Hardingham v RP Data Pty Limited

THE SECURITY FOR COSTS APPLICATIONS 4 On 3 April 2020 RP Data and REA each filed an interlocutory application seeking security for their costs of the appeal to the Full Court, pursuant to rule 36.09 of the Federal Court Rules 2011 (Cth). RP Data seeks security of $80,000, and REA seeks security of $40,000. In support of its application RP Data relies upon the affidavit of Dale Francis Cliff, a Partner at Mills Oakley, the solicitors for RP Data. REA relies upon the affidavit of Katherine Louise Hay, a Partner at Corrs Chambers Westgarth, the solicitors for REA. 5 The appellants rely on the affidavit of Mr Hardingham affirmed on 22 May 2020. In summary, Mr Hardingham deposes to his impecuniosity, which is not in dispute. Mr Hardingham further deposes that: [16] I have been told by my clients that it is unlikely they will be engaging the services of [REMA] on the same or similar level [sic] to previous years as a result of the COVID-19 pandemic, as the Government has placed restrictions on the real estate industry and marketing campaigns. As a result, there was an immediate effect on the business of REM, with a significant downturn in business, which is still continuing. I am considering whether or not to liquidate [REMA] as it does not appear to be a viable enterprise as at the date of swearing this affidavit. … [24] A funder was responsible for the legal fees incurred by [REMA] and myself for [the first instance] proceedings, including Mr Cobden SC, Mr Sleight and Neville Hourn + Borg Legal. Indemnity for my own legal fees was the extent of agreement for funding. [25] In respect of the legal fees to be incurred in the appeal proceedings, Neville Hourn + Borg Legal, Mr Richard Cobden SC and Mr James Sleight have agreed to undertake the appeal proceedings on a speculative basis. Neither [REMA] or I have the benefit of any funding for the appeal. [26] If an order for a stay of the costs orders is refused, [REMA] has no assets or means of raising funds to carry out those orders, [REMA] would be insolvent and I would have no alternative but to place [REMA] in liquidation. Further, if such a cost order was enforced against myself, I would have no alternative but to apply for bankruptcy. If an order for a stay is refused, it would have the effect of preventing [REMA] and I from prosecuting these proceedings as neither it nor I would be able to carry out the costs orders. 6 RP Data and REA submit that they are entitled to security for costs given the impecuniosity of the appellants. They contend that to the extent the appellants have an arguable appeal, their prospects of success in the appeal should be characterised as weak. They submit that the appellants brought the claim below, lost that claim and now insist on appealing, and therefore cannot be characterised as a party that is seeking to preserve a position that may well be open, citing John Caines Management Pty Ltd v Adrenalin International Powersports Pty Ltd [2004] FCA 747 at [22]. Additionally, the respondents succeeded at first instance and should not be required to participate in further litigation without a level of costs protection. They further submit that Mr Hardingham did not go far enough in his affidavit to give evidence that the appeal would be stultified if security is ordered; and that if a security order is not met by the appellants that would not have the effect of stultifying the appeal but is rather merely the consequence of the statutory provisions relating to security for costs. 7 The appellants accept that they are impecunious, and that the reason for their impecuniosity cannot be said to arise from the conduct of the respondents but is rather attributed to the loss of business caused as a result of the COVID-19 pandemic and associated restrictions. The appellants submit that the appeal will be stultified if security is granted. They submit that any financial prejudice to be suffered by the respondents if security is not granted should be viewed in the context of the respondents' overall financial standing, and weighed against the prejudice that will be suffered by the appellants if security is granted and they are unable to prosecute the appeal. They contend that it would be oppressive to allow large corporate respondents, with market capitalisation in the billions, to obtain security from an individual and a small corporation in circumstances where the appellants have an argument with potential merit and the quantum of the respondents' costs will be relatively insignificant for the respondents, citing Pioneer Park Pty Ltd v Australia and New Zealand Banking Group Limited [2007] NSWCA 344 at [56].

RELEVANT PRINCIPLES 8 The Court's discretion to require the provision of security for costs rises from s 56 of the Federal Court of Australia Act 1976 (Cth). It is broad and unfettered. The factors informing the exercise of the discretion cannot be stated exhaustively. The only limitation is that the discretion be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCAFC 29; 2 FCR 1 at 3. Some of the relevant principles in considering whether to grant security for costs in appeal proceedings were summarised by Emmett J in Dye v Commonwealth Securities Limited [2012] FCA 992: [26] … The relevant considerations include, at least, 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; (f) whether there are any other particular discretionary matters peculiar to the circumstances of the case. 9 Furthermore, the purpose of the discretion to order costs on appeal is protective, to ensure that a respondent is not unreasonably exposed to a risk that if the respondent is successful in defending the claim the respondent will nevertheless be deprived of the benefit of a costs order because of the appellant's impecuniosity. Whilst courts are reluctant to order that an impecunious applicant, being a natural person, provide security where the effect would be to stifle that person's access to the courts, where such a person has already obtained access to a court and has received a decision dismissing the claim, the position is different. That is because at the appellant level, there has already been a determination adverse to the person against whom security for costs is sought: see Tran v The Commonwealth [2009] FCA 921 at [3] - [6]; Frigger v Kitay [2019] FCA 624 at [35] and the authorities cited there.

