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[2022] FCA 1562
Federal Court of Australia
2022-12-22
Neaves JJ, Emmett J, Halley J
Original judgment source is linked above.
Introduction 1 By an interlocutory application dated 24 October 2022, the respondent, Mr Jay Koo Kim, seeks an order for security for costs against the appellant, Mr Seoung Jin Goo in the sum of $60,000. 2 The appellant is an undischarged bankrupt. He has filed a notice of appeal against a sequestration order made on 12 August 2022 by the primary judge in the Federal Circuit and Family Court of Australia (Division 2) against the estate of the appellant. 3 The application for security for costs is supported by an affidavit of Mr Stefan Psaltis, the solicitor for the respondent, sworn on 24 October 2022. Mr Psaltis annexes to his affidavit a copy of an estimate that he has made of the future costs that the respondent will incur in the appeal. His estimate is that the future costs of the respondent in the appeal would be $67,650. 4 The appellant relies on an affidavit that he swore on 22 November 2022 in opposition to the application for security for costs. The appellant annexes copies of correspondence between the parties' solicitors and draft submissions for the appeal that he intends to rely upon. 5 The principles governing an application for security for costs are well established and not in dispute. The Court has power pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) to make an order for the provision of security for costs and to stay proceedings until the security is provided. Rule 36.09 of the Federal Court Rules 2011 (Cth) also provides for applications for security for costs. The Court's discretion is unfettered but must be exercised judicially, and each case will depend on its particular circumstances: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, 3-4 (Sheppard, Morling and Neaves JJ). 6 The relevant considerations that are to be taken into account in a security for costs application were stated by Emmett J in Dye v Commonwealth Securities Ltd [2012] FCA 992 (Dye) at [26] to include the following matters: (a) the prospects of success for the appeals; (b) the risk that an order for costs will not be satisfied; (c) whether the making of an order for security would be oppressive insofar as it would stifle a reasonably arguable claim; (d) whether impecuniosity of an appellant arises out of the conduct that is the subject of complaint in the relevant proceeding; (e) whether there are any aspects of public interest that weigh in the balance against granting security; and (f) whether there are any other particular discretionary matters peculiar to the circumstances of the case. 7 The stultification of proceedings brought by an individual litigant is a relevant consideration weighing against an order requiring the provision of security for costs, but is not determinative, particularly in the context of an application for security for costs of an appeal: Moore v Macks [2007] FCA 509 at [20] (Mansfield J); Dye at [27]-[28] (Emmett J); Nyoni v Pharmacy Board of Australia [2018] FCA 1313 (Nyoni) at [22], [25] (White J). 8 In Dye, Emmett J provided the following explanation of the approach generally taken to applications for the security for costs of an appeal (at [27]): As a general rule, in relation to proceedings at first instance, impecuniosity, and even insolvency, does not mandate that an order for the provision of security for costs should be made. However, that principle does not necessarily apply in relation to an appeal, where the appellant has had the benefit of a decision of a court at first instance. An insolvent party will not be excluded from an appeal, but if he cannot find security, he may be prevented from taking his opponent from one court to another. The feature of an appeal that marks it out from a proceeding at first instance is that there has already been a decision given by the court that heard the matter at first instance. That is to say, the appellant has had his or her day in court and has had an opportunity to present his or her case, and has had a ruling that must be presumed to be correct. Security may not necessarily be ordered if an appeal is brought in good faith and raises substantial questions of law. However, the position will be different where the appeal turns largely on questions of fact and it does not give rise to any important question of law. 9 The prospects of success may be particularly relevant to an application for security for the costs of an appeal: McCardle v Lyons [2019] FCA 1554 (McCardle) at [37] (Wheelahan J) citing Singh v Secretary, Department of Employment and Workplace Relations [2007] FCA 90 at [12] (Sundberg J). 