consideration
60 The questions arising on the application for leave to appeal are whether paragraph 2 of her Honour's orders of 22 April 2016, with respect to security for costs, was attended by sufficient doubt to warrant reconsideration by an appellate court and, if so, whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-400; and Re CSR Ltd [2010] FCAFC 34; 183 FCR 358 at [5]. Bearing in mind the purpose of an order for security, the likely costs to the Commissioner of a 5-day hearing, Mr Vasiliades' residence out of the jurisdiction, and his lack of assets within Australia, the second question should be answered in the affirmative. Indeed, Mr Vasiliades made no submission to the contrary.
61 As emphasised below, the judgment of the primary judge was a discretionary one. As the parties acknowledged, conformably with House v The King 55 CLR 499 at 505, before an appeal will be allowed from such a judgment, "[i]t must appear that some error has been made in exercising the discretion". It is also well recognised that an appellate court will "exercise particular caution in reviewing decisions pertaining to practice and procedure" although "the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration": Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 at 177. These principles are relevant to the present appeal.
62 The order respecting security for costs made by the primary judge was made under s 56(1) of the Federal Court Act, which provides:
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.
63 Rule 19.01 of the Rules, which also applies to an application for security for costs, further addresses the practice and procedure of the Court in considering such an application. Rule 19.01(1)(a) provides that "[a] respondent may apply to the Court for an order ... that an applicant give security for costs". Rule 19.01(2) stipulates that such an application must be accompanied by an affidavit "stating the facts on which the order for security for costs is sought", and to this end desirably addressing (r 19.01(3)):
(a) whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered;
(b) whether the applicant is ordinarily resident outside Australia;
(c) whether the applicant is suing for someone else's benefit;
(d) whether the applicant is impecunious;
(e) any other relevant matter.
In r 19.01, "applicant" is defined to include "a cross-claimant", and "respondent" to include "a cross-respondent" (r 19.01(4)).
64 Rule 19.01 is broadly equivalent to O 28 of the former Federal Court Rules 1979 (Cth), which was applicable to proceedings at first instance. (Order 52 r 20 of the former Rules made separate provision for security for costs in appellate proceedings.) The provisions of the Rules, former and current, were made in exercise of the rule-making power conferred on the Judges of the Court (or a majority of them) by s 59 of the Federal Court Act, in particular s 59(2)(n). Section 59(1) confers a power to make Rules of Court "not inconsistent with" the Federal Court Act. Rule 19.01 cannot therefore enlarge the power with respect to security for costs beyond the power conferred by s 56 of the Federal Court Act.
65 But for s 56 or its equivalent, a power to order security for costs may well have been said to arise in exercise of an inherent or implied power to ensure that proceedings before the Court were conducted justly and efficiently.
66 In England, courts established pursuant to the Royal Prerogative were at one time attributed with inherent power to order security for costs. When, however, statute made provision for appeals, then statutory provision was expressly made for ordering security for costs as ancillary to appeals: see, for example, J H Billington Ltd v Billington [1907] 2 KB 106 at 109-110. The position in England has of course altered since 1907, when J H Billington was decided.
67 In England, prior to the implementation of reforms recommended by Lord Woolf, Ord 23 of the Rules of the Supreme Court 1965 governed applications for security for costs in the English High Court and the civil division of the Court of Appeal (see Ord 1, r 2). In such cases as CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1995] 1 BCLC 148; [1994] 2 Lloyd's Rep 567 and Condliffe v Hislop [1996] 1 All ER 431; [1996] 1 WLR 753, Ord 23 was held to be exhaustive of the power to order security: see also Re Little Olympian Each Ways Ltd [1994] 4 All ER 561; [1995] 1 WLR 560 at 564-5. It is worth noting, however, that whilst accepting there was no inherent jurisdiction outside Ord 23 to grant security for costs, Kennedy LJ (with whom Peter Gibson LJ and Sir Roger Parker agreed) nonetheless held that the court was entitled to protect its own procedures, and since the principle that costs follow the event was of fundamental importance, then if that principle were threatened, "the court might, at least in some cases, be prepared to order that the action be stayed": Condliffe v Hislop [1996] 1 All ER 431 at 440; cf. Abraham v Thompson [1997] 4 All ER 362 at 369-371. Since the reforms proposed by Lord Woolf, applications for security for costs in England may now be made under r 25.12 of the Civil Procedure Rules 1998.
