Federal Court of Australia

Nugawela v Dudley (Trustee) [2023] FCA 1603

ORDERS

THE COURT ORDERS THAT:

1.    The appellant must provide security for the costs of the appeal in the sum of $50,000 by payment of that sum into the Court.

2.    The appeal is stayed until the security required by paragraph 1 of these orders is provided.

3.    The appellant has liberty to apply in relation to the manner of providing the security for costs.

4.    If the security for costs in accordance with these orders as varied is not provided by 19 February 2024, then the appeal is dismissed.

5.    By 4.00 pm AWST on 19 December 2023, the respondent must file and serve a bill of costs for the security for costs application.

6.    By 4.00 pm AWST on 25 January 2024, the appellant may provide a written submission of no longer than 3 pages in length in response to the respondent's bill of costs.

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

REASONS FOR JUDGMENT

(edited from the transcript)

JACKSON J:

1    On 20 June 2023 a judge of this Court dismissed an application made by Patrick Nugawela against his trustee in bankruptcy, Gregory Bruce Dudley. The application was dismissed on the basis of long delay by Dr Nugawela in complying with procedural directions made by the primary judge. During much of that delay, the proceeding had been stayed as a result of non-compliance with procedural directions. Dr Nugawela has appealed from the dismissal order. The respondent, Mr Dudley, now seeks security for the costs of the appeal.

The proceeding before the primary judge

2    The background of the matter need not be set out in detail. Dr Nugawela's claim, as dismissed by the primary judge, concerned allegations that Mr Dudley should have assigned litigation against the Australian Taxation Office to him and should not have abandoned proceedings that Dr Nugawela had brought.

3    Dr Nugawela was self-represented before the primary judge. His Honour determined that Dr Nugawela should have an opportunity to file a chronology of facts, verified by affidavit, so as to seek to demonstrate that there was a basis for his claims against Mr Dudley. Orders to that effect were made on 12 April 2018, requiring the chronology to be filed by 27 April 2018. By 29 May 2018, Dr Nugawela had not filed any chronology and on that day the primary judge made orders staying the proceeding until compliance with his earlier orders occurred. In the meantime, Mr Dudley had made an application for security for costs of the proceeding before the primary judge, but because of the stay that application was never determined.

4    No further step was taken until, on 20 June 2023, the primary judge convened a case management hearing for the purpose of Dr Nugawela showing cause as to why the proceeding should not be dismissed. On that day, Dr Nugawela provided an affidavit purporting to contain the chronology which he had been ordered to provide more than three years earlier. It appears that the only explanation for delay in the affidavit was a statement by Dr Nugawela that he had no intention of delaying the filing of the chronology, but wanted to ensure efficient use of the Court's resources by filing a final chronology that reflected the outcome of pending litigation.

5    The primary judge did not accept this explanation, and dismissed the application on the basis of the long delay. He ordered costs against Dr Nugawela.

The purported appeal

6    Dr Nugawela now purports to appeal from the primary judge's order dismissing the application. I say 'purports' because it is not clear whether leave to appeal is required. While the primary judge's order was to dismiss the application in the original jurisdiction on a final basis, his Honour did so on the ground of delay and default and, therefore, did not finally determine the rights and liabilities of the parties. Nevertheless, on the view that I have taken of the present application for security for costs, it is not necessary to consider that point further at this stage.

7    Dr Nugawela remains self-represented on the appeal. The purported grounds of appeal are long and discursive. They contain much factual background on the bankruptcy and the apparent actions of a bank which seems to have held a mortgage over property in which Dr Nugawela had an interest, all of which has little apparent relevance to the merits of the appeal.

8    As best one can discern, Dr Nugawela appears to be appealing on the basis that the primary judge erred in exercising his discretion to dismiss the application without assessing its substance. It is not clear what errors are said to have been made, but Dr Nugawela does appear to contend that the primary judge should have accepted the chronology he proffered on the day of the hearing on 20 June 2023 as compliance with the earlier orders. He also appears to contend that the delay did not prejudice Mr Dudley. He also relies on an assertion that the 'dismissed action sought to clarify important points of law pertaining to bankruptcy and trustee duties'.

