FEDERAL COURT OF AUSTRALIA

Australian Solar Mesh Sales Pty Ltd v Spruson & Ferguson, Patent & Trade Mark Attorneys [1999] FCA 1730

PRACTICE AND PROCEDURE – application for security for costs – impecunious appellant company – separate trial of jurisdictional issue

Federal Court of Australia Act 1976 (Cth), ss 25(2B)(c), 56(1)

Corporations Law, ss 58AA, 1335

Federal Court Rules, O 52, r 20

Patents Act 1990 (Cth)

Re Wakim; Ex parte McNally (1999) 163 ALR 270, cited

Felton v Mulligan (1971) 124 CLR 367, cited

Robins v Incentive Dynamics Pty Ltd [1999] FCA 1651, referred to

Edensor Nominees Pty Ltd v Australian Securities & Investments Commission [1999] FCA 1722, cited

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

AUSTRALIAN SOLAR MESH SALES PTY LIMITED v NEVILLE JOHN ANDERSON, DANIEL RALPH SHANAHAN, JOHN GORDON HINDE, FRASER PATISON OLD, DAVID CARLYLE GRIFFITH, JOHN DAVID O'CONNOR, SIMON DUDLEY WILLIAMS, KENNETH JOHN MCINNIS trading as SPRUSON & FERGUSON, PATENT & TRADE MARK ATTORNEYS

N 562 OF 1999

JUDGE:          SACKVILLE J

PLACE:          SYDNEY

DATE:            13 DECEMBER 1999

THE COURT ORDERS THAT:

1.      Ground 2 of the amended notice of appeal be heard separately and before the determination of any other ground specified in the amended notice of appeal.

2.      Order 1 be subject to any further order of the Full Court.

3.      The appellant be at liberty, in any written submissions filed in the appeal, to make submissions as to whether the Full Court should amend Order 1 so as to include Ground 16 of the amended notice of appeal.

4.      The costs of the motions determined today be costs in the appeal.

5.      The matter be placed in the Full Court callover list on 8 March 2000.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     I have before me an application by way of notice of motion brought by respondents to an appeal.  The appeal is from orders made by Branson J on 14 May 1999, dismissing an application by the present appellant (the applicant at first instance).  Her Honour did so after a hearing lasting some twenty-three days.  In substance, the question before her Honour, which involved very substantial factual issues, was whether certain patent attorneys retained by the appellant had breached a duty of care owed to the appellant.  Her Honour found against the appellant on a variety of grounds. 

2                     The respondents to the appeal, the partners in the firm of patent attorneys, have filed a notice of motion seeking an order that the appellant provide security for costs in the sum of $60,000, or such other amount as the Court orders, and on such terms as the Court may order.

3                     The respondents’ motion is supported by an affidavit of a solicitor experienced in litigation.   The solicitor estimates that some two to three days would be required for the hearing of all of the issues raised in the notice of appeal.  In addition, extensive preparation time by senior and junior counsel would be required.  This evidence provides the basis for the estimate of $60,000 put forward on behalf of the respondents. 

4                     On the hearing of the motion, Mr Gwozdecky, who appears for the appellant, filed without objection a motion seeking the separate determination of the issues raised by Grounds 1, 2 and 16 of the amended notice of appeal.  The motion, in effect, seeks orders that the issues raised by those grounds be heard separately and before the other grounds specified in the amended notice of appeal.

5                     Ground 2 of the amended notice of appeal challenges the decision of the primary Judge on the basis that her Honour lacked jurisdiction to hear and determine the proceedings.  This ground plainly relies on the decision of the High Court in Re Wakim; Ex parte McNally (1999) 163 ALR 270, which was handed down after her Honour had delivered judgment in the present proceedings.  Ground 16 of the amended notice of appeal asserts that her Honour erred in failing to strike out par 13 of the respondents’ amended defence.  The significance of par 13 is that the respondents intend to argue that the defence thereby asserted (to the effect that the petty patent claimed by the appellant was in any event invalid and liable to be revoked) attracted federal jurisdiction, since it raised a matter arising under a law of the Commonwealth Parliament, namely the Patents Act 1990 (Cth).  Accordingly (so the respondents will argue), her Honour was exercising federal jurisdiction notwithstanding that the claim pleaded by the appellant did not raise any federal issue: see Felton v Mulligan (1971) 124 CLR 367, at 408, per Walsh J.

6                     Ground 1 of the amended notice of appeal makes the rather extraordinary claim (given that it is the appellant which has instituted the appeal) that the Court has no jurisdiction to hear and determine the appeal.  It is difficult to understand what the appellant intends to raise by Ground 1.  Compare Robins v Incentive Dynamics Pty Ltd [1999] FCA 1651 (FC), at [26]-[27].

7                     Mr Nicholas, on behalf of the respondents, did not resist the proposition that there should be a separate determination of the jurisdictional issue raised by Ground 2 of the amended notice of appeal.  He also, in my view correctly, conceded that there is a serious question to be determined on the appeal so far as the jurisdictional issue is concerned.  It is not necessary, of course, in relation to the present motions, to determine whether par 13 of the amended defence was sufficient to attract federal jurisdiction.  It is enough to note that the appellant's argument raises a serious question to be determined by a Full Court.