68 The High Court of Australia has also been said to have an inherent or implied power in the exercise of its original jurisdiction to award security for costs. In Merribee Pastoral Industries Pty Limited v Australia and New Zealand Banking Group Limited [1998] HCA 41; 193 CLR 502, Kirby J reflected on the English legal history of the power and the history of provisions for security for costs in the High Court, including by the High Court Procedure Act 1903 (Cth), since repealed, and in successive Rules of Court, commenting (at [18]):
The view was apparently then taken that, appeal, being itself a creature of statute, the regulation of its terms would require statutory provision. This explained the introduction of the specific power for the English High Court and Court of Appeal to order security for the costs of an appeal. It was doubtless upon that footing that the High Court Procedure Act so provided for this Court in 1903. The generality of the provision for security for costs in relation to proceedings other than appeals, lying in the original jurisdiction of a superior court of record, could be left safely to the inherent power of such a court. Although this Court was not created out of the Royal Prerogative but by the Constitution, it enjoys and has exercised the inherent or implied powers traditionally belonging to the Royal Courts of Justice of England and proper to a final court of appeal. It also enjoys and has exercised large powers implied from its functions.
(Citations omitted)
Hence, so his Honour reasoned, although there was no statutory or other provision conferring power on the High Court to order security for costs in its original jurisdiction, the Court had had an inherent or implied power to do so.
69 Furthermore, the preponderance of authority concerning the State Supreme Courts is that the power to order security for costs derives from the inherent power of a Supreme Court to regulate its own procedure: see Lines v Tana Pty Ltd [1987] VR 641 at 642 (Crockett, O'Bryan and Tadgell JJ); O'Neill v De Leo (1993) 2 Tas R 225 at 229-230 (Green CJ); Shannon v Australian and New Zealand Banking Group Ltd (No 2) [1994] 2 Qd R 563 at 563-564 (Williams J); and Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 at 447-448 (Holland J). In the last-mentioned case, Holland J stated (at 447) that, in his view, "it is settled by modern authority that power to require security for costs is inherent in the court whether functioning at Common Law or in Equity", adding that "[c]ourts have frequently asserted inherent power to regulate their own practice and procedure to procure proper and effective administration of justice and prevent abuse of process". State Supreme Courts have, on a number of occasions, rejected the proposition that current statutory provisions and the making of court rules on security for costs put aside this inherent power: see, for example, Rajski [1982] 2 NSWLR 443 at 448; and Shannon [1994] 2 Qd R 563 at 564.
70 The Federal Court is "a superior court of record and is a court of law and equity": see Federal Court Act, s 5(2). It has, as Gummow J said in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461 at 466, "the general judicature system powers and obligations". Whatever the other sources of power that might exist for security for costs, this application was brought only on the basis of s 56 and r 19.01. Section 56 clearly provides sufficient authority to make a security for costs order of the kind the Commissioner sought: cf. Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,420. Furthermore, a comparison of the decisions in this Court with the other decisions to which we have referred, indicates that, as a practical matter, an exercise of discretion under s 56 will generally be governed by the same consideration as an exercise of what in other courts is described as inherent or implied power to grant security for costs.
71 The discretion conferred by s 56 is a broad one, subject only to the limitation that it must be exercised judicially. The discretion has been sometimes described as unfettered and to depend on the particular circumstances of the case: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 at 4. The latter observation might be thought a truism, save that it strongly indicates that the exercise of the discretion is not determined by rules.
72 The purpose to be served by making an order for security for costs is to ensure that a successful respondent to a claim will have a fund available within the jurisdiction of the Court against which the respondent, if successful in defence, can enforce a judgment for costs in the respondent's favour. This purpose is, of course, relevant to an exercise of discretion. The factors that the courts have over time recognised as relevant to an exercise of discretion are relevant because they bear on the purpose for which an order for security for costs is made. Thus, if an applicant in a proceeding is ordinarily resident outside the jurisdiction, an award of security for costs means that a respondent "does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement": Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,422 (Gummow J). See also: Logue v Hansen Technologies Ltd 125 FCR 590 at [18] (Weinberg J); GAIN Capital UK Limited v Citigroup Inc [2015] FCA 1009 at [18] (Yates J); and Oswal [2015] FCA 1143 at [57] (Nicholas J).