The evidence on the application for security for costs

9    Mr Dudley's application for security for costs relies on two affidavits sworn by his solicitor, Colin Touyz. The first affidavit annexes a further affidavit which Mr Dudley swore in support of the application for security for costs that had been made in the proceeding at first instance.

10    In summary, according to Mr Dudley's affidavit:

(1)    A sequestration order was made in respect of Dr Nugawela on 21 February 2017 and Mr Dudley was appointed trustee in bankruptcy.

(2)    Mr Dudley had not been able to obtain a statement of affairs from Dr Nugawela.

(3)    By operation of law, all proceedings which had been the subject of Dr Nugawela's application had been abandoned.

(4)    If Mr Dudley were to be successful in the proceeding at first instance, Dr Nugawela would have no funds to pay any costs order in Mr Dudley's favour.

(5)    The further legal costs that would be incurred if the proceeding went ahead would be in the vicinity of $50,000 to $75,000.

11    Mr Dudley's affidavit was sworn on 15 February 2018, and there is no evidence updating it. But it must be acknowledged that Dr Nugawela was given the opportunity to file evidence in opposition to the application for security for costs in this appeal but has not done so. Not only has he not filed any evidence in opposition to the application, he did not appear at this hearing of the application for security for costs, and did not comply with an order requiring him to file written submissions on the application.

12    As well as Mr Touyz's affidavit of 4 August 2023 annexing Mr Dudley's earlier affidavit, Mr Touyz has sworn a further affidavit on 16 November 2023 containing an estimate of the costs of the appeal broken down according to the scale found in Schedule 3 of the Federal Court Rules 2011 (Cth). The total of the estimate is $73,300.

Principles

13    The principles to be applied in an application of this kind were helpfully summarised by O'Bryan J in Mathews v All Options Pty Ltd [2019] FCA 1972, as follows:

[12]    The application for security is made under s 56(1) of the Federal Court of Australia Act 1976 (Cth) and rule 36.09(1) of the Federal Court Rules 2011. Section 56(1) authorises the Court or a Judge to order an appellant to give security for the payment of costs that may be awarded against him or her. Rule 36.09(1) provides that a party may apply for an order that:

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

(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.

[13]    The applicable principles were explained by Tamberlin J in Cooper v Universal Music Australia Pty Ltd [2006] FCA 642 at [11] and [12]:

[11]    The Court has a wide discretion in relation to the grant of security for costs. There is no general rule because each case depends upon its own circumstances. In relation to an appeal, Courts have given weight to the injustice that might be caused to a successful litigant if the litigant is compelled to contest the matter for a second time without the probability of obtaining the costs if ultimately successful: Cowell v Taylor (1885) 31 Ch D 34 at 38. In Equity Access v Westpac Banking Corp (1989) ATPR 40-972, Hill J at 50,635 listed some of the relevant matters to be considered when deciding whether security for costs ought to be awarded:

•    the prospects of success;

•    the quantum of risk that a costs order will not be satisfied;

•    whether the making of an order would be oppressive in that it would stifle the reasonably arguable claim;

•    whether any impecuniosity of the appellants arises out of the conduct complained of;

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

•    whether there are any particular discretionary matters peculiar to the circumstances of the case.

[12]    Although Courts will be reluctant to make an order for security for costs against a natural person on account of his or her impecuniosity, there is no general principle that prevents the making of such an order.

[14]    In Cowell v Taylor (1885) 31 Ch D 34, Bowen LJ said (at 38):

The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also, I believe, in equity. There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty's courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another.

[15]    That principle, that the court will more readily grant security against a litigant who is impecunious in the case of appellate proceedings, has been followed and applied on many occasions: see for example Skyring v Sweeney [1999] FCA 61 at [6] per Spender J; Moore v Macks [2007] FCA 509 at [20] per Mansfield J; Clack v Collins (No 1) [2010] FCA 513 at [7]-[8] per Jagot J; Sheather v Staples Waste Removals Pty Limited [2012] FCA 998 at [18] per Nicholas J; Carey v Freehills [2014] FCA 325 at [16]-[17] per Marshall J.

Consideration

14    On the basis of the principles set out above, the discretionary factors which go to whether or not security for costs should be ordered in this matter may be summarised as follows.

