FEDERAL COURT OF AUSTRALIA

Dranichnikov v Centrelink [2002] FCA 1622

COSTS – motion seeking security for costs in respect of appeal to Full Court – whether fact that applicants are extensive litigants is relevant to the question of whether security should be granted – prospects of success of appeal – whether fact that applicants have chosen not to pursue less costly avenue of merits review before Social Security Appeals Tribunal is relevant – ability of applicants to pay respondent’s costs of appeal if not successful on appeal

Federal Court of Australia Act 1976 (Cth), s 56

Administrative Decisions (Judicial Review) Act 1977 (Cth)

A New Tax System (Family Assistance) Act 1999 (Cth), s 21

Social Security Act 1991 (Cth), s 7(2)

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), ss 97, 101

Federal Court Rules, O 28, O 52 r 20

Arnold v Queensland (1987) 73 ALR 607, followed

Bates v Omareef Pty Ltd  [1998] FCA 536, cited

Cowell v Taylor (1885) 31 Ch D 34, followed

Tait v Bindal People [2002] FCA 322, cited

Wiest v Director of Public Prosecutions [1988] FCA 568, cited

Bethune v Porteous (1892) 18 VLR 493, cited

Ciappina v Ciappina (1983) 70 FLR 287, considered

Endormer Pty Limited (In Liquidation) v Australian Guarantee Corporation Limited [2001] FCA 510, cited

SERGEY DRANICHNIKOV and OLGA DRANICHNIKOV v CENTRELINK and BRIAN McKENNA

No Q 177 of 2002

SPENDER J

BRISBANE

20 DECEMBER 2002

THE COURT ORDERS THAT:

(1)       The respondents on the motion provide security for costs in a form satisfactory to the Registrar in the sum of $2000.

(2)       Unless that security is provided by 4pm Tuesday 11 February 2003, the application for leave to appeal be stayed.

(3)       In respect of the costs of the motion for security for costs, the applicants on the motion have their costs of the motion, to be taxed if not agreed.

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

REASONS FOR JUDGMENT

1                     This is a judgment in respect of an application by notice of motion for security for costs made by the respondents to an appeal that has been lodged by Sergey Dranichnikov and Olga Dranichnikov from judgements of Dowsett J of 25 October 2002 and 5 November 2002.  I give my reasons for ordering security for costs on the motion now, notwithstanding that Mrs Dranichnikov faxed to a Deputy Registrar of the Court a letter this morning which said:

“I refer to the judgement of the notice of motion of 13 December 2002 which was listed on 20 December 2002. 

At the hearing of 18 December 2002 his Honour Spender excused Sergey Dranichnikov not to be at the hearing of today.  Yesterday I had an urgent appointment with the doctor because of my kidney’s inflammation.  Unfortunately, today I am still sick and experience strong pain. 

In this regard, may I ask you to list the hearing for delivering judgement for any other day, suitable for his Honour. 

Thank you for your understanding this special situation.”

2                     Notwithstanding the desire of Mrs Dranichnikov to be present, or perhaps even her understanding that she was obliged to be present for the giving of judgment today, I think that I should give judgment, notwithstanding the matters referred to in the facsimile transmission from her.  No utility would be served by adjourning the giving of judgment, except increasing costs, and nothing requires the presence of either Mr or Mrs Dranichnikov in relation to it. 

3                     The notice of motion seeking security for costs was filed on 13 December 2002 by Centrelink as first respondent, and Brian McKenna as second respondent, in proceedings Q177 of 2002.  The orders sought were as follows:

1.                  That the applicants provide security for costs in such amount and within such time as the Court orders failing which the appeal herein is to stand dismissed.

2.                  The applicants pay the respondents’ costs of and incidental to the Motion.

3.                  The time for filing and serving this Motion be abridged.

4.                  Such further or other order as the Court deems fit.

4                     I heard submissions from the parties concerning that notice of motion on 18 December immediately after hearing a notice of motion where the applicants sought relief in relation to their appeal.  There was no inhibition created for Mrs Dranichnikov on behalf of herself and her husband in putting submissions to the Court on the question of security for costs, notwithstanding the short notice of the respondents’ motion for security.  I should also say that Mrs Dranichnikov eloquently and competently put submissions on the question of security for costs.  I will refer to those submissions in detail a little later. 

