Federal Court of Australia

Quach v MLC Limited [2022] FCA 586

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 54A(3) of the Federal Court of Australia Act 1976 (Cth) (Act), the Report of the Referee, National Judicial Registrar Colbran, dated 26 April 2022, be adopted in the whole.

2.    Pursuant to s 56 of the Act and r 36.09(1)(a) of the Federal Court Rules 2011 (Cth), the appellant provide security for the respondent’s costs in the sum of $39,395, such security to be provided either by way of payment into Court or by provision of an unconditional bank guarantee.

3.    Pursuant to r 36.09(1)(b) of the Rules, the appeal be stayed until the security for costs has been given by the appellant pursuant to Order 2.

4.    Pursuant to s 56 of the Act and r 36.09(1)(c) of the Rules, the appeal be dismissed if security for costs has not been provided by the appellant pursuant to Order 2 by 4:00 pm on 10 June 2022.

5.    The appellant pay the respondent’s costs in respect of:

(a)    the interlocutory application filed by the appellant on, and dated, 2 May 2022; and

(b)    the interlocutory application filed by the respondent on 13 September 2021 and dated 8 September 2021.

6.    The Registrar refuse to accept for filing the notice of a constitutional matter under s 78B of the Judiciary Act 1903 (Cth), lodged by the appellant on 16 May 2022.

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

REASONS FOR JUDGMENT

CHEESEMAN J:

Introduction

1    Michael Quach is a deregistered medical practitioner. He effected a policy of insurance with MLC Limited, the respondent, on 25 November 2005. The policy covered Dr Quach for income protection in the event of total and permanent, or partial, disability, and critical illness, as defined in the policy wording. Dr Quach brought proceedings in this Court against MLC in which he claimed that MLC failed to indemnify him under the policy and also breached its duty of utmost good faith under s 13 of the Insurance Contracts Act 1984 (Cth) (ICA). The proceedings were dismissed and Dr Quach was ordered to pay costs: Quach v MLC Limited (No 6) [2021] FCA 271. On 29 March 2021, Dr Quach filed a notice of appeal (ACD 19 of 2021) (appeal proceedings).

2    In the appeal proceedings, MLC filed an interlocutory application dated 8 September 2021, filed on 13 September 2021, seeking: (1) an order pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 36.09(1)(a) of the Federal Court Rules 2011 (Cth) that Dr Quach give security for its costs of the appeal in the sum $67,000; (2) that the proceedings be stayed pending payment of security for costs; and (3) in the event of non-payment of security for MLC’s costs, that the appeal proceedings be dismissed under s 56 of the FCA Act and r 36.09 of the Rules.

3    On 1 April 2022, pursuant to s 54A(1) of the FCA Act and Division 28.6 of the Rules, a Registrar of the Court was appointed as referee to prepare a report for the Court on the following questions:

(1)    Whether security for the respondent’s costs should be granted; and

(2)    If so, in what amount and in what form.

4    On 26 April 2022, the Referee provided her Report in which she set out her reasons for forming the following opinions in respect of the questions. First, that Dr Quach should provide security for costs of MLC of the appeal proceedings. Secondly, that the amount of the security should be $39,395.00. Finally, that the form of the security should be either by way of payment into Court or by provision of an unconditional bank guarantee.

5    The Report was sent to the parties on 3 May 2022 with a preliminary indication that the Court intended to adopt the findings in the Report subject to any application under r 28.67 of the Rules. That same day Dr Quach filed an application seeking an order that the Court reject the Report in the whole. The parties filed and served written submissions ahead of an oral hearing. MLC opposes the application and submits that the Report should be adopted in the whole. MLC otherwise seeks the orders in its interlocutory application to the effect that the appeal be stayed until security has been provided, or dismissed, if security is not provided within 21 days of entry of the orders.

Conclusion in summary form

6    For the reasons which follow, I am satisfied that the Court should adopt the Report of the Referee in the whole and make orders in accordance with the opinions contained therein and with prayers 2, 3 and 4 of the interlocutory application filed by MLC on 13 September 2021.

