Ceil Comfort Insulation Pty Ltd & Ors v ARM Equipment Finance Pty Ltd & Anor

Ceil Comfort Insulation Pty Ltd & Ors v ARM Equipment Finance Pty Ltd & Anor - [2001] NSWSC 28 - NSWSC 2001 case summary — Zoe

[11]

Furthermore, in relation to the inherent jurisdiction of the court to order security for cost he said: "… but if I hold - as I have - that I cannot, under the rule to which I have referred, make an order for security for costs because the Constitution prevents this from being done, it seems to me that I would be equally fettered in exercising the inherent jurisdiction of this Court to order security for costs." (supra at 374) 6 Although the headnote to the report of the decision refers to the rule in question being held to be "ultra vires and void", such terminology is not in fact used by Helsham J. He says that the discrimination imposed by Pt 53 r 2(1)(a) "is not permitted, since s 117 was enacted" (supra at 373). 7 In Rajski v Computer Manufacture and Design Pty Ltd (1982) 2 NSWLR 443 Holland J determined that the inherent jurisdiction of the Court to make orders for security for costs enured the passing of the Supreme Court Act 1970 and, having referred to Australian Building Construction Employees' and Builders' Labourers' Federation v Commonwealth Trading Bank went on to say: "… I would respectfully offer the view that there is no discrimination between residents of different States involved in the inherent jurisdiction of the Court to award security for costs as that case seems to suggest." (supra at 451 ) 8 There is thus a disagreement between the two cases as to the ambit and operation of s.117 of the Constitution in relation to the jurisdiction or power of the Court to make orders for security for costs against a plaintiff ordinarily resident outside New South Wales. B. To Whom does s.117 of the Constitution apply? 9 Section 117 of the Constitution is a constitutional guarantee of certain individual freedoms as for all subjects of the Queen resident in a State of Australia. This is effected by the creation of an immunity for such persons from any disability or discrimination in another State which would not be equally applicable if that person were a resident in such other State. 10 The opening words of the section, namely "a subject of the Queen", repeated as they are later in the section, are significant. The Annotated Constitution of the Commonwealth (Quick and Garran, 1901 Ed p.766) notes that the forerunner of s.117 in the original Bill of 1891 and the later draft of 1897 referred to privileges and immunities of "citizens" of the States, thereby adopting the wording of the Constitution of the United States. However, the concept of citizenship of a State was difficult in legal theory in Australia and as the founding fathers of the Constitution were not prepared to define citizenship in the Constitution, the phrase "a subject of the Queen" was adopted instead. 11 "A subject of the Queen" is not a phrase apt to describe a corporation (P H Lane, The Australian Federal System, 2nd Ed p.907). The phrase "a subject of the Queen" is also used in s.34 of the Constitution and, by incorporation, in s.16, as one of the qualifications of members of the Houses of Parliament. It would not be sensible to regard a corporation as falling within this qualification nor would it be appropriate to give the phrase in question a different meaning in ss. 16 and 34 on the one hand and 117 on the other. In addition, the concept that a corporation could be described as a subject of the Queen is not one which has found favour with the Courts. This is exemplified in Street v Queensland Bar Association(1989) 168 CLR 461, in which Brennan J stated that "(i)ts protection is limited to natural persons" (supra at 504). This view expressed by Brennan J accords with the early United States decisions on the equivalent provision in the Constitution of the United States, (Quick and Garran, op. cit. p.777). 12 Moreover, in Street v Queensland Bar Association it was said by Mason CJ that : "the form and language indicate that s.117 is directed towards individuals and their protection from disability or discrimination of the kind contemplated by the section" (supra at 486) (bold added) 13 Brennan J also said that the phrase "a subject of the Queen" connotes "the Queen in right of Australia" (supra at 505) and was the antonym of "alien" in s.51(xix) of the Constitution. That term encompasses persons who are not citizens of Australia even though they may be British subjects or subjects of the Queen by reason of their citizenship of some other country. (Nolan v Minister for Immigration and Ethnic Affairs) (1988) 165 CLR 178 at 186). This conclusion flows from the emergence of Australia as an independent and sovereign nation state (Bonser v La Macchia (1968 - 1969) 122 CLR 177 at 189; see also Matchett and Ors v Deputy Commissioner of Taxation [2000] NSWSC 975, Supreme Court unreported 23 October, 2000) and the recognition that "the Queen of the United Kingdom is entirely independent and distinct from" the Queen of Australia (Regina v Foreign Secretary Ex parte Indian Association (1982) QB 892 at 928). 14 Deane J took the view that the phrase "a subject of the Queen" in s.117 of the Constitution: "must be understood, in contemporary circumstances, as a reference to a subject o f the Queen of Australia, that is to say, as a reference to an Australian citizen " (supra at 525) (bold added) 15 Dawson J said that s.117: "is unusual in that it is one of the few provisions of the Constitution which speaks in terms of individual freedoms rather than of legislative power. (supra at 541) (bold added),

