FEDERAL COURT OF AUSTRALIA

Waters v Commonwealth of Australia (Australian Taxation Office) [2017] FCA 312

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application dated 21 October 2016 be dismissed.

2.    Pursuant to s 56(4) of the Federal Court of Australia Act 1976 (Cth) and rules 5.21(a) and 19.01(1)(c) of the Federal Court Rules 2011 (Cth), if the applicant does not, by 5:00 pm on 26 May 2017, comply with Order 1 of the orders made on 16 October 2014, the proceeding against the respondent be dismissed.

3.    Subject to Order 4 below, the applicant pay the respondent’s costs of the interlocutory applications dated 21 October 2016 and 27 January 2017 respectively, as agreed or assessed.

4.    If either party wishes to make submissions concerning Order 3, leave is granted to file and serve outlines of submissions not to exceed three pages in length within seven days hereof.

5.    Liberty to apply on the giving of 72 hours’ notice.

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

REASONS FOR JUDGMENT

Griffiths J:

Introduction

1    There are before the Court two separate interlocutory applications. The first, dated 21 October 2016, was filed by the applicant (Ms Waters). In it, Ms Waters seeks my recusal from further hearing the proceeding on the ground of apprehended bias. Ms Waters also seeks a variation of the orders made by the Court on 16 October 2014 and, in particular, Order 1 made on that date, which was in the following terms:

1.    The applicant is to provide security for the costs of and incidental to the proceedings in the amount of $30,000 (exclusive of GST) in the form of a bank guarantee (or in such other form as is acceptable to the District Registrar) to be lodged with the District Registrar and a copy of which is to be served on the solicitor for the respondent.

2    Ms Waters also seeks to have the respondent (the ATO) disqualified from filing any further interlocutory application in the proceeding.

3    The second interlocutory application, filed by the ATO on 27 January 2017, seeks an order pursuant to s 56(4) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) that Ms Waters’ substantive proceeding be dismissed.

4    It was appropriate to hear and determine first Ms Waters’ recusal application. After hearing from the parties on this issue I indicated that I would not recuse myself and that reasons would be provided later.

5    The Court then proceeded to hear the balance of Ms Waters’ interlocutory application, as well as the ATO’s interlocutory application.

(a) The recusal application

6    These are the reasons why I dismissed Ms Waters’ recusal application.

7    Some of the relevant background to the proceeding is summarised in my earlier reasons for judgment relating to security for costs (Waters v Commonwealth of Australia (Australian Taxation Office) [2014] FCA 1107 (Waters security for costs) at [2] to [9]). For convenience, I shall briefly restate those matters and also summarise some relevant subsequent events.

8    In January 2014, Ms Waters commenced substantive proceedings in the Court against her former employer, the ATO. She alleged that she was discriminated against by the ATO on the basis of her disability, contrary to relevant provisions in the Disability Discrimination Act 1992 (Cth). She also claimed that the ATO’s conduct was in breach of her contract of employment. Ms Waters was employed by the ATO from early 2000 until she was constructively dismissed on 19 November 2004. In March 2004, she was diagnosed with obsessive compulsive disorder (OCD).

9    When the ATO sought security for costs by an interlocutory application dated March 2014, the pleadings had closed but at that time no evidence as to the substantive factual matters had been filed. The ATO denied the primary allegations made by Ms Waters in her statement of claim, which allegations are summarised in [3] of Waters security for costs.

10    Prior to the substantive proceedings being commenced in this Court, Ms Waters had unsuccessfully brought proceedings in relation to the same broad subject matter in the Supreme Court of New South Wales. Those proceedings were commenced on 5 November 2010. Their history is set out in [7] to [9] of Waters security for costs. In brief, on 13 July 2012, Barr AJ struck out Ms Waters’ second further amended statement of claim and ordered her to pay the ATO’s costs. The Court of Appeal subsequently refused Ms Waters leave to appeal from that decision and Ms Waters was again ordered to pay the ATO’s costs. Ms Waters applied unsuccessfully for special leave to appeal to the High Court and was ordered to pay the ATO’s costs.

11    Ms Waters also sought leave to appeal from the decision in Waters security for costs. Leave to appeal was refused by the Full Court, with costs (see Waters v Commonwealth of Australia (Australian Taxation Office) [2015] FCAFC 46 (Waters leave to appeal)). It will be necessary to return and describe some aspects of their Honours’ reasoning in that judgment because it is relevant to the recusal application.

12    As deposed by Ms Waters in her affidavit sworn on 22 December 2016 in support of her interlocutory application, she commenced proceedings in the High Court seeking an order to show cause. On 18 December 2015, Gageler J dismissed her application and ordered her to pay the ATO’s costs.

13    On 24 August 2016, Bell and Keane JJ dismissed an application by Ms Waters for leave to appeal from Gageler J’s decision. She was ordered to pay the ATO’s costs of that application.

(i) The parties’ submissions on recusal summarised

14    Ms Waters represented herself. She submitted that the relevant test for apprehended bias is that established in cases such as Ebner v The Official Trustee in Bankruptcy [2000] HCA 63; 205 CLR 337 (Ebner) and Johnson v Johnson [2000] HCA 48; 201 CLR 488 (Johnson).

15    The parties did not dispute the relevant principles. The central question is whether a fair-minded and informed lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question that he or she is required to decide. This involves two essential steps:

(a)    there must be an identification of what was said might lead a judge to decide a case other than on its legal and factual merits; and

(b)    there must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding a case on its merits.

16    It is also established that an allegation of bias, including an allegation of apprehended bias, must be “distinctly made and clearly proved” (Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; 205 CLR 507 at [69] and see also the Full Court’s summary of the relevant principles in ALA15 v Minister for Immigration and Border Protection [2016] FCAFC 30 at [35]-[36]). Moreover, it is established that a judge should not recuse himself or herself from hearing a particular case unless there is a “proper and substantial reason” for doing so (see Kennedy v Secretary, Department of Industry (No 2) [2016] FCA 746 at [19]. As Mason J said in Re JRL; Ex parte CJL [1986] HCA 39; 161 CLR 342 (JRL) at 352 (footnotes omitted):

It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be ‘firmly established’: Reg. v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group; Watson; Re Lusink; Ex parte Shaw. Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.

17    Ms Waters relied on five matters in support of the apprehended bias claim. The first four matters relate to various matters which Ms Waters submitted are contained in the reasons for judgment in Waters security for costs, namely:

(a)    referring to evidence given by the ATO’s solicitor, Ms Trembath, that was objected to and not read (which Ms Waters said was the primary matter she relied upon);

(b)    the ATO’s failure to discharge its onus to establish Ms Waters’ impecuniosity;

(c)    the finding of “relative impecuniosity”. Ms Waters submitted that, consistently with what she described as my “impressionistic view”, I proposed to counsel for the ATO that Ms Waters was “relatively impecunious”, yet in [57] of the reasons for judgment in Waters security for costs this is described as a “submission by [the ATO’s counsel]”; and

(d)    the reference in [64] of those reasons for judgment to the litigation having been brought “by a disgruntled former employee”. Ms Waters submitted that such a finding was made in the absence of any allegation to that effect and was contrary to the evidence adduced by the ATO.

