FEDERAL COURT OF AUSTRALIA

Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd [2004] FCA 1334

APPEALS – security for costs – impecunious appellant – self represented – extensive notice of appeal – wide ranging factual challenges – lengthy and expensive hearing – costs unlikely to be recovered – costs of trial at first instance unlikely to be recovered in any event – principles governing discretion – security for costs ordered

Trade Practices Act 1974 (Cth)

Federal Court of Australia Act 1976 (Cth) s 56

Federal Court Rules O 28, O 52

Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd  [2004] FCA 853 cited

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 cited

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

Cowell v Taylor [1885] 31 Ch D 34 cited

Bethune v Porteous [1892] 18 VLR 493 cited

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

Paton, S v Campbell Capital  Ltd  [1993] FCA 449 cited 

J & M O’Brien Enterprises Pty Ltd v The Shell  Company of Australia Limited (No 2) (1983) 70 FLR 261 cited

Lucas v Yorke (1983) 50 ALR 228 cited

Cummings, JB  v Lewis, MT & Ors [1991] FCA 772  cited

Endormer Pty Ltd (In Liq) v Australian Guarantee Corporation Ltd [2001] FCA 510 cited

KAREN CAREY-HAZELL v GETZ BROS & CO (AUST) PTY LIMITED, PETER THOMPSON and TREVOR NICHOLLS

W176 OF 2004

FRENCH J

15 OCTOBER 2004

PERTH

THE COURT ORDERS THAT:

On the First Respondent’s amended motion filed in Court 28 September 2004 and the Second and Third Respondents’ motion filed 26 August 2004:

1.         The appellant is to provide security for the first respondent’s costs of the appeal in the  amount of $75,000 and for the second and third respondents’ costs of the appeal in the further amount of $75,000 by way of bank guarantees on the terms set out in the attached schedule or such other terms as may be agreed to respectively by the first respondent and by the second and third respondents.

2.         The appeal be stayed until such security has been provided or until further order.

3.         The respondents have liberty to apply for further security for their costs of the appeal on 7 days’ notice.

4.         The appellant have liberty to apply to reduce the security for costs of the appeal on 7 days’ notice.

5.         The appellant is to pay:

            (a)        the first respondent’s costs of its motion;

            (b)        the second and third respondents’ costs of their motion.

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

SCHEDULE

At the request of Karen Carey-Hazell, [name of bank] (‘the Bank’) guarantees payment to .......................... up to a maximum of $75,000 (‘the Maximum Amount’) in respect of any order for costs against Ms Carey-Hazell in proceeding number W176 of 2004 – Karen Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd & Ors (‘the Proceedings’) in the Full Federal Court of Australia, Western Australian District Registry (‘the Court’).

The Bank irrevocably undertakes to pay the [  ] Respondent(s) upon receipt of a written demand from the solicitors on the record for the [  ] Respondent(s) attaching:

1.         a sealed copy of an order quantifying the amount of costs payable by Ms Carey-Hazell to the [ ] Respondent(s) issued by, or entered with, the Court in the Proceedings; or

2.         an original letter from the solicitors on the record for the [  ] Respondent(s), which is on the firm’s letterhead and signed by a partner of that firm, certifying that an agreement has been reached between Ms Carey-Hazell and the [  ] Respondent(s) about the quantum of costs payable by Ms Carey-Hazell to the [ ] Respondent(s) in the Proceedings and specifying the amount agreed; or

3.         an original written agreement between and executed by Ms Carey-Hazell and the [ ] Respondent(s) agreeing and specifying the quantum of costs payable by Ms Carey-Hazell to the [ ] Respondent(s) in the Proceedings,

such amount as is quantified in paragraphs 1, 2 and 3 up to the Maximum Amount, such payment to be made without reference to Ms Carey-Hazell and despite any notice given by Ms Carey-Hazell or any other party to the Bank not to make the payment.

