FEDERAL COURT OF AUSTRALIA

Nendy Enterprises Pty Ltd v New Holland Australia Pty Ltd [2002] FCA 550

PRACTICE and PROCEDURE – application for an extension of time within which to appeal against an order for security of costs – appeal from interlocutory orders – order for security of costs against a representative party

Federal Court of Australia Act 1976 (Cth) Part IVA, ss 56, 431A

Woodhouse v McPhee (1997) 80 FCR 529 cited

Ryan v Great Lakes Council (1998) 154 ALR 584 cited

Ryan v Great Lakes Council (1998) 155 ALR 447 referred to

Tobacco Control Coalition Inc v Phillip Morris (Australia) Ltd [2000] FCA 1004 referred to

Nendy Enterprises Pty Ltd v New Holland Australia Pty Ltd [2001] FCA 582 referred to

House v The King (1936) 55 CLR 499 cited

Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1980) 31 ALR 232  cited

NENDY ENTERPRISES PTY LIMITED v NEW HOLLAND AUSTRALIA PTY LIMITED

N1149 OF 2001

TAMBERLIN J

SYDNEY

10 MAY 2002

THE COURT ORDERS THAT:

1.         The application is dismissed.

2.         The applicant pay the respondent’s costs.

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 filed on 19 February 2002 by the applicant, Nendy Enterprises Pty Limited (“Nendy”), seeking an extension of time to appeal from two interlocutory orders of Whitlam J given on 6 November 2001 and 19 December 2001, requiring Nendy to provide security for costs in an amount of $50,000.  The application also seeks leave to appeal from the orders to provide security.

2                     The proceedings are in the form of a representative action filed pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth) (“the FCA”) in which Nendy has been selected as the representative party.

3                     There was no application for leave to appeal lodged against the primary decision of Whitlam J to order security for costs which was made on 6 November 2001 until the present application of 19 February 2002 almost three months after his Honour’s judgment.  The time limit for an application for leave to appeal from an interlocutory judgment is seven days from the date of the order: see O 52 r 10(2) of the Federal Court Rules (“the FCR”).  The application dismissed by Whitlam J on 19 December sought to revisit the earlier application.

4                     Nor was any application made to seek leave to appeal from this latter decision until the present application.  Under s 56 of the FCA, the Court has a broad, general discretion as to an order for security for costs, which must be exercised judicially. 

5                     The only evidence relied on before me in an attempt to explain the substantial delay by Nendy was the affidavit of Mr Long, filed on 21 February 2002, the solicitor for Nendy.  No explanation is given for the substantial delay in seeking leave to appeal within the required time from the decision of 6 November, except unawareness of the provision and the pursuit of possible alternative measures.  Nor is any satisfactory explanation proffered in relation to the delay in seeking an extension of time after the decision of 19 December 2001.  There is simply a bald assertion that “due to harvesting commitments” Mr Long was unable to obtain instructions from the principal of Nendy and that if security were required the proceedings would be permanently stayed because Nendy would not have sufficient funds.  However, this is a matter of bald assertion on hearsay evidence without any specific circumstances being raised or details provided as to the financial position of Nendy.

6                     The respondent on the other hand does not claim any particular prejudice if time were extended but submits that the explanation given is inadequate and that the prospects of a successful application for leave to appeal on the interlocutory question of security for costs are slight.  It is apparent, on the other hand, that if the respondent does not obtain an order for security for costs, then it may well suffer considerable hardship if it is eventually successful and cannot recover its costs. It is evident that substantial costs will be involved in the preparation of the case and the hearing.

7                     I should also record that there is no submission before me that there is no arguable case on the substantive issues sought to be raised in the principal proceedings.

8                     Nendy is a corporation.  There is no statement before me as to its financial circumstances except that it would be unable to meet the order for security for costs of $50,000.  This indicates that it is not a company of great financial substance and the likelihood appears to be that it would not be able to meet any order for costs, if eventually made at the conclusion of the substantive proceedings.  Notwithstanding this, Nendy contends that, because the proceeding is in the nature of a representative action, special considerations therefore apply.