18    Ms Waters also relied upon the alleged effect on me of her several attempts to challenge Waters security for costs, as described above. She submitted that “it is impossible for his Honour to expunge from his or her mind such facts as the two attempts to impugn his Honour’s decision, including a show cause application, seeking substantive relief of certiorari in the original jurisdiction of the High Court”.

(ii) Disposition of the recusal application

19    The ATO submitted that Ms Waters had not shown any logical connection between the five matters raised by her or why the Court might not decide relevant matters on their merits.

20    For the following reasons, I am not persuaded that a fair-minded and informed lay observer might reasonably apprehend that I might not bring an impartial and unprejudiced mind to the matters which I am being asked to determine at this interlocutory stage, namely those identified in the parties’ respective interlocutory applications. That is so in relation to the five matters raised by Ms Waters, whether viewed individually or collectively.

21    The first matter relied on by Ms Waters is my erroneous reference in [17] of Waters security for costs to Ms Trembath’s evidence that the difficulty Ms Waters had experienced in the past in obtaining legal representation may have been partly due to her inability to meet the high costs of legal representation. The Full Court found the latter part of that statement to be in error because the respondent did not press the second part of the relevant sentence in Ms Trembath’s affidavit and it was not read (see Waters leave to appeal at [52]). Justice Katzmann (with whom North J agreed) concluded that nothing turned on that error because it was not inconsistent with the evidence adduced by Ms Water.

22    Ms Waters has not established why that error, which was found to be immaterial, could provide a sufficient basis for a claim of apprehended bias having regard to the principles and authorities referred to above. Ms Waters’ submission that this error, “supported an impressionistic theory of Ms Waters’ alleged impecuniosity, for which otherwise, evidence adduced by the respondent was wholly deficient”, is inconsistent with the Full Court’s reasoning. Justice Katzmann also pointed out in [52] and [53] of Waters leave to appeal that the error was not inconsistent with Ms Waters’ own evidence. Her solicitor had given evidence inter alia that she was eligible for waiver and exemption of court fees in the Court because she held a Centrelink pensioner card. Thus, it was found that there was other evidence to support the finding (see also the observations of Flick J in [17]). Ms Waters accepted that this reasoning and these findings on the part of the members of the Full Court should be imputed to the hypothetical observer. The necessary logical connection between this matter and the feared deviation from Ms Waters’ interlocutory application being determined on its merits has not been established.

23    Ms Waters relied upon the Court of Appeal’s decision in Kwan v Kang [2003] NSWCA 336 (Kwan) and the statements in [86] and [87] of the joint judgment of Sheller, Ipp and Tobias JJA relating to findings made on an interlocutory issue which are expressed in a way which indicates that the primary judge has come to a final conclusion on a significant issue on which the ultimate result of a trial depends. Those observations have no relevance to this first matter. The error in Waters security for costs occurred in a part of the judgment which set out background matters. It did not relate to a significant issue of the sort described in Kwan. The ultimate finding that Ms Waters was relatively impecunious was based on other considerations.

24    Secondly, similar reasoning applies to Ms Waters’ submissions concerning her criticisms of my findings relating to the ATO’s onus of establishing, as a threshold aspect of its security for costs application, Ms Water’s impecuniosity. In my respectful view, the hypothetical lay observer would take into account the observations of Katzmann J and Flick J in Waters leave to appeal as referred to at [22] above. This matter has no substance and no logical connection has been established.

25    Thirdly, the same may be said in respect of Ms Waters’ complaints concerning my use of the phrase “relative impecuniosity”. Ms Waters’ complaint seems to be that, while this expression is attributed in the reasons for judgment to a submission made by the ATO’s counsel, I personally had coined the expression. The expression appears in [57] of Waters security for costs:

… I accept the submission by Mr Glover (who appeared for the ATO) that the evidence indicates that Ms Waters is relatively impecunious.

26    The transcript of the hearing on 14 October 2014 records the following exchange in relation to the ATO’s contention that, to the extent that Ms Waters conceded impecuniosity or financial hardship, it was caused by the ATO’s conduct in circumstances where her written submissions had a heading “Applicant’s Impecuniosity is Caused by the Respondent’s Conduct”:

HIS HONOUR: It was those words “to the extent” which informed my question to you a moment ago as to whether or not there was in fact any concession of impecuniosity.

MR GLOVER: Yes. And, indeed, I should make clear on behalf of the respondent that our evidence and our inquiries were such that we did not have the information to identify whether the applicant was impecunious or not, and Ms Trembath’s evidence is very, very fair in that respect and sets out reasons why she might think that the – or why she believes the applicant was not impecunious, but looking at the matters in the Coffey affidavit it can be seen that the applicant does have very low income. She does have a stable place of residence, and that is conceded. She owns and is paying off her property, but – and this is a relevant factor – there has been no attempt by the applicant, or there’s no evidence given about any attempts made by the applicant to get or obtain additional security in relation to her property to meet the security sought by the respondent in this case.

HIS HONOUR: Yes. Would you accept that, on the basis of the material, it would open for the court to find that she is relatively impecunious?

MR GLOVER: Yes, your Honour.

HIS HONOUR: Thank you.

MR GLOVER: And, indeed, that relative qualification you put on impecuniosity is indeed relevant for the level of security that is sought here. And this is relevant to whether the sum of security would stifle the proceedings. The respondent is not seeking to recover – or seeking security for its estimate of these hearings, its estimate of what it might have recovered as costs in the previous proceedings, but simply a small sum on account of its security to indeed give its security to run the proceedings. Just to finish off, your Honour, on the point of whether the applicant’s impecuniosity arises out of the conduct complained of, if your Honour looks at paragraph 22.1 of the respondent’s submissions, that summarises the reasons the respondent submits the applicant has not discharged her onus of establishing a requisite causal connection.

27    Even if the phrase emanated from me and was then adopted by Mr Glover, I consider that the requisite logical connection contained in the second limb of the relevant test has not been established in relation to this matter, particularly having regard to the context in which the expression was raised.

28    Fourthly, Ms Waters’ criticisms of the use of the expression “disgruntled former employee” in Waters security for costs do not provide a sufficient basis for apprehended bias having regard to the relevant principles. I acknowledge that, unfortunately, that expression has caused Ms Waters personal distress, however, the hypothetical observer would take into account what the Full Court said on this matter concerning the non-pejorative meaning of the word “disgruntled” (see Katzmann J at [34]-[36] and Flick J at [19]). The requisite logical connection has not been established.

29    As to the final matter relied upon by Ms Waters, namely the effect on me of her unsuccessful attempts to challenge my decision in Waters security for costs, the observations of Mason J in JRL, which are set out in [16] above, are squarely in point.

30    For these reasons, the recusal application was rejected.

(b) Ms Waters’ application to have the security for costs order made on 16 October 2014 set aside or discharged

31    Ms Waters, who appeared for herself, relied upon two affidavits sworn by her dated 22 December 2016 and 9 February 2017 respectively.