REASONS FOR JUDGMENT ON MOTION FOR SECURITY FOR COSTS

Introduction

1                     On 6 July 2004, a judge of this Court dismissed a claim brought by Karen Carey-Hazell against the Australian distributor of the St Jude Medical mechanical mitral heart valve and against a cardiologist and surgeon.  Ms Carey-Hazell had undergone an operation which involved the implantation of the mechanical valve.  The implantation was not successful.  Over a period she subsequently suffered from blood clotting and a stroke.  The valve was eventually removed and a pig tissue valve inserted.  Such a valve is not as long lived as the mechanical valve.  Ms Carey-Hazell claimed that the mechanical valve was defective and that she had been given wrong advice by her doctors relating to the risks of the procedure. 

2                     She now seeks to appeal against the decision dismissing her application.  She is presently legally unrepresented and has filed a substantial notice of appeal raising a large number of challenges to findings of fact made by the trial judge.  The distributor and the doctors have applied to the Court for an order that Ms Carey-Hazell provide some security for the costs of the appeal in the event that she is unsuccessful.

3                     For the reasons that follow, I am satisfied that given the nature of the appeal that she has lodged it is appropriate that she provide some security for the costs of the appeal.  In the event that the grounds of appeal are narrowed and the likely costs and duration of the appeal reduced, she will have liberty to apply to vary the orders which are now made.

Factual Background

4                     Karen Carey-Hazell, who is 42 years of age, has suffered, since aged 13, with Barlow’s Syndrome which involved a partial prolapse of the mitral valve of her heart.  On 20 June 1996 she underwent surgery at Sir Charles Gardiner Hospital in Perth.  Her mitral valve could not be repaired and a mechanical valve manufactured by St Jude Medical Inc, a United States based company, was implanted.  Getz Bros & Co (Aust) Pty Ltd (Getz) distributes the St Jude medical valve in Australia.  Ms Carey-Hazel’s cardiologist was Dr Peter Thompson.  The surgeon who carried out the operation was Dr Trevor Nicholls. 

5                     Post-operatively, Ms Carey-Hazell suffered some blood clotting and infarcts to the spleen and left kidney.  In March 1997 she suffered a mid brain stroke.  Following a review of her case by a conference of specialists the mechanical valve was removed and a porcine tissue value was implanted. 

6                     On 13 March 2001, Ms Carey-Hazell commenced proceedings in this Court against Getz and Drs Thompson and Nicholls.  She asserted causes of action:

1.         Against Getz as deemed manufacturer pursuant to s 74A(4) of the Trade Practices Act 1974 (Cth) asserting – its liability for defective goods pursuant to s 75AD of the Trade Practices Act, breach of the requirement that the goods be reasonably fit for their purpose and for common law negligence.

2.         Against Dr Thompson – claiming he was negligent in failing to warn her of material risks associated with the operation.

3.         Against Dr Nicholls – claiming he was negligent for failing to warn her of material risks associated with the operation.

7                     Ms Carey-Hazel said she had suffered a range of injuries as a result of the implantation of the mechanical valve.  These included splinter haemorrhages, kidney and spleen infarcts, stroke, occluded left vertebral artery and partially occluded right vertebral artery, loss of life expectancy, scarring to the heart, permanent visual injury and pericarditis.  She claimed damages for pain and suffering and loss of enjoyment of life and loss of her expectation of life.  She also claimed economic loss based upon the loss of her opportunity to earn income as an Investment Development Manager with her brother’s company, Westpoint Pty Ltd (Westpoint).  She said the net past value of her lost opportunity was $1,466,000 based upon an annual pre-tax remuneration of $500,000.  Her future loss after contingencies was said to be between $4,087,747.60 and $4,289,517.70. 

8                     The trial of the action proceeded before Kiefel J.  It occupied 13 hearing days in February 2004.  On 6 July 2004, Kiefel J delivered judgment – Carey-Hazell v Getz Bros & Co (Aust) Pty Ltd  [2004] FCA 853.  She dismissed the application and ordered that Ms Carey-Hazell pay the respondents’ costs, including costs reserved.  The reasons for judgment were comprehensive and lengthy, occupying some 78 pages. 