8                     Mr Nicholas recognised that the respondents’ acceptance that there should be a separate determination of the jurisdictional issue on the appeal meant that it could not press its application for an order for security for costs in the sum of $60,000.  He submitted that the appropriate course was to make an order for security for costs in the sum of approximately $14,000, since this was the amount that would be required by the respondents for the conduct of a hearing limited to the jurisdictional issue.  This amount was arrived at on the basis that senior and junior counsel would be required for a hearing of one day and for one day’s preparation.

9                     The respondents’ motion for security for costs was said by Mr Nicholas to be brought pursuant to s 1335 of the Corporations Law, which allows “the court having jurisdiction in the matter” to require a corporate plaintiff to give security for costs.  The difficulty is that, following the decision in Re Wakim, it seems that the purported conferral of power or jurisdiction on the Federal Court by the Corporations Law (a law of a State) is not valid: see s 58AA (definition of “court”) and Edensor Nominees Pty Ltd v Australian Securities & Investment Commission [1999] FCA 1722 (FC).

10                  Although nothing turns on it, the true source of authority for the Court to deal with the respondents’ motion would seem to be s 56(1) of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”).  Section 56(1) provides that the Court or a Judge may order an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against the appellant.  However, this provision must be read together with Federal Court Rules (“FCR”) O 52 r 20, which provides as follows:

 “Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court should be required.”

11                  In Paton v Campbell Capital Limited (1 July 1993, unreported), Burchett J noted that the wording of O 52 r 20, places what his Honour referred to (at 2) as "something of an onus" to demonstrate that security should be provided.  Mr Nicholas submits that that onus is discharged in the present case because it is not disputed by the appellant that it is impecunious.  I accept that the impecuniosity of the appellant enlivens the power of the Court to make an order for security for costs pursuant to s 56 of the Federal Court Act.  Nonetheless, it remains necessary to consider whether, as a matter of discretion, the Court should make an order in favour of the respondents.

12                  It seems to me that the circumstances of the present case are unusual.  The issue that is to be debated on the appeal, at least in the first instance, concerns the jurisdiction of the Court to make the orders adverse to the appellant.  This was not an issue that her Honour addressed in her judgment or, indeed, could have addressed given that the High Court had not then delivered judgment in Re Wakim.  The jurisdictional issue is one that, having been raised, the Court is bound to address.  Moreover, as Mr Nicholas has accepted, the issue identified by the appellant is a serious one.

13                  In these circumstances, despite the appellant’s impecuniosity, it does not seem to me appropriate at this stage to make an order for security for costs.  The appellant has raised a jurisdictional issue on which the primary Judge (for reasons beyond her control) gave no considered ruling.  The position concerning security for costs may well be different if and when the appeal proceeds on the remaining issues, in respect of which the respondents have the benefit of favourable rulings by the primary Judge.

14                  For these reasons, I do not consider it appropriate to make an order for security for costs in relation to the appeal in so far as it is concerned with the jurisdictional issue.  Should the Full Court reject the appellant’s jurisdictional argument, a further application by the respondents for security for costs in relation to the remainder of the appeal may well be successful.  That, however, is something that can await another day.

15                  I have already referred to the appellant’s motion.  There are obvious advantages in the jurisdictional issue being addressed first and, as I have explained, the respondents do not object to such an order being made.  Mr Nicholas did not dispute that s 25(2B)(c) of the Federal Court Act confers power on a single Judge to make an order of this kind.  Accordingly, an order should be made (subject to any further order that may be made by the Full Court) that Ground 2 of the amended notice of appeal be heard and determined separately and before any other ground specified in the amended notice of appeal. 

16                  I do not think that Ground 16 of the amended notice of appeal should be included in the orders I propose to make.  That ground raises questions that go beyond the jurisdictional issue.  If the appellant considers that Ground 16 is essential to its jurisdictional argument, it can make written submissions to that effect and invite the Full Court to modify the orders I propose to make.

17                  I note that the particulars to Ground 2 include an assertion that the Federal Courts (State Jurisdiction) Act 1999 (NSW), in so far as it is constitutionally valid, is retrospective in nature.  At the moment, it is entirely unclear to me what role, if any, the State legislation can play on an appeal which seeks to challenge the jurisdiction of the primary Judge to determine the proceedings that were before her.  However, that is an issue that can be disposed of by the Full Court.

18                  The orders I propose to make are these:

1.         Ground 2 of the amended notice of appeal be heard separately and before the determination of any other ground specified in the amended notice of appeal.

2.         Order 1 be subject to any further order of the Full Court.

3.                  The appellant be at liberty, in any written submissions filed in the appeal, to make submissions as to whether the Full Court should amend Order 1 so as to include Ground 16 of the amended notice of appeal.

4.                  The costs of the motions determined today be costs in the appeal.

5.                  The matter be placed in the Full Court callover list on 8 March 2000.

Associate:

Dated:              13 December 1999