Legal principles

Adoption of Referee’s Report

7    Rule 28.67(1) relevantly provides that after a referee’s report has been given to the Court, a party may, on application, ask the Court to adopt, vary or reject the report, in the whole or in part.

8    The principles applicable to the exercise of the Court’s discretion in the context of an application under r 28.67 of the Rules are well established. For a recent statement of the applicable principles see: Pateras v State of Victoria [2022] FCA 238 at [22] – [23] (Anderson J) and the authorities cited therein. In summary:

(1)    The application is not an appeal. The Court does not conduct a hearing de novo or a rehearing. A party who is dissatisfied with a referee’s report is not entitled to require the Court to reconsider and re-determine afresh matters, whether of fact or law, which the party wants to contest.

(2)    The discretion to adopt, vary or reject a referee’s report is to be exercised in a manner consistent with the context and purpose of the relevant rules. The purpose of the Rules is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as a rehearsal for the real contest.

(3)    If the source of a party’s dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh.

(4)    If the referee’s report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, “patent misapprehension of the evidence” means a lack of understanding of the evidence and not the weight attributed to it; and “perversity or manifest unreasonableness” means a conclusion that no reasonable tribunal of fact could have reached.

(5)    In general, the referee’s findings of fact should not be re-agitated before the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee has expertise. It is not enough for an aggrieved party to point to errors of fact which would be amenable to correction by an appellate court.

(6)    Even if it were to be shown that the Court might have come to a different conclusion in some respect from that reached by the referee, absent any error of the kind referred to above, it would not be a proper exercise of the discretion conferred by r 28.67 of the Rules, to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report.

(7)    The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee the evidence and submissions upon which they wish to rely.

(8)    Although the reasons given by the referee may appear to be adequate, where the party challenging the report contends that they are not because the referee did not deal with “very significant evidence”, the Court may examine the evidence to see whether the reasons were in fact inadequate because they omitted to refer to such evidence.

The above summary of principles is taken from Gulf Conveyor Systems Pty Ltd v Gulf Integrated Systems Solutions Pty Ltd [2020] FCA 1245 at [13] – [21] (Katzmann J) and omits the authorities cited therein.

Security for Costs

9    The Court has a broad and unfettered discretion under s 56 of the FCA Act to order an applicant, or an appellant, to give security for costs that may be awarded against the party. Section 56 provides:

(1)    The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.

(2)    The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

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

(4)    If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.

(5)    This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.

10    The outcome in each case must depend on its own circumstances: Frigger, in the matter of Computer Accounting and Tax Pty Ltd (in liq) (No 2) [2018] FCA 612 at [5] (Colvin J). But for the requirement to act judicially, the discretion is “effectively unlimited or unconfined”: Lim v Comcare [2016] FCA 1346 at [18] (Wigney J). The factors informing the exercise of the discretion cannot be stated exhaustively: Hardingham v RP Data Pty Ltd [2020] FCA 1062 at [8] (Burley J).

11    Rule 36.09(1) of the 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.

Consideration of the referee’s reasons

12    Dr Quach’s submissions in support of his contention that the Report should be rejected in whole are primarily directed to challenging factual findings made by the Referee and by the primary judge in the decision the subject of appeal. For that reason, it is helpful to begin by reviewing the Referee’s reasons for forming her opinion in respect of each of the questions.

13    In preparing the Report the Referee had regard to the material identified in the Referee’s Report (RR) [10] and [11] which included written submissions prepared by or on behalf of each of the parties and to affidavits filed for each of the parties. The Referee had regard to: (1) an affidavit of Alphonse Luke Edwards dated 8 September 2021, sworn 26 April 2022, filed by MLC in support of the application for security for costs; and (2) five affidavits of Dr Quach affirmed 22 March 2021, 25 August 2021, 24 November 2021, 6 December 2021 and 19 April 2022 opposing the application. I interpolate to note that the parties had ample opportunity to prepare evidence in respect of the security for costs application and to put that evidence before the Referee. The parties also made written submissions to the Referee in advance of a hearing before the Referee at which Dr Quach and MLC’s Counsel made oral submissions.

