Federal Court of Australia

McCardle v Johnson [2023] FCA 1369

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) the applicant provide security in the sum of $10,000 inclusive of GST for the first respondent’s costs of the application for leave to appeal and for extensions of time by payment into Court or in such other form as may be acceptable to the first respondent or, failing that, acceptable to a Registrar of the Court.

2.    Such security be provided by 4 December 2023.

3.    The proceeding be dismissed in the event of the applicant’s default in providing security as ordered.

4.    The costs be costs in the cause of the application for leave to appeal and for extensions of time.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

STEWART J:

1    The principal proceeding before me was commenced by a notice of appeal, although the applicant, who was wrongly referred to in that notice as the appellant, accepts that the orders against which she seeks to appeal are interlocutory orders, and for that reason she requires leave to appeal. The applicant also accepts that in respect of at least some of the many orders identified in that notice of appeal, she requires an extension of time. Indeed, the document headed “notice of appeal”, as she points out, indicates as much. In the circumstances, the parties have rightly treated the principal proceeding as being a proceeding in the nature of an application for leave to appeal and for extensions of time where required, and that the notice of appeal would be regarded as the draft notice of appeal in respect of which leave is sought.

2    The case immediately before me today, within that principal proceeding that I have identified, is an application by the first respondent, who is the applicant’s trustee in bankruptcy, for security for costs. That application was put on the basis of security for costs for the appeal, but it has been accepted by Mr Russell, who appears for the first respondent, quite appropriately, that the application should be an application for security for costs pending the determination of the application for leave to appeal and for extensions of time. The parties addressed me on that basis, and it is on that basis that I now consider and determine the application before me today.

3    The applicant – in the underlying case – is an undischarged bankrupt, and the first respondent, which is the only active respondent in the case, is the applicant’s trustee in bankruptcy. There are a series of orders made by the primary judge that are the subject of the application for leave to appeal.

4    The first respondent was appointed trustee of the applicant’s bankrupt estate on 16 June 2016. The evidence is that ordinarily the applicant would have been discharged from bankruptcy on 1 April 2019. During the first respondent’s appointment as trustee, he lodged several objections to the applicant’s discharge from bankruptcy. The result of that is that the bankrupt, that is, the applicant, is now due to be discharged from bankruptcy only on 1 April 2024. The proceedings before the primary judge were commenced on 1 April 2021. The applicant claimed wide-ranging relief against the first respondent in relation to her bankruptcy, and the objections to her discharge from bankruptcy.

5    A number of interlocutory applications were filed which resulted in the following decisions of the primary judge, all of which are now the subject of the application for leave to appeal. In the primary judge’s first decision, reported as McCardle v Johnson [2021] FCA 1528, on 29 November 2021, her Honour dismissed the applicant’s application for an adjournment of the first respondent’s application for summary dismissal or to strike out the applicant’s statement of claim. The primary judge also refused the applicant’s application for the primary judge to recuse herself.

6    In the second judgment, the reasons for which are reported as McCardle v Johnson (No 2) [2022] FCA 168, on 4 March 2022, the primary judge determined the first respondent’s strike out application on the papers. Her Honour entered summary judgment dismissing some of the applicant’s claims and struck out the balance, giving the applicant leave to replead those claims. The applicant was ordered to file and serve a further amended statement of claim repleading those claims by 1 April 2022. The primary judge also ordered the applicant to provide security for the first respondent’s costs of a defence to the amended statement of claim in the amount of $11,000 by 1 April 2022.

7    In a third judgment, on 11 July 2023, the reasons for which are reported as McCardle v Johnson (No 3) [2023] FCA 790, the primary judge dismissed the proceeding below on the basis that security had not been provided. Notably, nor had an amended statement of claim been filed or served. Her Honour also refused a further application made by the applicant for her Honour’s recusal.

