FEDERAL COURT OF AUSTRALIA

Tigers AFC (Mayne) Inc v The AFL & Ors [2000] FCA 1650

PRACTICE AND PROCEDURE – security for costs – where applicant an impecunious incorporated association – consideration of relevant factors, and particularly promptness of application for security, merits of principal action, and public interest – whether security for costs should be ordered.

Federal Court of Australia Act 1976, s 56

Federal Court Rules, O 28 r 3

Trade Practices Act 1974, ss 4D(1) and s45

Bell Wholesale Co Pty Ltd v Gates Export Corp (1984) 52 ALR 176 - cited

Friends of Hinchinbrook Society Inc v Minister for Environment and Ors (No 1)

(1996) 69 FCR 1 - cited

KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Ors (1995) 56 FCR 189 - cited

Equity Access Ltd v Westpac Banking Corporation and Ors (1989) ATPR 40-972 - cited

Harpur v Ariadne Australia Limited [1984] 2 QdR 523 - cited

Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 - cited

Jodast Pty Ltd & Ors v A & J Blattner Pty Ltd & Ors (1991) 104 ALR 248 - cited

Rugby Union Players Association Inc v Australian Rugby Union Ltd (unreported,

Supreme Court of NSW, 30 July 1997) - cited

TIGERS AUSTRALIAN FOOTBALL CLUB (MAYNE) INC v THE AUSTRALIAN FOOTBALL LEAGUE and AFL QUEENSLAND LTD and QUEENSLAND STATE FOOTBALL LEAGUE LTD and BRISBANE BEARS-FITZROY FOOTBALL CLUB and SOUTHPORT FOOTBALL CLUB LTD and BROADBEACH FOOTBALL CLUB INC and LABRADOR FOOTBALL CLUB INC and MORNINGSIDE FOOTBALL CLUB LTD and MT GRAVATT SPORTING AND WORKERS CLUB and NORTHERN EAGLES FOOTBALL CLUB INC and VICTORIA POINT SHARKS SPORTING CLUB INC

Q 45 OF 2000

SPENDER J

BRISBANE

10 NOVEMBER 2000

THE COURT ORDERS THAT:

1.                  The notice of motion filed 22 September 2000 by the first to fourth respondents seeking security for costs be dismissed.

2.                  Costs of the motion, including reserved costs, be the costs of the applicant in the principal proceedings.

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

REASONS FOR JUDGMENT

1                     This is an application for security for costs, by the first four respondents in the proceedings, against Mayne Australian Football Club (Mayne) Inc (‘Tigers Mayne’).  The primary proceedings are brought by Tigers Mayne, and have as their object the inclusion of Tigers Mayne as one of the clubs competing in the premier competition for Australian Rules football teams in South-East Queensland in 2001.  Tigers Mayne is an incorporated association and was incorporated on 12 June 1997. 

2                     Previously the Tigers Mayne Australian Football Club was the manifestation of a company limited by guarantee.  That company was placed in liquidation on 10 March 1997.  Tigers Mayne had competed in the premier Australian Rules competition in South-East Queensland in 1999, but did not in fact compete in 2000.  The circumstances that led to that situation are at the core of the present proceedings, which arise in the following way. 

3                     The third respondent (‘the QSFL’) formerly ran the premier state league Australian Rules football competition in Queensland prior to 2000.  The first respondent (‘the AFL’) is a body which has as its objects the running and promotion of Australian Rules football throughout Australia.  From at least 1998, the QSFL had been looking at reducing its 10 team competition to an eight or six team competition.  In November 1998 it resolved to run an eight team competition in 1999, which is in fact what happened.  In July 1999 it resolved to run a six to eight team competition in the year 2000. 

4                     In June 1999 the AFL, with the knowledge and co-operation of the QSFL, undertook a general review of Australian Rules football in Queensland at all levels.  The AFL Review Committee ultimately recommended that there be a single peak body for the governance of Australian Rules football in Queensland, and with the knowledge and co-operation of the QSFL and other Queensland Australian Rules bodies the AFL set up a new peak body, which was AFL Queensland Ltd (‘AFL Queensland’), the second respondent.

5                     AFL Queensland was incorporated on 22 November 1999.  One of its objects was to run the state league competition previously run by the QSFL.  AFL Queensland also took on the obligations of the former Australian Rules peak body in Queensland, the Queensland Australian Football League (‘QAFL’).  The QSFL, via its members, resolved by special resolution on 22 December 1999 to place itself into voluntary liquidation, and the former general manager of the QSFL was appointed general manager and secretary for the new governing entity, AFL Queensland.