9                     In the concluding paragraph of the judgment her Honour said (at [272]):

‘The applicant has been unable to establish liability in any of the respondents.  So far as concerns the first respondent it has not been shown that the St Jude Medical valve was defective or unfit for its known purpose.  The first respondent did not otherwise breach a duty of care owed to the applicant under the common law, assuming that such a claim remains open to her.  The necessary advices about the prospect of a prosthetic valve being necessary, the risks associated with it and the need for a lifetime regime of anticoagulant drugs were provided by the second or third respondents.  If it was necessary to advise the applicant of the alternative of a tissue valve, the third respondent did so.  The applicant was therefore sufficiently informed.  In any event I do not accept that she would have elected to have a tissue valve and not a mechanical valve.  Almost all of the applicant’s present symptoms and inability to work are caused by her pre-existing conditions.  Had she established liability her damages would be limited.’

On the latter point Kiefel J found that Ms Carey-Hazell’s inability to undertake many activities and household tasks and her inability to work were not causally connected to the effects of the post-operative stroke.  Her Honour said (at [263]):

‘The symptoms which render her unable to  work and enjoy life are largely pre-existing conditions of either undetermined cause or attributed to her migraine condition.  To those symptoms need to be added the effects of the injuries to the applicant’s neck and back from the motor vehicle accidents.’

10                  In relation to pain and suffering, her Honour would have assessed the applicant’s damages at $40,000.  She referred to pain and suffering caused by thromboembolic events which required hospitalisation on two occasions and incurred considerable anxiety upon their occurrence.  Her Honour found that although Ms Carey-Hazell had made a good recovery from the stroke she might experience more severe diplopia and experience it more often.  Her balance was mildly impaired.

11                  As to the claimed economic loss, her Honour said (at [265]):

‘It follows from my findings as to the extent of the injuries suffered by the applicant as a result of the thromboembolic events, and what causes her inability to work, that she has not suffered any substantial loss of earnings or earning capacity.  The infarcts and stroke resulted in hospitalisation and required a period for recovery in which time the applicant was not able to work.  That work was however limited to ten hours per week for her husband’s firm.  The applicant now undertakes that work and also works for her brother’s company for about the same number of hours.’

Her Honour found no basis for attributing Ms Carey-Hazell’s limited earning capacity to problems arising from the implant of the St Jude medical valve.  She rejected her claim that she would have been able to earn in the order of $500,000 as the Investment Development Manager for her brother’s company. By reference to figures used in earlier unrelated litigation her Honour assessed the amount that Ms Carey-Hazell would have earned  at $50,000 per annum. 

12                  On 27 July 2004, Ms Carey-Hazell’s then solicitors, Wojtowicz Kelly, filed a Notice of Appeal from the judgment of Kiefel J.  On 6 August 2004, Getz filed a notice of motion seeking security for the costs of the appeal.  The two doctors followed suit on 26 August 2004.  On that day Ms Carey-Hazell filed a notice indicating that her solicitors had ceased to act and that she was thereafter representing herself.  The motions for security for costs of the appeal were adjourned to 28 September.  Getz filed an amended motion on that date increasing the amount of the security sought.  Argument proceeded on affidavit evidence from all sides and judgment on the motions was reserved until today.

13                  Ms Carey-Hazell filed an Amended Notice of Appeal on 10 September, a Further Amended Notice of Appeal on 15 September and a Further Reamended Notice of Appeal on 20 September.  I approach the motions on the basis that the grounds of appeal are as set out in the latter document. 

The Further Reamended Notice of Appeal

14                  The Further Reamended Notice of Appeal filed by Ms Carey-Hazell is 36 pages long and contains 32 grounds of appeal with over 130 subparagraphs.  In summary the grounds are as follows:

1.         The trial judge erred in finding that a chip in the mechanical valve occurred during a post-explantation examination.

2.         The trial judge wrongly excluded evidence of similar incidents demonstrating failures in the manufacturer’s quality control processes.