8    The applicant did not seek leave to appeal from the second judgment, and in particular the order that the applicant put up security for costs in the stated sum by 1 April 2022, until after the dismissal of the proceeding. That was notwithstanding that Judicial Registrar Lynch had written to the applicant on 6 June 2022 informing her of her right to apply for an extension of time to file an application for leave to appeal. The applicant was therefore aware of her right to seek leave to appeal against the order requiring her to pay or otherwise establish security for costs, but she did not do so and instead allowed further time to elapse and for the dismissal application to be determined.

9    Turning now to the applicable principles, the court may order an appellant, or relevantly an applicant in the present circumstances, to provide security for the payment of costs that may be awarded against them pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth). Well-known and often traversed authorities establish that the Court’s discretion to order security for costs is a broad one, the only constraint upon which is the requirement that it be exercised judicially. In particular, the court asks itself whether there is a likelihood that in the event that the respondent is successful and receives a costs order in its favour, the applicant will not be able to meet that costs order.

10    In Soh v Commonwealth of Australia [2008] FCA 1524, at [10], Moore J identified general principles relevant to the exercise of the discretionary power to order security for costs. Relevant factors to consider include the following: (1) the prospects of success, (2) the quantum of risk that a costs order will not be satisfied, (3) whether the making of an order would be oppressive in that it would stifle a reasonably arguable claim, (4) whether any impecuniosity of the party from whom security is sought arises out of the conduct complained of, (5) whether there are aspects of public interest which weigh in the balance against such an order, and (6) whether there are any particular discretionary matters peculiar to the circumstances of the case. The third of those factors, being whether the making of an order for security for costs would stifle a reasonably arguable claim, has been the subject of further consideration, specifically in the context of appeals.

11    In Clack v Collins (No 1) [2010] FCA 513, Jagot J canvassed the authorities dealing with this question and identified that in the case of appeals there is an exception to the general proposition that poverty should be no bar to a litigant. Her Honour identified that it was said in Cowell v Taylor (1885) 31 Ch D 34 at 38 that there is an exception in the case of appeals where the appellant has had the benefit of a decision by a court, and so the insolvent party is not excluded from the courts, but only prevented, if they cannot find security, from dragging their opponent from one court to another. The matter was put somewhat graphically by Spender J in Tait v Bindal People [2002] FCA 322 at [3]-[4] as follows:

The difference is that, at the appellant [scil. appellate] level, there has already been a determination adverse to the person against whom security for costs is sought and, if it be shown that there is a substantial risk that even if successful the respondent to the application for leave to appeal, or to an appeal, will be deprived of his costs, such an outcome would clearly be unjust.

In a sense, it would be giving to a person who has been on the receiving end so to speak of a determination by the courts a free hit at great cost to the other party in the appeal proceedings.

12    His Honour, in that case, expressly included circumstances of an application for leave to appeal as being within the exception from the usual rule against stifling a proceeding. Thus, the exception does not only apply where there is an appeal as of right. Indeed, it seems to me that, if anything, the consideration may apply with more force in circumstances such as the present where not only is leave to appeal required, but also extensions of time are required. However, I expressly do not decide the present case on that basis. I am content to deal with it within the exception as identified in the authorities that I have referred to.

13    There are a number of matters which I take into consideration. The first is that the present proceeding is just the type of “free hit” case that is referred to by Spender J in Tait v Bindal People involving an inherent unfairness that the authorities warn against. That means that the consideration of stifling the appeal has less force than it might otherwise have.

14    Secondly, there is the prospects of success of the application for leave to appeal and for extensions of time. This factor should only be considered at a high level, and it must be recognised that the arguments on the merits of those applications have not yet been dealt with, or even articulated in particular detail. That said, it is not obvious that there are any reasonable prospects of obtaining leave to appeal, particularly having regard to the fact that the two unparticularised proposed grounds of appeal are that there was a denial of procedural fairness and there is a reasonable apprehension that the primary judge was biased. I am prepared to accept that it may be that extensions of time and leave to appeal would be granted in due course, but there is certainly no clear or obvious basis on which the grounds of appeal might succeed. Perhaps most tellingly, the applicant’s previous failure to seek leave to appeal from the order in the second of the primary judge’s judgments that security for costs be put by 1 April 2022 and her failure to explain that failure, would appear to be a substantial obstacle standing between the applicant and any ultimate success. Also, leave to appeal against that order requires a considerable extension of time in circumstances where no explanation for the delay has been given. As mentioned, the correspondence from Judicial Registrar Lynch to the applicant would foreclose any explanation based on ignorance or mistake.