15    First, it does not appear on the face of the notice of appeal that the prospects of success in the appeal are strong. I have summarised above what appears to be the basis of Dr Nugawela's contention that the primary judge erred. Conspicuously, if unsurprisingly given that Dr Nugawela is self-represented, those grounds do not engage with the basic principle that the primary judge's decision was a discretionary one, so any error shown must be an error of the kind described in House v The King (1936) 55 CLR 499. As well as suffering from prolixity and a lack of coherence or apparent relevance, as already described, the purported grounds of appeal do not identify any instance of the primary judge either mistaking the facts or misunderstanding or misapplying any legal principles.

16    While, of course, it would not be appropriate to say anything more definitive at this early stage of the appeal, it can be said that on the face of the limited materials in front of the Court that the merits of the appeal do not appear to be strong. Again, while it may have been open for Dr Nugawela to argue to the contrary in this application, he has not appeared or filed any written submissions and has not given any apparent explanation for his default of appearance.

17    Turning to the risk that a costs order will not be satisfied, there is no specific evidence as to Dr Nugawela's financial position. However, one fact which obviously bears upon that is that a sequestration order was made against him in 2017. Lessening the reliance the Court can place on that, however, is that Mr Touyz was unable to confirm whether now, some six years after that sequestration order, Dr Nugawela remains an undischarged bankrupt.

18    Mr Touyz did point to a notice stating the grounds of opposition to the application for security for costs in the proceeding at first instance, in which Dr Nugawela asserted that the application was oppressive and said that Mr Dudley relied upon Dr Nugawela's 'stated impecuniosity, contributorily caused by the Trustee Respondent's conduct subject of the claim'. In particulars to that contention, Dr Nugawela said, among other things, that Mr Dudley had frozen his bank accounts and placed caveats on property.

19    However, while there is no more recent evidence, let alone more specific evidence, as to Dr Nugawela's financial position, two other material points about that may be made. The first is to repeat that Dr Nugawela has had an opportunity to put evidence on as to his financial position, including any evidence he may be able to adduce in support of a contention that he will be able to meet an adverse costs order against him, and has not done so.

20    The second point to be made is that it appears from the Court's own knowledge of the procedural history of the matter, including the history set out in the primary judge's reasons, that Dr Nugawela has engaged in a large number of pieces of litigation in this Court and in other jurisdictions, in which he has been self-represented throughout. It may be inferred from that that he is unable to pay the costs of instructing a lawyer to act on his behalf, and the further inference may be open that he would not be able to meet an adverse costs order made against him. I will proceed on the basis that an inference to that effect should be made.

21    Turning to the next discretionary consideration, I do not consider that the making of a security for costs order will be oppressive in that it will stifle a reasonably arguable appeal. As already discussed, if there is a reasonably arguable basis to assert error on the part of the primary judge, it is not apparent from the purported grounds of appeal.

22    Turning to the question of whether any impecuniosity arises out of the conduct complained of, Dr Nugawela appears to assert in the notice stating grounds of opposition to the application for security for costs in the original jurisdiction, which I have already mentioned, that Mr Dudley's election to abandon certain proceedings has had an impact upon Dr Nugawela's solvency and his ability to protect assets. However, that assertion is made in very general terms, and it is impossible to place any weight upon it in circumstances where, as I must point out once again, Dr Nugawela has not taken up the opportunity to provide cogent evidence of any of those matters in opposition to this application. It is impossible for the Court, on the materials before it, to form any view that the proceedings which Dr Nugawela appears to assert the trustee has wrongly abandoned or stifled had any merit. I therefore do not find that Dr Nugawela's impecuniosity arises out of any conduct on the part of Mr Dudley.

23    There are no apparent aspects of the public interest which weigh in the balance against making an order for security for costs.

24    As for further particular discretionary matters, I do take into account that this is an appeal and, as summarised above, the general rule that security for costs is not to be ordered in a way which shuts an impecunious natural person out of pursuing his or her legal rights has less weight in circumstances where it is an appeal. Nevertheless, I take into account as a particular factor in this case, which points the other way, that the appeal is from a decision to dismiss the proceeding in the original jurisdiction for non-compliance with procedural steps and want of prosecution. The primary judge made no determination on those substantive rights. Nevertheless, it does appear to me that, on balance, the fact that this application is sought in an appeal does significantly dilute the strength of the general rule that security for costs are not to be awarded against a natural person.