10 In Nyoni, the Court ordered a bankrupt appellant to provide security for costs where it determined that it should proceed on the basis that it was not able to conclude that the appeal had no prospects of success, nor that the appeal had strong prospects of success (at [19]), and it was satisfied that an order for security would stultify the appeal (at [21]). The Court concluded that an order for security for costs was appropriate given the "present uncertainty" concerning the appellant's prospects of success on the appeal, the fact that it could not be satisfied that the appellant's impecuniosity was attributable to the respondents and the extent to which the appellant had brought proceedings in the Courts in an unmeritorious way and seemingly without satisfying adverse costs orders made against him (at [39]). 11 Security for costs have also been ordered against impecunious appellants in circumstances where the Court has concluded that the grounds of appeal are little more than a re-ventilation of matters that have been raised before a primary judge and already decided: Beames v Rigby [2002] FCA 1095 at [4] (Dowsett J); Mead v Mead [2010] FCA 288 at [10] (Jacobson J). 12 In McCardle, the Court declined to order that a bankrupt appellant provide security for costs for an application for leave to appeal even in the absence of any direct evidence that an order for security for costs would stultify the appeal (at [45]). The Court did not accept that the prospects for success of an appeal were poor and was satisfied that the primary judge had not properly considered evidence on which the appellant had relied (at [38]). The view that the Court took of the merits of the appeal and the fact that the appellant did not have a hearing of her claim in the Federal Circuit Court because the primary judge dismissed the proceedings upon an application by the respondents for summary judgment, ultimately outweighed any countervailing considerations (at [45]). 13 In Allison v Murphy [2021] FCA 1551 (Downes J), the Court dismissed an application for security for costs against a bankrupt appellant where it was satisfied that there was a real risk that the proceedings would be stultified (at [27]), it did not accept the respondent's submission that the appellant's prospects for success were "hopeless" (at [32] and it considered that there was at least a reasonable prospect that an absence of evidence finding by the primary judge was an error (at [34]) and a ground of appeal raised a substantive point of law (at [36]).
Submissions 14 The respondent submits that: (a) the appellant has very limited prospects of success on the appeal; (b) there is no possibility of any costs order in favour of the respondent being satisfied because the appellant is a bankrupt; (c) the Court should not conclude that the provision of security would stifle the appeal because the appellant is otherwise in a positon to agitate the appeal and the appellant has submitted that he would be able to meet any costs order; (d) the respondent did not cause the appellant's impecuniosity; and (e) the public interest does not favour giving litigants multiple opportunities to continue litigating and exposing other parties to incurring costs in circumstances where there is no or little prospect of recovering those costs if those parties are successful. 15 The appellant submits that by reason of his bankruptcy, he has no ability to provide any substantive security for costs and therefore an order that he provide security for costs would stultify the appeal. The appellant submits that: (a) he faces the risk of bankruptcy again if he is unsuccessful on the appeal; (b) the ground of appeal is very narrow and the matter could be determined on the papers; (c) the appeal has good prospects because it deals with principles that have received support in relevant authorities; (d) the primary judge did not directly address the issue in his reasons for judgment; and (e) the issue raised in the appeal has not previously been squarely addressed and to the extent that there is a lacuna in the authorities, the public interest weighs against the provision of security if an order for security would otherwise stultify the appeal.