5                     Mr Murray Belcher on behalf of the applicants for security acknowledged that impecuniosity alone does not provide a basis for granting an order for security for costs, citing Arnold v Queensland (1987) 73 ALR 607.  The Full Federal Court in Arnold was concerned with an appeal, so called, from a decision of the Administrative Appeals Tribunal that certain documents were exempt.  Notwithstanding the matter was heard by a Full Court, it was an application in the original jurisdiction of the Court, and the question of security for costs on such an application is governed specifically by O 53, r 8(1) of the Federal Court Rules which empowers the Court in special circumstances to order, in relation to an appeal from the Administrative Appeals Tribunal, that such security for costs of appeal to the Court be given as it thinks fit and, subject to that special case, no security for costs is required.  In Arnold, Wilcox J said at 613:

“Rule 8(1) gives no guidance as to the nature of the special circumstances which will attract an order for security for costs.  No doubt the capacity of the applicant to pay any costs which may be ordered against him or her is always a relevant matter, but mere impecuniosity will not necessarily lead to an order for security: see Cameron Unit Services Pty Ltd v Whelpton & Associates (Aust) Pty Ltd [1986] ATPR 40-732. Care must be taken not to stifle an action which, in the interests of justice, ought to be determined on its merits.”

6                     Those opinions are apposite, particularly in circumstances where a party is seeking to have the Court exercise jurisdiction at first instance, as is the position where an application is brought as “an appeal” from the Administrative Appeals Tribunal.  The present proceedings involve an appeal in the appellate jurisdiction of the Court from a judgment of a single judge of the Court.  In those circumstances, regard has to be had to s 56 of the Federal Court of Australia Act 1976 (Cth) which relevantly provides:

“(1)  The Court or a Judge may order an applicant in a 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 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.

…

(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.”

7                     Order 28 of the Federal Court Rules relevantly provides: 

“2(1)   An application that an applicant shall provide security for costs shall be made by motion upon notice.

2(2)     The notice of motion shall be supported by an affidavit stating the material facts and the grounds upon which security for costs is sought.

3(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.”

Order 52 r 20 is the relevant Rule in respect of an appeal of the kind presently in question.  Order 52 r 20 provides:

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

8                     In relation to this matter, Hill J in Bates v Omareef Pty Ltd [1998] FCA 536 referred to the exception expressed in Cowell v Taylor (1885) 31 Ch D 34 that appeals are an exception to the general rule that poverty is no bar to a litigant who is a natural person.  I had occasion to refer to that position in a recent judgment of Tait v Bindal People [2002] FCA 322 on 20 March 2002.  [I should note that there is an incorrect reference in my judgment in that case to the judgment of Gummow J referred to in par [4].  It is not the reported judgment of Gummow J which bears on the question of security for costs, but an earlier limited distribution ex tempore judgment, unreported, of 5 September 1988 ([1988] FCA 568), which deals with two applications for security for costs: one from the judgment of Davies J and the second from the judgment of Pincus J.]

9                     In Wiest v Director of Public Prosecutions [1988] FCA 568, Gummow J referred to the old case of Bethune v Porteous (1892) 18 VLR 493, where Hood J observed at 494:

“In my opinion the reason underlying the numerous and varying cases in which appellants have been ordered to give security will be found in the injustice to a successful litigant that may be caused if he be compelled to contest the matter for a second time without a probability of obtaining his costs if ultimately successful.  No general rule can be laid down, as each case has to depend upon its own ‘special circumstances,’ but the foregoing principle has been frequently recognised as applying to appeals.  The respondent has obtained a judgment and has acquired what has been called a vested right; having fought his opponent once and defeated him, he ought not to be further vexed by being dragged from court to court to again litigate the same matter with an adversary who cannot compensate him for the extra costs incurred by so doing.”

10                  In Bates v Omareef, Hill J explained the effect of O 52 r 20 on the principle in Cowell v Taylor, noting that in light of the terms of r 20, there was no presumption that an order for security will be made against an appellant.  Hill J continued:

“Indeed, quite to the contrary, a costs 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.”

