FEDERAL COURT OF AUSTRALIA

Soh v Commonwealth of Australia [2006] FCA 575

PROCEDURE – costs – security for costs – impecunious applicant resident out of jurisdiction – whether public interest aspects involved in substantive proceedings outweigh prima facie case for security for costs – inadequacy of material to enable fair assessment of possible additional costs occasioned by absence from Australia.

Federal Court of Australia Act 1976 (Cth), s 56(1)

Foreign Judgments Act 1991 (Cth), s 5

Federal Court Rules (Cth), O 28 r 3

Foreign Judgment Regulations 1992 (Cth)

Barton v Minister for Foreign Affairs (1984) 2 FCR 463, applied

CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270, applied

P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, applied

Qureshi v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 142 FCR 444, discussed

Swain Investments Limited v Danumet Pty Limited & Anor (unreported, Supreme Court of New South Wales, Cole J, 5 May 1989), applied

JAY HO SOH v COMMONWEALTH OF AUSTRALIA and STATE OF NEW SOUTH WALES

NSD 596 OF 2004

MADGWICK J

17 MAY 2006

SYDNEY

THE COURT ORDERS THAT:

1.         The application for security for costs is dismissed with costs.

REASONS FOR JUDGMENT

1                     The first respondent seeks an order for security for costs from the applicant pursuant to s 56(1) of the Federal Court of Australia Act 1976 (Cth) and O 28 r 3 of the Federal Court Rules (Cth).

2                     The action brought by Mr Soh (‘the applicant’), now resident in South Korea, seeks damages for his allegedly wrongful imprisonment between June 1999 and March 2000.   In brief, his claim arises from his detention in Australia as an unlawful non-citizen.  He was detained at Villawood Immigration Detention Centre from June 1998.  Following an altercation at that Centre, in which the applicant was admittedly involved, the respondents arranged his removal to a New South Wales prison, in June 1999.  No criminal charge was laid against him.  He was later deported from Australia to Korea on 23 September 2003.  Mr Soh claims that his ‘incarceration’ in New South Wales prisons between June 1999 and March 2000 was unconstitutional in light of s 120 of the Constitution, and what is said to be the Chapter III prohibition on the criminal detention of unconvicted persons by the Commonwealth.  He also claims that s 5 of the Migration Act 1958 (Cth), insofar as it authorised his transfer to a prison, is beyond the legislative power of the Commonwealth.  Mr Soh commenced the proceedings for which security is now sought in the High Court of

Australia and the proceedings were remitted to this Court.  Mr Soh has no assets in Australia and the evidence is that he is impecunious.

3                     The Commonwealth expresses concern that, should judgment be given in its favour in the substantive proceedings, it will not be able to enforce a costs order against the applicant in Korea.  In addition, according to the Commonwealth, the applicant’s claim against the respondents is futile in light of the Commonwealth’s intention to file a cross-claim against him for a sum greater than he can expect to be awarded if his claim is successful.  Mr Soh says that if an order for security is made for a sum greater than $1000, he will not be able to continue his claim.  He asserts that it is in the public interest that his case be heard and determined.

4                     An order for security for costs is an exercise of discretion by the court in which the court must weigh all of the circumstances of the case: P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 per McHugh J at 323 (‘Chellaram’).  However, as McHugh J said (at 323): ‘[F]or many years the practice has been to order [a non-resident] 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’.   

5                     In CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Limited (1987) 72 ALR 270 (‘CBS Records’), Bowen CJ said at 284-5:

‘Counsel for the respondent also asked for an order for security for costs to be made … in accordance with O 28, r3(1)(a). This rule certainly gives a discretion to the court to make an order for security. However, it appears to me that it is a discretion to be exercised upon rational grounds and any party applying for security carries the onus of establishing a case showing that security should be granted. The fact that an applicant is ordinarily resident outside Australia is a precondition to an application under that part of the rule but is not sufficient in itself, in my view, to induce the court to exercise its discretion to make an order, particularly in circumstances such as the present. No evidence was given to assist the court in relation to the amount which might be required for security.

I am not persuaded that I should exercise the discretion conferred by O 28, r3(1)(a) to make an order for security for costs as asked by the respondent.’

Extra-territorial residence of the applicant

6                     Order 28 r 3 of the Federal Court Rules provides that, when considering an application for security for costs, the Court may take into account, among other things, that the applicant ‘is ordinarily resident outside Australia’.  The Commonwealth submitted that this is a factor to which great weight must be given in this case. 

