Food Channel Network Pty Ltd v Television Food Network, GP

REASONS FOR JUDGMENT 1 By a Notice of Motion dated 2 February 2010, Television Food Network, G.P moves the Court for orders: 1 Pursuant to section 56 of the Federal Court Act 1976 the Appellant give security in the amount of thirty eight thousand dollars ($38,000) for the Respondent's costs of and incidental to this appeal and the Appellant's appeal in QUD 132 of 2009 ("the Appeals") such security: (a) To be in the form of a guarantee from an Australian Bank of (at the Appellant's option) by payment of the said amount to the Registrar to be deposited into an interest bearing account, and (b) To be provided [by 22 March 2010]. 2 The Appeals be stayed until the security is provided. 3 The Appellant pay the Respondent's costs of and incidental to this motion. 4 Such further orders and directions as the Court sees fit. 2 Section 56(1) of the Federal Court of Australia Act 1976 (Cth) (the Act) provides as follows: 56(1) 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. 3 A single judge has power to order the provision of security for costs of an appeal: Croker v Deputy Registrar of the High Court of Australia [2003] FCA 681 at [2] per Hely J; and Moore v Macks [2007] FCA 509 per Mansfield J. 4 The discretion to order security must be exercised judicially, but is a broad and unfettered discretion: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1. 5 It is submitted on behalf of the respondent to the appeals that the overwhelming factor supporting an order for security for costs of the appeals is the appellant's impecuniosity. It was said further that the personal guarantee that Mr Lawrence is prepared to give does not improve the appellant's position. 6 Notwithstanding the statements contained in Colwell v Taylor (1885) 31 Ch D 34 at 38, where Bowen LJ said: 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. the position now is as referred to in O 52 r 20 of the Federal Court Rules. 7 That rule provides: Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required. 8 I had occasion to consider that rule and the principles applicable to an application for security for costs of an appeal in Freeman v National Australia Bank Ltd [2004] FCA 601, and also in Rana v Commonwealth of Australia [2008] FCA 1667. 9 In the latter case, I said: 7 It is important also to note the provisions of O 52 r 20 of the Federal Court Rules. Prior to the introduction of that rule, Hill J, in Equity Access Limited v Westpac Banking Corporation (1989) ATPR ¶40-972 at p.50,635, had set out some of the relevant factors on an application for security for costs: the chances of success of the applicant; whether the applicant's claim is bona fide or a sham; the quantum of risk that the applicant cannot satisfy a costs order; relevantly, whether the impecuniosity arises out of the act in respect of which relief is sought; whether there are aspects of public interest which weigh in the balance against the making of an order; and whether there are any particular discretionary matters peculiar to the circumstances of the case. Those considerations were indicated as being some only of the matters appropriate for consideration. 8 However, in respect of the particular operation of O 52 r 20, Hill J later in 1998, in Bates v Omareef Pty Ltd [1998] FCA 536 (4 May 1998) referred to the view expressed in Cowell v Taylor (1885) 31 Ch. D. 34 that appeals are an exception to the rule that poverty is no bar to a litigant who is natural person. Explaining the effect of O 52 r 20 on the principle in Cowell v Taylor, Hill Jsaid: … although the Court has a jurisdiction to order costs in an appeal … there is no presumption that a costs order will be made for security. 9 His Honour continued: Indeed, quite to the contrary, a cost order would not be made unless the party seeking security can persuade the Court that the general rule that security not be ordered should not apply in the circumstances of a particular case. 10 His Honour referred to the observations of Burchett J in Paton v Campbell Capital Limited [1993] FCA 449 (1 July 1993). In that case Burchett J said that the wording of O 52 r 20 places what his Honour referred to as "something of an onus" to demonstrate that security should be provided. 10 Here it is said that there is a matter of public importance raised on the appeals. I have difficulty in seeing that the question of whether there was an intention to use the mark is properly to be characterised as a matter of public importance. However, having regard to O 52 r 20 it seems to me important to bear in mind the following circumstances: the costs ordered to be paid by Collier J at first instance in this proceeding, which has led to the appeal, have been taxed at an amount in excess of $99,000; and the costs ordered to be paid are, it is common ground between the parties, due for payment and have not been paid. 11 Apart from the inference to be drawn by the failure to pay those costs, the evidence does not establish that the corporation is impecunious. In the affidavit of Trevor George Hauff, a solicitor with Potts and Co, Mr Hauff makes reference in par 12 and following to other applications for security for costs and says: The Appellant and the Respondent were the same parties before Justice Greenwood in QUD388 of 2008. In that matter the Respondent by way of Notice of Motion filed on the 12th February 2009 sought an order for security for costs. The Appellant's sole shareholder and managing director Mr.Paul Lawrence gave an undertaking to the Court to stand behind the company and to pay for any costs incurred by the company the Appellant in those proceedings. On the 11th February 2009 His Honour Justice Greenwood dismissed the security for costs application and awarded costs to the Appellant. A copy of the relevant pages of the Judgment of Justice Greenwood is attached hereto and marked Annexure "TGH1". On the 22nd January 2010 I wrote to the solicitors for the Respondent Bennett&Philp offering the same undertaking by Mr.Lawrence in respect to this matter. Attached hereto and marked Annexure "TGH2" is a true copy of that letter. The financial circumstances of the Appellant and Mr.Lawrence since that time have not changed. The parties hereto have been in a number of trade mark disputes both before the Registrar of trade marks and the Federal Court and the Appellant has always met any cost orders made against it. There is nothing to suggest it will not meet it's obligations should it have a further costs order against it in these proceedings. 