14    The Referee summarised the general principles applicable to exercising the discretion to grant security for costs: RR[13] – [16]. The Referee correctly summarised the general principles with an appropriate focus on the grant of security in the particular context of appeal proceedings.

15    Before turning to the application of the general principles to the particular facts, the Referee addressed three broad submissions on the relevant principles advanced by Dr Quach.

16    First, the Referee addressed Dr Quach’s submission that the Court did not have jurisdiction on the basis that there was no power to order security for costs in the ICA. The Referee considered that this submission was misconceived. The Referee noted that s 56 of the FCA Act empowers the Court to order an appellant in an appeal under Division 2 of Part III to give security for the payment of costs that may be awarded against him or her. The Referee further noted that the power conferred by s 56 is not subject to, or conditional upon, the ICA. The Referee’s observation, and her conclusion, in respect of Dr Quach’s first submission was correct.

17    The second of Dr Quach’s submissions, which the Referee considered, was based on a cost order made by Justice Rares on 3 February 2020 in separate proceedings (ACD61/2019, being proceedings instituted by Dr Quach for leave to appeal from a decision in respect of a claim for legal professional privilege made by MLC): RR[19]. The 3 February 2020 cost order required “[MLC] pay [Dr Quach’s] costs of the appeal as a litigant in person”. Dr Quach submitted that the Referee was bound by that order so that “[MLC] [must] pay [Dr Quach’s] costs of the [MLC’s application for security for costs] as a litigant in person”. The Referee noted that the present appeal proceedings (ACD19/2021) are different proceedings to ACD61/2019. That is correct. The appeal proceedings do not concern an appeal from ACD61/2019 but, rather, arise from ACD18/2019. The Referee concluded that the costs order in ACD61/2019 was not relevant to the appeal proceedings and that she was also not bound to apply those orders on a “like for like” basis and order that MLC pay Dr Quach’s costs on the security application as a “litigant in person”: RR[19]. The Referee’s conclusion was correct.

18    Finally, the Referee considered Dr Quach’s submission that MLC had a statutory obligation to act in good faith under s 13 of the ICA in its dealings with him and was acting in bad faith by attempting, via its application for security for costs, to require him to pay costs in the appeal proceedings before those costs accrued. The Referee considered Dr Quach’s submission was misconceived. The Referee observed that “[if] [MLC] has a well-founded concern that [Dr Quach] may be unable to meet an adverse costs order, it is entitled to seek security for costs”. The Referee found that s 13 of the ICA did not limit MLC’s entitlement to seek security for its costs of the appeal proceedings: RR[20]. The Referee was correct to describe Dr Quach’s submission based on s 13 of the ICA as misconceived and to conclude as she did.

19    The Referee then moved to consider the application of the general principles to the particular circumstances of the appeal proceedings. The Referee considered the following matters in turn: (1) Dr Quach’s impecuniosity/inability to pay the costs of MLC; (2) the likelihood of the success of the appeal; (3) other factors relevant to the exercise of discretion; and (4) the quantum of security.

Dr Quach’s impecuniosity/inability to pay the costs of MLC

20    The Referee considered the evidence in respect of Dr Quach’s impecuniosity: RR[21] – [27].

21    Following a careful assessment of the evidence the Referee concluded that there was a “legitimate concern that Dr Quach may not be able to meet an adverse cost order made against him”: RR[27]. The Referee was satisfied that “in circumstances where the [Dr Quach] has not filed any relevant evidence on his ability to pay an adverse costs order, it is appropriate to draw an inference that it is highly likely he is unable to pay”: RR[27].

22    The Referee’s analysis reflected a careful consideration of the submissions advanced by both parties.

23    MLC relied on 22 publicly available judgments in the period from 2015 to 2021 in which costs orders had been made against Dr Quach in various jurisdictions. The Referee had regard to the 22 judgments only for the purpose of establishing the orders that were made, and not as proof of the existence of the facts in issue, in each proceeding. Dr Quach submitted that all orders, including the 22 costs orders, have been stayed because of his appeal to the Court in Dr Michael Van Thanh Quach v Frank Marks (ACD25/2021 and ACD57/2021). Based on Dr Quach’s contention that the costs orders are stayed, I infer that he does not, and did not, contend that he has paid the costs orders. The Referee gave little weight to this submission as the majority of the 22 costs orders were not made by the NSW Civil and Administrative Tribunal. The Referee took into account that MLC had not led evidence in respect of completed assessments or taxation of the costs orders or demands for payment. Against this, the Referee noted that Dr Quach did not file any evidence in respect of his financial position and did not respond to MLC’s letters seeking information regarding his ability to meet a potential costs order in the appeal proceedings: RR[25].