73 In the present case, the arguments advanced by the parties before the primary judge principally turned on two competing considerations: (1) that the applicant was ordinarily resident outside Australia and had no disclosed assets in Australia to meet an award of costs that might be made in the Commissioner's favour; and (2) the nature of Mr Vasiliades' Part IVC proceedings. This is not to suggest that these were the only relevant considerations: we have already mentioned the primary judge's reference to the fact that the party against whom security was sought was a natural person, and the parties also relied on some other matters, including the Commissioner's application of the amount of $2,701,196.68 against the judgment debt (see [106] below).
74 Regarding the first principal consideration to which we have referred, however, there was no evidence before her Honour concerning either Mr Vasiliades' assets or ordinary residence, although it was common ground that he was an Australian non-resident without apparent assets in Australia. The significance of this consideration was emphasised in PS Chellaram & Co Ltd v China Ocean Shipping Co 102 ALR 321 (in which the respondents applied for an order that the appellant provide security for the costs of its appeal). In reasons for judgment awarding security, McHugh J stated (at 323):
To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.
75 The fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction is clearly a significant circumstance militating in favour of an applicant for security for costs. As the above passage highlights, however, there is no rule that security for costs will be awarded as of course where an applicant is resident out of the jurisdiction and has no assets within the jurisdiction. A case may disclose countervailing circumstances that properly justify refusing an application.
76 Regarding the second principal consideration, Mr Vasiliades' case at the hearing before the primary judge was that the three proceedings brought by him under Part IVC of the TAA (at pp 2 and 4-5 of the transcript of those proceedings):
... are, in substance, defensive proceedings. And the law has always been that security for costs will not be awarded against an individual who is a defendant in substance. The authorities for that are the case of Willey v Synan in the High Court, relying on Scrutton LJ in a Court of Appeal decision of Maatschappij.
...
Now, in this court ... there has been a departure from the principles expressed in Willey v Synan and by Scrutton CJ [sic]. Beginning with Madgwick v Kelly and continuing through Oswal and Hii, the court, in our submission respectfully, really hasn't placed sufficient weight on this principle that security for costs should not be awarded against an individual who is, in essence, a defendant. Our submission, which your Honour finds set out in paragraphs 12 and 13 of our written submissions, is that circumstances should be truly extraordinary before the court departs from the principle that security for costs will not be awarded against a natural person who is a defendant.
77 For Mr Vasiliades, in reply, it was submitted (at pp 28-29 of the transcript) that "the High Court ... gave an absolute rule in [Willey v Synan]", after which the primary judge remarked (at p 29 of the transcript) that:
[T]here appeared to be two competing principles at stake here. First, there's the Willey principle in respect of proceedings that are essentially defensive. Secondly, there's the principle that where you have an overseas litigant who has no assets in Australia, it's a strong factor in favour of the granting of security.
Counsel for Mr Vasiliades responded:
With respect, your Honour, the rules have always been that an individual overseas or otherwise ought not be ordered to give security and the reason for that, of course, is the defendant is not the person who's calling on the processes of the court ... That's why the debate about who's, in substance, a defendant, has come about ...
78 Having read the transcript of the hearing before the primary judge and the parties' written submissions filed before that hearing, it seems to us that either Mr Vasiliades put his case on the basis that Willey v Synan 54 CLR 175 was authority for a rule that no order for security for costs would be made where the party bringing the proceeding was, in substance, a defendant; alternatively, that it would have been reasonable for her Honour to have understood his case in this way (notwithstanding senior counsel's perception, stated at the hearing before us, that "the highest it was put was this was a very strongly stated position in those authorities").
