application for security for costs
15 I turn then to consider Pineview's application for security for costs of the appeal. That application is made under r 36.09 of the Rules, which provides that:
(1) A party may apply to the Court for an order that:
(a) the appellant give security for the costs of the appeal, and for the manner, time and terms for giving the security; and
(b) the appeal be stayed until security is given; and
(c) if the appellant fails to comply with the order to provide security within the time specified in the order - the appeal be stayed or dismissed.
(2) An application under subrule (1) must be accompanied by an affidavit stating the facts in support of the application.
(Note omitted.)
16 In support of the application, Pineview relies on an affidavit sworn by its solicitor, Jim Kekatos, on 21 November 2019. Mr Dimitriou relies on an affidavit sworn by his solicitor, Geoffrey John Adelstein, sworn on 9 December 2019. Mr Kekatos' affidavit deals with the history of various proceedings involving the parties who are now before me, as well as the estimated costs of the appeal. Mr Adelstein's affidavit responds to Mr Kekatos' estimate of the costs of the appeal.
17 In Neptune Hospitality Pty Ltd v Ozmen Entertainment Pty Ltd [2019] FCA 1734 at [19]-[22], I set out the principles applicable to an application for security for costs of an appeal as follows:
19 Section 56 of the Federal Court Act gives the Court a wide power to order security for costs. The discretion to order security is broad and unfettered but must be exercised judicially: see Bell Wholesale Co Ltd v Gates Export Corp (1984) 2 FCR 1 at 3.
20 In Tait v Bindal People [2002] FCA 322 (Tait) at [2]-[4] Spender J noted that there is a difference when ordering security for costs in an appeal as opposed to a first instance matter. His Honour said the following in relation to applications for security for costs under s 56 of the Federal Court Act:
2 The position in relation to security for costs in the present matter is governed by s 56 of the Federal Court of Australia Act 1976 (Cth). Section 56 provides that security is to be of such amount and given at such time and in such manner and form as the Court or Judge directs. As to whether security for costs should be ordered, Cowell v Taylor (1885) 31 Ch D 34 at 38, a case of more than 100 years ago, sets out the fundamental principle:
"The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law. 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".
3 What that passage demonstrates is that there is a difference in principle in relation to the ordering of security for costs in a first instance matter and the ordering, or the consideration of the ordering, of security for costs where one is at the appellate level. The difference is that, at the appellant 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.
4 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. That consideration, it seems to me, is also reinforced by the judgment of Gummow J in Wiest v Director of Public Prosecutions and Anor (1988) 23 FCR 472. That case involved appeals against extradition with penal consequences. Such consequences were clearly very relevant considerations, but discretionary reasons moved the Court to order security for costs. Such discretionary considerations, which were particularly noted by Gummow J, included the delay between the filing of the papers and the bringing of the applications for security. His Honour referred to a particular circumstance which is relevant here, and that is that the applicant for security has a judgment in its favour. There was a reference by Gummow J to Bethune v Porteous (1892) 18 VLR 493, again an old case. In that case, Hood J said (at 494):
"the reason underlying the numerous and varying cases in which appellants have been ordered to give security will be found in the injustice to a successful litigant that may be caused if he be compelled to contest the matter for a second time without a probability of obtaining his costs if ultimately successful."
That really is the fundamental question of justice behind my decision to order security for costs.
21 In Clack v Collins (No 1) [2010] FCA 513 Jagot J also observed the difference in approach. At [8]-[10] her Honour set out a number of decisions which highlighted that difference:
8 In Moore v Macks [2007] FCA 509 at [20] Mansfield J referred with approval to the decision in Cowell v Taylor (1885) 31 Ch D 34 at 38. In that case, Bowen LJ said:
…
9 Mansfield J also referred to the decision of Spender J in Skyring v Sweeney [1999] FCA 61 at [6] to the effect that:
Impecuniosity is a factor which can be taken into account as justifying the grant of security. Impecuniosity ought not to be a bar to a person prosecuting at first instance a claim, but the position on appeal seems to me to be fundamentally different. In effect, in the absence of an order for security for costs in the circumstances of this case, Mr Skyring, in effect, is given a free hit, and that seems to me to be intrinsically unfair.