6                     Earlier, by letter of 14 September 1999, the AFL had sought expressions of interest from clubs that might wish to play in the state league competition.  The expressions of interest were to be reviewed by a committee set up by the AFL.  Relevantly, the letter stated:

“The purpose of the letter is to invite Clubs interested in fielding a Team in the State League to lodge an Expression of Interest to compete for the 2000 season.  Lodging an Expression of Interest does not constitute a commitment on the part of the Club.”

7                     There were expressions of interest received from more clubs than there were places.  A sub-committee of two persons, Mr John Brown, who is the chairman of the AFL, and Dr Susan Dann, was appointed, so the respondents claim.  That sub-committee established uniform criteria for eight of the nine clubs that expressed interest, and proceeded to carry out an assessment of each club's expression of interest using those criteria.  The respondents say that of the nine clubs that applied, the applicant, Tigers Mayne, was rated last, by a considerable margin.

8                     Tigers Mayne asserts in these proceedings that either the QSFL and AFL Queensland or alternatively the QSFL and the AFL were in competition for the supply of competition organising services in respect of the premier Australian football competition in Southeast Queensland.  Tigers Mayne alleges that there was a contract, agreement, or understanding between those three entities just referred to, which contained an exclusionary provision within the meaning of s 4D(1) and s 45 of the Trade Practices Act 1974.  The claimed exclusionary provision is the term limiting the premier competition for Australian football in Southeast Queensland to eight teams.

9                     Alternatively, Tigers Mayne says that the material, including the letter of 14 September 1999, gave rise to a contract which has been breached by the AFL in a number of ways.  The applicants on the motion for security for costs proceed on the basis that, it being accepted by all parties that Tigers Mayne is impecunious (in the sense that it lacks the financial capacity to pay any order for costs that may be made against it in these proceedings), the issues simply become:  what the proper estimate of assessable defence costs is; and secondly, whether that amount should be discounted as a matter of discretion to avoid stifling the action, or whether for some other discretionary reason there should be a reduction in the amount ordered by way of security.

10                  The power of the Court to order security for costs is to be found in s 56 of the Federal Court of Australia Act 1976.  Section 56 provides inter alia:

“(1)     The Court or a Judge may order an applicant in the proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him.

(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.”

11                  The power conferred by s 56 is a wide one - a discretion to make orders must be exercised judicially, but that is the only relevant limitation.  That approach has been expressed in many cases, including by the Full Federal Court in Bell Wholesale Co Pty Ltd v Gates Export Corp (1984) 52 ALR 176 at 178. 

12                  Order 28 of the Federal Court Rules deals with the question of security for costs, and O 28 r 3 relevantly provides:

“(1)     Where, in any proceeding, it appears to the Court on the application of a respondent -

(a)          that an applicant is ordinarily resident outside Australia;

(b)          that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent if ordered to do so;

(c)          subject to sub-rule (2), that the address of an applicant is not stated or is misstated in his originating process; or

(d)          that an applicant has changed his address after the commencement of the proceeding with a view to avoiding the consequences of the proceeding,

            the Court may order that applicant to give such security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding.” 

13                  The power contained in s 56 is not limited by the provisions of O 28 r 3.  The only possible circumstance referred to in O 28 r 3 that may have an application in these proceedings is that set out in subpara (b).

14                  The authorities indicate that there are a number of factors which may be taken into account in the exercise of the discretion conferred by s 56 of the Federal Court Act.  I refer particularly to Friends of Hinchinbrook Society Inc v Minister for Environment and Ors (No 1) (1996) 69 FCR 1 at 21;  KP Cable Investments Pty Ltd v Meltglow Pty Ltd and Ors (1995) 56 FCR 189 at 197; and 198 and Equity Access Ltd v Westpac Banking Corporation and Ors (1989) ATPR 40-972 at 50,635.

15                  From those cases, the factors that may be relevant include: (a) whether the application for security for costs was brought promptly; (b) the strengths and bona fides of the applicant’s case; (c) whether any impecuniosity of the applicant was caused by the respondent’s conduct the subject of the claim; (d) whether the respondent’s application for security is oppressive; (e) whether an order for security would stifle the litigation (which, in a sense, is a subset of the earlier factor); (f) whether there are any persons standing behind the applicant (here an incorporated association) who stand to benefit financially or perhaps in other ways from the applicant’s success; (g) whether any persons standing behind the applicant have offered any personal undertaking to be liable for the costs; (h) whether there are any public interest considerations relevant; and (i) any other particular discretionary matter relevant to the circumstances of the particular case.

16                  The applicants on the motion rely on the principle that is to be found expressed in Harpur v Ariadne Australia Limited [1984] 2 QdR 523, which is that those who stand to benefit from litigation conducted in a company's name should not be permitted to avoid the corresponding risk of liability by sheltering behind the corporate veil.