32    Ms Waters contended that there had been material changes of circumstances since 16 October 2014. First, she deposed that, on 26 July 2016, she sold her principal place of residence in Maroubra for $394,000 owing to what she described as “an unsustainable debt position”. She annexed a copy of documentation from her bank, which revealed a payout figure to the bank as mortgagee in the amount of $168,904.17. Ms Waters deposed that, on 26 July 2016, the bank deposited funds of $200,000 into her cash management account and her real estate agent deposited an amount of $10,877, being the residual deposit.

33    The second change of circumstance raised by Ms Waters relates to debts which had accrued since around mid-2015 being amounts owed to the Owners’ Corporation ($3,503); a dental surgeon ($1,469); Gells Lawyers ($1,675) and an amount owing on her credit cards ($9,000). Ms Waters deposed that she believed that she owed Gells Lawyers a further amount of $2,000, but she said that she had not yet received a tax invoice.

34    A third matter relied upon by Ms Waters related to what she described as an agreement she had with her father to repay him a loan and interest in the amount of $103,000. She said that the money had been loaned to her by her father in 2009 from his retirement savings on condition that it be repaid either upon a settlement with the ATO, the sale of her property or such other financial sources as were available to her. She said that Centrelink had recognised the debt as bona fide on 15 December 2016.

35    The fourth matter was that Ms Waters had been advised by Centrelink on 15 December 2016 that should she not repurchase another residential property as her principal place of residence within 12 months from the sale of her former residence, the exemption on the deemed sale proceeds would expire, which would allow for “the putative net proceeds for assessment to be $98,756”.

36    The fifth matter related to Ms Waters’ current savings as at 22 December 2016, which she said totalled $47,000. She explained that $50,000 was also invested in a fixed deposit, that she was 49 years of age and had only $500 in a fixed, non-earning superannuation account held by a financial services company and no other assets in her name. She said that she was seeking to “restore” her lost superannuation after she had had early access to it from 2007 because of her personal financial circumstances. Ms Waters said that she was accessing her savings on a daily basis to meet living costs, including medical costs in relation to what she described as overdue medical treatment.

37    The sixth matter related to Ms Waters’ current residential accommodation. She said that she currently resides in Maroubra in a property owned by her 94 year old great aunt. Ms Waters deposed that, at the date of her first affidavit, she was receiving a Newstart allowance as well as certain concessional arrangements relating to her illness. She said that she was not on a Disability Support Pension but did hold a Pensioner Concession Card.

38    The seventh matter relied on by Ms Waters relates to a debt she owes to Centrelink dating back to 2012 which requires her Centrelink benefits ($410 fortnightly) to be reduced by $133 per fortnight. She said that the outstanding balance owed to Centrelink is $2,344.

39    It should also be noted that the ATO did not object to Ms Waters relying upon the affidavit of her former solicitor, Mr Coffey, which affidavit had been read in the hearing in October 2014 relating to the ATO’s application for security for costs. In particular, she relied on that part of the affidavit which addressed the issue whether Ms Waters’ impecuniosity was caused by the ATO’s conduct (i.e. [49]-[65]).

40    Ms Waters gave evidence of her attempts to engage with the ATO concerning the extant costs orders arising from her litigation in the Supreme Court. She annexed a copy of her solicitor’s letter dated 29 May 2015 which contained a proposal concerning the extant costs orders. She deposed that she was unaware of any response from the ATO regarding the issue of costs sent either by her former solicitor or herself from 6 May 2016. She said that her “only opportunity to communicate with the respondent’s solicitors was the day of directions for my interlocutory application on 6 December 2016”. Ms Waters further deposed that the ATO had not particularised its costs in relation to her unsuccessful proceedings in the High Court. Ms Waters was not cross-examined.

41    Ms Waters submitted that, having regard to her current financial position, if she had to pay security in the amount of $30,000, her ability to run her claims would be stultified, she would be unable to retain lawyers and, on that basis, would have no prospects of success.

42    The ATO’s submissions on this matter may be summarised as follows. First, the ATO pointed out that, as the date of the filing of Ms Waters’ interlocutory application, and currently, there are seven costs orders made against Ms Waters in favour of the ATO, six of which relate to proceedings or appeals that have been finalised. To date, none of these costs orders has been satisfied.

43    Secondly, based on Ms Waters’ affidavit sworn on 22 December 2016, Ms Waters has, from mid-2015, incurred debts of $15,647 and may also owe her former solicitors approximately $2,000 in costs for legal services. No invoices or receipts were provided by Ms Waters in respect of these debts.

44    Thirdly, Ms Waters did not disclose the terms of the agreement with her father requiring that she repay him $103,000 which she borrowed since 2009.

45    Fourthly, the ATO elaborated upon the correspondence between Ms Waters and itself, which relevantly may be summarised as follows:

    On 18 December 2014, the ATO’s solicitors wrote to Ms Waters’ then solicitors concerning the then four outstanding costs orders and invited Ms Waters to provide a proposal as to how she intended to address the outstanding costs orders.

    On 27 January 2015, the ATO’s solicitors received an email from Ms Waters in which she said that she had been advised to await her solicitor’s return on 2 February 2015 before she could respond to the letter dated 18 December 2014.

    On 2 February 2015, Ms Waters’ solicitors advised the ATO’s solicitors that they were “in the process of finalising a response” to the 18 December 2014 letter and anticipated that it would be sent the following day.

    On 10 February 2015, Ms Waters’ solicitors emailed the ATO’s solicitors and stated that because of “the Full Court timetable, particularly relevant to Ms Waters, we again advise that she is in the process of receiving Counsel’s advice regarding your letter dated 18 December 2014”.

    Not having received any further response, on 13 April 2015, the ATO’s solicitors wrote to Ms Waters’ solicitors stating that the ATO was prepared to give her until 27 April 2015 to provide a proposal as to how she intended to address the outstanding costs orders against her. Ms Waters was told that the ATO was willing to consider any proposal on this topic which also sought to settle the substantive proceedings.

    By an email dated 28 April 2015, Ms Waters’ solicitors advised that she was meeting with Counsel that week to obtain further advice in relation to the correspondence concerning costs. This was reiterated in a further email dated 4 May 2015, which added that Ms Waters was “committed to providing a response with the view to putting a proposal to your client within the next 2-3 weeks”.

    By an email dated 20 May 2016, Ms Waters’ solicitors requested a short extension to provide her response and the ATO’s solicitors agreed to the time being extended to 29 May 2015.

    By letter dated 29 May 2015, Ms Waters’ solicitors sent a letter to the ATO’s solicitors which contained an “outline of proposal to settle previous costs orders and Ms Waters’ substantive matter”. In substance, the general proposal was that the outstanding costs orders be set-off against an amount to settle the substantive matter in Ms Waters’ favour and that a substantive proposal could be submitted by 17 July 2015 if the ATO was amenable to the general proposal.

    By letter dated 22 June 2015, the ATO’s solicitors wrote to Ms Waters’ solicitors and provided an updated disclosure of estimated costs relating to Ms Waters’ unsuccessful application for leave to appeal to the Full Court (the estimate was approximately $63,000 on a solicitor-client basis). It was also stated that the ATO would seek an order for costs if Ms Waters failed in her show cause application in the High Court. Finally, the letter stated that the ATO would provide a separate response to the letter dated 29 May 2015.