79 The reasons for judgment of the primary judge indicate, in our view, that her Honour accepted the case for Mr Vasiliades (as she understood it) that Willey v Synan 54 CLR 175 and Maatschappij [1923] 2 KB 166 stood for the proposition that there was a rule, or a very strong predilection, against ordering security for costs against a party bringing a proceeding that was "essentially defensive in nature" and that this was why her Honour refused to award the Commissioner security for costs against Mr Vasiliades. Thus, for example, her Honour stated (PJ [18]) that "[t]here is a strong line of authority [referring to Willey v Synan and Maatschappij] that a court should be reluctant to order security where the proceeding is essentially defensive in nature"; and, also that Mr Vasiliades submitted that the circumstances should be "truly extraordinary" before the Court departs from the principle in Willey v Synan "which is intended to prevent a defendant being put into a position where that defendant is shut out from justice" (PJ [18]). Significantly, at a critical point in her reasons, her Honour said (PJ [26]) that "[a]lthough in both Oswal and Hii the defensive nature of the Pt IVC proceedings was held not to outweigh other factors bearing upon whether security should be granted, I am of the view it is a significant factor that should, and does, weigh against an order for security in the present case. These proceedings are truly defensive in character and the principle espoused in Willey v Synan applies to the circumstances of this case. ... These proceedings are the avenue by which the taxpayer can challenge the Commissioner's assessments... In the circumstances, I do not consider that the taxpayer should be required to give security for costs" (emphasis added).
80 We consider that her Honour was led into error, as we explain below.
81 We accept that statements made in the reasons for judgment of Scrutton LJ in Maatschappij [1923] 2 KB 166 can be read as supporting the proposition that a court will not order security for costs to be provided by the party bringing the action where that party is in truth the party under attack. Scrutton LJ stated (at 177-8):
But it is said here that the Perlak Company [the intervening defendant] has not been compelled to come as a defendant but has intervened of its own free will. There are however a set of cases in which foreign claimants have come to England to protect property attacked in English proceedings, but have not been ordered to give security, because they are only there in defence of their property threatened by English proceedings. ... [T]he the position, I think, extends to every case where the person against whom security is sought is really defending himself against attack, even if he be nominally a plaintiff, but really defending himself against defendants' previous action against him. ... The Court always, as I understand, endeavours to be guided by the substance and not by the form of the matter, and orders security for costs against the foreign attacker, not against the foreigner defending himself or his property from attack.
...
Though the question is a difficult one, I am of opinion that the Perlak Company are really defending themselves and not attacking, and therefore should not be ordered to give security.
82 The circumstances of that case disclose, however, that it was not a case in which security was denied on the basis that the principal proceedings were brought as a defensive measure. In that case, security for costs was sought against a party that had been granted leave to intervene as a defendant, the original defendants having agreed to pay the debt as claimed by the plaintiffs to whomever the court determined it was due. The intervening party was a foreign company which was claiming priority. In these circumstances, the English Court of Appeal refused the plaintiffs' application for security against the intervening defendant.
83 Furthermore, bearing in mind English and Australian legal history over the past 60 plus years, English decisions concerning security for costs are of limited assistance in this Court. It may also be worth noting that, in 1987, Millett J said that a purpose of the introduction of Ord 23 of the Rules of the Supreme Court 1965 was to "[sweep] away the encrustation of accumulated practice" and substitute a general discretion: DSQ Property Co Ltd v Lotus Cars Ltd [1987] 1 WLR 127 at 133. As indicated above, the English courts have continued along this path.
84 What is more, we would not read Willey v Synan 54 CLR 175 as authority for a rule that a court must not order security for costs from a party bringing proceedings where that party is in substance a defendant. In Willey v Synan the Collector of Customs applied for security for costs against the plaintiff seaman under O XXVIII r 9 of the then High Court Rules 1928 (Cth), which provided that a plaintiff ordinarily resident beyond the Commonwealth may be ordered to give security for the costs. The non-resident plaintiff had found English silver coins on board a ship. Officers of the Customs Department took possession of them under the Customs Act 1901 (Cth) and gave notice under that Act that the coins would be condemned unless the plaintiff brought an action for their recovery. In consequence, the plaintiff instituted an action in the High Court under s 207 of the Customs Act 1901 (Cth) to recover them. In argument for the plaintiff it was said that the plaintiff was not the attacker but the person attacked, and that "the ordinary rule [was] that the person attacked, who normally is the defendant, will not be ordered to give security for costs". As Latham CJ observed (at 180) the Collector of Customs "really initiated legal process by giving notice under sec 207 [of the Customs Act] which would result in the exclusion of any right of the plaintiff unless the plaintiff himself took legal proceedings": see also Dixon J at 185-186. The High Court was unanimously of the view that security should not be ordered because the plaintiff was, in substance, in the position of a defendant, since he had to commence proceedings to avoid the statutory forfeiture.
