FEDERAL COURT OF AUSTRALIA

Craven v Ready Flowers Pty Ltd [2014] FCA 693

THE COURT ORDERS THAT:

1.    The appellant provide security for the respondent’s costs of the appeal in an amount of $10,000 in a form acceptable to the Registrar of the Court on or before 16 July 2014.

2.    The event that the appellant does not provide such security for the respondent’s costs on or before 16 July 2014, the appeal stand dismissed.

3.    The costs of the application for security for costs are reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The appellant has appealed against a judgment given by Dowsett J dismissing the appellant’s application for an extension of time to comply with a bankruptcy notice and other orders. The application presently before the Court is an application brought by the respondent for security for its costs of the appeal.

2    The procedural history of these and related proceedings is lengthy and somewhat complex. It is necessary to describe that history in order to identify the issues involved in this application.

3    The appellant commenced proceedings in the Federal Magistrates Court on 10 March 2009 alleging that the respondent had, since 2006, contravened the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1989 (Qld) by making misrepresentations concerning the conduct of the respondent’s business of online sales of flowers.

4    The respondent contended that it had sold the business to another company on 1 February 2009. On 25 September 2012, Jarrett FM (as he was then) determined, as a separate issue, that the respondent had sold the business with effect from 1 February 2009, so that any conduct after that date was not conduct for which the respondent was responsible.

5    The company to which the business was sold and the respondent had two directors in common. One of those directors was Peter Hegarty. Mr Hegarty had sworn an affidavit to the effect that the respondent did not operate the business after 1 February 2009, and it is plain that his evidence was relevant to the judgment of the Federal Magistrates Court.

6    The appellant applied for an extension of time to seek leave to appeal against the judgment of the Federal Magistrates Court on the separate issue. At the hearing of that application before Greenwood J, the appellant sought to rely on an affidavit, which set out what was said to be “fresh evidence.” That evidence was an email from a person who said that he had bought flowers through the “Ready Flowers” website and that his credit card statement noted the seller as “Ready Flowers Pty Ltd”, the respondent. The appellant claimed that this showed that Mr Hegarty’s evidence was false and that a fraud had been perpetrated on the Federal Magistrates Court. He sought to rely on this evidence in support of his application for an extension of time, but Greenwood J rejected the affidavit. A transcript of his Honour’s ruling is not available.

7    Greenwood J ultimately refused the application for an extension of time to seek leave to appeal and ordered that the applicant pay the respondent’s costs. The appellant could not appeal against the refusal of the extension of time and did not apply for leave to appeal against the costs order.

8    On 4 February 2014, an assessment estimate of the bill of costs was issued by the respondent and served on the appellant. The appellant did not file a notice of objection against the estimate of costs. On 1 April 2014, the Court issued a certificate of taxation, certifying that the respondent’s costs of the proceeding before Greenwood J were $30,578.45.

9    The respondent served a bankruptcy notice on the appellant on 4 April 2014, claiming a debt based on the certificate of taxation in the amount of $30,578.45. The appellant then commenced a proceeding in the Federal Court (QUD 156 of 2014) by way of originating application supported by a statement of claim in which he seeks an order setting aside the costs order made by Greenwood J. That proceeding is yet to be determined.

10    On 22 April 2014, the appellant applied to the Federal Court, pursuant to s 41(6A) of the Bankruptcy Act 1966 (Cth) for an extension of time to comply with the bankruptcy notice. In that application, the appellant again relied on “fresh evidence”. He relied on the affidavit that had been rejected by Greenwood J and a further affidavit that annexed other bank and credit card statements, which showed the payee as “Ready Flowers Pty Ltd”. He also annexed other material which he says shows that the affidavit of Mr Hegarty was false. His argument was that the extension was justified because he had commenced proceedings to set aside the costs order made by Greenwood J in proceeding QUD 156 of 2014 on the basis of the allegedly false evidence.

11    Dowsett J held, relevantly:

5    Mr Craven seeks to establish the total or partial untruthfulness of the statement by reference to a number of statements from other people indicating that they had paid amounts by credit card, which amounts were eventually credited to an account kept by the creditor, such transactions having occurred since the alleged sale of the business in 2009. The actual circumstances in which the sale occurred have not been explained. However that issue was a live issue, if not in the proceedings in the Circuit Court, then certainly in the proceedings before Greenwood J. It seems that in the latter proceedings, Mr Craven sought to lead evidence of transactions of the sort to which I have referred. He was not permitted to do so.

6    In those circumstances, it seems to me that the issue has been fully ventilated in the Circuit Court and before Greenwood J. The application to set aside the order made by Greenwood J was only made after the bankruptcy notice was served. In the circumstances I am satisfied that the application to set aside the judgment has not been instituted bona fide. I decline to extend time for compliance with the bankruptcy notice. The application will be refused. I order that the applicant pay the respondent’s costs of these proceedings.