9                     I have been referred to earlier decisions of the Court in Woodhouse v McPhee (1997) 80 FCR 529 at 531-534 per Merkel J, whose remarks were applied in Ryan v Great Lakes Council (1998) 154 ALR 584 at 587 per Wilcox J.  In a later decision, (1998) 155 ALR 447 at 456, Lindgren J after reviewing the authorities concluded in relation to the above decisions:

“The decisions of Merkel J and Wilcox J are not decisions that a representative party in a proceeding under Part IVA can not, in any circumstances, be ordered to provide security.  It is not appropriate to seek to identify, and therefore to limit, the situations in which such an order might be made.  It might, however, be found useful in some cases to inquire whether security would have been ordered if separate actions had been brought by the group members.  If the group members or some of them were impecunious companies or persons ordinarily resident outside Australia and a ‘person of straw’ had been deliberately chosen to be the representative party, it might be appropriate to order that the representative party provide security and that the proceeding be stayed until the security was provided.”

10                  These observations were recently applied by Wilcox J in Tobacco Control Coalition Inc v Phillip Morris (Australia) Ltd [2000] FCA 1004 at [74] where his Honour said:

“There is no question as to the power of the Court to order that TCCI, as applicant in the proceeding, provide security for the respondents’ costs and that, in default, the action be stayed or dismissed.  There are powerful arguments in favour of taking that course: TCCI is admittedly impecunious and unlikely to be able to meet any costs order that might eventually be made against it.  Although the action is a representative proceeding …brought for the benefit of group members who have the general immunity in respect of costs conferred by s 43(1A) of [the FCA], that circumstance does not preclude the making of a security order, especially bearing in mind that the proceeding has been structured so as to immunise from costs orders the organisations whose officers control TCCI.  I do not accept Mr Francey’s suggestion that the applications for security were left to late.  The applications were foreshadowed at the first directions hearing after delivery of the Statement of Claim, and were made in accordance with a timetable then laid down.”

11                  In the present case it is evident from the reasons of Whitlam J in Nendy Enterprises Pty Ltd v New Holland Australia Pty Ltd [2001] FCA 582 at [4] that Nendy was selected as the appropriate representative party on a basis which gave rise to some concern on the part of his Honour, and this was a factor which was considered by him to be important.  The indications are that it may have been deliberately selected as an impecunious representative party.  In any event, the important fact is that on the evidence before me, Nendy does not appear to be a corporate entity of any significant financial substance.  This is of significance bearing in mind the provisions of s 43(1A) of the FCA which limits the power of the Court to award costs against any party except the representative party.

12                  It is important to bear in mind in this proceeding that this is an interlocutory matter and that it is under the case management by Whitlam J and that his Honour has had the opportunity of considering the question of security on two separate occasions.  Moreover, his Honour, in the exercise of his discretion, has heavily discounted the quantum of costs asserted to be appropriate as to security by the respondent.  Furthermore, the decision of his Honour was both discretionary and interlocutory. In relation to both these aspects, the courts do not set aside decisions without material error being shown in the exercise of a judge’s discretion: see House v The King (1936) 55 CLR 499 and Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1980) 31 ALR 232 at 235 and 252.

13                  I am not persuaded in the present case that sufficient doubt has been raised as to the correctness of his Honour’s decision to order security for costs so as to warrant the grant of an extension of time on the limited material before me.  I should add that Nendy has now had close to five months on which to adduce evidence on this application since the original order was made but has failed to provide any satisfactory or sufficient evidence in my opinion.

14                  Counsel submitted that considerations of “public interest” support the application for grant of an extension of time because the law is unclear as to whether the principles adverted to in Woodhouse and Ryan apply where the representative party is a relatively insubstantial corporation.  In this case it is not necessary for me to determine this broad issue and in my opinion this submission as a basis for grant of extension of time has no substance. I would add that there is no evidence before me to warrant a conclusion that any impecuniosity of Nendy was caused by the causes of action which are complained of in the present case.

15                  For the above reasons the application for an extension of time is dismissed with costs and consequently no order will be made as to the grant of leave and I so order.

Associate:

Dated:              10 May 2002