3.         The trial judge wrongly dismissed the appellant’s motion for leave to issue a subpoena to St Jude Medical and wrongly refused to adjourn the trial.

4.         The trial judge failed to give sufficient consideration to the effect of certain evidence on the credibility of Getz.

5.         The trial judge erred in finding that Getz had established an affirmative defence under s 75AK(1) of the Trade Practices Act.

6.         The trial judge erred in construing the words ‘because of’ in s 75AD of the Trade Practices Act as referring to a ‘common law practical or common sense concept of causation’.

7.         The trial judge erred in finding that the appellant had failed to establish that her infarct came about because of a chip on the valve.

8.         The trial judge erred in rejecting as unreasonable the observation that a thrombus first develops or develops to a greater extent in the hinge area of the valve. 

9.         The trial judge erred in finding that observations of the valve after it had been explanted contradicted the proposition that a thrombus on the valve developed because of the chip.

10.       The trial judge erred in finding that the appellant’s claim under s 74B of the Trade Practices Act was not made out because that finding relied upon her Honour’s findings as to the presence of a chip on the valve at the time of supply and as to whether it could be regarded as causative of the appellant’s thromboembolisms. 

11.       The trial judge erred in rejecting the appellant’s common law claim that Getz breached its duty by supplying a heart valve that was not fit for the purpose. 

12.       The trial judge erred in finding that the appellant did not and could not allege that the failure of the valve manufacturer’s booklet to warn of thromboembolism was causally connected to the injuries she sustained.

13.       The trial judge erred in ruling that certain parts of an expert report were inadmissible.

14.       The trial judge denied the appellant natural justice in the use she made of a viewing of the mechanical valve during the trial.

15.       The trial judge erred in finding that the appellant was not entitled to be warned by the doctors about the rate of risk of thromboembolism developing on the valve. 

16.       The trial judge erred in finding that it was not necessary for the doctors to ask the appellant questions that would have revealed her intention to have nerve block treatment.  This relates to the proposition that a post-operative anticoagulant therapy prevents the use of nerve block treatment for an unrelated earlier soft tissue injury.

17.       The trial judge erred in finding that the appellant would not have been told that nerve block treatment would not be possible if she took anticoagulants. 

18.       The trial judge erred in finding that had the appellant been properly warned she would not have chosen a prosthetic tissue heart valve.

19.       The trial judge erred in finding, by reference to figures used in earlier litigation, that the amount of income the appellant would have earned, absent her post operative problems, would have been $50,000.  The trial judge was said in this respect to have failed to place significant weight on the evidence.

20.       The trial judge erred in being confirmed in her view about the appellant’s economic loss by the fact that, in litigation arising out of earlier motor vehicle accidents, the appellant and her brother had not suggested that she could earn more than $40,000.

21.       The trial judge erred in finding that no basis was shown for attributing the appellant’s limited earning capacity to the problems which arose from the implant of the mechanical heart valve.

22.       The trial judge erred in finding that the work carried out by the appellant was limited to ten hours per week for her husband’s firm and that she now undertook that work and work for her brother’s company for about the same number of hours.

23.       The trial judge erred in finding that the appellant had not taken any other measures to reduce the pain.

24.       The trial judge failed to consider or give proper weight to parts of the evidence relevant to her final deliberations in finding that the appellant’s injuries were not caused by the alleged defect.

25.       The trial judge erred by failing to apply the test laid down by the High Court in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506  relating to causation of loss from negligent acts or omissions.

26.       The trial judge erred in finding that adverse effects on the appellant would have been noticeable approaching heart failure and that some indication of the problem would have been expected in echocardiograms. 

27.       The trial judge erred in finding that the appellant was maintained on anticoagulants because of her history of thromboembolic events and the possibility that she was predisposed to thrombosis and in finding a possibility that the appellant suffered from a genetic clotting disorder.

28.       The trial judge erred in finding that the appellant had suffered from the condition of menorrhagia in the past and before she took anticoagulants. 

