FEDERAL COURT OF AUSTRALIA

Ogawa v The University of Melbourne [2004] FCA 491

PROCEDURE  - application for security for costs – impecuniosity of applicant – circumstances in which an award for security for costs will be made against an impecunious applicant

Trade Practices Act 1974 (Cth) s 52

Federal Court of Australia Act 1976 (Cth) s 56

Logue v Hansen Technologies [2003] FCA 81, followed

P S Chellaram & Co Ltd v China Ocean Supply Co (1991) 102 ALR 321, referred to

Scargill v Minister for Immigration and Multicultural Affairs [2003] FCAFC 116, referred to

Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1, referred to

MEGUMI OGAWA v UNIVERSITY OF MELBOURNE

Q 136 OF 2003

MARSHALL J

26 APRIL 2004

MELBOURNE

THE COURT ORDERS THAT:

1.                  Paragraphs 1 to 4 of the respondent’s motion of 24 November 2003 be dismissed.

2.                  Costs reserved.

3.                  The substantive hearing be adjourned to a telephone directions hearing at 10.15 am on 4 May 2004 at which time the parties will be heard on whether the matter should be transferred to the Federal Magistrates Court.

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

REASONS FOR JUDGMENT

Background

1                     On 9 September 2003 the applicant, Ms Ogawa, applied to the Court for orders in respect of what she alleged to be contraventions of the Trade Practices Act 1974 (Cth) (“the TP Act”).  Ms Ogawa, in the alternative, in the accrued jurisdiction of the Court, sought damages for breach of contract and negligence.  Ms Ogawa commenced the proceeding in the Queensland District Registry of the Court.

2                     In her statement of claim, filed in the proceeding, Ms Ogawa alleged, amongst other things, that the respondent, The University of Melbourne (“the University”) had engaged in misleading and deceptive conduct with respect to her undertaking of a Doctor of Philosophy course at the University (“the course”).

3                     In an amended statement of claim, filed on 8 October 2003, Ms Ogawa contended that the University had breached s 52 of the TP Act.  She abandoned her claims made in the accrued jurisdiction of the Court.  On 24 November 2003 the University filed a defence in which it denied that it had breached s 52 of the TP Act.

4                     Also on 24 November 2003, the University filed a notice of motion seeking that the proceeding be transferred to the Victoria District Registry of the Court.  Amongst other relief, the University sought the following orders:-

“1.       The applicant provide security for the respondent’s costs of the proceeding, … in the manner and for the amount and on the terms which the Court considers appropriate, pursuant to Order 28, rule 3(1) of the Rules of Court and section 56 of the Federal Court of Australia Act 1976 (Cth).

2.      The applicant’s claims made in the proceeding against the respondent be stayed until such security has been given.

3.      If the applicant fails to provide such security as is ordered within the time limited in the order, the applicant’s claims made in the proceeding against the respondent be thereafter stayed.

4.      Liberty be reserved to the respondent to apply for further security for costs of the proceeding.”

5                     On 25 November 2003, Kiefel J ordered that the proceeding be transferred to the Victoria District Registry.  Her Honour adjourned the motion, in so far as it concerned the issue of security for costs, to a date to be fixed.  It is the adjourned portion of the motion filed on 24 November 2003 that is currently before the Court.  The issue for the Court to determine is whether Ms Ogawa should be ordered to provide security for the University’s costs as sought in the proposed orders.

Background facts

6                     Ms Ogawa is a citizen of Japan.  She was born in Japan on 24 October 1967.  In 1991 Ms Ogawa graduated in law from the Waseda University.  From 1991 to 1999 she was employed in Japan.  From 1996 to 1998 Ms Ogawa received relatively small amounts of income while engaged full time in a master’s degree.  She completed her master’s thesis in 1999 and held a full time paid position for a few months until coming to Australia.

7                     Ms Ogawa entered Australia on 24 November 1999 to commence studies for a Doctor of Philosophy degree (“PhD”) in the School of Law at the University of Queensland.  She entered the country as a holder of a student visa.  Apart from a few brief absences varying from between one week to three weeks, Ms Ogawa has remained in Australia since 1999.

8                     Ms Ogawa was able to study in Australia after receiving a Rotary Scholarship.  It was envisaged by Rotary that, at the end of her studies, Ms Ogawa would return to Japan.