85 Dixon J (with whom Rich J agreed) referred (at 184-5) to Scrutton LJ's judgment in Maatschappij [1923] 2 KB 166 in support of the principle, which he affirmed as correct, that "a party to judicial proceedings, who resides beyond the jurisdiction, should not be required to give security for costs unless, however the parties are arranged upon the record, he is the person invoking or resorting to the jurisdiction for the purpose of establishing rights or obtaining relief". Dixon J added (at 184) that "[i]f he does avail himself of the remedies the jurisdiction provides in order to obtain affirmative relief or redress, he may be ordered to give security, although he becomes a defendant in the action".
86 The High Court did not say, however, that an exercise of discretion to award security for costs was cut down or necessarily limited by the fact a person bringing the proceeding was in substance a defendant. Nor did it say that this factor necessarily prevailed over all other factors in every case. The case was only fought (see 177-178) on the basis that the appellant said that the Collector of Customs was in the position of a plaintiff and the respondent said that it was the plaintiff who was in the position of a plaintiff. It seems to us that Willey v Synan stands for the proposition that the justice of the case must be kept in mind in any exercise of the discretion and that this will depend on the particular circumstances of the case. The purpose of an award of security for costs is relevant at this point. Generally speaking, a party bringing proceedings chooses to institute proceedings after considering the advantages and disadvantages of doing so (including the likelihood of recovering costs from the defendants). In instituting proceedings, a party assumes the risk of being unable to recover costs from those who are sued. The parties against whom proceedings are brought are not respondents by choice but because someone else has chosen to sue them. As noted, the purpose of an order for security is to ensure that there is a fund available for the benefit of a successful respondent, to mitigate the injustice that would arise if a successful respondent, who has not chosen to incur the expense of the litigation, cannot recover costs from the party who chose to bring the proceedings in the first place. The policy of the law in this regard is related to the accepted understanding in Australian courts that normally costs follow the event. It follows from this that an order for security for costs is generally made against a person who brought the proceeding, however named on the record, and is generally not made against a respondent (although, again, this may not be a hard and fast rule: cf. Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; 132 CLR 301 at 305).
87 Willey v Synan 54 CLR 175 is an example of a case in which a court has, as matter of discretion, determined that, having regard to the particular circumstances raised in argument, it was not in the interests of justice to order security for costs against the party named on the record as bringing the proceeding because he was compelled by statute to bring an action for recovery to protect his rights and, as against the applicant for security for costs, should be treated as if he were the defendant. The case is authority for the proposition that the justice of the case controls the exercise of the discretion and that the fact that a party is in substance a defendant is a relevant circumstance in considering an application for security for costs against that party. As McHugh J explained in PS Chellaram 102 ALR 321 (see [74] above) the importance of any one circumstance will depend on all the other relevant circumstances in the case. A factor such as the plaintiff's residence outside the jurisdiction, without assets in the jurisdiction, might often have "great weight" and determinative practical effect. But the exercise remains one of considering all the factors.
88 We can discern no authority binding on this Court for the proposition there is anything in the nature of an absolute rule that a court will not order a person who is in substance a defendant to provide security for costs. In Stanley-Hill v Kool [1982] 1 NSWLR 460 at 464, Reynolds JA (with whom Moffitt P and Glass JA agreed) rejected the notion that rules govern the exercise of the discretion to award security for costs.
