FEDERAL COURT OF AUSTRALIA

PRACTICE & PROCEDURE – application by respondents to an appeal for security for costs where appellant is an individual – whether a presumption that security for costs will be ordered – desirable that claims of bias or apparent bias be ventilated and not stultified by an order for security – application for security dismissed.

Federal Court of Australia Act 1976 – s 56

Federal Court Rules – Order 52, r 20

Equity Access Limited v Westpac Banking Corporation (1989) ATPR ¶40-972 – distinguished

Cowell v Taylor (1885) 31 Ch D 34 – cited

Fletcher v Federal Commissioner of Taxation (1992) 23 ATR 555 – cited

Paton v Campbell Capital Limited (unreported, Burchett J, 1 July 1993) – cited

Cummings v Lewis (unreported, Beaumont J, 4 December 1991) – considered

MICHAEL JOHN BATES v OMAREEF PTY LTD & ORS

NG 917 of 1997

HILL J

SYDNEY

4 MAY 1998

THE COURT ORDERS THAT:

1.                  The Notice of Motion of the Respondents that an order be made that the Appellant provide security for the costs of the appeal be dismissed.

2.                  The Respondents to pay the Appellant’s costs of the Notice of Motion.

3.                  Any amendment to the Notice of Appeal be filed and served on or before 18 May 1998.

4.                  The Appellant and a representative of the Respondents attend upon a Registrar of the Court this afternoon for the purpose of settling the appeal index.

EX TEMPORE REASONS FOR JUDGMENT

The respondents to an appeal brought by Michael John Bates move the Court for an order that Mr Bates give security for the payment of any costs in the appeal that might be awarded against him.  The jurisdiction so to do, which may be exercised by a single judge, is to be found in s 56 of the Federal Court of Australia Act 1976. 

The proceedings from which the appeal is brought were commenced by Mr Bates against the respondents seeking damages for breach of a contract, which he said existed between himself and one or more of the corporate respondents for the making-up of wet-suits.

It was Mr Bates' case that a contract existed which was to continue for a lengthy period, said to be related to a licence agreement that had existed between the respondents and a third party.  The respondents denied the terms of the contract as alleged by Mr Bates and asserted that he had been in fundamental breach, in any event, of the contract and that the contract had been terminated properly by them. 

The trial of the proceedings lasted some 3½ weeks.  In the result Emmett J found that a contract did exist although the term of the contract was, in essence, only in respect of the particular season and further that there had been a breach of the contract by the respondents in terminating it.  But having regard to the short-term arrangement between Mr Bates and the respondents, the damages for repudiation amounted to $6200 and judgment for Mr Bates in that amount was entered.  His Honour dismissed various claims which Mr Bates had brought relying, inter alia, on the Trade Practices Act 1974, estoppel and conspiracy.

Because the original claim which Mr Bates had made was for damages of some millions of dollars, his Honour refused to award costs in Mr Bates' favour, and indeed made cost orders against him in respect of certain matters.  It is from his Honour's orders that Mr Bates now appeals to the Full Court. 

The Notice of Appeal filed by Mr Bates on 6 November 1997 was drafted by Mr Bates it would seem personally.  Indeed, without any disrespect to Mr Bates, it is clear that some of the difficulties he has faced have been brought about by the fact that he was unrepresented.  He was, however, at various times during the proceedings below represented by at least two if not more law firms, one of which was the firm of Blake Dawson Waldron, who at some stage ceased to act for Mr Bates.

In the grounds of appeal the only matter that stands out is a suggestion that his Honour was either biased or appeared to be biased.  Matters adverted to refer to what is said to have been a meeting between his Honour and Mr Foster SC, who appeared for the respondents, without the knowledge of Mr Bates and is said to have occurred immediately prior to the commencement of the case and at a time when Sir Lawrence Street was apparently mediating the matter, Sir Laurence being Emmett J's father-in-law. 