9                     From 24 November 1999 to 5 December 2001 Ms Ogawa resided in Brisbane.  All but the first week of that time was spent (apart from a few brief overseas absences) at a university college in Brisbane.

10                  From 6 December 2001 to 26 November 2002, Ms Ogawa resided at “International House” near the University.

11                  On 27 November 2002, Ms Ogawa returned to Brisbane and commenced to live at “Women’s College” in St Lucia.  She has resided there ever since.

12                  Ms Ogawa transferred her PhD to Melbourne from Brisbane but was unable to complete it in the time allocated.  She had intended to work as a post doctorate research fellow at the University on the completion of her PhD.  For that purpose, she applied for an Australian Post Doctorate Fellowship but was unsuccessful in that application.

13                  Ms Ogawa returned to Brisbane after the University refused to extend the time in which she was able to complete her PhD.

14                  On 29 September 2003, a delegate of the Minister of Immigration and Multicultural and Indigenous Affairs cancelled Ms Ogawa’s student visa.  The reason for the cancellation was Ms Ogawa’s failure to maintain her enrolment in a registered course of study.  Ms Ogawa has applied to the Migration Review Tribunal for a review of the decision to cancel her student visa.  She remains in Australia as the holder of a bridging visa to enable her to be present to prosecute that review.

Impecuniosity – the evidence in summary

15                  Ms Ogawa owns no property in Australia or Japan and is not the director of any company.  She has only modest assets, including a computer and mobile telephone.  Ms Ogawa has relied on her savings, gained through employment in Japan, to support herself.  Additionally she relied on scholarship income, which ceased on 24 December 2002. Periodically, she has exchanged Japanese currency held by her, for Australian currency. Recently her supply of Japanese currency was exhausted.

16                  Ms Ogawa’s husband is employed as an academic at a Japanese University.  The marriage was entered into eight years ago.  Ms Ogawa is now reliant on her husband to send her money so that she is able to pay rent and survive.  Ms Ogawa’s husband rents his premises in Japan and is not wealthy.  Ms Ogawa would be unable to look to him to support her if she was required to pay any significant sum by way of security for costs.  Ms Ogawa’s husband is in receipt of a modest income and is unlikely to be able, in any event, to pay security for costs, even at the lower level sought by the University, that is, $65,000.  On the other hand, there is evidence that Ms Ogawa’s husband has assisted in the funding of Ms Ogawa’s tuition at the University.

17                  There are doubts about whether Ms Ogawa is truly impecunious, but those doubts do not lead the Court to consider that she is capable of bringing in sufficient funds to meet any security for costs for thousands of dollars.  The doubts spring from Ms Ogawa telling the Court at a telephone mention that she could not afford an airplane booking to Melbourne from Brisbane and return in the sum of $400, when, it subsequently transpired in evidence, that at the time she did have the money.  However, I accept her explanation that she had factored in that sum towards her next payment of rent.  It would have been better had her explanation at mention for not affording to come to Melbourne been a fuller one.  In the end the Court convened a video hearing for the day, without Ms Ogawa thereby incurring any expense.  The Court originally expressed its reluctance to have a video hearing of the motion given the likelihood, which did eventuate, that Ms Ogawa would be cross-examined.

18                  Aspects of Ms Ogawa’s cross-examination lead the Court to suspect that she may not have been candid with it about her financial circumstances.  On balance, I accept the explanation from her pro bono counsel that she did not include a fulsome account of her income in her affidavit as a consequence of being a litigant in person, preparing affidavit material without the benefit of an Australian lawyer.

Ordinarily resident outside Australia – the evidence in summary

19                  Ms Ogawa gave evidence that if she failed in her attempt to regain her student visa, and was required to return to Japan, she would reside in Japan with her husband.  Ms Ogawa did not dispute that, as a Rotary Scholarship holder, she was expected to return to Japan at the completion of her PhD.  However, she stated that she later intended to stay on in Australia to do post doctorate work.

20                  Ms Ogawa has ordinarily resided in Australia for the last four and a half years.  She has expressed an intention to continue to reside in Australia at least to complete her PhD and perhaps, notwithstanding an initial rejection, do post-doctorate work in Australia.

21                  It is not clear, on the evidence, whether Ms Ogawa intends to stay in Australia on a long term basis or return to Japan to be with her husband.  Understandably, she was reluctant to give evidence about the nature of her relationship with her husband or about whether they were estranged.  It is sufficient for the Court to observe that Ms Ogawa would like to remain in Australia, at least in the medium term, and that if she was unable to do so she would return to Japan and reside with her husband.