10 In Singh v Secretary, Department of Employment and Workplace Relations [2007] FCA 90, Sundberg J at [11] also cited with approval the decision in Cowell v Taylor and at [12] emphasised that the question of prospects of success on the appeal are especially relevant in the case of an appeal where "the appellant has had his day in court." At [13] and [14] Sundberg J referred to a relevant consideration being the fact that the appellant had not paid any of the costs in the proceeding below, although in the case of Singh those costs had already been taxed.
22 After referring to the decision in Tait (see [20] above) her Honour said at [13]:
In Soh v Commonwealth of Australia [2008] FCA 1524, at [10], Moore J identified six factors relevant to the decision whether or not security for costs should be awarded, namely (i) the prospects of success, (ii) the quantum of risk that a costs order will not be satisfied, (iii) whether the making of a costs order would be oppressive in that it would stifle a reasonably arguable claim, (iv) whether any impecuniosity of the party from whom security is sought arises out of the conduct complained of, (v) whether there are aspects of public interest which weigh in the balance against such an order, and (vi) whether there are any particular discretionary matters peculiar to the circumstances of the case. Consistent with the decisions to which I have referred, at [11] in Soh, Moore J also referred to the observations of Spender J in Tait v Bindal People.
18 Pineview submitted that there were two reasons why security should be ordered in its favour. To some degree, those reasons overlapped.
19 The first was that if the appeal fails, Mr Dimitriou will remain a bankrupt and Pineview will have a costs order made in its favour, but, given the circumstances, it will remain unsatisfied.
20 The second reason given was based on the history of litigation between Mr Dimitriou on the one hand and Pineview on the other. Counsel for Pineview took me to aspects of various judgments both in this Court and in the Supreme Court of New South Wales, where comments had been made about the conduct of litigation. It seems that there has been a protracted history of litigation between the parties. However, the submission ultimately made by Pineview, if I have understood it properly, is that in circumstances where it has had to deal with a protracted history of proceedings, if Mr Dimitriou is unsuccessful in his appeal, he will remain an undischarged bankrupt and Pineview will not be able to recover its costs, a position it should not be left in having regard to the history of litigation between the parties.
21 Pineview also submitted that there was no evidence before the Court that the appeal would be stultified if security was ordered and that, in effect, the Court would take judicial notice of the fact that Mr Dimitriou is legally represented on this application and in the appeal and would infer that he is in some way able to fund his representation.
22 As to the quantum of any security, Pineview submitted that at the end of the day the Court could form its own view about the appropriate quantum of security to be ordered if there was an issue with the evidence relied on by it and, I infer, as a result of the contest between Mr Kekatos on the other hand and Mr Adelstein on the other as to the appropriate quantum.
23 In response, Mr Dimitriou submitted that his impecuniosity or his bankruptcy arises out of the conduct complained of; that is, it arises out of a finding that the debt the subject of the bankruptcy notice which founded the creditor's petition, or alternatively a debt, is owing to Pineview. As I understand Mr Dimitriou's position and, at a high level, his ground of appeal, he contends that there is no debt owing to Pineview and that there was an error in the way in which the trial judge interpreted the evidence to find to the contrary.
24 In that regard, counsel for Mr Dimitriou referred me to [105] of his affidavit in which he deposes that:
It is purely unfair for Pineview to claim it is a creditor against me for $1.276Mil, proceed to bankrupt me in the circumstances that became evident, however disregarded at the Hearing of 21 August 2019 is that all it claimed after 2:00pm on 21 August 2019 was to be indemnified of its legal fees in administrating the trust, however purposely withheld the two deeds being the ANZ Deed and the Russo deed for which after consideration is given to those deeds read in conjunction and reliant upon the discharge of the ANZ Bank facility, the creditor is not owed any monies at all, whether by me or any companies that were involved in the equity suit.
25 As to quantum, counsel for Mr Dimitriou submitted that the Court had before it the considered evidence of Mr Adelstein in relation to quantum and that it would have regard to that evidence. Counsel for Mr Dimitriou discouraged the Court from simply coming to its own view without regard to the considered evidence of Mr Kekatos on the one hand and Mr Adelstein on the other, but noted that there may be items where there would be disagreement as to estimation on the part of either of those gentlemen and where the Court would therefore form its own view on those particular items.