24    Based on her review of the materials and consideration of the parties’ competing positions, the Referee was satisfied that there was a legitimate concern that Dr Quach may not be able to meet an adverse costs order against him. The Referee took into account that: (1) Dr Quach has been prevented from practising in his profession as a doctor since 2015 (as a result of his deregistration); (2) MLC had paid approximately $1,014,864.67 to Dr Quach in two separate payments on 20 April 2021 and 17 June 2021 (those payments being in the amount of $982,825.01 in monthly benefits for his insurance claim for the period 9 September 2014 to 8 February 2021 and $32,039.66 by way of premium refunds for the period 9 August 2014 to 24 April 2021); (3) it was unclear what, if anything, Dr Quach had done with this money; (4) Dr Quach was no longer in receipt of income protection benefits from MLC; (5) Dr Quach has a significant number of costs orders against him, none of which have been paid; and (6) despite MLC’s requests, Dr Quach did not provide information in respect of his assets, liabilities and/or cash flow. The Referee was satisfied that in circumstances where Dr Quach did not file any relevant evidence of his ability to pay an adverse costs order, it was appropriate to draw an inference that it is highly likely that he is unable to pay. Based on the Referee’s analysis, it would be appropriate to draw an additional alternative inference that it is likely that Dr Quach will not accept that he should pay an adverse costs order, if such an order is made.

Likelihood of the success of the appeal

25    The Referee next moved to consider the likelihood of the success of the appeal: RR[28] – [33]. I interpolate to note that the likelihood of success on the appeal is one of the matters that the Court typically takes into account in determining an application for security: see Equity Access Ltd v Westpac Banking Corporation [1989] FCA 361; ATPR 40-972 at [24] (Hill J); KP Cable Investments Pty Ltd v Meltglow Pty & Ors [1995] FCA 76; 56 FCR 189 at 196 – 198 (Beazley J, as her Honour then was); Dye v Commonwealth Securities Ltd [2012] FCA 992 at [26] (Emmett J, when his Honour was in this Court); All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Ltd [2020] FCA 840 at [43] (Allsop CJ).

26    The Referee considered that for the purpose of the security for costs application it was not appropriate to undertake a detailed analysis of the merits of the appeal. The Referee considered each of the four grounds of appeal at a high level.

27    Ground 1 appears to be directed to a denial of procedural fairness in the way in which the primary proceedings were managed. The Referee noted that there was nothing on the face of the orders of the primary judge that indicated that Dr Quach was not afforded a fair hearing in the way that the case was managed. The Referee understood that by Ground 2 of the appeal, Dr Quach contends that the primary judge was not bound to apply the Evidence Act 1995 (Cth), and in particular s 91 of the Evidence Act, in the proceedings at first instance in relation to what factual findings may be drawn from two decisions of NCAT and a “medical report” (which Dr Quach did not tender in any event). Noting that the Referee was necessarily considering the notice of appeal at a high level, her conclusion that if her understanding of Ground 2 was correct, the ground appears to be untenable, is correct. The Referee frankly acknowledges that it is difficult to follow what is meant by Ground 3. Ground 4 was similarly incoherent and not tenable as a matter of law. Based on her analysis, the Referee found that prima facie the likelihood of success of the appeal was low. In doing so, the Referee noted that “the judge at first instance dismissed [Dr Quach]’s application in a most definitive manner”: RR[28]. I interpolate to note that the Referee’s description of the primary judge’s reasons was apt: see, for example, PJ[51], PJ[57], PJ[59], PJ[61], PJ[63], PJ[73], PJ[75] and PJ[76].