29.       The trial judge erred in finding that the appellant’s disequilibrium and problems with lack of coordination, headaches and vision disturbances were not associated with her heart or the effects of the St Jude mechanical heart valve.

30.       The trial judge erred in finding no evidence to support the conclusion that the appellant suffered an occluded vertebral artery as a result of post-operative thromboembolisms.

31.       The trial judge erred in finding the amount of general damages to be $40,000. She failed to give sufficient weight to the evidence.

32.       The trial judge erred in finding that the only other claim raised was with respect to domestic expenses and that there was no evidence which would permit an assessment of them.

As may be seen from these grounds, the hearing of the appeal is likely to involve a wide ranging and detailed review of the evidence before her Honour with respect to challenges made to her findings of fact.

15                  The evidence for Getz in support of its motion was in the form of three affidavits sworn by Anthony O’Reilly, a solicitor.  Mr O’Reilly said that Getz’ legal costs at first instance were yet to be finally quantified but the total costs are in excess of $1.5 million.  He gave evidence that Ms Carey-Hazell’s assets were as follows:

(a)        A house at 21 Lakeway Street, Claremont jointly owned with her husband valued at $875,000 and subject to two mortgages.  The first mortgage is to Westpac Banking Corporation in the amount of $160,000 registered on 26 July 1996.  The second mortgage is in favour of Westpoint in the amount of $250,000 lodged on 13 July 2004. 

(b)        A vacant block of land at 160 Estuary Road, Dawesville.  This property is valued at $290,000 and is also subject to a mortgage to Westpac Banking Corporation in the amount of $492,800 and a second mortgage to Westpoint in the amount of $240,000.  That mortgage is yet to be registered.

(c)        One sixth of a share in a property at 97 Innamincka Road, Greenmount.  That share is said to be worth $30,0000.

(d)        A strata property at 811 Hay Street, Perth valued at $375,000.  That is subject to a mortgage to St George Bank Ltd in the amount of $250,000 registered on 14 November 2003 and a mortgage to Westpoint in the amount of $175,000 which is yet to be registered.  The unregistered mortgage document was dated 2 March 2004.

(e)        Shares in Telstra Corporation, TAB Limited and St Jude Medical Inc, together with a motor vehicle, art works, jewellery, computer equipment and camera equipment. 

16                  Mr O’Reilly, in his first affidavit, estimated Getz reasonable costs of defending the appeal at $274,000 and exhibited a schedule setting out the basis of that estimate on the assumption of a three day hearing for the appeal.  He expressed the opinion, based on his experience with assessments of costs, that if Getz were successful in the appeal it would probably be allowed 75% of the reasonable costs incurred by it. 

17                  In a second affidavit sworn on 23 August 2004, Mr O’Reilly exhibited a letter dated 29 July 2004 from Ms Carey-Hazell’s solicitors stating that they could not provide him with the information he sought unless he let them know the estimated quantum of his client’s costs and some basis for the amount claimed.  He referred to evidence at trial given by Norman Carey, Ms Carey-Hazell’s brother, in support of her claim for economic loss.  Mr Carey is the ultimate owner of the Westpoint group of companies.  He and his company, Heca Nominees Pty Ltd, hold one half of the issued share capital in Westpoint.  Since at least 16 May 2002, Westpoint or a related entity and/or Mr Carey have underwritten the payment of the legal fees of Ms Carey-Hazell’s solicitors and her counsel and other disbursements associated with the court proceedings.  On or about 23 January 2004, Westpoint and Mr Carey and Ms Carey-Hazell entered into a loan agreement under which she borrowed money from Westpoint at a commercial rate of interest to fund the proceedings at first instance.

