd (1983) 74 FLR 1 at 12. His Honour considered that the obligations imposed on the respondents by the former Trade Practices Act 1974 (Cth) were:
In the nature of public standards of conduct which are considered desirable and in the public interest. To some extent the existence of that public interest transcends the private interests of the parties to these proceedings and at this stage weighs in the balance against making the orders sought by the respondents.
143 Although the Court received supplementary submissions from the parties concerning the potential significance for the respondents’ claim for security of the fact that the proceedings include claims for the imposition of civil penalties, it is both unnecessary and inappropriate to address the issues which arise: unnecessary, because the appeals should be allowed for other reasons, and inappropriate because it was not a matter which the primary Judge was asked to address in the exercise of the discretion.
Conclusion
144 In the circumstances of this case, it is not readily apparent, having regard to the nature of the proceedings and the effect of s 570 to which I have referred, that an order for security could be a proper exercise of the discretion. I agree with the reasons of the Chief Justice on this topic.
145 For these additional reasons, I agree with the orders proposed by the Chief Justice.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice White. |
Associate:
Dated: 10 November 2020