    On 23 June 2015, the ATO’s solicitors sent a without prejudice letter to Ms Waters’ solicitors.

    By an email dated 24 June 2015, Ms Waters’ solicitors advised that it would be “imprudent” for her to provide a substantive response to the letters dated 22 and 23 June 2015 until she obtained Counsel’s advice.

    Further without prejudice correspondence was exchanged between the parties. On 21 July 2015, Ms Waters’ solicitors wrote stating that, because of Ms Waters’ application to the High Court, it was premature to have assessed the costs of her unsuccessful application for leave to appeal from Waters leave to appeal.

    On 25 February 2016, Ms Waters’ solicitors were asked whether they had instructions to accept service of draft applications for assessment of costs, notice to lodge objections and bills of costs in relation to the proceedings in the NSW Supreme Court and Court of Appeal. On the same day, Ms Waters sought leave to appeal from Gageler J’s decision.

    By letter dated 2 March 2016, Ms Waters (who had by now taken personal responsibility for matters relating to the outstanding costs orders) wrote to the ATO’s solicitors on the subject of costs. Her letter included the following statements:

… As far as I’m concerned, your client made a choice to “finalise” the previous costs orders by having my substantive matter stayed indefinitely by the [hitherto successful] security for costs application filed by your client on 21 March 2014. The solitary ground for the security for costs application was the unpaid costs orders to which you refer… Your client submitted no other ground with which it sought security for costs, and even if so, without referring to my submissions in any of the proceedings, any further ground would most likely have failed for a matter at first instance: see especially First instance judgment, [67] – Griffiths J’s holding that my case is “arguable”, undisturbed by the Full Court.

…

By reason of the issues referred to in the foregoing paragraphs, I am astonished and incredulous that your client – the Commonwealth of Australia (Australian Taxation Office) – would exercise such an extraordinary misuse of law so as to “double dip” on these previous costs. Your client has stultified my substantive proceeding to recover my just rights and now wants a different regime for its advantage, causing me detriment.

…

… As you are aware, I have not been able to bring my substantive proceeding to a hearing on the merits for over two years and have incurred considerable legal costs in order to be able to do so. Therefore, I have no choice but to consider my numerous options – whether in the proceedings on foot or through political/parliamentary processes – with respect to your client’s conduct having regard to the proposed costs assessment, as outlined in your letter. I consider the proposed actions on behalf of your client a scandalous abuse of executive power and public money at the highest level – quite possibly an action for tort misfeasance in public office by reason that this proposed action is malicious and intended to cause me harm.”

    By letter dated 30 March 2016, the ATO’s solicitors wrote to Ms Waters and denied the allegations in her letter dated 2 March 2016. Ms Waters was informed that she would be sent bills of costs in each matter and a draft application to the Supreme Court for assessment of costs in each matter and that she would have an opportunity to lodge objections within 21 days. It was stated inter alia that the ATO remained open to reaching an agreement with her on costs as an alternative to having the costs assessed.

    The ATO’s solicitors sent draft bills of costs to Ms Waters on 4 April 2016, to which Ms Waters provided some general objections by a letter dated 26 April 2016. Those objections included her claim that any costs assessment at that time would “materially interfere with argument in court proceedings currently on foot in the Federal Court and the High Court”. (It may be interpolated at this point that it is unclear to which proceeding in the Federal Court Ms Waters was referring, in circumstances where her substantive action was stayed, the Full Court handed down its judgment on 27 March 2015 and it was not until October 2016 that Ms Waters filed her interlocutory application in this Court).

    By letter dated 6 May 2016, the ATO’s solicitors wrote to Ms Waters and provided her with an overview of the costs assessment process. With reference to the invitation set out in Ms Waters’ letter dated 26 April 2016 to reconsider the settlement proposal contained in the area letter dated 28 July 2015, Ms Waters was told that the ATO “is considering your invitation in relation to your previous settlement proposal dated 28 July 2015 and will, as requested, revert to Gells if it has any response on that point” (emphasis added).

46    The ATO did not dispute Ms Waters’ claim that there was no further communication between the parties until the directions hearing before me on 6 December 2016 in relation to Ms Waters’ interlocutory application dated 21 October 2016.

47    The ATO acknowledged that the Court had a discretion under s 56(3) of the FCA Act in an appropriate case to vary existing orders for security for costs. It submitted, however, that this would generally not occur unless there is a material change of circumstances since the original application was heard or new evidence emerges which was not reasonably available at the time of the original application, citing Ninan v St George Bank Ltd (No 2) [2013] FCA 273 at [10] per Griffiths J.

48    The ATO submitted that Ms Waters had not established an appropriate basis for setting aside or discharging the security for costs order because:

(a)    the proceeds from her property sale indicate that Ms Waters now has cash deposits that are more than sufficient to meet the $30,000 payment, even if the debt to her father is taken into account;

(b)    notwithstanding that Ms Waters has cash deposits totalling $97,000, she has offered no explanation as to why she is not prepared to pay the requisite $30,000 and she has given no evidence concerning her living expenses. Even if the $50,000 fixed deposit is not available because it is being used to restore Ms Water’s lost superannuation, she has $47,000 in other savings;

(c)    assuming that the repayment of Ms Waters’ Centrelink debt arose after the security for costs order, it is unclear why this warrants any alteration to the security for costs order considering that she is repaying the debt at $133 per fortnight;

(d)    Ms Waters has not demonstrated any relevant change to the five primary bases upon which the security for costs order was made on 16 October 2014; and

(e)    Ms Waters’ submissions regarding stultification should not be accepted because they boil down to an alleged inability on her part to retain lawyers.

(i) Disposition of the application to vary or discharge the order for costs

49    The Court clearly has the power to vary or discharge an order for security for costs in appropriate circumstances (see s 56(3) of the FCA Act and rr 1.32 and 39.05 of the Federal Court Rules 2011 (Cth)).

50    In Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [2001] FCA 1603 (Truth About Motorways), Hely J said at [11]:

It is clear from the terms of [the predecessor provision to s 56(3) of the Federal Court of Australia Act 1976 (Cth)] that the Court has power to set aside or vary the original security for costs order. The Court retains jurisdiction, because of the very nature of an interlocutory order, to set aside, vary or discharge it up to the time of the final disposition of the proceedings. However, as McLelland J recognised in Brimaud v Honeysett Instant Print Pty Ltd (1988) 6 ACLC 942, it would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will. Hence the ordinary practice is that an application to set aside, vary or discharge an order of a substantive nature made after a contested hearing in contemplation that it would operate until a final disposition of the proceedings, must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application. That principle was applied by a Full Court of this Court in Darling Harbourside (Sydney) Pty Ltd v Sanirise Pty Ltd (unreported, Beaumont, Carr, Sackville JJ, 17 May 1996) to an order for the provision of security for costs. The Full Court set aside an order varying an order for the provision of security upon the basis that there had been no material change in circumstances established so as to warrant a variation of the original order.

51    In oral address, Mr Glover (who appeared for the ATO) initially contended that in a case involving an alleged material change of circumstance, the relevant question is whether any such material change of circumstance is demonstrated to affect the ability of the applicant to comply with the order. He later acknowledged, correctly in my respectful view, that this submission was too narrow.