11                  In the present case, it is contended on behalf of the applicants for security, the respondents in the principal appeal, that there are four reasons why the interests of justice require an order for security for costs to be made in the circumstances of this case.  The first refers to the fact that both Mr and Mrs Dranichnikov are extensive litigants.  It is submitted that they, in proceedings below and in other proceedings, have demonstrated a propensity to take every point and to seek to appeal, delay or avoid any decision with which they do not agree, irrespective of whether there is any legitimate or meritorious basis for so doing.

12                  In respect of this matter, on 5 November 2002, Dowsett J ordered that:

(1)               The notice of motion dated 5 November be dismissed;

(2)                The application for review of the decision [by an Officer of Centrelink] referred to in par 1 of the amended application of 26 September 2002 be dismissed;

(3)                The application for review of the decision referred to in par 3 of the amended application dated 26 September 2002 be dismissed;

(4)               The amended application dated 26 September 2002 be dismissed;

(5)               Mrs Dranichnikov pay the respondent’s costs of these proceedings up to, and including, the hearing on 25 October 2002, including reserved costs;

(6)               Mr Dranichnikov pay the respondent’s costs of the hearing generally, including reserved costs; 

(7)               The total of the amount recoverable under orders 5 and 6 is not to exceed the amount of taxed costs properly allowable in respect of the proceedings generally.

13                  It is not irrelevant, in my opinion, to have regard to Dowsett J’s comments in the last paragraph of his reasons for judgment.  His Honour said:

“I wish to make a few observations with respect to the way in which these proceedings have been conducted.  Mr and Mrs Dranichnikov have repeatedly accused me of corruption, unfairness, rudeness and a variety of other weaknesses in the way in which I have conducted these proceedings.  It may be that I have not been as tolerant of Mr and Mrs Dranichnikov as I should have been or as they may have wished.  However I have no doubt that the proceedings have been conducted appropriately.  In my view, Mr and Mrs Dranichnikov have been determined from the outset, for reasons which I do not fully understand, to make sure that these proceedings took as long as possible.  Whether this has something to do with other proceedings in which they are involved I do not know.”

14                  The proceedings before Dowsett J involved an amended application under the Administrative Decisions (Judicial Review) Act 1977 (Cth), where the Dranichnikovs sought a review of a decision of an Officer of Centrelink made on 16 August 2002 to recover a debt of $5,180.99; the purported decision of a Centrelink Customer Officer made on 10 September 2002 that the Dranichnikovs were not eligible for any payments or concessions through Centrelink because they were not residents for Social Security purposes, and a decision of the second respondent, Brian McKenna, of 28 August 2002 to garnishee Mr Dranichnikov’s wages to recover the debt of $5180.99. 

15                  The first decision was a decision subject to a full merits review by the Social Security Appeals Tribunal (“the SSAT”).  Mr Dranichnikov applied to the SSAT for a review of that decision on 4 September 2002, but prior to the hearing by the SSAT he withdrew his application.  At issue in the proceedings before Dowsett J was the right of the respondent to recover the sum of $5180.99 paid to Mr Dranichnikov as a family tax benefit.  That right arose because it was contended by Centrelink that Mr Dranichnikov was not eligible to receive the payment in the first place. 

16                  Pursuant to s 21 of the A New Tax System (Family Assistance) Act 1999 (Cth) (“the Family Assistance Act), a person is only eligible for the family tax benefit if he or she is an Australian resident.  An “Australian resident” is defined to have the same meaning as in the Social Security Act 1991 (Cth).  Section 7(2) of the Social Security Act 1991 (Cth) defines “Australian resident” to mean a person who resides in Australia and is either an Australian citizen, the holder of a permanent visa, the holder of a special category visa who is likely to remain permanently in Australia, or the holder of a special purpose visa who is likely to remain permanently in Australia.

