Freeman v National Australia Bank Limited

REASONS FOR JUDGMENT 1 This is an application for security for costs made by the National Australia Bank in relation to an appeal by Mr Freeman from a judgment of Dowsett J given on 6 February 2004 dismissing Mr Freeman's application to have his bankruptcy annulled. 2 There is power for the Court to make an order for security for costs conferred by s 56 of the Federal Court of Australia Act 1976 (Cth) ("the Act"). In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, a judgment of the Full Court (Sheppard, Morling and Neaves JJ), the Full Court said at 3: '[The Federal Court Rules] cannot operate so as to limit the wide power conferred by s. 56 itself. The discretion to make orders under s. 56 must be exercised judicially, but that is the only relevant limitation.' Their Honours also noted at 3 that: 'Moreover, it is plain from the terms of O. 28 itself that r. 3 is not intended to be an exhaustive statement of the cases in which an order for security for costs can be made.' 3 It is relevant to note that the Full Court in that case dismissed an appeal from a decision of a judge of the Court ordering that the appellant provide security for costs of proceedings at first instance brought by it against the respondent for damages for alleged breaches of certain provisions of the Trade Practices Act 1974 (Cth). The present application concerns security for costs of an appeal. 4 Mr Freeman, it is conceded, is impecunious. It is necessary to have particular regard, in the application of the discretion conferred by s 56 of the Act, to O 52 r 20 of the Federal Court Rules, which provides specifically: 'Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required.' 5 As Hill J noted of O 52 r 20 in his extempore reasons for judgment in Bates v Omareef Pty Ltd & Ors [1998] FCA 536 ("Bates"), given on 4 May 1998: '… although the Court has a jurisdiction to order costs in an appeal which jurisdiction is conferred upon it by statute, there is no presumption that a costs order will be made for security. Indeed, quite to the contrary, a costs 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. His Honour continued: 'As Burchett J said in Paton v Campbell Capital Limited, (unreported 1 July 1993) the wording of Order 52, r 20 places what his Honour referred to as "something of an onus" to demonstrate that security should be provided.' 6 In Bates, Hill J declined to order security for costs. He acknowledged that: 'It is fair to say that the appeal involves no question of legal principle.' However, his Honour was of the view that the matter complained of was of a kind which it is not in the public interest to stifle. The matter complained of was an allegation that the judge hearing the matter at first instance displayed either actual or apparent bias in the conduct of the case. As his Honour noted: 'Put in another way, the issue involved is an issue of seriousness to the administration of justice.' In that context his Honour declined to make an order for security for costs. 7 As to the quantum that had been sought, his Honour's remarks have, it seems to me, some resonance in the present case. His Honour said: 'In this connection it might be noted that in affidavit evidence it is suggested that the costs of the appeal would, including solicitors and clients, amount to $54,875, working on the assumption that the appeal would take no more than one day. I do not propose to say anything about the estimate that is made other than it seems to me, having regard to the one issue with which the Notice of Appeal deals, namely that of bias, that if the costs were to amount to the figures shown a question of misconduct might arise. Mr Bates relies particularly on the fact that if security is awarded against him, he will forever be shut out of his right to appeal. That is, of course, a matter that warrants consideration and is reflected by Order 52 r 20.' 8 Absent O 52 r 20, the position concerning appeals is, I think, properly described in the observations of Bowen LJ, in Cowell v Taylor (1885) 31 Ch D 34, where his Lordship 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.' 9 The effect of O 52 r 20 is that, absent circumstances suggesting an exercise of discretion to order security for costs, an unsuccessful litigant can drag his opponent at least to the Appeal Court without having to provide security. 