18                  In a third affidavit, Mr O’Reilly referred to the Further Reamended Notice of Appeal.  He asserted that many of the additional grounds related to issues that were not raised in the court below or were not the subject of evidence at the trial.  He claimed it was likely that Ms Carey-Hazell would need to apply for an order allowing her to file and serve evidence in addition to that relied upon below.  If she were granted leave to rely upon such additional evidence, Getz would be required to file and serve evidence in reply.  This was likely to include evidence from witnesses located in the United States of America.  On this basis he claimed that Getz would incur additional costs and exhibited a revised estimate of the costs of defending the appeal which he saw as ranging between $390,685 and $417,175.  On the basis of an allowance of 75% of reasonable costs incurred, the recoverable amount should be between $293,685 and $312,881 were Getz to be successful in the appeal.

19                  The motions filed on behalf of Dr Thompson and Nicholls were supported by two affidavits sworn by Enore Panetta, a solicitor with Clayton Utz who represented the doctors at trial.  In his affidavit of 26 August 2004 Mr Panetta estimated that the total legal costs for the two doctors as at 21 July 2004 were approximately $800,000.  He referred to the nature of the grounds of appeal and the duration of the trial.  The bundle of trial documents had comprised 32 volumes amounting to 5,551 pages.  The appeal would require substantial preparation to consider the range of material relevant to the grounds.  This could take several weeks involving both counsel and solicitors.  Senior counsel for the doctors estimated that the appeal would last about three days.  A new junior counsel would have to be briefed because junior counsel at the trial was unavailable.  Mr Panetta estimated that the doctors’ costs of defending the appeal would be approximately $205,000 and exhibited a schedule in support of that estimate.  He said he had sought advice from a costs consultant of what would be recovered on a party/party basis if the doctors were successful on the appeal.  On the assumption that the doctors could recover between two thirds to three quarters of the actual costs incurred, he estimated that the costs incurred on a party/party basis would be between $136,666 and $153,700.  His own investigations and searches confirmed the asset position of Ms Carey-Hazell as set out in Mr O’Reilly’s affidavit.

20                  In a second affidavit, sworn on 24 September 2004, Mr Panetta referred to the Further Reamended Notice of Appeal which, as he observed, now comprises 36 pages and raises 32 grounds of appeal with approximately 135 subgrounds or particulars of the itemised grounds of appeal.  He said counsel for the doctors now estimated that the appeal would last about seven days.  On this basis he revised his estimate of the costs of defending the appeal.  This revised estimate, based on five days preparation and seven day for the hearing of the appeal, was approximately $290,000.  He set out a schedule showing the breakdown of the costs estimate so made.

21                  Ms Carey-Hazell filed an affidavit in reply which she swore on 20 September 2004.  She said that she had moved for a stay of the execution of the costs until the appeal was decided but that motion had been dismissed.  Her legal costs to this point amount to some $970,000.  They were financed by a loan from Westpac Bank secured by a mortgage over her family home and a loan from her brother’s company, Westpoint, secured by second mortgages over her family home, her land in Dawesville and an apartment she had purchased for her sons’ future.  Her brother lent her the money on a commercial basis so that she would not have to sell the family home and other property to raise the funds for the legal fees prior to trial.  A statement of a loan account was exhibited to her affidavit.

22                  Ms Carey-Hazell annexed to her affidavit a financial statement filed in the Family Court of Western Australia.  In December 2003 her marriage broke down and her assets were subject to an order of the Family Court.  A draft order was attached.  It appears that as a result of the Family Court proceedings there will be a division of assets between her and her husband.  Ms Carey-Hazell is the sole parent of twin sons aged 16.  She claimed that her ability to work is limited by injuries associated with the implant of the valve and that she can no longer have nerve blocks to reduce pain caused by a previous neck and back injury.  This inability,  she said, arose from her need to use anticoagulants.  She is currently employed by her brother’s company as Manager of Multimedia.  She works ten hours a week and is paid $1,000 per week gross.  She has had to defer some of her work to represent herself in this matter.  It is likely that she will have to take extensive unpaid leave as she is unable to increase the hours that she can work.  She claims that her appeal has some chance of success on the basis that the learned trial judge erred in law and denied her natural justice. 