17                  Mr Dranichnikov is neither an Australian citizen nor the holder of a permanent, special category or special purpose visa.  Accordingly, so it was said, he was and is not entitled to the payment of a family tax benefit.  On 8 March 2001 a letter was sent to him advising him that he was ineligible for the family tax benefit as he was not a permanent resident of Australia.  Mr Dranichnikov sought review of that decision, and the decision was affirmed by an Authorised Review Officer of Centrelink.  Notwithstanding this finding, Mr Dranichnikov claimed entitlement to the family tax benefit in his taxation return for the 2001 financial year. 

18                  Dowsett J found that Mr Dranichnikov was not entitled to any benefit under s 21 of the Family Assistance Act.  The grounds of appeal, apart from raising questions concerning bias and unfairness on the part of the primary judge, seek to revisit the arguments which failed before the primary judge.

19                  Also relevant to the first submission advanced on behalf of the applicants for security as to why security for costs should be granted is the circumstance that the Dranichnikovs have been ordered to pay costs in many other proceedings, the details of which are set out in the affidavit of Shannon Railton filed 13 December 2002.  It is unnecessary here to set out those details, save to point out that they are orders for costs by various Full Courts of the Federal Court, by various judges at first instance of the Federal Court, by the Federal Magistrates Court and by the High Court.  It should also be pointed out, however, that Mrs Dranichnikov was successful in her appeal to a Full Federal Court in Q 36 of 2001, and as a result, the Minister was ordered to pay her costs in that matter and in the Court below, that matter being Q 89 of 2000.  Also, Mr Dranichnikov has been granted special leave to appeal by the High Court in B 96 of 2000, which is a matter to be heard in the High Court on 4 February 2003.  Notwithstanding those matters, however, there are a large number of costs orders which are owing and unchallenged at the present time. 

20                  The second factor on which the applicants for security for costs rely concerns the prospects of success in the appeal.  It was submitted that the appeal has been brought as part of the usual practice of the Dranichnikovs of refusing to accept adverse decisions.  It is, of course, invidious to assess the prospects of success in the absence of full argument, although it should be pointed out that the proposed appeal simply seeks to re-argue the points decided adversely to the Dranichnikovs below, with the addition of further complaints concerning the way that matter was conducted by Dowsett J.  I simply note that my impression, uninformed as it is by detailed argument, is that the prospects of success are not large.

21                  The third factor on which the applicants for security rely is that the Dranichnikovs have specifically chosen not to pursue the less costly and possibly more appropriate avenue of merits review before the SSAT. 

22                  The fourth matter raised by the applicants for security is uncontroversial.  It is that the Dranichnikovs are unlikely to be able to pay the respondent's costs of the appeal should that appeal not be successful.  In an affidavit filed by the Dranichnikovs, the couples’ income and expenses are set out.  It is plain that it is unlikely that the Dranichnikovs would be able to pay the respondent’s costs of the appeal should that appeal fail.  There is, in addition, the outstanding costs orders to which passing reference has been made, and it was not contended on behalf of the Dranichnikovs that they were other than impecunious.  In fact, that was the basis on which the application for security was primarily resisted.

23                  Having regard to the particular circumstances of this case to which reference has been made, it seems to me that this is a case where there would be an injustice to the respondents on the appeal if they were required to contest the same issues for a second time without the probability of obtaining their costs in the event that they are successful again. 

24                  In my opinion, on the question of whether security for costs should be granted, it is important to note the concession in the submissions on behalf of Centrelink that the two arguments put unsuccessfully to Dowsett J (namely that, having received the payment of the family tax benefit as a result of the information included in Mr Dranichnikov’s taxation return, the first respondent or its officers should not be entitled to recover such payment from him, or alternatively that the debt should be waived) could have been dealt with on a review by the SSAT.  The decision whether or not to waiver debt under either s 97 or s 101 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) is an exercise of discretion which might be thought better to be left to a Tribunal exercising de novo review than by the Court pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth).  The concession by the applicants for security is that, if security for costs were to be granted, there would be nothing to prevent the Dranichnikovs from pursuing SSAT review, although there would be questions of time limits and delay.

25                  It seems to me that the considerations observed by Hood J in the old case of Bethune v Porteous apply in this case and that, in the particular circumstance of this case, it would be unjust not to provide at least some security for the respondents to the appeal in the event that the appeal is unsuccessful. 