The Statutory Context

22                  Section 56 of the Federal Court of Australia Act 1976 (Cth) (“the Act”) 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.

(3)       The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.

(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.”

Order 28 rr (3), (4), (5) of the Rules of Court provide

“3       (1)        When considering an application by a respondent for an order for security for costs under section 56 of the Act, the Court may take into account the following matters:

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

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

(c)        subject to subrule (2), that the address of the applicant is not stated or is incorrectly stated in the originating process;

(d)        that an applicant has changed address after the commencement of the proceeding in an attempt to avoid the consequences of the proceeding.

(2)       The Court shall not order an applicant to give security by reason only of paragraph (1) (c) if it appears to the Court that the failure to state his address or the mis-statement of his address was made without intention to deceive.

(4)       Where the Court orders an applicant to give security for costs, the security shall be given in such manner, at such time, and in such terms (if any), as the Court may by order direct.

(5)       (1)        Where the Court orders that the applicant provide security for costs, it may order:

(a)        that the proceeding on any claims by the applicant for relief be stayed until security is provided; or

(b)        that if the applicant fails to comply with the order to provide security within the time limited in the order, the proceeding be thereafter stayed or dismissed.

(2)        Subject to subrule (1), the Court may set aside or vary any order made under this Order.

(3)        Where a proceeding stands dismissed pursuant to an order under this Order, that order shall not be set aside or varied except in special circumstances.”

Ordinarily resident outside Australia – consideration

23                  The usual practice of the Court is that a party who is not ordinarily resident in Australia or has little assets here is normally ordered to give security for costs:  see Logue v Hansen Technologies [2003] FCA 81, (2003) 125 FCR 590 at [38], per Weinberg J.

24                  In Logue,Weinberg J [at 39] referred to the observations of McHugh J in P S Chellaram & Co Ltd v China Ocean Supply Co (1991) 102 ALR 321 at 323 that:

“... for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.”

25                  Factors which point towards Ms Ogawa not being ordinarily resident in Australia are:

• her Japanese citizenship;
• her marriage to a Japanese national, with an expressed intention to return to him if required to leave Australia;
• her return to Japan, since entering Australia in 1999, on four separate occasions;
• her husband’s funding of her current living expenses in Australia;
• her status in Australia as the holder of a bridging visa;
• the expectation implicit in her being the recipient and holder of a Rotary Scholarship that she return to Japan after completion of her PhD;
• her failure to complete her PhD or be accepted for post-doctorate work; and

·        her lack of assets in Australia.

26                  Factors which point in the opposite direction are:

• her residence in Brisbane and Melbourne for four and a half years;
• her desire to complete her PhD in Australia;
• her desire to do post-doctorate work in Australia; and
• her lack of assets in Japan.

27                  It will always be a matter of fact and degree whether a person will be considered to be ordinarily resident or not ordinarily resident in a place:  see Scargill v Minister for Immigration and Multicultural Affairs [2003] FCAFC 116.

28                  On balance, the evidence before the Court supports the view that Ms Ogawa is ordinarily resident in Japan and that her ties with her country of citizenship transcend the historical. However, given the Court’s view about Ms Ogawa’s impecuniosity, it is not necessary to make a firm finding on this aspect of the motion.

Impecuniosity– consideration

29                  The Court approaches the issue of impecuniosity on the assumption that Ms Ogawa is not ordinarily resident in Australia.

30                  In Logue, the applicant in the proceeding could not point to any countervailing circumstances which would overcome the weight of the circumstance that O 28 r 3(1)(a) applied:  see Logue at [40].

31                  In the instant circumstances, Ms Ogawa contends that she has a reasonable prospect of success in the proceeding and that she would be forced to abandon it if a security for costs order is made.

32                  It is inappropriate to embark upon the exercise of considering the prospects of success of the substantive application.  In written submissions filed with the Court by the University it is submitted that the substantive application is devoid of merit.  Ms Ogawa contends to the contrary.  I agree with the observations of Weinberg J at [46] and [47] in Logue, where his Honour said:

“It would also be inappropriate, in my opinion, in a case of this kind, for a judge who will ultimately have to determine the outcome of such a proceeding to make findings based solely upon the pleadings, as to the likelihood that the applicant will ultimately succeed. The position might well be different if the application for security for costs were heard by a registrar (which cannot be done insofar as reliance is based upon s56), or a different judge, and there was some evidence before the Court which enabled an assessment of the prospects of success to be made. There is a useful discussion of this issue by Hill J in Equity Access at 50,636.