89 Conformably with this aspect of Stanley-Hill v Kool [1982] 1 NSWLR 460, decisions in State Supreme Courts emphasise that previous exercises of discretion may guide an exercise of discretion but do not limit it. In Rajski [1982] 2 NSWLR 443, for example, Holland J (at 448) rejected the proposition that the inherent jurisdiction to award security for costs was restricted to the examples in the decided cases in which security had been granted "in the sense of denying the existence of the power for any other cases". Holland J said (at 448-9):
It may be postulated that the general practice in the exercise of the power is to be found in the cases but it is another thing to say that an ever present inherent power to regulate the court's procedure so as to attain the ends of justice can wither away or become shrunken by limited past examples of its exercise. In my opinion, the fact that in the past the power has been regularly exercised in a limited number of cases and refused in others proves the existence of but does not restrict the jurisdiction.
In that case, Holland J firmly rejected a rule-based approach to exercising the discretion. His Honour's judgment was upheld on appeal ([1983] 2 NSWLR 122) and been has regularly cited and applied: see, for example, Bhagat v Murphy [2000] NSWSC 892; Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251; Welsel v Francis [2011] NSWSC 477; and Nitopi v Nitopi (No 2) [2016] NSWSC 476.
90 Although the source of the authority to order security for costs in the Federal Court is different from that in the State Supreme Courts, there is as much reason to avoid a rule-based approach in this Court and to avoid a strong predilection for a particular outcome as a consequence of the presence or absence of any specific factor (although some factors - such as absence from the jurisdiction without assets in the jurisdiction - might have significant weight). As we have said, s 56 of the Federal Court Act confers a broad judicial discretion, in the exercise of which the significance of any particular factor will depend not only "upon its own intrinsic persuasiveness" (to adopt the language of McHugh J in PS Chellaram 102 ALR 321 at 323) but on the other circumstances of the case. The wide discretion that it clearly confers does not lend itself to an overly "mechanical" approach (cf. Madgwick v Kelly 212 FCR 1 at [92]) and precludes limitation by the application of judge-made rules in its exercise. As Allsop CJ and Middleton J stated in their joint judgment in Madgwick v Kelly at [92], "[f]airness ... lies at the heart of the exercise of discretion under s 56 - fairness as to whether security should be ordered and, also, importantly, in what amount".
91 Indeed, the Full Court in Madgwick v Kelly 212 FCR 1 effectively approved a multifactorial approach to an exercise of the discretion conferred by s 56 of the Federal Court Act. In their joint reasons (at [7]), Allsop CJ and Middleton J set out the factors listed by the primary judge as relevant to the exercise of discretion in that case. These included "[w]hether the proceeding is essentially defensive in nature?". Much like McHugh J in PS Chellaram 102 ALR 321 at 323, their Honours observed in Madgwick v Kelly at [8] that:
The primary judge thereafter framed his consideration of the application by reference to these factors. All these factors were legitimate to consider in an application such as this. ... Nevertheless, it should not be taken that every case requires an examination of all these factors. Much will depend on the facts of the individual case, and, importantly, how the application is argued by the parties.
92 As the previous paragraph might indicate, an issue arose in Madgwick v Kelly 212 FCR 1 as to whether the proceedings were essentially defensive in nature. The proceedings were related class actions brought by investors in a failed managed investment scheme. In relation to this, Allsop CJ and Middleton J stated (at [18]):
The expression of the matter by the primary judge ... was, if we may say so, flawless. To the extent there was an interweaving (though in separate proceedings) of the different cases in the overall controversy or matter, as revealed by the primary judge's careful discussion of the strength and bona fides of the claims ... that was a legitimate factor to weigh, along with others.
93 This, as noted earlier, conforms also to the approach of the Court of Appeal of the Supreme Court of New South Wales in Stanley-Hill v Kool [1982] 1 NSWLR 460 and such other decisions as Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 (Ormiston J, Supreme Court of Victoria), E I Du Pont de Nemours & Co v Commissioner of Patents (No 7) (1990) 18 IPR 643 (Hodgson J, Supreme Court of New South Wales), Weily's Quarries v Devine Shipping Pty Ltd [1994] TASSC 76; 14 ACSR 186 (Zeeman J, Supreme Court of Tasmania), and Putney Group Pty Limited v The Royal Rehabilitation Centre Sydney [2009] NSWSC 424 (Forster J, Supreme Court of New South Wales). It also generally reflects the approach of numerous judges of this Court: see Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance Ltd (in liq) [2003] FCA 803 at [82] (Jacobson J); Oswal v Commissioner of Taxation [2015] FCA 1366 at [44] (Griffiths J); Hii 238 FCR 304 at [29] (Collier J); and Thunderdome 36 FCR 297 at 307-8 (Olney J). It may be that other judges on other occasions have taken a contrary view, that there is no power to order security for costs where a plaintiff is, in substance, in the position of a defendant: see, for example, Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 at 329 (Wilcox J); Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 622 at 626 (Sundberg J); and Aurora Networks Pty Ltd v Halbedl; In the Matter of Aurora Networks Pty Ltd [2013] FCA 632 at [20] (Foster J). If this were so, it is inconsistent with s 56 of the Federal Court Act and Madgwick v Kelly 212 FCR 1, as well as many other authorities.