26                  As to the amount of security, the only information before me appears in the affidavit of Shannon Railton of 13 December 2002, where in par 10 she deposes:

“In relation to the current matter before the Court, it is likely that the respondent’s costs and disbursements will exceed $6,000.00 to defend the appeal.  This estimate is based on the hearing of the appeal taking half a day before the Full Court, there being a need to attend a call over, to attend an appointment to settle the appeal papers, to consider any appeal papers prepared, to brief counsel and to attend the hearing.”

27                  The position is just a little bit better than that referred to by Neaves J in Ciappina v Ciappina (1983) 70 FLR 287, where his Honour noted at 291:

“No material was placed before me by way of estimating the costs likely to be incurred by the respondent in contesting the appeal.  No skeleton bill of costs was, for example, provided and the court is left to form a view of what such costs are likely to be based on such knowledge as it has of the issues as disclosed by the reasons for judgment and the notice of appeal.”

His Honour had earlier observed on the principal question on security at 290:

“It is now well established that the impecuniosity of an appellant resulting in an inability to pay the costs of an appeal should that appeal not be successful amounts to a special circumstances justifying an order for security: Harlock v Ashberry (1818) 19 Ch D 84; Kardynal v Dodek [1978] VR 414.”

28                  His Honour noted at 291:

“… as Fullagar J said in Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 at 175:

‘... in ordering security for costs, the court does not set out to give a complete and certain indemnity to a respondent: see Aberdare & Plymouth Co v Hankey (1888) 32 SJ 644.  It is not, of course, to be assumed that the appellant will fail.’”

29                  There has been no detailed costing going beyond the “estimate” to which I have made reference.  I think that the order that I should make in this case is to fix the amount of security which should be provided at $2000.  That does not purport to be an indemnity or anything like it for the likely costs of the appeal.  It is, however, a sufficient deterrent to put the bona fides of the Dranichnikovs about the appeal to the test. 

30                  The motion sought security and, in the event of failure to provide it, that the appeal stand dismissed.  In that context, I am conscious of the observations of Beaumont J in Endormer Pty Limited (In Liquidation) v Australian Guarantee Corporation Limited [2001] FCA 510, where his Honour said:

“Taken literally, [s 56(1) of the Federal Court of Australia Act 1976 (Cth)] empowers a single Judge of the Court (even though, as in this case, that Judge will not be a member of the Full Court on the appeal) to order security for costs of the appeal. 

I made such an order in a case which bears some similarity to the present case in Cummings v Lewis, unreported, 4 December 1991.  The order in that case was in the usual form, that is to say, that unless, before a certain date, security for costs in the amount specified was provided, the proceedings on the appeal be stayed.  Such an order is, in my view, interlocutory both as a matter of form and substance.  In other words, in my view, a single Judge cannot exercise the appellant jurisdiction of the Court to dismiss an appeal in the event that security were not provided; or even to order a permanent stay of the proceedings on the appeal. 

            It must follow, in my opinion, that the jurisdiction of the Court should more properly be exercised by the Full Court assigned to hear the appeal itself in a case such as the present where there is a substantial contest on the question of whether or not security should be provided, and where the appellants invite a single Judge of the Court who will not be participating in the appeal itself, to embark upon and make findings about questions that will be agitated on appeal (such as the history of the dealings between the parties and considerations of the kind considered by Brennan J in Lucas v York (1983) 50 ALR 228).”

31                  Notwithstanding those observations, I think it appropriate to make the orders that I have indicated.  The orders of the Court on the motion seeking security for costs is that:

(1)       The respondents on the motion provide security in a form satisfactory to the Registrar in the sum of $2000.

(2)       Unless that security is provided by 4pm Tuesday 11 February 2003, the application for leave to appeal be stayed.

32                  I simply note that I have chosen 11 February 2003 because the Full Court callover for the May 2003 sittings is on Wednesday 12 February 2003. 

33                  In respect of the costs of this motion for security for costs, there seems to me to be no reason why the ordinary rule should not be applied, and the applicants on the motion have their costs of the motion, to be taxed if not agreed. 

Associate:

Dated:              24 December 2002