It follows that I do not propose to embark upon the task of expressing an opinion as to the applicant’s prospects of success, and nothing that I have said should be regarded as indicating, in any way, what I consider the likely outcome of the principal proceeding to be.”

33                  The parties have debated, in written submissions, the merits of the case as pleaded.  As the University has foreshadowed a pleading motion, it is inappropriate that the Court engage in an examination of the prospect of success of the application based on the current pleadings.  That is especially so in light of Ms Ogawa’s foreshadowed desire to seek leave for a further amendment of the statement of claim.

34                  It remains for the Court to consider whether the prospect that Ms Ogawa would be forced to abandon the proceeding is a realistic one or not.

35                  The University contends that the Court should not accept Ms Ogawa’s bare assertion that she would lack the resources to continue the proceeding if the Court made the order sought by the University.  The University points to the fact that Ms Ogawa’s husband assisted in the funding of the tuition fees at the University and that there is no evidence before the Court concerning the assets or funds of her husband.

36                  The University relies upon the judgment of the Full Court in Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 where at 4 the following appears:

“In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts.”

37                  In the instant case, Ms Ogawa is the only person who will benefit from the litigation.  It is only her assets that are relevant.  There is no evidence that her husband generally stands behind her for the purpose of this litigation.  In any event the University did not contend that Ms Ogawa’s husband stood to benefit from the litigation.

38                  Generally the Court, in the exercise of its wide discretion on the question of security for costs will not order an impecunious natural person to give such security:  see Fletcher v Federal Commissioner of Taxation (1992) 37 FCR 288 at 291, per Hill J.

39                  In Barton v Minister for Foreign Affairs (1984) 2 FCR 463, Morling J made a security for costs order in favour of the respondent in the sum of $2,000 in circumstances where the applicant was impecunious and ordinarily resident in the United Kingdom.

40                  His Honour was reluctant to make an order which would shut the applicant out of his case but considered that justice would be done by making an order for the provision of security in a sum approximate to the respondent’s costs of registering a judgment in the United Kingdom.

41                  The parties provided no evidence to his Honour on the costs of registering such a judgment but Morling J considered that the “most generous estimate would not exceed $2,000.”

42                  In Barton the applicant was seeking employment in London and, therefore, perhaps his Honour viewed a sum of $2,000 as not being one which would impede the trial from continuing.  In the instant matter, an order for security for costs for the sum of the approximate cost of registering a judgment in Japan, even for $2,000, would be one which would stifle this litigation.  This is especially so given that Ms Ogawa is unable to work due to employment restrictions attached to her bridging visa.

Conclusion

43                  On the material before the Court, the better view is that any order for security for costs would stifle the litigation as a consequence of Ms Ogawa’s impecuniosity.  On balance, the circumstance of Ms Ogawa’s impecuniosity outweighs the great weight that would ordinarily attach to the assumption that she is not ordinarily resident in Australia, combined with the firm finding that she has no assets here.  In summary, the Court is reluctant, in the exercise of its broad discretion under s 56 of the Act, to shut out an impecunious applicant from advancing her case.

Progress of the matter

44                  As the matter before the Court came into this Registry in a part heard state, the Court considered that it should deal with the matter before seeking the views of the parties about possible transfer to the Federal Magistrates’ Court.  That Court has the jurisdiction to deal with claims under the TP Act in which damages of less than $200,000 are sought.  The Court is unable to perceive that damages in that sum are sought in this proceeding.  Consequently as well as making orders dealing with the matter, the Court will require the parties to address it at the next telephone directions hearing on whether the matter should be transferred to the Federal Magistrates Court.  In that regard, the attention of the parties is directed to O 82 of the Rules of Court.

45                  The Court will order as follows:

1.   Paragraphs 1 to 4 of the respondent’s motion of 24 November 2003 be dismissed.

2.   Costs reserved.

3.   The substantive hearing be adjourned to a telephone directions hearing at 10.15 am on 4 May 2004 at which time the parties will be heard on whether the matter should be transferred to the Federal Magistrates Court.

Associate:

Dated:              26 April 2004