[12]

and "must be taken to refer to a subject of the Queen in right of Australia and hence an Australian citizen " (id)(bold added) 16 Toohey J said that: " 'Subject of the Queen' is now to be understood as referring to the Queen in right of Australia. Whether a person living in Australia , but not a natural born or naturalised citizen is entitled to the protection accorded by s.117 is a matter to be considered when the occasion arises." (supra at 554) (bold added) 17 Brennan J also left open the question as to whether or not a subject of the Queen was synonymous with the term "Australian citizen" (supra at 505). 18 The view expressed by Gaudron J was that: "Within our Federal framework it is the status of being a 'subject of the Queen' (those words being understood to refer to a subject of the Queen in right of Australia) and resident within a State which signify membership of the body politic constituting that State. That membership carries with it rights to participate in the political processes of the State." (supra at 572) 19 As can be seen from the foregoing, each of the judgments of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ is couched in such a way as to accept implicitly that a corporation does not qualify for the protection afforded by s.117, a proposition stated explicitly by Brennan J. 20 A like conclusion is reached by reference to whether a corporation can be said to be "resident in a State" within the meaning of s.117. The word "resident" is also to be found in s.75(iv) of the Constitution. That section confers original jurisdiction on the High Court, inter alia, in matters "between residents of different States or between a State and a resident of another State." The phrase as it occurs in s.75(iv) has been likened to s.117 in that it has been said in relation to it that "(a)n instructive parallel expression occurs in s.117" (Quick and Garran op. cit. at 776; see also P H Lane op. cit. P.907) 21 In Australian Temperance and General Mutual Assurance Society Ltd v Howe (1922) 31 CLR 290 the High Court held that the words "residents" and "resident" in s 75 (iv) refer to natural persons only and not to artificial persons or corporations. This decision was applied by Dixon J sitting in the original jurisdiction of the High Court in Cox v Journeaux (1934) 52 CLR 282 at 283. An appeal to the Full High Court from his decision was dismissed (Gavan Duffy CJ, Starke, Evatt and McTiernan JJ (1934) 52 CLR 285. 22 In Union Steamship Co of New Zealand Ltd v Ferguson (1969) 119 CLR 191 Windeyer J, also sitting in the original jurisdiction of the High Court, decided that the Union Steamship Co of New Zealand Ltd "being a corporation, could not be a 'resident' of Victoria within the meaning of s 75 (iv) of the Constitution". In so deciding he relied on Australian Temperance and General Mutual Life Assurance Society Ltd v Howe and Cox v Journeaux. An appeal from Windeyer J's decision was dismissed by the Full High Court (Barwick CJ, Kitto, Menzies and Owen JJ (1969) 119 CLR 206). 23 In Commissioner of Taxes v Parks (1933) St.R.Qd. 306 at 315-6 the Full Court of Queensland equated the meaning of the word "resident" in s 75 (iv) of the Constitution with the same word in s 117. 24 Furthermore, in Henry v Boehm (1973) 128 CLR 483 Gibbs J, repeated a statement of Griffith CJ in Davies and Jones v Western Australia (1904) 2 CLR 29 at 39 and, having pointed out that the word "resident" can be used in a variety of senses, referred to Commissioner of Taxes v Parks, with which he stated his agreement. Thus the correlation between the relevant words used in s 75 (iv) and s 117 appears to have been accepted by Gibbs J. 25 Although the decision of the majority in Henry v Boehm was expressly overruled in Street v Queensland Bar Association, that does not in my opinion detract from the correlation made by Gibbs J in Henry v Boehm. 26 The considerations referred to above lead to the conclusion that because Ceil is a corporation it would not be entitled to the protection afforded by s.117 of the Constitution even if Pt 53 r 2(1)(a) subjects it to a disability or discrimination within the meaning of s.117. Since the immunity created or protection conferred by s.117 does not operate in Ceil's favour in relation to the operation of the relevant rule, it does not operate in its favour in relation to the exercise of the inherent jurisdiction of the Court to order security for costs either. C. Does Part 52 r 2(1)(a) subject a subject of the Queen to a disability or discrimination? 27 The next matter to determine is whether Pt 53 r 2 (1)(a) imposes a disability or discrimination of the kind proscribed by s.117 of the Constitution.