52    In my opinion, the correct test to apply here is that which is reflected in the following extract from McLelland J’s decision in Brimaud v Honeysett Instant Print Pty Ltd (1998) 217 ALR 44 at 46-47:

In the present case I am dealing with an interlocutory order of a substantive nature made after a contested hearing in contemplation that it would operate until the final disposition of the proceedings. In such a case the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application: see Woods v Sheriff of Queensland (1895) 6 QLJ 163 at 164-5; Hutchinson v Nominal Defendant [1972] 1 NSWLR 443 AT 447-8; Chanel Ltd v F W Woolworth & Co [1981] 1 All ER 745; [1981] 1 WLR 485; Adam P Brown Male Fashions v Philip Morris (1981) 148 CLR 170 at 177-8; 35 ALR 625 at 629-30 Butt v Butt [1987] 1 WLR 1351 at 1353; Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890 at 894:

The following passages illustrate the point:

The defendants are seeking a rehearing on evidence which, or much of which, so far as one can tell, they could have adduced on the earlier occasion if they had sought an adequate adjournment, which they would probably have obtained. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter. The fact that he capitulated at the first encounter cannot improve a party’s position.

(Chanel v Woolworth & Co at All ER 751-2; WLR 492-3 per Buckley LJ.)

A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust… Of course the changed circumstances must be established by evidence.

(Adam P Brown Male Fashions at CLR 178; ALR 630 per Gibbs CJ and Aickin, Wilson and Brennan JJ).

53    That is the test which has been adopted and applied in numerous decisions at first instance in this Court including Truth About Motorways per Hely J; Austcorp Project No 20 Pty Limited v The Trust Co (PTAL) Limited, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (in liq) (No 4) [2015] FCA 850 (Austcorp), per Gleeson J; Australian Competition and Consumer Commission v Adata (Vic) Pty Ltd (No 2) [2015] FCA 272 per Reeves J and Dallas Buyers Club LLC v iiNet Limited (No 5) [2015] FCA 1437 per Perram J and the cases cited therein.

54    In her reasons for judgment in Austcorp, Gleeson J gave an example at [13] of a material change of circumstances as including a significant material improvement in a plaintiff’s financial situation because of an agreement with a litigation funder.

55    The reasons for judgment in Waters security for costs speak for themselves and need not be repeated here. There is, however, one matter which needs to be clarified in the light of the prominence given to it by Ms Waters. It relates to her claim, which was repeatedly made, both in correspondence with the ATO’s solicitors and in oral address, that the solitary ground for the ATO’s original security for costs application was the unpaid costs orders in proceedings other than the substantive proceedings in this Court. I accept Mr Glover’s submission that this statement reveals a fundamental misunderstanding by Ms Waters regarding the basis for the making of the order for security for costs on 16 October 2014. That order said nothing about any costs orders arising from other proceedings which were outstanding at that time. The security for costs order was intended to secure the ATO’s costs of the substantive proceedings, from their date of commencement until their final determination. This is made clear in [69] of the reasons for judgment. It was also noted at [18] that the ATO’s solicitor gave evidence that, on her instructions, the ATO was seeking protection for any costs incurred in defending the substantive proceedings in circumstances where, at that time, Ms Waters had not paid three extant costs orders.

56    Without doubt, Ms Waters’ past conduct in relation to the outstanding legal costs in proceedings apart from these was a matter which was taken into account in determining whether or not to make an order for security of costs, as is made clear in [55] and [69] of the reasons for judgment. But there were many other matters taken into account, both for and against making such an order, as is evident from those reasons for judgment (see [47] ff).

57    For the following reasons, I do not consider that Ms Waters has established a sufficient basis for varying or discharging the security for costs order.

58    As noted above, Ms Waters was not required for cross-examination and the ATO did not adduce any evidence itself which cast doubt on Ms Waters’ affidavit evidence relating to what she described as material changes in circumstances since October 2014. But even if I accept that evidence, which I do, I do not consider that the matters raised by Ms Waters render unjust enforcement of the security for costs order in all the relevant circumstances of this case.

59    When the security for costs order was made, it is fair to say that, at that time, in relative terms Ms Waters was asset rich and cash poor. That has now changed with the sale of her residential property on 26 July 2016. As the ATO pointed out, when Ms Waters finalised her affidavit dated 22 December 2006 she had cash deposits totalling $97,000. That sum of money was available to her after she had repaid the loan and interest to her father in the amount of $103,000. I accept that Ms Waters has other debts and needs to meet her ongoing daily living expenses (which were not particularised by her). But it is difficult to resist the ATO’s submission that Ms Waters made a choice not to seek to obtain a bank guarantee in the amount of $30,000 or otherwise pay that sum as security for costs, rather than use the net proceeds as she did. Ms Waters explained why she placed $50,000 of the net proceeds on fixed deposit and with a view to restoring her lost superannuation. That was an informed choice by her. It is not a matter for the Court to determine whether or not Ms Waters’ personal financial choices were sound. The important point is that the choices were made by Ms Waters in circumstances where she could otherwise have used the available money to satisfy the security for costs order, whether by bank guarantee or otherwise. The stay would then have been lifted.

60    The same can be said in respect of her decision to put $47,000 into her savings account. Ms Waters did not provide any details of her living expenses. It is entirely unclear whether she pays any rent for living in her great aunt’s residential property. It may be assumed that she does have ongoing living expenses, but their quantum remains unclear. Ms Waters tendered in evidence extracts from a report entitled “Poverty in Australia 2016” by the Australian Council of Social Service, which contains statistics and statements concerning the median income poverty line for a single adult in 2014. In the Executive Summary, it is stated that, while an overall minority of people receiving social security payments fell under the poverty line in 2014 (36.1%), a majority of Newstart recipients (55%) were in that category. Furthermore, it states that a single person with no children on Newstart in 2013-14 fell $109.55 per week below the poverty line. It is difficult to see how this material assists Ms Waters’ interlocutory application. The material relates to 2014 and provides no adequate evidentiary foundation to obtain a clear understanding Ms Waters’ individual financial circumstances and living expenses, even as a recipient of Newstart, in late 2016 or at the date of the hearing of her interlocutory application.

61    Ms Waters’ unchallenged evidence regarding her Centrelink benefits, her repayment of a debt to Centrelink and what she was told concerning the “preclusion period” should be accepted. The fact remains, however, that when Ms Waters swore her affidavit she had available to her an amount in cash of $97,000, which she could have used to pay the security for costs, including if necessary a security for a bank guarantee, but she chose not to do so.

62    Based on the evidence relied upon by Ms Waters and her oral and written submissions, I am not persuaded that there has been any relevant change to the matters which underpinned the decision to require her to pay security for costs. While it is evident that there has been some discussion between the parties on the issue of the outstanding costs orders (including costs orders which Ms Waters has been ordered to pay arising from her unsuccessful litigation post 16 October 2014), it is notable that, there are now seven outstanding costs orders against her, including the three which were extant at the time of my earlier decision. Ms Waters was provided with draft bills of costs on or around 4 April 2016 and she provided some “general objections” in her letter dated 26 April 2016. In that letter, Ms Waters invited the ATO to reconsider the proposal set out in her solicitors’ letter dated 28 July 2015 or, alternatively, make a counteroffer to settle the substantive matter. As noted above, the ATO’s solicitors said in their letter in response dated 6 May 2016 that the ATO “is considering your invitation in relation to your previous settlement proposal dated 28 July 2015 and will, as requested, revert to Gells if it has any response on that point” (emphasis added). No assurance was given that a response would be provided.