I should say at this stage, although Mr Bates and presumably the respondents are perfectly aware of it, a long time ago I was also a partner of Blake Dawson Waldron, of which Emmett J was a partner.  However, my own view is that that would neither disqualify me now nor be fairly seen as showing the influence of bias, particularly as the association with that firm finished more than 20 years ago and although there seems to be some suggestion by Mr Bates to the contrary, the person who acted for him in that firm is a person whom, so far as I am aware, I have never met. 

I have been referred both by Mr Bates and by counsel for the respondents to a number of cases.  Both parties seem to rely on what I had said in Equity Access Limited v Westpac Banking Corporation (1989) ATPR ¶40-972, a judgment which has been followed in a number of cases since.  In that case I distilled six matters which the cases decided before that case indicated were matters that were taken into account in determining whether an award for security for costs should be made.  The discretion to exercise security, whether at first instance or in relation to an appeal, is of course a judicial discretion and the list of matters which I set out were not, of course, intended to be either rules which might fetter the exercise of discretion or to be an exclusive list of matters which might in an appropriate case be required to be considered. 

Two matters do, however, distinguish the present case from Equity Access.  The first is that Mr Bates as appellant is an individual and not a corporation.  The second is that the present application is made in the context of an appeal and not in the context of a first instance proceedings.

Where an applicant for security is a corporation, at least where the proceedings are in the original jurisdiction of the Court, it has long been a matter of legislative policy that security for costs will ordinarily be given.  That policy, of course, is found today in the Corporations Law.  

There is a difference too where the question for security for costs arises on an appeal.  Counsel for the respondents referred me to what Bowen LJ had said in Cowell v Taylor (1885) 31 Ch D 34 at 38 as expressing the general rule and the exception which relates to it in the case of appeals.  In the passage cited Bowen LJ said:

“The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also, I believe, in equity.  There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty's Courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another.  There is also an exception introduced in order to prevent abuse, that if an insolvent sues as nominal plaintiff for the benefit of somebody else, he must give security ... Those are the common cases, I do not say that there may not be others.”

In Fletcher v Federal Commissioner of Taxation (1992) 23 ATR 555 at 558 I collected a number of the cases in which this general rule has been repeated.  One can, of course, understand the reason for an exception to the general rule in that, as the passage cited above illustrates, the litigant has at least had his case determined by a hearing and unless it could be said that at least serious issues of law are involved the respondent to the appeal should be able to have the benefit of the judgment which has been obtained.

No doubt where a court is of the view that the appeal is without real merit or substance or that the issue sought to be litigated in the appeal is not one of any real importance, a court would likely exercise a discretion to order security for costs in an appeal, at least where there is a real prospect that the respondent would be left without remedy should the appeal not succeed and an order for costs be made in it.  While, as I have suggested, where an applicant is a corporation there may be said almost to be a presumption that security for costs will as a general rule be granted, no such presumption exists in the case of an appeal.

Indeed, Order 52, rule 20 provides specifically that:

“Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required.” [emphasis added]

Put another way, although the Court has a jurisdiction to order costs in an appeal which jurisdiction is conferred upon it by statute, there is no presumption that a costs order will be made for security.  Indeed, quite to the contrary, a cost order would not be made unless the party seeking security can persuade the Court that the general rule that security not be ordered should not apply in the circumstances of a particular case.

As Burchett J said in Paton v Campbell Capital Limited (unreported 1 July 1993) the wording of Order 52, r 20 places what his Honour referred to as “something of an onus” to demonstrate that security should be provided.  There is no dispute between the parties that Mr Bates is impecunious.  He freely concedes that.  He claims, and no doubt if his case were ultimately successful the claim would be self evident, that a reason for his impecuniosity lies in the fact that the respondents terminated the agreement with him. 

I should say at this point that although the Notice of Appeal was filed in time, the subsequent progress of the appeal has been far from satisfactory.  Attempts have been made unsuccessfully to have an appeal index settled.  I do not place the blame on one side or the other for this not occurring but for reasons which do not matter the appeal index is still not settled.  Mr Bates has also said from time to time that he proposes to file an amended notice of appeal but despite time having elapsed has not yet done so.  These are not matters which weigh particularly heavily one way or the other on the present application although they are matters which, if the application is to be refused, will need to be dealt with as it is not appropriate that the appeal be delayed any further.