26 The question of whether security for costs should be ordered, in this case, requires me to undertake something of a balancing exercise, recognising that I have a wide power as conferred by s 56 of the Federal Court of Australia Act 1976 (Cth) to order security.
27 For the purposes of this application, Pineview has also conceded that Mr Dimitriou has an arguable ground of appeal. It is impossible for me to determine the prospects of success of that ground. Based on the submissions I have heard today, it is clearly complicated, will in due course require some explanation by counsel for both parties and will, no doubt, be the subject of detailed submissions and argument at the hearing of the appeal. For the purposes of this application, I would consider that factor to be a neutral one.
28 The next issue to be considered is the risk that a costs order will not be satisfied. In this case, that seems to be a very high risk. There is no evidence before me of how a costs order might be satisfied. That is therefore a factor which weighs heavily in favour of the making of an order for security.
29 The third question is whether the making of a security for costs order would stifle a reasonably arguable claim. Once again, there is no evidence, one way or the other, of whether that would be so. Mr Dimitriou has not relied on any evidence as to his financial status or his ability to rely on third parties to, for example, fund a costs order or his own prosecution of the appeal. In the absence of evidence, in my view, that factor also weighs in favour of the making of an order for security.
30 The fourth issue is whether Mr Dimitriou's impecuniosity arises out of the conduct complained of. There is no doubt that if Mr Dimitriou is successful on appeal, the sequestration order will be set aside and he will no longer be a bankrupt. Based on the material that was put before me today, it is difficult, if not impossible, for me to determine the effect of any conduct on the part of Pineview and whether Mr Dimitriou's impecuniosity or, more aptly, his bankruptcy is as a result of conduct on the part of Pineview. In any event, it is certainly the result of the proceeding before the primary judge that the sequestration order was made. Once again, I would consider this to be a neutral factor.
31 The fifth issue is whether there are any aspects of public interest which weigh in the balance against making such an order. Mr Dimitriou is a bankrupt. In my opinion, that status is a matter which one would take into account in determining whether to make an order for security for costs. That is a factor which would weigh in Mr Dimitriou's favour and against making an order for security.
32 Finally, I need to consider whether there are any particular discretionary matters peculiar to this case. Pineview points to the fact that it has had visited upon it more than its fair share of litigation and costs to date by reason of the conduct of the proceeding before the primary judge and other proceedings. As I have already observed, there has been a long history of litigation between the parties. But I do not think that that takes the matter any further.
33 On balance, having regard to those factors, I am of the opinion that an order should be made in Pineview's favour that Mr Dimitriou pay security for its costs of the appeal.
34 That then leaves me to consider the quantum of security that should be ordered. On the one hand, Mr Kekatos has estimated that Pineview's total costs of the appeal, including its costs of the applications before me today, is $96,800, and that the likely costs to be recovered on a party/party basis are between 80% to 90% of the actual costs. On the other hand, Mr Adelstein, having reviewed Mr Kekatos' estimate, takes issue with a number of the items and the amounts arrived at, and is of the opinion that the total estimate for professional costs, counsel's fees and disbursements for both the applications currently before me and the preparation and hearing of the appeal is $23,650. Mr Adelstein considers that the range of recovery for party/party costs is between 65% and 75% of the total costs.
35 There are a number of aspects of Mr Kekatos' estimate which seem to me to be overestimated. For example, Mr Kekatos estimates that the drafting of the interlocutory application for security for costs and summary dismissal, included in a single interlocutory application, would take 10 hours with an estimate of $5,500, and that the preparation for hearing of those applications, including briefing and conferring with counsel, would take 20 hours with an estimate of $11,000. Those estimates seem to me to be at the higher end. On those items, I would prefer Mr Adelstein's estimates. Similarly, there are other items estimated on behalf of Pineview which seem to me to be too high. That said, on some items, I would not accept Mr Adelstein's estimate, which seemed to me to be at the lower end of the scale.
36 Having regard to the estimates and calculations provided by each of Mr Kekatos and Mr Adelstein, in my opinion the appropriate amount of security that should be ordered is $45,000 inclusive of GST.