63    It appears that there was no further communication between the parties prior to the directions hearing on 6 December 2016 when it must have been apparent to Ms Waters that the ATO was still pressing for payment of the various outstanding costs orders, including those relating to Waters security for costs and Waters leave to appeal. Ms Waters did not give any evidence of any step taken by her from 6 December 2016 to 21 March 2017 to seek to resolve those or any other outstanding costs orders.

64    None of the material relied on by Ms Waters puts in doubt my previous finding that her impecuniosity was not caused by the ATO’s conduct. Nor has she advanced any proper basis for departing from my earlier conclusion that the security for costs order would not have the effect of stultifying the proceedings. It is evident that, despite the making of that order, Ms Waters was able to retain solicitors and counsel to represent her in proceedings in the Full Court of this Court and two proceedings in the High Court. Ms Waters’ submissions concerning stultification related to the consequences of what she said was her financial inability to retain lawyers to act for her in the substantive proceeding. I do not accept that the proceeding is necessarily stultified if Ms Waters is unable to obtain legal representation. As noted above, she appeared for herself in support of her interlocutory application and to oppose the ATO’s interlocutory application. Ms Waters impressed me as an intelligent and highly competent person. Her written submissions were clear and coherent and of considerable assistance to the Court. Her oral submissions, which were of considerable but not unreasonable length, were relevant and focused. Ms Waters displayed a high level of skill as an advocate. This included taking the Court to relevant passages of several authorities which Ms Waters relied upon in support of her case. In my respectful view, Ms Waters more than held her own in presenting her case. I accept that the presentation of her substantive case would be more demanding but, based upon my observations of Ms Waters, I do not doubt that she would be able competently to present that case. Accordingly, I do not accept her submissions concerning stultification, focused as they were on her inability to retain legal advisers.

(c) Ms Waters’ application to prevent any further interlocutory applications by the respondent

65    Ms Waters contended that, because of the ATO’s conduct, she had been prevented from obtaining a hearing on the merits of her substantive case notwithstanding that there was a finding in [67] of Waters security for costs that she had an “arguable” case. She contended that this amounted to a denial of her “constitutional entitlement to access justice in the Federal Court” and that it was therefore appropriate to prevent the ATO from filing any further interlocutory applications which would have “the potential to erode public confidence in the Federal Court and serve as a deterrent to potential litigants with genuine claims”.

66    The ATO submitted that no appropriate basis had been established to make an order preventing it from filing further interlocutory applications. It emphasised that, to date, it had filed only two interlocutory applications, the first which led to the making of the Waters security for costs and the second and more recent one which seeks dismissal of the proceedings for non-compliance with that earlier order. The ATO submitted that there was nothing to suggest that either interlocutory application was an abuse of process or involved conduct which should disqualify it from filing further interlocutory applications.

(i) Disposition of the application to prevent the ATO filing any future interlocutory applications

67    Ms Waters has not established any basis which would warrant an order being made at this stage so as to prevent the ATO from filing any further interlocutory applications. The two interlocutory applications which have been filed by the ATO in these proceedings have both been made responsibly. The first was successful and Ms Waters was ordered to pay the ATO’s costs. As will shortly emerge, the outcome of the ATO’s second application will be the making of orders in its favour. As matters will then stand it seems improbable that there will be any need for the ATO to file any further interlocutory applications in the proceeding. So, to that extent, this part of Ms Water’s interlocutory application may be moot. In any event, however, no basis has been shown for making the order which Ms Waters seeks.

(d) The ATO’s interlocutory application seeking dismissal of the substantive proceeding

68    The ATO relied upon an affidavit sworn on 27 January 2017 by its instructing solicitor, Ms Trembath. Annexed to the affidavit was voluminous correspondence between the parties on the issue of outstanding costs (that correspondence is summarised above). Ms Waters relied on her affidavit dated 9 February 2017 in response to that of Ms Trembath.

69    Ms Waters also relied upon an outline of written submissions dated 10 March 2017 and signed by her in opposing the ATO’s interlocutory application. In brief, those submissions were as follows:

(a)    The proceedings have not been stayed since 16 October 2014, because Ms Waters has exercised her rights to challenge Waters security for costs.

(b)    Prior to Ms Trembath’s affidavit, the ATO had never identified to Ms Waters its costs in the High Court proceedings and no bills of costs have been provided to Ms Waters in respect of any of the proceedings where she has been ordered to pay costs.

(c)    Ms Waters disputed the ATO’s claim that she had notice of the proposed summary dismissal application since at least 6 December 2016, when proposed consent orders were first shown to her prior to a directions hearing.

(d)    Ms Waters reiterated her claim that, if she had to pay $30,000, this would stultify her ability to run her substantive case because she could not afford lawyers.

(e)    Ms Waters disputed the ATO’s claim that she had not satisfactorily explained why she could not meet the security for costs order, citing the evidence in her affidavit dated 22 December 2016.

(f)    Ms Waters contended that it was not open to the ATO to question Centrelink’s assessment of her asset and debt position and that it was open to the ATO to cross-examine her on her affidavit evidence.

(g)    Ms Waters contended that it was not “sustainable” for the ATO to suggest that she should not reinstate her lost superannuation.

(h)    As to the ATO’s submission that she should fund the security for costs from her current savings of $47,000, Ms Waters contended that she lived well below the poverty line and “could not possibly afford basic living expenses on the $210 per week [less expenses of complying with Centrelink obligations] from her current benefit (regardless of whether or she pays rent at her current residence)”, as well as having “medical bills from overdue consultations and tests”.

(i)    If Ms Waters paid her security for costs in the sum of $30,000, Centrelink would ask her why her bank account “was suddenly depleted of $30,000”.

(j)    Centrelink has been informed of the changes to Ms Waters’ circumstances, as was reflected in the fact that she had been issued with a new “Pensioner Concession Card” updating her address.

(k)    Ms Waters should not be penalised by the delays which were occasioned by the difficulties of her obtaining advice from her Counsel.

(l)    On the assumption that the Court found that Ms Waters is impecunious, she relied upon authorities which provide that it is not in the interests of justice to order security against an impecunious litigant, citing Kiefel v State of Victoria [2014] FCA 604 (Kiefel) at [34]; Soh v Commonwealth of Australia [2006] FCA 575 (Soh) at [16] and [34] and Tran v The Commonwealth [2009] FCA 921 (Tran) at [5], [18] and [27].

(m)    Ms Waters contended that it was plain that she would be prejudiced if her proceedings were summarily dismissed without her having had an opportunity to have her substantive claims heard and determined on their merits, with particular reference to various statements that she had an “arguable” case.

70    Ms Waters referred to the fact that, during oral argument concerning her application for leave to appeal in the Full Court, senior counsel for the ATO affirmed that “certain admissions are made in the defence”. She also relied upon statements by Flick J during the course of oral argument in the Full Court.