Counsel for the respondents to the appeal point to the fact that the grounds of appeal, at least as presently framed, raise no issue of legal substance.  They say that I should do as Beaumont J did in Cummings v Lewis (unreported, 4 December 1991) and order security in these circumstances.  They say for the appeal to succeed it would be necessary for findings of fact made by the trial judge to be displaced.  Since those findings of fact were dependent upon credit it would be highly unlikely that an attack on them would succeed having regard to well established principles.  It is for the trial judge to determine who to believe, not a court on appeal.  This was the substance of the appeal in Cummings v Lewis and was the basic reason for Beaumont J ultimately ordering security for costs against the litigant in person.  Counsel for the respondents says also that his clients should not be put to further expense.  He points to the fact that the hearing at first instance occupied substantial amounts of time and that the respondent should not now be put to the further expense of responding to the appeal.

In this connection it might be noted that in affidavit evidence it is suggested that the costs of the appeal would, including solicitors and clients, amount to $54,875, working on the assumption that the appeal would take no more than one day.  I do not propose to say anything about the estimate that is made other than it seems to me, having regard to the one issue with which the Notice of Appeal deals, namely that of bias, that if the costs were to amount to the figures shown a question of misconduct might arise.  Mr Bates relies particularly on the fact that if security is awarded against him, he will forever be shut out of his right to appeal.  That is, of course, a matter that warrants consideration and is reflected by Order 52 r 20.

The prospects of success on a matter about which there has been some controversy of principle is always a difficult matter to deal with on security for costs applications.  This is particularly so where a judge hearing the matter might be, as it were, required to second guess an appeal court which in due course might consider the matter.  It is fair to say that the appeal involves no question of legal principle.  It is not suggested that Emmett J erred in the application of legal principle.  Indeed, his Honour decided the case as a straightforward breach of contract case which depended entirely upon evidence as to what the terms of the contract were and the circumstances in which it came to an end.

The matter complained of is, however, a matter which, in my view, it is not in the public interest to stifle and that is where there is a suggestion that the judge hearing the matter at first instance displayed either actual or apparent bias in the conduct of the case.  I would not wish to express a view as to Mr Bates' chances of success in having that matter decided in his favour on an appeal.  I do not think that there is any suggestion made that the point is not raised in a bona fide way.  Although much will depend upon what if any matter is raised in the appeal by way of factual matters, it could not be said at this stage that the appeal was so hopeless that it would be inappropriate for an appeal court to deal with the matter. 

Put in another way, the issue involved is an issue of seriousness to the administration of justice.  Its resolution may ultimately be in the respondent's favour but it could not be said to be a frivolous appeal.  I am conscious of the fact that the respondents, if the appeal is to be allowed to proceed, will incur further costs, albeit not quite of the magnitude suggested.  Although it is not a matter that I have taken into account in the conclusion which I have reached it is perhaps not totally immaterial to note that the present application might well have costs not a great deal less than the ultimate appeal.  It has certainly not permitted the appeal to be expedited. 

As I have already indicated, there are matters which do point in either direction on the question of whether an order for security should in the present case be made.  However, having regard particularly to the interests in the administration of justice that complaints of the kind made be able to be dealt with in the open, rather than stultified by an order for security for costs, I would propose to not direct security for costs be given in the present case and to accordingly dismiss the motion to that end.  I do, however, propose to order that any amendment to the Notice of Appeal which Mr Bates may seek to make be filed and served on or before 18 May 1998.

Mr Bates should clearly understand that no extension of time from that date will be given and that his appeal will be heard by the Full Court, subject to any order that that Court may make, on the basis of the Notice of Appeal now filed, or in its amended form as filed on or before 18 May. 

I have arranged for a Registrar of the Court to settle the Appeal Index this afternoon and I direct both Mr Bates and someone representing the respondents to attend for that purpose.  To enable that to happen, it would be desirable if the parties could now make an appointment for a time that suits them both this afternoon as there will be a Registrar available to deal with the matter. 

Associate:

Dated:              4 May 1998