7                     Whilst the applicant did not deny that his extra-territorial residence was a factor to be considered, he demurred as to the weight to be given to it, arguing that ‘other circumstances’ exist in this case.  The applicant submitted that, by virtue of South Korean legislation and inferences to be drawn from the Foreign Judgments Act 1991 (Cth) (‘the Act’) and the Foreign Judgment Regulations 1992 (Cth) (‘the Regulations’), the Commonwealth would be able to enforce any judgment for costs against the applicant in the District Court of South Korea.

8                     Section 5(1) of the Act provides:

‘If the Governor-General is satisfied that, in the event of the benefits conferred by this Part being applied to money judgments given in the superior courts of a country, substantial reciprocity of treatment will be assured in relation to the enforcement in that country of money judgments given in all Australian superior courts, the regulations may provide that this Part extends in relation to that country’.

9                     Section 5 is in Pt 2 of the Act.  The Regulations provide that South Korea is a country to which Pt 2 applies (see reg 3 and the Schedule to the Regulations).  Regulation 4 provides that a court listed in the Schedule to the Regulations is a superior court for the purposes of the Act.  The District Court of South Korea (the Republic of Korea) is so listed.

10                  The Commonwealth referred to the caution exhibited by courts in relation to the significance of the said Act.  In Farmitalia Carlo Erba Srl v Delta West Pty Ltd (1994) 28 IPR 336 (‘Farmitalia’), Heerey J (at 342) said that merely showing, without more, that the relevant party was ordinarily resident in one of the countries listed in the Regulations, was not satisfactory, the contrary would amount to treating the Actor the Regulations as an amendment, sub silentio, of O 28 r 3(1)(a).  His Honour found that the inclusion of Italy (the country in which the litigant in question was incorporated) in the Schedule to the Regulationsdid not establish that any judgment in favour of the respondent would be satisfied because there was no evidence that the applicant held assets in Italy, or alternatively, ‘in some other country or countries or that, if it did, an Australian judgment registered in Italy would be enforceable in such other country or countries’ (at 342).

11                  However, in Farmitalia, unlike the present case, there was apparently no evidence before Heerey J regarding Italian laws for the enforcement of foreign judgments in Italy

12                  The applicant relied on an affidavit sworn by his solicitor, Mr Kwon, that he had received legal advice from a Korean lawyer that an order for costs made by this Court would not be contrary to Korean legislation, and therefore enforceable in Korea. 

13                  Attached to Mr Kwon’s affidavit is his translation of s 26(1) of the Korean Civil Enforcement Act and s 217 of the Korea Civil Litigation Act.  The first provision states that the compulsory execution of a foreign judgment shall be carried out only after a Korean court has pronounced its lawfulness.  The second provision sets out the conditions which must first be met for this.  The advice of the Korean lawyer is to the effect that a judgment by this Court in this case will not be contrary to the s 217 conditions, and will be enforceable in Korea.

14                  The Commonwealth argued that little weight should be given to Mr Kwon’s affidavit given that it relies on the ‘expert’ evidence of the Korean lawyer without providing the details of the lawyer’s specialised knowledge, the facts the lawyer was asked to accept, or the questions the lawyer was asked.

15                  Surprisingly, the Commonwealth did not lead any evidence on this issue. 

The applicant’s impecuniosity

16                  The applicant’s solicitor has sworn that the applicant is impecunious.  The Commonwealth submitted that, while this is not a decisive factor when the party is a natural person resident in Australia, it is a significant factor in its favour where, as here, the applicant resides outside Australia and has not established any assets against which a judgment for costs can be enforced (per Cooper J in Re Skase; Ex parte Skase v Abbott [1992] FCA 534 at 10).  The applicant submitted that it would be a curious result that an impecunious person within jurisdiction could not be ordered to pay a security, but one outside the jurisdiction

could, when the place of residence does not affect the impecuniosity.  In Barton v Minister for Foreign Affairs (1984) 2 FCR 463 (‘Barton’), Morling J said (at 469):

‘…in my view…it would be an odd result if an impecunious plaintiff was ordered to give security merely because he was ordinarily resident outside Australia, although his absence from Australia had little, if any, prejudicial effect on the respondent’s prospects of recovering his costs.’

Futility

17                  The Commonwealth submitted that any damages this Court may award the applicant in the event that he is successful will be less than the debts he allegedly owes the Commonwealth.  The Commonwealth has given an undertaking to this Court that it will file a cross-claim for those debts should the matter proceed.  Those debts arise from the costs incurred by the Commonwealth both in holding the applicant in custody as an unlawful citizen (although excluding the period for which the applicant now claims wrongful imprisonment), and in removing him to South Korea.  In addition there is an unpaid order for costs in the sum of $4800 made by this Court in an unsuccessful challenge to the decision of the Immigration Review Tribunal to refuse him a bridging visa.  The Commonwealth’s evidence is that the debt is approximately $181 000 (not including costs attributable to the contested period).