10 In my judgment there is no question of legal principle involved in the appeal from the judgment of Dowsett J. The grounds on which that decision is challenged are really directed to the exercise of the discretion in the circumstances as Mr Freeman contends they ought to have been judged, but no question of legal principle seems to be involved, nor is there an issue of the kind referred to by Hill J in Bates involved in this case. 11 As the submissions by Mr Freeman on his own behalf before me today confirm, what he is seeking to do is to demonstrate what he has been unsuccessful in demonstrating thus far in many proceedings, namely that the decisions in favour of the National Australia Bank from the time of the first trial before Ambrose J and in successive proceedings, have been erroneously determined in favour of the bank and adversely to Mr Freeman. In various detailed submissions, Mr Freeman argues that the National Australia Bank has behaved in a way that was deprecated by the APRA report, and has conducted itself in the corporate culture berated by that report. Further, that various findings at first instance, and on appeal, and on applications for special leave have been tainted by a failure to appreciate the significance of the APRA report in demonstrating the correctness of the submissions made by Mr Freeman which were not favourably received by the various Courts. 12 One of the major reasons for my decision that this is a case where I ought to order security for costs is that this is not simply an appeal from a judgment exercising at first instance a discretion adverse to an appellant. This present appeal has to be seen in the context of the extensive litigation that has occurred between Mr Freeman and the National Australia Bank. A document called "Relevant Chronology", filed on behalf of the bank, sets out the litigation history preceding the present appeal. '25, 28 Sept 2000 Supreme Court Proceedings No 4013 of 1995 issued by the National Australia Bank ("the Bank") against Lynton Noel Charles Freeman ("Mr Freeman") for recovery of possession of mortgaged land and for a debt owed to the Bank under an expired bank facility, heard in the Supreme Court before Ambrose J "the Supreme Court Proceedings"). 11 Oct 2000 Ambrose J gave judgment in the Supreme Court Proceedings in favour of the Bank for recovery of possession of Mr Freeman's property and for the sum of $1,427,890.08 together with indemnity costs ("the Judgment") [2000] QSC 295. Feb 2001 Subsequently the Bank sold the property through receivers appointed by it, and petitioned for Mr Freeman's bankruptcy. The Creditor's Petition based on the unsatisfied return of an enforcement warrant in February 2001, pursuant to the Judgment, was opposed by Mr Freeman ("the Bankruptcy Proceedings"). 31 Aug 2001 Appeal of the Judgment by Mr Freeman heard by the Court of Appeal ("the First Appeal"). Decision reserved. 10 Dec 2001 Mr Freeman's notice of motion seeking a review of a decision of Registrar Baldwin refusing discovery in the Bankruptcy Proceedings heard in the Federal Court by Spender J. Mr Freeman's request for disclosure by the Bank of documents in the Bankruptcy Proceedings refused and costs ordered against Mr Freeman National Australia Bank v Freeman [2001] FCA 1783. 02 Nov 2001 The First Appeal dismissed with costs against Mr Freeman National Australia Bank v Freeman [2001] QCA 473. 28 Feb 2002 The contested Bankruptcy Proceedings heard before Spender J in the Federal Court. Decision reserved. 14 Mar 2002 Spender J in Federal Court makes a sequestration order against the estate of Mr Freeman - short stay granted ("the Sequestration Order") National Australia Bank v Freeman [2002] FCA 244. 02 April 2002 Mr Freeman files an appeal against the making of the Sequestration Order in the Bankruptcy Proceedings ("the Appeal of the Sequestration Order"). 9 April 2002 Spender J makes a further stay order in respect of the Appeal of the Sequestration Order until the full Federal Court determination of the Appeal of the Sequestration Order. 7 May 2002 Muir J in Supreme Court dismisses summary judgment application by the Bank in Supreme Court proceedings S.2339 of 2002 issued by Mr Freeman against the Bank, for compensation for alleged loss and damage arising from breaches of duties and sale of mortgaged property at under value in the sum of $7,081,653.00 (the Proceedings against the Bank"). 14 March 2003 Special leave application to the High Court by Mr Freeman in relation to the Judgment refused with costs Freeman v National Australia Bank Ltd B96/2001 14 March 2003. 28 Aug 2003 Full Federal Court orders that the Bankrupt's Appeal of the Sequestration Order be dismissed with costs Freeman v National Australia Bank Ltd [2003] FCAFC. 