23                  Ms Carey-Hazell said that if Getz and the doctors press for payment of the costs of trial prior to the appeal, it is possible that she would be bankrupted.  She is representing herself and will continue to do so as she cannot afford legal representation.  She does not have the money, nor is she able to obtain loan funds to provide for security for costs which are claimed.  Getz’ legal costs are being funded by St Jude Medical Inc which is a large international corporation.  The doctors’ case is being funded by their medical indemnity insurer.   She said that if the motions for security of costs were granted she would be unable to provide the funds and effectively denied her right to appeal.  The most she could offer was a payment of $100 per week, being the balance between her projected income and expenses, into an account to be held in trust towards the security. 

Findings

24                  On the affidavit evidence to which I have referred, I am satisfied that:

1.         Ms Carey-Hazell will be unable, out of her own funds, to pay the substantial legal costs ordered against her at trial if the judgment at first instance stands.

2.         Ms Carey-Hazell will be unable, out of her own funds, to satisfy any order for costs awarded against her if she is unsuccessful in the appeal.

3.         The legal costs of the respondents on the appeal recoverable on a party/party basis are likely to be in excess of $150,000.  I make that conservative assessment on the basis of the estimate offered by Mr Panetta and on the assumption that the appeal could be conducted over a period of three days.  I accept that there is a real possibility that the appeal could take longer and that the costs could be greater.

4.         Ms Carey-Hazell has been funded to date in the proceedings by bank borrowings and by her brother’s company. 

5.         There is no evidence to suggest that Ms Carey-Hazell’s brother will be willing or able to provide funds to meet any order for the provision of security for costs.

6.         If an order for security for costs is made and the appeal stayed pending provision of the security, it is unlikely that Ms Carey-Hazell will be able to prosecute the appeal at all.

Statutory Framework

25                  Section 56 of the Federal Court of Australia Act 1976 (Cth) 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.

(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.’

26                  Order 28 of the Federal Court Rules also makes provision for security for costs.  It does not limit the Court’s discretion under s 56.  There are matters relevant to the grant of security which the Court may take into account and which are set out in O 28 r 3, but none of them is material for present purposes.  Order 28 r 5 provides:

‘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.’

Order 28 r 6 provides that the order does not affect the provisions of any Act under which the Court may require security for costs to be given.

27                  Order 52 r 20, relating specifically to appeals, provides:

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

Relevant Considerations in the Discretion to Award Security for Costs

28                  The general principles relevant to the exercise of the discretion to order security for costs were conveniently set out by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189.  They are:

1.         Whether the application for security has been brought promptly.

2.         The strength and bona fides of the applicant’s case.

3.         Whether the applicant’s impecuniosity was caused by the respondent’s conduct the subject of the claim.

4.         Whether the respondent’s application for security is oppressive in the sense that it is being used merely to deny an impecunious applicant a right to litigate.

5.         Whether there are any persons standing behind the applicant who are likely to benefit from the litigation and who are willing to provide the necessary security.

6.         Whether the persons standing behind the applicant have offered any personal undertaking to be liable for the costs and, if so, the form of any such undertaking.

7.         Whether the applicant is in substance a plaintiff or the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt the respondent’s self-help procedures.

29                  As a general rule impecuniosity and even insolvency does not mandate an order for security for costs – Cowell v Taylor [1885] 31 Ch D 34 at 38.  However that case did recognise an exception in the case of appeals:

‘... the appellant has had the benefit of a decision by one of Her Majesty’s courts, and so an insolvent party is not excluded from the courts, but only prevented, if he cannot find security, from dragging his opponent from one court to another.’

See also Bethune v Porteous [1892] 18 VLR 493 at 494 referred to in Wiest, EA v Director of Public Prosecutions [1988] FCA 568 (Gummow J).