18                  However, there is a vast difference between the parties as to the amount of damages likely to be awarded to the applicant should he be successful.  The Commonwealth’s estimate was not more than $116 000.  The applicant estimated a figure in the region of $300 000. Both parties based their estimates on amounts previously awarded by other courts to persons wrongfully imprisoned in differing circumstances (see Taylor v Ruddock (unreported, District Court of New South Wales, Murrell DCJ, 18 December 2002) and affirmed on appeal in Ruddock v Taylor (2003) 58 NSWLR 269, but note Ruddock v Taylor (2005) 221 ALR 32; Spautz v Butterworth (1996) 41 NSWLR 1).

19                  The applicant also challenges the Commonwealth’s prospect of substantial success on the cross-claim, foreshadowing an argument that the statutory imposition of the charges relied on contravenes s 55 of the Constitution.  However Kenny J has ruled otherwise on a similar question:  see Qureshi v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 142 FCR 444 (‘Qureshi’).

20                  In addition, the applicant submitted that the potential cross-claim by the Commonwealth is an irrelevant consideration on the question of security for costs as it has not been pleaded by way of defence.  Further, should the Commonwealth so plead, it would need to do so by way of a set off under O 11 r 12 of the Federal Court Rules and such pleading would be struck out for failure to disclose a defence:  only equitable set offs are available to the Commonwealth, and only those that exhibit a sufficiently close connection between the two claims (see AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 per Giles J at 712).  The Commonwealth replied that it is not obliged to plead a set off because this Court has the power to order that any debt determined in the cross-claim be balanced against any damages awarded to the applicant (pursuant to ss 22 and 23 of the Federal Court of Australia Act 1976 (Cth)).

Amount of security

21                  The applicant submitted that the authorities establish that where there is reciprocal legislation for the enforcement of foreign judgments, any security ordered is to be limited to the costs of enforcement in the other jurisdiction: see Connop v Varena [1984] 1 NSWLR 71 (‘Connop’) at 75 per Rath J; Barton at 470 per Morling J; D S Parklane Development Pty Ltd v Korea First Finance Ltd (unreported, Supreme Court of New South Wales, Santow J, 20 August 1997) at 6; Bou-Simon v Attorney-General of the Commonwealth of Australia [1998] FCA 1701 at 5-6; Ogawa v University of Melbourne [2004] FCA 491 at [42]-[43] per Marshall J; Mindshare Communications Ltd v Orleans Investment Pty Ltd [2000] FCA 251 at [33]-[40] per Katz J.

22                  In Connop, Rath J said (at 74):

‘[T]here may be some delay, inconvenience and expense arising from registration and execution of a judgment in New Zealand; but apart from this I see no difference in regard to the costs of the … defendants between the circumstances of this case and those of a similar case where a plaintiff is not ordinarily resident outside the State.’

23                  The Commonwealth furnished no evidence as to the potential costs of enforcing a judgment in South Korea or in Australia.  The Korean lawyer’s advice included a break down of the costs of registering a judgment in South Korea, which amounted to less than $1000.  This amount covers the cost of registering the judgment, service fees, and court-assessed legal costs.

CONSIDERATION

Futility

24                  I accept that, as a practical matter, the apparent debt to the Commonwealth may and would be sued on as a cross-claim and, to the extent that such a claim may be made out, it could operate to reduce any judgment that might otherwise be given for damages recoverable by Mr Soh.  There is no justification, however, for concluding that the applicant’s claim against the Commonwealth will necessarily or even very likely be futile.  There may be some defence to the projected cross-claim and it is too early to estimate Mr Soh’s possible damages.  Reference to other wrongful imprisonment cases is of dubious value.

25                  What can be said, however, is that Mr Soh owes probably a substantial sum to the Commonwealth and it is not certain that, if he succeeds in his action against the Commonwealth, he will be awarded an amount sufficiently large to cancel out that debt.  That state of affairs is relevant to whether security should be ordered and tends in favour of such an order.

The public interest

26                  In general it seems to me that, in principle, a case for security being ordered has been made out.  Such is the strong prima facie position in relation to a claim brought by a person outside the jurisdiction of the Court.  The major argument to the contrary is that the litigation, both as constituted and as projected (in the light of the intended cross-claim), involves important questions which it would be in the public interest to have determined.  Whether under the guise of immigration detention it is lawful to incarcerate a detainee in a place of punishment, if that is what has occurred, is in my opinion, such a question.  Whether there is no legal obstacle to the Commonwealth levying and conclusively quantifying the amount of the levy against a detainee the alleged costs of the detention is also such a question.  (I understand Kenny J in Qureshi at [83]-[84] to have upheld the constitutionality of such a levy but not, by her judgment, necessarily to have foreclosed an argument about the legality of the conclusive quantification.  In any case, Mr Soh wishes, if pressed, to challenge the correctness of her Honour’s decision).