(i) Disposition of the ATO’s interlocutory application

71    It is desirable to say something immediately concerning Ms Waters’ reliance upon statements that she has an “arguable” case. In Waters security for costs, after noting the ATO’s submission that Ms Waters’ prospects in the substantive proceedings were “low”, I stated at [67] that “for the purposes of interlocutory application, I am prepared to accept that Ms Waters has an arguable case”. That statement was made in the context of the well settled principle that the Court should not engage in a detailed assessment of the strength or weakness of a case at the interlocutory stage, as is reflected in my reference to Elshanawany v Greater Murray Area Health Service [2004] FCA 1272 (Elshanawany) in those reasons for judgment. The significance of the statement is confined to the express purpose for which it was made.

72    Nor do I consider that this aspect of Ms Waters’ argument is advanced by her reliance upon other matters. The first relates to what Mr Kennett SC (who appeared for the ATO) said during oral address in the leave to appeal application to the Full Court. The transcript of that hearing records him saying as follows:

… There are no affidavits yet filed in the substantive proceeding. It’s a case where certain admissions are made in the defence. They are carefully, as my junior has been pointing out to me, drawn and narrowly drawn”.

73    That passage falls far short of constituting an admission that Ms Waters’ substantive case was “arguable”. It is made clear in the ATO’s defence in the substantive proceeding that it denies that Ms Waters is entitled to any relief.

74    Ms Waters also relies upon statements made by Flick J in the Full Court. It is relevant to set out extracts from pages 3 and 4 of that transcript:

FLICK J:    He accepted that she has got an arguable case – whatever the expression was.

MR KING:    Yes. But we say it’s stronger than an arguable case.

FLICK J:    Yes. Well, proceed from the premise that it’s a good case.

…

FLICK J:    --- assuming that there’s a public interest in the case and assuming that woman has more than an arguable case – however you want to characterise it.

75    These exchanges with Mr King, who appeared for Ms Waters in the Full Court, fall far short of establishing that Ms Waters’ substantive case is in fact a good case. Justice Flick made clear that he was asking Mr King to proceed on an assumption or premise that the case was “arguable” or “a good case” for the purposes of understanding Ms Waters’ contention as to why the Full Court should grant her leave to appeal from Waters security for costs. There is no basis for suggesting that these expressions reflected Flick J’s personal assessment of the merits or strength of Ms Waters’ substantive case. The time for any such assessment has simply not arisen, not the least because no evidence has yet been filed in that substantive proceeding.

76    It is understandable that Ms Waters is concerned to have her substantive case heard and determined. However, the Court has an obligation to ensure that justice is administered to all parties in litigation. It was the Court’s assessment in October 2014 that the interests of justice required Ms Waters to pay security for costs as a condition of her prosecuting her substantive action. In my respectful view, for the reasons that follow, that remains the case.

77    Section 56(4) of the FCA Act provides that if security or further security is not given in accordance with an order made under that provision, the Court or a judge may order that the proceedings be dismissed (see also rule 5.23 of the Federal Court Rules 2011 (Cth)). It is well settled that the Court’s discretion under this provision is broad and unfettered but must be exercised judicially in full. In Microbio Resources Inc v Betatene Ltd [1993] FCA 848 (Microbio), the Full Court said:

The Court is careful to see that orders for security for costs do not work injustice to parties against whom such orders are made, but if those parties do not comply with the orders and give no evidence or explanation as to why they have not complied with them, they cannot be heard to complain of injustice if, after a considerable length of time, and extensions of time, the ultimate sanction of dismissal is applied. It is incumbent on parties in such circumstances to provide evidence of their position.

78    Shortly after Microbio was decided, in proceedings in the New South Wales Supreme Court in Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18, Einstein J identified at [24] the following five factors which are relevant to the exercise of the discretion such as that conferred by s 56(4) (noting that Einstein J’s decision was upheld on appeal at Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271):

1    the period that has elapsed since security was ordered;

2    the fact that the plaintiff/applicant has been on notice of the application for dismissal;

3    the seeming inability of the plaintiff/applicant to further fund the main proceedings;

4    the prejudice to the defendant/respondent; and

5    the position of the Court.

79    These five factors have also guided the exercise of the discretion in cases such Capital Webworks Pty Ltd v Adultshop.Com Limited [2008] FCA 423 at [14] per McKerracher J and Austcorp at [21] per Gleeson J.

80    As noted above, Ms Waters relied upon several authorities in support of her contention that it is not in the administration of justice to order security against an impecunious litigant. With respect, I do not consider that the authorities cited by her support that bald proposition. In Kiefel, Mortimer J correctly emphasised that the Court’s power under s 56 to order payment of security for costs is a “wide power” which must be exercised judicially and each case depends on its own circumstances. Her Honour then noted in [34]:

The potential chilling effect of requirements to provide security for costs on individual litigants are well recognised, and the impediment which such orders could otherwise impose on access to justice means, at first-instance level, an individual impecunious litigant will rarely be ordered to provide security.

81    I repeat and adopt what I said in Waters security for costs at [43] on those observations. I remain of the view that, in circumstances where each case necessarily turns on its own particular facts and circumstances, the preferable approach is one which disavows any predisposition one way or the other to order security for costs in the case of an individual impecunious litigant. The impecuniosity of an individual litigant is, of course, a relevant consideration to be taken into account but it is not determinative and it should not be assessed in isolation from other relevant considerations. I respectfully agree with Jacobson J’s observations in Elshanawany at [11] to the effect that, in general, a natural person who commences litigation will not be required to provide security for costs merely because the person is impecunious.

82    As to Ms Waters’ reliance on observations by Madgwick J in Soh at [16] and [34], it is important to note that those observations were directed to the factual circumstance in that case where the applicant resided outside Australia and had not established any assets against which a judgment for costs could be enforced. In [34], his Honour simply observed that there was little point ordering security for costs in circumstances where such an order would give the recipient “scant, real security if complied with, but would otherwise simply shut out an impecunious person from seeking legal address for an alleged wrong”. The observations reflected the particular circumstances of that litigation, where the applicant was seeking damages for alleged wrongful imprisonment arising from his immigration detention. The applicant said that if he was ordered to pay security for costs in a sum greater than $1,000 he would not be able to pursue his claim. Justice Madgwick found that the applicant had no assets in Australia and that the evidence was that he was impecunious.

83    In Tran, Jagot J dismissed an application seeking security for costs in the sum of $25,000 in respect of an appeal. Her Honour observed at [5] that courts are reluctant to order an impecunious applicant, who is a natural person, providing security where the effect would be to stifle that person’s access to justice. She added, however, that the position was different where such a person has already obtained access to a court and has received a decision dismissing the claim. Her Honour was not suggesting that, in any other case, security for costs should not be ordered against an impecunious person. The matters which weighed particularly with her Honour are those which she identified in [27], namely that the appeal was bona fide and not hopeless or manifestly without merit; the importance of the issues not only to the appellant but also to the operation of the Migration Act 1958 (Cth) more generally; the circumstances giving rise to the appellant’s claim and that the effect of an order for security would be to stultify the appeal. Her Honour’s judgment reinforces the fundamental need to pay close attention to the particular circumstances of any individual case.