[20]

36 The judgments of the majority in Henry v Boehm turned firstly on a construction of the words "disability or discrimination" which limited them to a disability or discrimination imposed solely on the basis of residence in a State other than the legislating State. Such a construction had the consequence of creating a distinction between a law discriminatory on its face or in terms (proscribed) and one having a discriminatory effect in its application, although the same provision was made in relation to residents of the State and residents of another State or other States (not proscribed). 37 In Street v Queensland Bar Association, McHugh J said that under the test adopted in Henry v Boehm: "Regard can only be had to the legal operation of the impugned provision and not to its factual consequences." (supra at 580) 38 The approach to s.117 adopted in Henry v Boehm was rejected in Street v Queensland Bar Association which expressly overruled the earlier decision. The tests of what constitutes a disability or discrimination within the meaning of s.117 of the Constitution adopted in Street v Queensland Bar Association varied slightly from Justice to Justice. However, all members of the Court disavowed an approach which had regard only to the legal operation of the provision in question rather than to its consequences on the facts of the particular case, but they excluded from the operation of s.117 certain matters (not relevant to the present case) based on implications arising from the Constitution in relation to the institutions, affairs and functioning of a State Government and rights naturally and exclusively associated with residence in a particular State. 39 Mason CJ stated that the correct view of s.117 was that it applied even though a particular requirement for residence was universal, on its face applying equally to both those who were permanent residents of a State and those who were not resident on either a permanent or other basis of such State, if the effect of the law in a given case was to subject the resident in such other State to any disability or discrimination. He said: "The section is not concerned with the form in which (the) law subjects the individual to a disability or discrimination. It is enough that the individual is subject to either of two detriments, whatever the means by which this is brought about by State law." (supra at 487)

[22]

and "… when a condition on obtaining a benefit or avoiding a burden is so expressed that protected persons are naturally or ordinarily disadvantaged in complying with it because they do not reside in the State, s.117 may relieve a protected person from compliance with the condition in part or in whole. On the other hand, if there is a rational and proportionate connection between the condition and some objective other than the subjecting of protected persons to different treatment because they are out-of-State residents, s.117 does not apply. If there be such a connection, there is no discrimination within s.117; if there be no such connection, there is discrimination within s.117." (supra at 510-511) 41 Deane J said that s.117 requires: "a comparison between the non-resident citizen's actual position under the impugned law and the position in which he would be under the law if he were resident in the particular State. If the non-resident citizen is subjected to discrimination or disability which would not be 'equally applicable to him' if he were resident, the guarantee of s.117 will, to that extent, be infringed." (supra at 525) 42 Dawson J also stated that the test was based on the making of a comparison. He said that: "The comparison is between the resident in another State who complains and his situation 'if he were' resident in the legislating State. It is the hypothetical situation of the complainant in the legislating State which is relevant, not the actual situation of residents in that State." (supra at 545) 43 Toohey J was of a like opinion. He said that : "The comparison required by s.117 is … between the plaintiff's situation as it is in fact and as it would be were he a resident of (the legislating State)." (supra at 558) 44 Gaudron J said that: "The protection of s.117 extends to indirect discrimination or different treatment which is revealed by the disparate impact of the matter in complaint." (supra at 569) 45 McHugh J expressed his view of s.117 in the following terms: "There is no reason why the terms 'discrimination' and 'disability' in s.117 should be given a meaning which excludes disability or discrimination arising from the factual operation of the law. If the interstate resident is subject to a disability or discrimination because of his residence, it cannot matter whether that result is produced because the law selects interstate residence as the basis of discrimination or the imposition of disability, or because the law selects some other criterion which operates so as to give rise in fact to a disability or discrimination on the ground of interstate residence. Discrimination can arise just as readily from a law which treats as equal those who are different as it can from a law which treats differently those whose circumstances are not materially different." (supra at 581) 46 As can be seen from the foregoing, the tests propounded by the Justices in Street v Queensland Bar Association are wider in their ambit than those in Henry v Boehm. (iii) Conclusion in relation to Part 53 r 2(1)(a) 47 Part 53 r 2(1)(a) gives to the Court an express power to require security for costs because, and solely because, the person at whom the rule is directed is a resident of a State other that New South Wales. Applying the law as it now stands as to what constitutes a disability or discrimination within the meaning of s.117 of the Constitution, I am of opinion that the provision of Pt 53 r 2 (1)(a)) constitutes such a disability and such a discrimination. Furthermore, even if the test or approach adopted in Henry v Boehm were to be applied the rule would impose a disability and involve discrimination against a resident of another State that would fall within the proscription in s.117 of the Constitution.