28    The Referee’s conclusion as to the prima facie likelihood of success of the appeal being low was supported by the material before her and was a relevant matter to consider for the purpose of the security for costs application.

Other factors relevant to the exercise of discretion

29    The Referee considered that the following factors weighed in favour of making an order in favour of MLC for security for costs. First, the application for security was brought promptly: RR[34]. Second, any impecuniosity of Dr Quach was not brought about by MLC: RR[35]. Finally, the Referee had regard to Dr Quach’s litigious history including that a vexatious litigant order has been made against him under the Vexatious Proceeding Act 2008 (NSW) in Quach v New South Wales Health Care Complaints Commission [2017] NSWCA 267 as another factor that was in favour of MLC being afforded some costs protection: Frigger v Kitay [2019] FCA 624: RR[38].

Quantum of Security

30    Having regard to the established principles summarised in the Report at [46] – [48], and applying discounts to categories of work for which costs were claimed variably from 5% to 50%, the Referee concluded that $39,395.00 should be paid in security for MLC’s costs. The security sought by MLC in its interlocutory application was in the sum of $67,000.

Submissions

31    Dr Quach is self-represented. He relies on his written submissions and two affidavits affirmed by him on 9 May 2022 and 16 May 2022. The affidavits were filed without leave and were the subject of objection. The objection was withdrawn on the basis that the affidavits would be treated as a submission. Dr Quach also relied upon the material that he put forward before the Referee and which is recited at [10] and [11] of the Report. He appeared via Microsoft Teams (at his request) to make oral submissions at the hearing of this application.

32    MLC was represented by Counsel and relied on written and oral submissions.

Dr Quach’s submissions

33    Based on his written and oral submissions, the submissions advanced by Dr Quach may be summarised as follows:

(1)    Dr Quach contends that the Report contains multiple factual errors. Those alleged factual errors are set out in Table 1 of Dr Quach’s 9 May affidavit. Dr Quach says that the Report is “utterly one-sided in favour of [MLC]”;

(2)    Dr Quach repeated his submission made before the Referee in which he contended that s 13 of the ICA and the “duty of utmost good faith” overrides MLC’s right to seek security for costs under s 1335 of the Corporations Act 2001 (Cth) (but which is to be understood as a reference to s 56 of the FCA Act, being the provision on which MLC relies);

(3)    in oral submissions, Dr Quach submitted that the Referee’s opinion as to prospects of success was an inappropriate prejudgment of the appeal in breach of s 80 of the Judiciary Act 1908 (Cth);

(4)    Dr Quach submitted during the course of his oral address that MLC had a conditional costs agreement with its legal representatives. An objection was taken by MLC to this submission on the basis that the submission was not made to the Referee and was in any event unsupported by evidence;

(5)    Dr Quach submits that the primary judge incorrectly ruled that a report prepared by Dr Skinner titled “Income Protection and Disablement” was not a business record. The document in question is an MLC claim form completed by Dr Quach’s treating medical practitioner, Dr Skinner, and which includes a reference to a diagnosis of “narcissistic personality disorder” being made by Dr Andrew Petherbridge in response to the question “[p]lease provide details of the patient’s diagnosis below”. Dr Quach argues that this document was evidence of his medical diagnosis. Dr Quach contends that the hearsay exception applies to business records under s 69 of the Evidence Act. Dr Quach further submits that MLC failed to adduce evidence from a medical expert to counter Dr Petherbridge’s diagnosis. Dr Quach appears to rely on this as a matter that is relevant to the Referee’s assessment of the prospects of success on the appeal;

(6)    Dr Quach contends that the application for security for costs is in breach of what he asserts is a “common law costs order” in place requiring that MLC pay “$1,014,625.65” irrespective of the result in the primary proceedings and the appeal proceedings. Dr Quach submits that the onus is on MLC to establish “beyond a reasonable doubt” that he cannot pay the potential costs of an appeal and that it has failed to do so. Dr Quach relies on what he describes as an undertaking given by MLC, through its Senior Counsel at the hearing before the primary judge on 2 March 2021, to pay his costs as a “litigant in person”. I understand this submission to be that MLC is liable to pay any costs Dr Quach incurs in any proceedings against MLC. An extract of the transcript of the hearing before the primary judge is annexed to Dr Quach’s 24 November 2021 affidavit. The relevant exchange occurred on 2 March 2021, Dr Quach relies upon is:

[SENIOR COUNSEL FOR MLC]: …there is no prevarication on MLCs part. The reason it hasn’t been paid is we need an up to date account number into which to transfer the funds. [Dr Quach] provided us with an account number with the initial claim back in 2015, but MLC doesn’t want to rely on a 2015 account number. So soon as we get that information, the money will be paid.