94 On this appeal (although not before the primary judge) senior counsel for the respondent conceded that it would not be the case today that a person who is in the position of a defendant would be - as a rule - at liberty to defend himself or herself without giving security. Rather, as senior counsel for the respondent accepted on this appeal, this is a factor to be considered in the consideration. For the reasons above, we accept that concession. However, as we have explained, the respondent's submissions before the primary judge, which the primary judge accepted, had been to the effect that such a rule, or strong predilection, existed.
95 Accordingly, we are of the view that the primary judge erred in refusing security for costs on the basis that there was a rule, or a very strong predilection, against ordering security for costs against a party bringing a proceeding that was "essentially defensive in nature". It follows that we would grant leave to appeal, allow the appeal, and re-exercise the discretion. Before we turn to the latter matter, we would address one further argument advanced by the Commissioner.
96 The Commissioner also challenged the primary judge's characterisation of the Part IVC proceedings instituted by Mr Vasiliades as "truly defensive in character" (PJ [26]) and as having an "essentially defensive nature" (PJ [29]). We do not consider that there is any error disclosed in this regard. We accept that not all Part IVC proceedings will be appropriately characterised in the same way. The Commissioner did not, however, point to any error in her Honour's account (as opposed to characterisation) of the statutory scheme, as it applied to Mr Vasiliades, at PJ [20] and [26] of her Honour's reasons. The Commissioner did not suggest that there was not a real issue to be decided between the parties (PJ [26]). As the primary judge indicated at PJ [19], the nature of the statutory scheme is relevant to the question of characterisation.
97 Plainly enough, even apart from the manner the cases were argued, there are differences between the statutory scheme in issue in Willey v Synan (where the High Court held that, by virtue of the requirement to institute proceedings to avoid statutory forfeiture, the plaintiff was in substance in the position of a defendant) and the scheme in issue in this case, which provides the avenue by which a taxpayer can contest a taxation liability.
98 In not dissimilar circumstances in Oswal [2015] FCA 1143 at [54], Nicholas J described the relevant Part IVC proceedings brought by the taxpayer as having "a significant defensive element", a description that Griffiths J, on the application for leave to appeal from Nicholas J's judgment, did not consider to have been misapplied (Oswal [2015] FCA 1366 at [44]); and in Hii 238 FCR 304 at [28] Collier J also accepted that there was merit in Mr Hii's submission that the relevant Part IVC proceedings had "a significant defensive element". We do not think that anything turns on the immaterially different language used by the primary judge in this case. Bearing in mind the nature of the statutory scheme to contest taxation liabilities, we cannot discern any relevant error in her Honour's characterisation of the proceedings brought by Mr Vasiliades in this case. As Allsop CJ and Middleton J remarked in Madgwick v Kelly 212 FCR 1 at [16], "[t]he language of 'defence' and 'attack' or 'offence' has some lineage", citing Maatschappij [1923] 2 KB 166 at 177 (Scrutton LJ) and Willey v Synan 54 CLR 175 at 178-179 (Latham CJ) and 184-185 (Dixon J), adding "[t]hat language is not however (and was not intended by the judges in those cases to be) a reason to analyse minutely the legal relationships involved in the disputes". Bearing in mind the nature of the statutory scheme to contest taxation liabilities, we cannot discern any relevant error in her Honour's characterisation of the proceedings brought by Mr Vasiliades in this case.