17                  The submissions of the applicants for security focus almost solely on the position of corporations against the need to ensure that litigation is not frustrated.  However, the crucial factor, in my assessment of the present case, is that Tigers Mayne is a non-profit incorporated association.  Ordinarily, a natural person will not be ordered to give security for costs.  That conclusion reflects the view that while the non-ordering of security for costs may have the consequence that an order for costs of a successful respondent will be an empty order, it is not right to shut an applicant out of court simply because of his impecuniosity - a fortiori if conduct by the respondents caused or contributed to that impecuniosity.  The position with corporations, however, is different.  As Connolly J said in Harpur at 532:

“An individual who conducts his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets.  The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play.  If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied.”

18                  In this case, apart from the crucial factor of the status of Tigers Mayne, there seem to be three other factors which require some specific comment.  The first concerns the promptness of the application.  Tigers Mayne complain that the application for security of the costs could have been brought earlier.  The reason why the promptness of the application is relevant is that it would be inequitable to permit an applicant to proceed further with an application, including the incurring of costs, without a prompt application for security of costs or at least notice that such an application was contemplated, because the absence of such an application would lull an applicant into a false belief that security for costs was not being sought.  The correspondence indicates that from a reasonably early stage Tigers Mayne were on notice that the respondents intended to bring an application for security of costs.  The timing of the application, in my view, was thus not a relevant discretionary factor on the application for security for costs. 

19                  The second matter that merits specific mention concerns the merits of the case.  In broad terms the case for the applicants, in the principal proceedings, has three limbs.  First, Tigers Mayne argues that a decision to have a competition limited to eight teams is a s 4D(1) exclusionary provision under the Trade Practices Act, and the conduct giving effect to that decision is a monopolistic abuse of market power.  That claim, then, is a challenge to the power of the AFL (and, perhaps, others in a similar position) to determine the size of a particular competition.  That aspect of the Tigers Mayne case deals, then, with the question of power.

20                  The other two limbs of the applicant’s case stem from a claim in contract.  The first aspect of the claim in contract is an allegation that there was an agreement that Tigers Mayne would be a member of the competition in 2000, notwithstanding that the letter of 14 September 1999 merely invites expressions of interest.  Somehow, it is said that this letter, with other material, constitutes a contract, agreement or understanding that Tigers Mayne would be a member of the competition.   

21                  The alternative claim in contract is that there was an agreement that the assessment process to determine the composition of the competition for the year 2000 would be conducted independently and fairly, and that the process that in fact was conducted was neither independent nor fair.  As Pincus J noted in Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634, at the stage of the hearing of an application for security for costs, there will usually be little information on which the Court can possibly assess the merits of the applicant's claim.  Accordingly, at the hearing of such an application a detailed investigation by the parties into the likelihood or otherwise of the success of the action will not be the right course to adopt. 

22                  In the Equity Access case, to which I have earlier referred, Hill J affirmed that view, but thought that it was particularly appropriate where, in the case before him, the application for security was made after three days of hearing when the Court had heard some but not all of the evidence and no submissions on the evidence had been made. 

23                  However, in another case, Jodast Pty Ltd and Ors v A & J Blattner Pty Ltd and Ors (1991) 104 ALR 248, Hill J indicated that the situation might be otherwise where the case of the applicant appeared on the face of the pleadings to be merely frivolous or vexatious.  So while it is relevant on the question of security for costs to take into account the bona fides and merit of the claim, there can be little definitive inquiry as to the ultimate merits.  It is only in a clear case, where the principal application appears to be frivolous or vexatious, that one would be entitled to conclude that security for costs should be ordered, having regard to an assessment of the merits.

24                  It seems to me, in this particular case, that the question of the alleged conduct contravening s 45 of the Trade Practices Act, which at first blush to me seems to be a quite unattractive argument, is none the less arguable. It also seems to me that the alternative contract claim raises clearly triable issues.  These conclusions are sufficient to indicate that this is not a case where it can be concluded that the application is frivolous, and that on that basis there should be an order for security for costs. 

25                  The next factor concerns the public interest.  Again in the Equity Access case, Hill J said at 50,637, in respect of proceedings based on a contravention of s 52 of the Trade Practices Act, which section appears in a part of the Trade Practices Act headed “Consumer Protection”:

“It is not to be forgotten that sec. 52 appears in that part of the Trade Practices Act concerned with consumer protection and in particular unfair practices that arise.  It is the policy of the legislature that trade and commerce will be made more competitive and free if conduct which is essentially unfair, misleading or deceptive or likely to mislead or deceive is prohibited.  Thus there is a public interest to be considered in proceedings based on section 52, which public interest is not present in ordinary inter partes common law actions in tort.”