(7)    Dr Quach also submits that the judgments relied upon by MLC in respect of the 22 costs orders are inadmissible under s 91 of the Evidence Act. Further, that in any event, the judgments relied upon by MLC have been invalidated by Quach v Horvarth [2021] NSWSC 1401 at [59].

Consideration

34    I have considered the Report dated 26 April 2022. I have had regard to the principles applicable to the exercise of the Court’s discretion in the context of an application, such as the present application, under r 28.67 (summarised at [8] above). There are no errors of principle or jurisdiction. The Report is well-reasoned and well-structured. The Referee has correctly applied the applicable principles in respect of making an order for security for costs in an appeal proceedings under s 56 of the FCA Act and r 36.09(1)(a) of the Rules.

35    The Referee correctly understood the scope of the inquiry and the nature of the task. The Referee accorded procedural fairness to both parties. The Report reflects that the Referee paid careful and close regard to the material before her and identified and applied the correct legal principles in arriving at her findings and opinions in respect of the questions.

36    I am not satisfied Dr Quach has established a proper basis for rejecting or varying the Report. The Referee was entitled to come to the conclusions she reached on the material before her. The Report does not disclose any perverse or unreasonable finding of fact. I do not consider that there is an error of principle or manifest unreasonableness such as would cause me to reject the Report. It is plain that in preparing the thorough and comprehensive Report, the Referee did turn her mind to the evidence and submissions of both parties.

37    To the extent that the submissions advanced by Dr Quach and summarised at [33] above raise discrete matters that are not disposed of by my reasons at [24] – [27] above, they may be addressed in short compass, using the same numbering:

(1)    By this part of his submissions, Dr Quach is in effect seeking to have the Court conduct a hearing de novo or a rehearing because he is dissatisfied with the Report. By this submission, Dr Quach seeks to have the Court exercise its discretion in a way that would frustrate the purpose of the relevant rules and reject the entirety of the Report. Dr Quach is seeking to re-agitate before the Court the findings of fact that the Referee made. Dr Quach has not demonstrated that the opinions of the Referee are based on a patent misapprehension of the evidence or a conclusion that no reasonable tribunal of fact could have made. Accordingly, I reject Dr Quach’s submission.

(2)    Dr Quach’s submissions in respect of s 13 of the ICA are a repetition of the submissions he made before the Referee. For the reasons expressed at [18] above, I reject Dr Quach’s submission.

(3)    Dr Quach’s submission to the effect that the Referee’s consideration of his prospects on the appeal constituted inappropriate prejudgment is misconceived for the reasons expressed at [25] above.

(4)    Dr Quach’s submission that MLC’s application for security for costs was precluded by his bare assertion that I should infer that MLC had entered into conditional costs agreements with its legal representatives, was not made before the Referee and are unsupported by evidence on which such an inference could properly be made. In addition, the submission is flawed as a matter of principle.

(5)    Dr Quach’s submission is misconceived. His submission is directed to findings made by the primary judge which must be construed in context. In the relevant part of the claim form Dr Skinner referred to an opinion given by Dr Petherbridge but also said that she had not given Dr Quach any psychiatric diagnosis. Dr Skinner also recorded answers in response to questions in the claim form to the effect that she believed Dr Quach of being capable of returning to work in the future and that Dr Quach did not, at the time, suffer from any symptoms which were impacting his ability to perform his usual work duties: see extracts at PJ[14] – [15]. Noting, as a matter of principle, that it is not appropriate to consider the merits of the appeal in detail for the purpose of the security application, Dr Quach’s submission does not demonstrate that the Referee’s opinion that the prospects of success of the appeal are low is flawed in the requisite sense for the purpose of the r 26.87 application.