25    Counsel for Mr Dudley submitted further that I should take into account that the proceeding in the original jurisdiction of the court from which Dr Nugawela seeks to appeal was 'completely misconceived'. However, I am not in a position to make a determination of that kind without a fuller consideration of the merits of Dr Nugawela's application before the primary judge, which is not possible on the evidence before me, nor would it be appropriate to determine in an application of this kind.

26    I do, however, take into account of what counsel for Mr Dudley further submitted was the fact that Dr Nugawela's procedural non-compliance, both in the proceeding in the original jurisdiction and in this appeal, was extensive. That this is so appears on the face of the reasons for decision of the primary judge, which I have already described and which, it must be said yet again, Dr Nugawela has not taken up the opportunity to contradict.

27    Further, while I would not characterise Dr Nugawela as having failed to comply with any procedural direction made in this appeal, it is apparent from correspondence between him and my chambers that he consistently sought to defer any hearing of this application for security for costs and did so on the basis of assertions made in correspondence of, for example, that he was 'in the midst of calamitous legal events beyond my control'. My chambers consistently informed Dr Nugawela that if he wished to rely on such matters in support of an application for adjournment of the hearing of the security for costs application, then he would need to do so on the basis of affidavit evidence which descended to particularity. Dr Nugawela has not provided any such evidence.

28    This behaviour, whether properly characterised as non-compliance or not, does, in my view, tend to suggest that there is a significant risk that if the appeal goes forward without Mr Dudley, the respondent, having some protection in relation to his costs, he is likely to incur significant further costs in dealing with potential unnecessary procedural steps and further delay occasioned by Dr Nugawela's conduct, not to mention likely difficulty in comprehending Dr Nugawela's grounds of appeal, if, indeed, Dr Nugawela does have any cogent grounds on which to rely.

29    In summary, then, there is evidence on which I infer for the purposes of this application that there is a significant risk that Dr Nugawela will not be able to meet any adverse costs order made against him. The merits of the appeal do not appear to be strong, and it does not appear that any order for security for costs is going to stifle a reasonably arguable claim.

30    Dr Nugawela's failure to appear or to file any submissions or evidence in opposition to this application must also be weighed in the balance as a discretionary matter in favour of ordering security for costs, and there is further concern that Dr Nugawela's conduct of both the proceeding in the original jurisdiction and this appeal is likely to cause further wasted costs for the respondent, regardless of the outcome of any appeal. For reasons I have given, the fact that Dr Nugawela is a natural person does not, in my view, weigh strongly against ordering security for costs in an appeal such as this.

31    For those reasons, I consider it appropriate to order security for costs.

Quantum of security

32    I have had regard to the cost estimate provided in Mr Touyz's affidavit of 16 November 2023 in terms of the quantum of security to be ordered. The $73,300 figure there is broken down by reference to items in the scale in Schedule 3 of the Federal Court Rules. It provides, for example, for $12,240 for two days' work in reviewing and considering the grounds of appeal and reading documents supplied by the appellant. It provides for the briefing of counsel, and I agree it would be appropriate for junior counsel to be briefed. It effectively allows for five days for getting up for the appeal, two days for the hearing of the appeal, and makes further allowances for skill, care and responsibility.

33    I doubt that this appeal would run for two days, since in the end, it is an appeal from a discretionary procedural decision of the primary judge to dismiss the proceeding in the original jurisdiction. I therefore consider that some of the estimated amounts are likely to be higher than would be actually provided for on any ultimate assessment of costs. But the amount of security for costs sought of $50,000 appears to me to be reasonable incorporating, as it does, a significant discount on the costs estimated in Mr Touyz's second affidavit. That is especially so in view of the likely procedural difficulties that would be encountered if any appeal were to proceed to hearing, as I have already outlined.

Orders

34    As r 39.06(1) contemplates, and as O'Bryan J accepted in Mathews, it will often be appropriate to make, not only the usual order staying a proceeding unless the security order is given, but also a further order that if the security is not provided within a certain period of time then the appeal is to be dismissed. In Mathews, the time provided for that was 42 days and I consider that to be appropriate in this case.

Associate:

Dated:    15 December 2023