[23]

D. Validity of Part 53 r 2(1)(a) 48 Section 117 of the Constitution confers immunity from certain disability or discrimination on persons who answer to the description "a subject of the Queen resident in a State". The concept of immunity is, in Hohfeldian terms, the jural opposite of liability ( W N Hohfeld (1913) 23 Yale LJ p. 30). It is a freedom from liability. Immunity is the jural correlative of disability. This means that where an immunity inheres in one person, the correlative inheres in another. An immunity "may and usually does co-exist" with a power (Stone Legal Systems and Lawyers' Reasoning 1968 p.146). An immunity assumes the validity of a particular law but involves freedom of a particular person or class of persons from liability under such law. (See Vacher & Sons Ltd v London Society of Compositors (1913) AC 107; Stone op. cit. p.147). Diplomatic immunity and the immunity of the Crown from the application of certain statutes are prime examples. The law from which the diplomat or Sovereign is immune remains in force and effect generally, but is not applicable to the person the subject of the immunity. 49 The fact that Pt 53 r 2(1)(a) seeks to impose a disability on or discriminate against the Iezzis in a way forbidden by s.117 of the Constitution does not mean that the rule is to be struck down as invalid. This statement accords with legal theory and is supported by authority. Mason CJ said in Street v Queensland Bar Association : "A person who would, but for s.117, be so effected by the law is immune from its operation insofar as it subjects him to impermissible disability or discrimination, though the law itself remains valid in its application to persons who would not be so affected." (supra at 486) 50 Brennan J was of a like opinion. He said that: "A law which imposes an impermissible disability or discrimination is not invalid; it remains in full force and, except in relation to a protected persons, in full effect". (supra at 504) 51 Thus, notwithstanding that Pt 53 r 2(1)(a) subjects the Iezzis to disability and discrimination within the meaning of s.117 of the Constitution it remains valid and applicable to those persons and entities that do not respond to the description "a subject of the Queen resident in any State" within the meaning of s.117. The rule continues to have effect in relation to Ceil just as it does in relation to natural persons resident in other countries or natural persons who are not subjects of the Queen of Australia. Thus when the headnote in Australian Building Construction Employees and Builders Labourers Federation states that "r 2(1) of Part 53 of the Supreme Court Rules is ultra vires and void" it is incorrect. However, this is not the terminology of Helsham J.

[26]

F. SUMMARY 56 From the foregoing analysis I conclude that whether the narrow test adopted in Henry v Boehm or the wider test, which is now the law, adopted in Street v Queensland Bar Association is applied, Pt 53 r 2(1)(a) would impinge on the area of immunity which s.117 of the Constitution confers on the Iezzis. It therefore can have no application to them. Absent evidence in relation to their financial state or other recognised basis for the ordering of security for costs, there is no ground on which security could be ordered against them and I decline to do so. G. Discretion 57 The situation is different in relation to Ceil. It does not come within the ambit of the immunity created by s.117 of the Constitution. Both the rule in question and the inherent jurisdiction apply to it and an order for security for costs could be made against it. 58 The only basis advanced for the ordering of security of costs against Ceil is that it is a resident of Western Australia, that is that its registered office is in Western Australia. In Pt 53 r 2(1)(a) the word "person" includes a corporation (s.21 Interpretation Act 1987). That conclusion depends on the word resident as used in the rule having a meaning different from that given to the same word in s.117 of the Constitution. However, as Griffith CJ said in Davies and Jones v Western Australia, "the word 'resident' is used in many senses" (supra at 39). This statement was adopted in Street v Queensland Bar Association (supra at 484 per Mason CJ; at 516-517 per Brennan J; at 543-544 per Dawson J; at 586-587 per McHugh J). 59 One such sense does admit of a corporation being resident in a particular place, as the analysis by Isaacs J in Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe shows (supra at 312 et seq). In my opinion, a corporation can be ordinarily resident in a place, in this case in Western Australia, within the meaning of the rule. 60 But Pt 53 r 2(1)(a) does not require security to be ordered if such a factual circumstance exists and if it is not proscribed by s.117. The rule confers a discretion on the Court to order or not to order security; so too does the inherent jurisdiction. 61 In the present case the plaintiffs have already provided security of $29,009.45 to cover the judgment and the professional and court costs awarded against them. That amount was provided promptly and without demur. No evidence has been adduced to suggest that Ceil is, or the Iezzis as its principals are, lacking in resources adequate to meet any order for costs should the plaintiffs be unsuccessful in the action. In these circumstances, I do not think it appropriate to exercise the discretion conferred by Pt 53 r 2(1)(a) so as to order security for costs against Ceil and I decline to do so.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (28 paragraphs)

Parties

Cases Cited (13)

Cited By (3)