(6)    Dr Quach’s contention in respect of what he describes as a “common law order” or undertaking does not establish a basis to vary or reject the Referee’s Report.. Dr Quach refers, in his affidavit of 19 April 2022, to an affidavit of 24 November 2021 and the annexure MQ1 thereto. It is plain on that evidence that the so called “common law order” is confined to the open offer by MLC to pay certain insurance benefits and refund premiums order to resolve the controversy at first instance: see PJ [47] – [49], particularly at [49] in respect of the agreement to pay costs. I further note that in the final orders below, the primary judge made another costs order against Dr Quach, which would itself be inconsistent with the submission that Dr Quach makes with respect to the alleged “common law costs orders” or undertaking.

(7)    Dr Quach’s submission that s 91 of the Evidence Act renders inadmissible each of the 22 judgments set out in Annexure B to the Report is misconceived. Each of those judgments is admissible as proof of the fact that costs orders were made. The Referee had regard to these judgments for that purpose. The submission that all 22 of the judgments are “invalidated” as a result of Quach v Horvath [2021] NSWSC 1401 at [59] is untenable.

38    Accordingly, I will make orders that the Report be wholly adopted. In addition, I will make orders consistent with the Referee’s opinion on each of the questions. I will make further orders in accordance with prayers 2 to 4 of MLC’s interlocutory application. I note that notwithstanding MLC’s written submissions on this part of the relief, Dr Quach did not address this aspect of the relief either in his written submissions in reply or in his oral submissions in chief. I am satisfied that it is appropriate to make these orders based on the evidence before me. It is also appropriate that costs should follow the event in respect of the interlocutory application filed by MLC on 13 September 2021, and the interlocutory application filed by Dr Quach on 3 May 2022. I will make orders accordingly.

Constitutional matter

39    Late on the day before Dr Quach’s application under r 28.67 was listed for hearing, he lodged for filing a notice under s 78B of the Judiciary Act (s 78B notice) seeking to raise a constitutional matter in respect of the interlocutory application as to whether the Report should be adopted or rejected. At the time of the hearing of the interlocutory application, the s 78B notice had not been accepted by the Registry.

40    The s 78B notice is in the following terms:

Notice of a Constitutional matter under section 78B of the Judiciary Act 1903

…

The Appellant gives notice that the proceeding involves a matter arising under the Constitution or involving its interpretation within the meaning of section 78B of the Judiciary Act 1903.

Nature of Constitutional matter

The nature of the Constitutional matter is the inconsistency to the extent that the vexatious order relied on my the respondent, MLC Limited, for an application for security of costs is invalid, pursuant to Section 109 of the Australian Constitution.

[State briefly but specifically, the nature of the Constitutional matter].

Facts showing that section 78B Judiciary Act 1903 applies

1.    MLC Limited in an appeal, has applied for security for costs. One of the grounds is a vexatious order against the Appellant.

2.    The vexatious order was made in an interlocutory judgement, Quach v New South Wales Health Care Complaints Commission; Quach v New South Wales Civil and Administrative Tribunal [2017] NSWCA 267.

3.    The Full Court of the Federal Court has ruled in Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCAFC 132; 265 FCR 290 at [14] ff per Allsop CJ, Moshinsky and Colvin JJ) that res judicata does not apply to interlocutory judgements. Griffiths J reaffirmed this common law in Dr Michael Van Thanh Quach v MLC Life Limited (No 4) [2020] FCA 532 at [24].

4.    Section 109. Inconsistency of laws of the Australian Constitution states,

“When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.”

5.    Therefore, the vexatious order made against the Appellant is inconsistent with Commonwealth law and is invalid.

41    Dr Quach made brief oral submissions in respect of the s 78B notice. He also asserted, without evidence, that the s 78B notice had been served on the Attorneys-General of the Commonwealth and the States.