Consideration 16 I am satisfied given the appellant's bankruptcy and his current financial position, as disclosed in his affidavit sworn on 22 November 2022, that: (a) there is a significant risk that an order for costs against the appellant would not be satisfied; and (b) an order for the appellant to provide security for costs would likely stultify the appeal. 17 I am not prepared to draw any inference from the fact that the appellant is legally represented, that he would be able to provide an amount by way of security that would be sufficient to meet any adverse costs order. 18 Further, it was not suggested by the appellant that his impecuniosity was caused by the respondent. 19 The principal questions that remain to be addressed, before weighing the competing considerations, are the prospects of success of the appeal and whether there are any public interest factors that might weigh against a grant of security. 20 The principal ground of appeal in the notice of appeal is expressed in the following terms: 3. The Court erred in giving no consideration or, alternatively, insufficient consideration, including par [68] of the Reasons, to the submission of the Respondent, noted at par [57] (sub par 58) of the Reasons, summarised as: "There are circumstances in which there is a "stay of a judgment" when the execution creditor is, for some reason, not in a position to issue execution upon his judgment. As a result of the order for specific performance being under the control of the Court, there was an effective stay of the applicant's rights to issue a Bankruptcy Notice (see s. 41(3)(b) of the Act). As a result, the Bankruptcy notice could not be issued and there was no act of Bankruptcy. If there is no act of Bankruptcy, the Petition should be dismissed." 21 The submission reproduced in ground 3 was directed at an "effective" stay by reason of an election by a creditor and a subsequent order of the Court. I am satisfied that this was not an issue that the primary judge specifically addressed in his reasons for judgment. 22 The appellant, by his counsel Mr Macdonald, advances the following propositions in support of the appeal in a draft outline of submissions for the appeal annexed to the appellant's affidavit: 9. It is a general principle concerning orders for specific performance that once such an order has been made, the contractual rights of the parties are not superseded but their future exercise is under the control of the court, so that the working out of the order for specific performance is under the court's control. Where an order for specific performance is not complied with by a one party, the other party may either apply to the court for enforcement of the order, or apply to dissolve the order and ask the court to put an end to the contract. Where an order for specific performance has been made, the rights and obligations of the parties come under the control of the court, and the working out of the order of specific performance is under the control of the court; (see Georges & anor v Peter Wieland & ors [2010] NSWSC 1378 at [25]). 10. In a number of circumstances, execution of a judgment may be deemed to be stayed even where there is no express order of a court staying execution. Execution is deemed to have been stayed where a judgment creditor is not "in a position to issue immediate execution upon it"; (see Jagatramka v Coeclerici Asia (PTE) Limited (No.2) [2015] FCCA 2743) at [23]). 23 I am satisfied that the proposition that an election to seek an order for specific performance places the "working out" of that order under the control of the Court and therefore has the effect of staying execution because the judgment creditor is not in "a position to issue immediate execution upon it" is a novel proposition. 24 I am also satisfied that, at least in some circumstances, execution of a judgment may be deemed to have been stayed if a creditor is not able to issue immediate execution upon it. 25 Hence, while it might be a novel proposition, it is best characterised as a novel application of an established principle. It raises a substantive and important point of law that was raised before the primary judge but not specifically addressed by the primary judge in his reasons for judgment. It cannot be dismissed as "hopeless" or a "re-ventilation" of matters raised and determined by the primary judge. As counsel for the respondent submitted in support of the amount that the respondent sought by way of security for costs, one might take the preliminary view that "It's a bad point", "it's novel" or "there's no prospects of success" but converting those initial thoughts into a set of submissions is very different and "there is a lot of work in doing that". I am satisfied that there is a "lot of work in doing that" because the point of law that is raised raises significant and substantive issues for consideration that have a broad application and relevance to bankruptcy law, in particular, the circumstances in which execution by a judgment creditor may be deemed to be stayed in the absence of an express order to that effect. 26 I am satisfied that the appeal raises a reasonably arguable ground of appeal and that there is a public interest in its determination. 27 In all the circumstances, and after weighing the competing considerations, I have concluded that no order for security for the costs of the appeal should be made against the appellant. I have reached that conclusion principally because an order for security for costs would likely stifle the appeal, the appeal raises a reasonably arguable and discrete substantive point of law and it is in the public interest that the issue be determined. 28 Given my conclusion that no order for security for costs of the appeal should be made, the question of the quantum of the security sought by the respondents does not arise.
Disposition 29 The interlocutory application seeking security for costs of the appeal is to be dismissed. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.
Goo
Kim