12 The letter referred to in paragraph 14 of that affidavit contains the following: With respect to the issue of security for costs, Mr. Lawrence has agreed to enter into similar undertakings as were given in the QUD 388/2008 matter. 13 The Court in that instance was prepared to accept such undertakings, and there have been no change in circumstances since that time. Notwithstanding that, Mr Hauff's affidavit contains a document TGH5 that is headed "Guarantee", and is in the following terms: I, PAUL LLOYD LAWRENCE, the sole shareholder and managing director of Food Channel Network Pty Ltd ("Food Channel"), the Applicant in these proceedings, do hereby GUARANTEE to pay any costs order made against Food Channel upon default of such payment being made by Food Channel. 14 The guarantee that is referred to in the letter of 22 January 2010 appears in the orders made by Greenwood J on 23 March 2009 in proceedings QUD 388 of 2008. 15 Greenwood J made orders which commence: Upon the undertaking of Paul Lloyd Lawrence to pay to the respondent any costs ordered to be paid by the applicant in these proceedings after demand having first been made on the applicant; the court orders that: And there follows the orders which the Court made. 16 Notwithstanding the disconformity between the "guarantee" document at TGH5 to Mr Hauff's affidavit and the undertaking (which clearly is an undertaking to the Court and which is contained as the preamble to the orders made by Greenwood J on 23 March 2009), counsel for the respondent on the motion for the security for costs made plain that the undertaking referred to in the letter of 22 January 2009 was an undertaking to the Court and is in the same terms as the undertaking that was made to the Court in respect of the orders made by Greenwood J on 23 March 2009. 17 It seems to me that that clarification of the undertaking is highly important to the disposition of this motion. I do not accept that what is said to be the appellant's impecuniosity is decisive in the present context. The totality of the evidence before me suggests that the real question of impecuniosity relates to the costs of approximately $99,000 of the litigation at first instance in this matter before Collier J. While I do not accept that this a matter of public importance in the sense discussed in the authorities, the evidence as to impecuniosity is far from compelling. 18 Mr Hauff deposes that Food Channel Network has paid all but the most recent order for costs against it, and it is important to note that any impecuniosity in respect of that costs order is as a consequence of the orders obtained by the respondent in the proceedings before Collier J at first instance. 19 Having regard to the undertaking that Mr Lawrence has indicated he will give, I am not satisfied that it is proper to conclude that the applicant on the motion has discharged the onus of establishing that there is a significant risk that a costs order would not be satisfied. 20 For the purpose of the Notice of Motion seeking security for costs, the respondent does not seek to challenge the strength of the appellant's case. 21 Having regard, particularly to the offer by Mr Lawrence, of an undertaking to the Court in relation to the costs of the appeals, it seems to me that I ought not to make an order for security for costs. It is likely that, if there were an order requiring the provision of security for costs, an arguable claim, at the very least, on behalf of the appellant would be, if not stifled, put seriously at risk. 22 Having regards to the provisions of O 52 r 20, in my judgment it is not appropriate that security for costs of an appeal be required. 23 As earlier indicated, Hill J said in Bates v Omareef Pty Ltd [1998] FCA 536, explaining the effect of O 52 r 20,: …although the Court has a jurisdiction to order costs in appeal … there is no presumption that a costs order will be made for security. 24 His Honour continued: Indeed, quite to the contrary, a cost order would not be made unless the party seeking security can persuade the Court that the general rule that security not be ordered should not apply in the circumstances of a particular case. 25 I am not satisfied that the applicant for security has made out that case and I decline to order the provision of security for costs. 26 On the question of costs of the motion, however, I am a bit troubled in that there seems to have been on the part of Mr Bennett a clear understanding that what was given, or what was offered, was not the undertaking that was given before Greenwood J, but merely a personal guarantee, and that notwithstanding the terms of the letter of 22 January, the subsequent correspondence, and in particular exhibit TGH5 of Mr Hauff's affidavit, had the effect of muddying the clear offer contained in the letter of 22 January 2010. 27 I have had regard to what has been said on the question of costs. It seems to me that the general rule that costs should follow the event calls for modification in the circumstances of this case, and I will order that the respondent on the motion, the appellant in the appeals, have its costs of the motion as its costs in the appeals. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.