42    In his written submissions in reply, Dr Quach submitted that the vexatious order made by the New South Wales Court of Appeal is invalid (as written):

Vexatious order is invalid

The Full Court ruled in Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCAFC 132; 265 FCR 290 at [14] ff per Allsop CJ, Moshinsky and Colvin JJ) that res judicata does not apply to interlocutory judgements. Griffiths J reaffirmed this common law in Dr Michael Van Thanh Quach v MLC Life Limited (No 4) [2020] FCA 532 at [24].

The vexatious order referred to in MLC Limited’s submissions was made in an interlocutory proceeding, Quach v New South Wales Health Care Complaints Commission; Quach v New South Wales Civil and Administrative Tribunal [2017] NSWCA 267.

Pursuant to Section 109 of the Australian Constitution, the vexatious order relied on by MLC Limited is invalid. A Section 78B Notice of Constitutional matter will be served on this point.

43    At the hearing of Dr Quach’s interlocutory application, Counsel for MLC submitted that MLC’s position (which was necessarily qualified, given the limited time available to obtain instructions) was that the s 78B notice raised no real or substantial dispute nor did the notice raise a question for consideration under the Constitution. MLC further submitted that no Commonwealth law was identified by Dr Quach and that the relevant vexatious order the subject of the s 78B notice was made under state legislation.

44    Given the timing of Dr Quach raising the issue I indicated to the parties that I would consider the s 78B notice which had been lodged, but not accepted for filing as at the time of the hearing, and inform the parties if it would be necessary to lodge written submissions in respect of the s 78B notice.

45    Having now had the opportunity to review the proposed s 78B notice, I am satisfied that the notice does not raise any constitutional matter. Dr Quach relies on s 109 of the Constitution yet he has not identified either a state law or a Commonwealth law which are relevantly inconsistent so as to attract the operation of s 109. He seeks to “invalidate” an order made under a law of NSW (namely, the vexatious litigant order made by the New South Wales Court of Appeal under the Vexatious Proceeding Act 2008 (NSW)) by reference to a decision of this Court. Dr Quach does not identify any Commonwealth law that is inconsistent with the state law to which he, indirectly, points. In Re Culleton [2017] HCA 3; 340 ALR 550, 556 at [29] – [30], Gageler J observed:

[29]     Section 78B of the Judiciary Act does not, in my opinion, prevent me from dismissing so much of the summons as seeks to give effect to Senator Culleton’s attempt to raise the constitutional objection to jurisdiction. French J made the point in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [(1999) 95 FCR 292; 167 ALR 303; [1999] FCA 1151 at [14]] that s 78B “does not impose on the Court a duty not to proceed pending the issue of a notice no matter how trivial, unarguable or concluded the constitutional point may be”. To give rise to the obligation not to proceed without notice a cause pending in court must truly “involve” a matter arising under the Constitution or involving its interpretation. As Toohey J stated in Re Finlayson; Ex parte Finlayson [(1997) 72 ALJR 73 at 74], in a passage quoted with approval by Gummow, Hayne and Callinan JJ in Glennan v Commissioner of Taxation [(2003) 77 ALJR 1195; 198 ALR 250; [2003] HCA 31 at [14]],“[I]n terms of s 78B, a cause does not ‘involve’ a matter arising under the Constitution or involving its interpretation merely because someone asserts that it does”. In short, the constitutional point must be real and substantial.

[30]     Given that Senator Culleton’s summons is interlocutory, and important to be dealt with expeditiously, I also incline to the view that s 78B(5) operates to relieve the Court of the strictures of s 78B(1). In my opinion, it is in the interests of justice that the giving by the Full Court of its answers to the questions referred by the Senate not be further delayed.

The above passage was cited in Citta Hobart Pty Ltd v Cawthorn [2022] HCA 16 at [44] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ) and [76] (Edelman J).

46    I am satisfied that there is no constitutional matter of the requisite character identified. I am also satisfied that in the context of the present application it is in the interests of justice, and consistent with the overarching purpose in s 37M of the FCA Act, that the present application not be further delayed.

47    I will not require the parties to file submissions in respect of the s 78B notice.

48    I will direct that the Registrar is to reject the filing of the s 78B notice. In so doing, I am conscious of the function of r 2.26 of the Rules.

Associate:

Dated:    20 May 2022