26                  I accept that there is some aspect of public interest in proceedings based on s 52 and perhaps even more widely on other sections of the Trade Practices Act, including sections outside that part of the Act dealing expressly with consumer protection.  It seems to me, however, that while there is, in a sense, a public interest in kerbing the misuse of monopolistic power in the marketplace, so there is a similar public interest in seeing that people pay their just debts or in seeing that citizens do not negligently hurt others; but one would not ordinarily conclude that actions in contract or tort between private citizens is public interest litigation and, in my view, the present proceedings are not properly to be described as public interest litigation.  Also, it should be said, while I accept that there may be a number of people who have a keen interest in the outcome of the present application and in the fortunes of Tigers Mayne Australian Football Club, that does not mean that there is a relevant public interest in the litigation. 

27                  The crucial factor, as I early indicated, is that in my opinion this litigation is not being conducted “for the benefit of others”, and in particular for the committee members of the Tigers Mayne club or the 85 members of the applicant.  While they may have a genuine emotional attachment to the club and an emotional interest in its fortunes, this litigation is not being conducted for the purposes or the benefit of persons other than Tigers Mayne.

28                  The position here, it seems to me, is quite similar to that which was the subject of the judgment of Giles CJ in the Supreme Court of New South Wales in Rugby Union Players Association Inc v Australian Rugby Union Ltd, delivered on 30 July 1997.  The plaintiff in that case was an association incorporated pursuant to the Associations Incorporation Act 1984.  Membership was limited to those players of rugby union who had played senior representative rugby since 1994 for any one or more of a number of defendants, were contracted to one or more of the defendants in those proceedings for the purpose of playing rugby union at senior representative level, or were the captain of a first division club in either the Brisbane, Sydney or Canberra rugby union competitions.

29                  It was suggested in that litigation that the plaintiff was not suing for its own benefit and that for that reason Pt 53 r 2(1)(b) of the relevant rules permitted the making of an order for security for costs.  Giles CJ said at 12,13:

“For the purposes of Pt53 r2(1)(b) "benefit" is not confined to financial benefit (Andrews v Caltex Oil Australia Pty Ltd (1982) 60 FLR 261; Upton v TVW Enterprises Ltd (1984) 57 ALR 261).  The mere fact that someone other than the plaintiff will benefit from success in the proceedings does not satisfy the rule (for example, where a trustee is necessarily the plaintiff, see Riot Nominees Pty Ltd v Suzuki Australia Pty Ltd (1981) 34 ALR 653; but cf Greener v Kahn & Co (1906) 2 KB 374 , Semler v Murphy (1967) 2 All ER 185; Upton v TVW Enterprises Ltd).  Conversely, potential benefit to persons other than the plaintiff does not mean that the plaintiff himself is not suing for his own benefit.  So in Andrews v Caltex Oil Australia Pty Ltd in seeking relief which would benefit all members of an association the plaintiffs would also receive a commercial or financial benefit, and in Byron Shire Business for the Future Inc v Byron Shire Council (1994) 83 LGERA 59 an association of mainly local businesses seeking to strike down a development consent was held to be suing for its own benefit, not just that of its members, because it would achieve a furtherance of its objectives of preserving the environment and encouraging the success of local businesses.  Whether Pt53 r2(1)(b) is satisfied is a question of fact in the circumstances of each case.”

Having considered the circumstances in that particular case his Honour concluded at 14:

“In my opinion the first to fourth defendants have failed to establish that the plaintiff is not suing for its own benefit, and for that reason Pt53 r2(1)(b) does not avail them.”

His Honour thus declined to make an order for security for costs. 

30                  I accept that my declining to make an order for security for costs in this matter may have consequences for the first to fourth respondents, and in particular may as a matter of practical reality require the commitment of funds for which they may not be able to be recompensed, and which might otherwise be applied for the proper purposes of the first to fourth respondents including, perhaps, the provision of developmental officers for schools or junior footballers.  However, that circumstance is not such as to make it desirable that I make an order for security for costs, the ultimate effect of which would be to stifle this litigation.

31                  Had I been minded to order security for costs, there has been no objection taken to the evidence concerning the possible quantum of it.  Recognising that the security is not meant to be an indemnity for costs, I would be minded to make an order for security for costs in an amount of approximately $60,000.  For the reasons, however, that I have expressed, the motion seeking security for costs is dismissed.  Because the applicant in the principal proceedings has, for discretionary reasons, been successful on the motion, I order that the costs of the motion, including any reserved costs, be the costs of the applicant in the principal proceedings.

Associate:

Dated:              20 November 2000