29 August 2003 Mr Freeman files application to set aside Judgment in Supreme Court ("Further Appeal"). 22 Sept 2003 Proceedings against the Bank abandoned by the Trustee. 15 Oct 2003 The Further Appeal dismissed with costs against Mr Freeman. 31 Oct 2003 Bankrupt's application to review the decision of the trustee to abandon the Proceedings against the Bank dismissed by Spender J in the Federal Court Freeman v National Australia Bank Ltd [2003] FCA 1233. 6 Feb 2004 Application to annul bankruptcy by Mr Freeman dismissed by Dowsett J ("the Annulment Application") Freeman v National Australia Bank Ltd [2004] FCA 103. 27 Feb 2004 Mr Freeman files a Notice of Appeal of the decision of Dowsett J of 6 February 2004 ("the Current Appeal"). April 2004 The Bank files an application for security for costs of the Current Appeal ("the Application").' 13 As that chronology shows, there has been a judgment in the Supreme Court at first instance, an appeal to the Court of Appeal, and an unsuccessful application for special leave. There has been a sequestration order granted by the Federal Court based on that judgment, an unsuccessful appeal to the Full Court of the Federal Court, and subsequently, the application to annul the bankruptcy, which is the judgment the subject of this appeal. It is, in my view, accurate to say that the thrust of Mr Freeman's complaints are directed to challenging the correctness of findings and conclusions made in that litigation against him and in favour of the National Australia Bank, and that the appeal from the judgment of Dowsett J is an attempt, in substance, Mr Freeman would say, to achieve justice ultimately. 14 That attempt is to be judged against the fact that the issues which he seeks to challenge have been adversely determined against him, and that his appeal rights in respect of those matters have been exhausted. It is relevant that there are ten costs orders against Mr Freeman in favour of the National Australia Bank which are unsatisfied, and there is no prospect that if his appeal is unsuccessful, the costs which the bank would have to expend in resisting that appeal will be recoverable. 15 While the factual circumstances are different, this seems to me to be very much of the same flavour as the litigation that was considered by Rich J in King v The Commercial Bank of Australia Limited (1920) 28 CLR 289. The factual circumstances, of course, are different, but his Honour said, at 294: 'In the circumstances I consider that the applicant - an impecunious litigant - having had the benefit of a decision of the Full Court of Victoria, is, in the words of the judgments in Swain v. Follows 18 Q.B.D., 585, at pp. 587-588, indulging in the luxury of an appeal to this Court and is dragging the respondent from one Court to another while engaged in another appeal to the Full Court of the State of Victoria against the same respondent in respect of a matter arising out of the same transaction, and that after lengthy and costly litigation.' 16 The determination exhibited by Mr Freeman is not a matter about which any adverse comment should be made, but in the view I take about the matter, he is not to be permitted, without sanction, to make a further attempt against the National Australia Bank which, if unsuccessful, is going to result in further unrecoverable costs incurred by the bank. It seems to me in all the circumstances just, that he should not have a "free hit", so to speak, and that at least $5,000 by way of security should be given, to provide some security in the event that his proposed appeal is unsuccessful. 17 Security for costs is never intended to be a full indemnity for the costs that might be expended. Whether to order security, and the amount of the security for costs ordered, are in the discretion of the Court and to be judged in the circumstances of the case. 18 I share the disquiet as to the quantum claimed in this matter that was expressed of a similar amount by Hill J in Bates. It is an uncomplicated appeal, it seems to me, as a matter of principle. I acknowledge that $5,000 is nowhere near what might be the likely costs of the appeal. Nonetheless, it provides a test of the bona fides of the appellant and provides some amount against which the costs expended might be able to be secured in the event that Mr Freeman's appeal is unsuccessful. 19 The order of the Court is that unless security is provided in the sum of $5,000 to the satisfaction of the Registrar by 4.00 pm on Friday 21 May 2004, the appeal be stayed.