15    Thirdly, it is in effect accepted that the applicant will not be able to pay any costs order that may be made against her in due course. She has said that a security for costs order would stifle the proceeding, and that she does not have assets to meet a costs order in due course. Not only is the applicant an undischarged bankrupt, but she has also failed to pay previous costs orders against her. So, prima facie, the power to order security for costs is enlivened. As I have mentioned, concern directed at avoiding a security for costs order stifling the proceeding bears less weight in the present circumstances of an application for leave to appeal than it would do in a primary proceeding.

16    In addition, the applicant has failed to pay the security that she was previously ordered to put up.

17    Fourthly, I turn to consider whether the first respondent has been in some way responsible for the applicant’s position of impecuniosity. In that regard, the applicant was bankrupt prior to the events complained of by her, and therefore was in impecunious circumstances long before the first respondent had any involvement in her affairs. Nevertheless, she submits that the first respondent’s conduct in the administration of the estate has led to unnecessary expenditure, the incurring of unnecessary costs and that her bankruptcy has been extended by the first respondent having lodged unmeritorious objections. She has complained that his conduct which is the subject of the underlying or the original proceeding has contributed to her being in the position where she will be unable to pay a costs order in due course.

18    The difficulty that I have with that submission and in dealing further with this factor is that there is no cogent evidence before me in support of it, and when the applicant had the opportunity to properly particularise her complaints against the first respondent by way of filing and serving an amended statement of claim, by 1 April 2022, she failed to do so. She still failed to do so thereafter. Therefore, not only is there insufficient evidence to be able to be satisfied that the first respondent has, indeed, contributed to the applicant’s circumstances of impecuniosity, but the applicant’s allegations in that regard are not even pleaded or advanced in a comprehensible manner.

19    Fifthly, the applicant also submits that there is an aspect of public interest which would weigh in the balance against a security for costs order. Of course, the conduct of a trustee in bankruptcy is a matter that attracts considerations of public interest. However, in circumstances where the applicant had the opportunity to air those matters in the primary proceeding and, for the reasons already explained, failed to do so, they must carry less weight at the appellate level. There does not appear to be anything in the proposed appeal that attracts any consideration of public interest.

20    Other matters raised by the applicant in opposing security for costs include her reference to many cases in which security for costs is ordered against companies rather than individuals. I am prepared to accept that that is probably correct, but that does not mean that security for costs is not often or cannot, in proper circumstances, be ordered against individuals. Indeed, s 56 of the Federal Court of Australia Act 1976 (Cth) provides for such orders and there are countless examples of such orders being made if the requirements are satisfied.

21    The applicant also submits that there is a res judicata operating in relation to the question of security for costs because it was dealt with by the primary judge, as mentioned, by her Honour’s orders on 22 March 2022. There are at least two difficulties with the applicant’s submission in that regard. One is that those orders were made in relation to a different proceeding and different costs, that is, the costs of the proceeding before her Honour. The orders that are sought now are in relation to the costs of the application for leave to appeal and extensions of time.

22    The second difficulty is that, if anything, the res judicata would operate the other way, in as much as it has been determined that the applicant must put up security for costs and she has failed to do so. Of course, I take no regard of that in supporting a security for costs order in this case, but only point out that there is no substance to the res judicata submission.

23    I have dealt with the other submissions of the applicant in my reasoning above.

24    Taking all those matters into consideration, I am comfortably satisfied that this is an appropriate case for the exercise of the discretion to order that the applicant put up security for costs pending the disposition of the application for extensions of time for leave to appeal. In my consideration, an amount of $10,000 is a fair amount to require to be put up. It is a conservative amount considering the breadth of the application and the number of orders which are sought to be appealed against.

Associate:

Dated:    8 November 2023