30                  The tendency in Cowell in favour of security for costs in the case of appeals is not reflected in O 52 r 20.  Burchett J said of that rule in Paton v Campbell Ltd [1993] FCA 449:

‘It is plain from the manner in which that rule is expressed that there is a discretion, but that there is something of an onus resting upon one who says that an appellant must be required to provide security.  A feature of an appeal, which marks it out from litigation at first instance from this point of view, is that there has already been a decision given by the judge who heard the matter at first instance, and that the appellant has, in other words, had a day in court, has had an opportunity to present his case and has had a ruling which may be presumed to be correct.’

His Honour went on to observe that it is unreal to ignore the reality that a significant proportion of appeals succeed.  He referred to decisions of the Court of Appeal of New South Wales illustrating the proposition that there is a discretion to require the giving of security where the Court is of the view either that the appeal is without real merit or substance or that the issues sought to be litigated in the appeal is not one of great importance to the appellant while the prospect of the respondent being left without remedy in respect of a costs order is significant.

31                  Security may not be ordered when an appeal is brought in good faith and raises a substantial question of law – J & M O’Brien Enterprises Pty Ltd v The Shell Company of Australia Limited (No 2) (1983) 70 FLR 261 at 264 (Bowen CJ); Lucas v Yorke (1983) 50 ALR 228 at 229 (Brennan J).  But where the appeal turns largely on questions of fact and gives rise to no important question of law, the position may be different – Cummings, JB v Lewis, MT & Ors [1991] FCA 772.

32                  There is no set of clear rules to resolve the question whether security should be ordered in a particular case.  The Court is required to have regard to all the circumstances of the case in exercising what is undeniably a broad discretionary judgment.   

Whether Security Should be Ordered

33                  In my opinion, Ms Carey-Hazell has by her Further ReAmended Notice of Appeal set up, without the benefit of legal advice, a very substantial task for herself in prosecuting the appeal.  She has also imposed a considerable burden upon the respondents in dealing with it.  She raises numerous challenges to the trial judge’s findings on matters of fact.  Such questions of law as are raised appear to occupy a very minor proportion of the time required to hear the appeal as a whole.  Although I am not in a position to say that Ms Carey-Hazell’s appeal is without merit, the prospects of its success are not enhanced by wide ranging and detailed factual challenges and the want of any legal advice to narrow the issues before the Full Court.  To the extent that it is largely a fact-based appeal, turning on the facts of a particular case, it does not raise any wider public interest issue which would weigh against an order for security for costs.

34                  There is no doubt that the litigation is of considerable importance to Ms Carey-Hazell, as is the appeal.  She faces substantial legal costs arising out of the trial of the action if she does not succeed on the appeal.  She is impecunious.  Unless her brother or some other party is prepared to provide funds to meet an order for security, then it is likely that she will not be able to pursue the appeal in the face of such an order.  On the other hand, the respondents will incur substantial and unrecoverable costs in the event that the appeal does not succeed.  This will be added to the costs that they are entitled to under the judgment of Kiefel J and which, in my opinion, they have very little prospect of recovering.  It is not to the point that Getz is supported by a large overseas corporation or that the doctors have insurance.

35                  In the circumstances, in my opinion, security ought to be ordered and the appeal stayed until further order.  Any order for a permanent stay or for dismissal of the appeal if security is not provided will be a matter for the Full Court – Endormer Pty Ltd (In Liq) v Australian Guarantee Corporation Ltd [2001] FCA 510 per Beaumont J. 

36                  As to the quantum of security, a conservative approach should be taken while having regard to the estimates of the respondents.  It is not required that an order for security provide a complete indemnity.  In a sense it is a balancing of risks and burdens between the parties.  I propose therefore to order that Ms Carey-Hazell provide security in the amount of $75,000 in respect of the first respondent and $75,000 in respect of the second and third respondents.  There will be liberty to all parties to apply to vary the order if circumstances should change.  In particular, there may be an opportunity for the amount of the security to be reduced if the scope and likely duration of the appeal is reduced.  This may lead Ms Carey-Hazell to give consideration to a serious culling of the grounds of appeal.  That, of course, is a matter for her and any legal advice which she may obtain.

Associate:

Dated:              15 October 2004