12    The appellant has appealed against the judgment of Dowsett J. The appellant’s grounds of appeal allege error in his Honour’s finding that the fresh evidence issue had been fully ventilated before the Federal Magistrates Court and Greenwood J.

13    The application for security for costs is made pursuant to r 36.09(1) of the Federal Court Rules 2011 (Cth).

14    Rule 36.09 of the Federal Court Rules provides:

(1)    A party may apply to the Court for an order that:

(a)    the appellant give security for the costs of the appeal, and for the manner, time and terms for giving the security; and

(b)    the appeal be stayed until security is given; and

(c)    if the appellant fails to comply with the order to provide security within the time specified in the order—the appeal be stayed or dismissed.

15    The Court has a broad discretion as to whether to order security for costs of an appeal, but the factors relevant to the exercise of the discretion include:

(a)    the appellant’s prospect of success;

(b)    the quantum of risk that a costs order will not be satisfied;

(c)    whether the making of a costs order would be oppressive in that it would stifle a reasonably arguable claim;

(d)    whether any impecuniosity of the appellant arises out of conduct alleged against the respondent;

(e)    whether there are aspects of public interest which weigh in the balance against such an order;

(f)    whether there are particular discretionary matters peculiar to the circumstances of the case;

(g)    the timing of the application, namely that it should be brought promptly;

[see, for example, Equity Access Limited v Westpac Banking Corporation (1989) ATPR 40-972) and Madgwick v Kelly (2013) 212 FCR 1 at [6]].

16    It is only possible for me to obtain a broad impression of the appellant’s prospects of success in the appeal. The significance of his “fresh evidence” has been rejected by two judges of the Court. It may be noted that in the appeal it will be necessary for the appellant to demonstrate the cogency of the evidence upon which he relies.

17    A central issue before the Federal Magistrates Court was whether the respondent conducted the business after 1 February 2009. The “fresh evidence” seems to be relevant to that issue, although its strength in establishing that matter seems doubtful.

18    It is difficult to assess the significance of the “fresh evidence” to what is ultimately the question of whether the costs order made by Greenwood J was wrongly made or should be set aside. Presumably, the appellant would argue that the “fresh evidence” shows that the evidence below was false, that the false evidence informed the Federal Magistrates Court’s decision, and that the decision of Greenwood J to refuse an extension of time and make the costs order was similarly influenced by that evidence. However, he has not applied for leave to appeal against the costs order and the proceeding before the Federal Court to set aside the costs order seems likely to fail in the form in which it has been brought.

19    In these circumstances, I cannot conclude that the appeal against the judgment of Dowsett J is hopeless, but I assess the appellant’s prospects as being very limited.

20    The appellant is impecunious. It is clear that he will not be able to meet any costs order that may be made against him in the appeal.

21    One factor affecting the exercise of the discretion is whether security for costs is sought at first instance or in an appeal. In Tait v Bindal People [2002] FCA 322, Spender J said:

2    As to whether security for costs should be ordered, Cowell v Taylor (1885) 31 Ch D 34 at 38, a case of more than 100 years ago, sets out the fundamental principle:

“The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law. There is an exception in the case of appeals, but there 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”.

3    What that passage demonstrates is that there is a difference in principle in relation to the ordering of security for costs in a first instance matter and the ordering, or the consideration of the ordering, of security for costs where one is at the appellate level. The difference is that, at the [appellate] level, there has already been a determination adverse to the person against whom security for costs is sought and, if it be shown that there is a substantial risk that even if successful the respondent to the application for leave to appeal, or to an appeal, will be deprived of his costs, such an outcome would clearly be unjust.

22    I consider that the fact that the appellant would receive a “free hit” in the appeal, if security for costs is not ordered, is significant.

23    It may be that the order would stifle the appeal, but that is by no means certain. The appellant appears to have brought the proceeding before the Federal Magistrates Court to protect the interests of a company of which he is a director. That company is involved in the business of selling flowers and is a going concern. It may be that the company can fund the security for costs.

24    Even if the effect of ordering security for costs is to stifle the appeal, I do not consider that the prospects of success in the appeal are sufficient for me to refuse to order security, when the potential for the respondent not to be able to recover its costs is taken into account.

25    The respondent has brought its application promptly. The appellant does not allege that his impecuniosity arises out of the conduct alleged against the respondent. I do not consider that there are other aspects of the public interest which weigh in the balance against making an order for security for costs.

26    In these circumstances, I think that it is appropriate to make an order for security for costs. The respondent’s solicitor has estimated the respondent’s costs of the appeal on a party and party basis at $30,000. I accept that estimate. Despite this, the respondent seeks security in the amount of $10,000. I consider that security limited to the amount of $10,000 is appropriate.

Associate:

Dated:    27 June 2014