27                  The public interest aspects of the matter do not, however, outweigh the strong presumption that an appropriate amount of security for costs should be ordered.  Interesting and important as the questions may be, the Commonwealth is still in the position of a party faced with obviously considerable potential costs.  I know little about the strength of the applicant’s substantive arguments.  Departures from the usual rule should not readily be made.  Additionally, the good chance that the proceedings will not practically assist Mr Soh, because of the apparent debt to the Commonwealth, confirms such an approach.

Quantification and practical matters

28                  The Commonwealth has, however, no valid claim to be put in a better position than if Mr Soh were present in Australia.  Morling J’s approach in Barton is in point here (see 469-470).  If he were in Australia his impecuniosity should be taken as a given.  If the Commonwealth assertions in the litigation are vindicated, the Commonwealth could take steps to establish the veracity of his claim to be impecunious and, if thought fit, to issue execution.  It is certain that there would be some costs associated with this.

29                  I accept that any costs order obtained by the Commonwealth would be enforceable in South Korea.  The absence of expert evidence from a Korean lawyer to the contrary is telling.  The inferences as to continuing reciprocity between Australia and South Korea, which arise from the terms of the Act and the fact and terms of the relevant Regulations, are the more easily drawn because of such absence.  The consequence is that the only worsening of the Commonwealth’s position would be in relation to attempted execution of the costs order in South Korea against the possibility that the applicant’s claim of impecuniosity is false.  It may well be that such costs would exceed the costs of execution in Australia to some unknown degree.

30                  There is some evidence that the Korean costs would be under $1000.  I agree with the Commonwealth that such evidence appears, on the face of it, not to be entirely persuasive.  However the Commonwealth has avoidably left the Court to speculate about a proper or better estimate.  That is very unsatisfactory.  There are unavoidable occasions, for example in some cases of assessment of damages, where a court must engage in speculation in order to do a degree of justice, however imperfect.  But courts should not seek out occasions to speculate nor should they do so to fill gaps which the litigant urging the speculation could readily have obviated.  I consider it is inappropriate in the present case to act on an entirely speculative basis.  If a party seeks security for costs it is reasonable for the Court to insist that at least the best practicable efforts at estimation of the relevant costs be made.  CBS Records is in point here.  What is at stake is a potential fetter, which may prove insuperable, to a party seeking relief being heard by the Court.

31                  I accept that it is likely that there would be some costs in Australia associated with the Korean costs of execution but, again, I am disinclined to speculate about the extent of them. 

32                  It follows that there is no sound basis for a conclusion that the costs of executing in South Korea (including some ‘double-handling’ costs in Australia) would significantly exceed the costs of executing in Australia.

33                  In the circumstances, I am not satisfied that I can fairly estimate an appropriate amount for an order for security of costs.  I decline simply to speculate and therefore will not make the order asked.  In any case, my best guess is that any such amount would be quite modest.  The likely relatively modest amount that might in any case be awarded also tells in favour of the course I propose.  A somewhat similar approach was adopted by Cole J in Swain Investments Limited v Danumet Pty Limited & Anor (unreported, Supreme Court of New South Wales, Cole J, 5 May 1989).  His Honour concluded that (at 7-9):

‘…if an order for security for costs is to be made, an appropriate order would be that the plaintiff provide security sufficient to cover the cost of registration in New Zealand of any judgment obtained by the defendant against the plaintiff in this Court. No material was placed before me as to an appropriate figure for such security.  I was informed that Morling J. had ordered $2,000 as an appropriate sum, but, as is apparent from the judgment, that was in respect of registration in the United Kingdom. Rath J., in 1984, regarded $750 as an appropriate amount in relation to registration in New Zealand.  No doubt there has been some increase in costs. I accordingly would have ordered that the plaintiff provide security for costs in the sum of $1,000…

I am unable to accept that the circumstance that a successful defendant may have to expend a comparatively modest sum of, say $1,000, to obtain registration of a costs judgment to enable its enforcement is, in a commercial matter, sufficient to justify the making of an order for the provision of security for costs in the sum of, say, $1,000.’ 

‘Commercial matters’ do not stand in any special position.

34                  There is little legitimate point to an order for security for costs if it would give the recipient scant, real security if complied with, but would otherwise simply shut out an impecunious person from seeking legal redress for an alleged wrong.

Disposition

35                  The application for security for costs is dismissed with costs.

Associate:

Dated:              17 May 2006