84    Ms Waters relied upon some statements by Kirby J, sitting as a single judge in the original jurisdiction of the High Court, in Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Limited [1998] HCA 41; 193 CLR 502 at [26]. His Honour set out there a number of propositions derived from decisions relating to orders for security for costs. In particular, Ms Waters placed refinance upon the following statement by Kirby J in [26] (footnote omitted):

(g)    That if an order were made it would effectively shut a party out of relief according to law in circumstances where that party’s impecuniosity is itself a matter which the litigation may help to cure.

85    In a footnote reference to that proposition, Kirby J cited Farrer v Lacy, Hartland & Co (1885) 28 ChD 482 (Farrer) at 485 per Bowen LJ. There are several points to note about this statement. The first is that Kirby J emphasised that the propositions stated by him reflected further considerations which “in the particular circumstances of the case” have been held to be relevant to the grant or refusal of an order for security for costs. His Honour was not suggesting that the proposition set out in (g) was one which applied in every case. Indeed, it is telling that in Farrer, to which Kirby J referred, it was emphasised that the relevant remarks were derived from an earlier decision of the Court of Appeal (Rourke v White Moss Colliery Company 1 C. P. D. 556), which was described by Baggallay LJ as involving an action which “was of a very special nature”. In that case, the plaintiff was a workman employed by a contractor who was injured while working for a company. He claimed that the injury was due to the negligence of an engineer employed by the company, but acting under the orders of the contractor. It was argued that it would be a denial of justice to the plaintiff, who had been reduced to poverty by the accident, if he could not appeal without giving security for costs. Those circumstances are different from those here. As noted above, Ms Waters has not provided a sufficient basis for revisiting the earlier finding that her impecuniosity was not caused by the ATO’s conduct.

86    It is desirable to outline some further relevant principles concerning the issue whether a proceeding should summarily be dismissed where there has been a failure to comply with an order for payment of security for costs.

87    In Strategic Financial and Project Services Pty Ltd v Bank of China [2012] FCA 701 (Strategic Financial) Robertson J cited, at [11], the following passage from the Full Court’s decision in Microbio:

The Court is careful to see that orders for security for costs do not work injustice to parties against whom such orders are made, but if those parties do not comply with the orders and give no evidence or explanation as to why they have not complied with them, they cannot be heard to complain of injustice if, after a considerable length of time, and extensions of time, the ultimate sanction of dismissal is applied. It is incumbent upon parties in such circumstances to provide evidence of their position.

88    In Strategic Financial, the applicants had not complied with an order for security for costs made two months earlier. Justice Robertson made self-executing orders that if the applicants did not comply with the order for payment of security for costs within two further weeks the proceedings were summarily dismissed with costs (i.e. a self-executing order). A similar self-executing order was made by Gleeson J in the particular circumstances in Austcorp.

89    As an alternative to its application that the substantive proceedings be dismissed for non-compliance with a security for costs order, the ATO submitted that the Court could provide Ms Waters with one further opportunity to comply with the order but have a self-executing order in the event of non-compliance. Mr Glover said that a period of 60 days would be reasonable.

90    I make the following findings and observations in relation to each of the five relevant factors which, although not exhaustive, guide the exercise of the discretion to make an order under s 56(4) of the FCA Act.

91    First, more than two years has lapsed since the security was ordered. Ms Waters has had ample opportunity to satisfy the order, particularly since July 2016 when her residential property was sold and she received the net proceeds. For the reasons given above, it appears that Ms Waters made informed choices as to how she would direct the net cash proceeds of her property sale, which did not include taking advantage of those proceeds to meet the security for costs order.

92    Secondly, I consider that Ms Waters had reasonable notice of the ATO’s interlocutory application to have her substantive proceeding dismissed. It can be inferred from the chronology of events that her filing of interlocutory application to have the security for costs order varied or discharged provided a catalyst for the ATO’s action. This is reflected in the Court’s orders dated 6 December 2016 which directed the ATO to file and serve any interlocutory application seeking dismissal of the proceeding, and any evidence in support, by 27 January 2017. The interlocutory application was lodged electronically on 27 January 2017.

93    Thirdly, there is no contest that, on the basis of the existing evidence, Ms Waters is unable to fund her substantive proceeding. Her evidence is that she cannot afford to retain legal advisers. Based on the existing evidence, she has no capacity to satisfy an adverse costs order in the event that her substantive application is unsuccessful. The ATO continues to be at risk of being unable to recover its costs if Ms Waters’ substantive proceedings are dismissed.

94    Fourthly, as to the ATO’s prejudice, it seems to me that the prejudice is self-evident, having regard to the costs which it has already incurred in the substantive proceedings, including in preparing its defence, and the inevitability of it incurring considerable additional costs if the substantive proceedings progress. I consider that the risk of prejudice should be minimised.

95    Fifthly, as to the position of the Court, I do not consider this particular factor weighs in favour of either party. I was not invited to find that Ms Waters’ failure to satisfy the security for costs order constituted a flagrant or contumelious disregard of that order and I make no such finding. Mr Glover said that the ATO did not contend that Ms Waters’ interlocutory application was an abuse of process. I agree.

96    I have considered all the matters raised by Ms Waters in opposing the ATO’s application, including the matters summarised in [69] above. In my view, these matters do not outweigh the factors which support the substantive proceeding being dismissed for non-compliance with the security for costs order. The reasons why I take that view are set out above in respect of many of the relevant matters raised by Ms Waters. In addition:

    while Ms Waters was fully entitled to exercise her legal rights to challenge Waters security for costs, those challenges ended on 24 August 2016 when her application for leave to appeal from Gageler J’s decision was dismissed; and

    Ms Waters was provided with draft bills of costs in relation to her unsuccessful proceedings in the Supreme Court and Court of Appeal by letter dated 4 April 2016 and she was provided with updates of the ATO’s estimated costs for various proceedings (see the ATO’s solicitors’ letters dated 18 December 2014 (which restated the ATO’s total estimated costs for the Supreme Court, Court of Appeal and High Court proceeding prior to the commencement of the proceedings in the Federal Court) and 22 June 2015 (which provided an estimate of the ATO’s costs concerning Ms Waters’ application for leave to appeal to the Full Court)). In my view it was not unreasonable for the ATO to defer preparing detailed bills of costs, because of the resources involved, unless and until that course became unavoidable.

97    For all these reasons, I consider that an order should be made under s 56(4). However, Ms Waters should have one further opportunity to comply with the security for costs order, as opposed to ordering that her substantive proceeding be summarily dismissed now. I accept Mr Glover’s statement that Ms Waters should, in these circumstances, be given 60 days to comply and, if she fails to do so, there should be a self-executing order to dismiss her originating application. The ATO did not seek costs in respect of that matter, but it did seek the costs of its interlocutory application.

98    I am not aware of any reason why the costs of the interlocutory applications should not follow the event as is the usual course. I will, however, give the parties an opportunity to make brief submissions, not to exceed three pages, within seven days if they wish to submit that costs should not follow the event in respect of the interlocutory applications. Any dispute on this matter will be determined on the papers.

Associate:

Dated:    24 March 2017