CONSIDERATION 10 There is no dispute that the impecuniosity of REMA and Mr Hardingham is such that there is a real risk that in the event that they fail in their appeal the respondents will not recover their costs of the appeal. Nevertheless, I do not consider that in the circumstances of this case it is appropriate to order that the appellants give security for the respondents' costs. 11 First, in my view the appellants have a sufficiently arguable case on appeal to warrant permitting it to proceed. It is not possible or appropriate in a security for costs application to reach any firm view as to the prospects of success on appeal, beyond a general consideration of the reasons for the decision of the primary judge and the formation of a general overview: Chapman v Luminis Pty Ltd [2002] FCA 496 at [17]; see also, by analogy Jackamarra v Krakouer [1988] HCA 27; 195 CLR 516 at [9]. 12 The appellants' case before the primary judge, as summarised in the primary judgment at [24], was that REMA had licenced its photographs and floor plans to agencies for the purpose of those works being used for the marketing of the properties depicted in discharge of each agency's retainer to sell market the property for sale or lease on behalf of the owner. The licence included an implied term that the agencies were able to grant a sub-licence for marketing the properties for sale or lease, but that implied licence did not extend to the use of the photographs and floor plans after the sale or lease of the property had been completed. 13 The primary judge rejected that argument. He made a number of relevant factual findings, and then concluded: [78] The objective circumstances in relation to the twenty transactions the subject of the separate question, each of which occurred after 9 April 2014, are such that: (1) it is to be inferred from the conduct of the applicants and the agencies, including their course of dealings; (2) alternatively, it should be implied into the agreements between the applicants and the agencies, in order to give business efficacy to those agreements, that the applicants agreed that the agencies were authorised, by way of licence from the applicants, to upload the photographs and floor plans to the realestate.com.au platform and grant to REA a licence in the form required by REA and contained in REA's usual terms and conditions. 14 REA's usual terms and conditions included the grant of a broad "irrevocable, perpetual, world-wide, royalty free licence to publish, copy, licence to other persons, use and adapt for any purpose related to our business any content you provide to us during the Tem, and this licence survives termination of this Agreement by you or us". The evidence before the primary judge demonstrated that property listings, including the photographs and floor plans attached to those listings, continued to be made available in relation to historical sale and lease transactions. Pursuant to the broad licence, REA sub-licenced photographs and floor plans to third parties including RP Data, and RP Data made those photographs and floor plans available in relation to both current and historical listings. Real estate agencies were required to agree to REA's usual terms and conditions, including this broad licence, before they could upload images to the realestate.com.au platform, and in a practical sense they were unable to negotiate out of those terms and conditions, including the broad licence: primary judgment at [59], [66]. 15 In grounds 3 to 5 of their Notice of Appeal the appellants contend that the primary judge erred in making the implication that he did at [78]. First, they submit that the primary judge failed to identify whether the implication was one made in law or in fact. Secondly, they submit that his Honour was precluded from making an implication in fact. The basis for this contention is that there was no evidence before his Honour from any of the real estate agents who had commissioned the appellants, including no evidence as to whether any agents had in fact read REA's terms and conditions. Rather, the factual bases for the implication made by the primary judge were: that "virtually every real estate agent in Australia had entered into an agreement with REA, in a form required by REA and amended by REA from time-to-time"; and that fact must have been known to someone in the position of the appellants, Mr Hardingham in particular, and was expressly made known to them following a response to a letter of demand issued by the appellants in 2014: primary judgment [67] and [71]. Thirdly, the appellants submit that in truth the term implied by the Court was a term implied by law. They contend that the term implied by the primary judge requires a photographer such as Mr Hardingham to adopt REA's terms and conditions into the terms of his or her own licence with a real estate agent, even though REA (and its sub-licencees, including RP Data) is a stranger to its contract. As the primary judge accepted at [77], the agencies could not in a practical sense negotiate out of REA's terms and conditions. The appellants submit that, by extension, photographers are similarly unable to negotiate out of REA's usual terms and conditions. Accordingly, the appellants contend that the term implied by the primary judge is one implied in law into all contracts between photographers and real estate agents in Australia, and given REA's position as a monopolist or near-monopolist, if the implication is one in law it will affect a large class of agreements. 16 As a further ground, in ground 6 the appellants also contend that if the primary judge was correct to imply the term in fact rather than in law, then the primary judge erred in finding that a licence to RP Data could be implied in fact in the absence of direct evidence from the agents. 17 The respondents accept that the appellants have prospects in the appeal, but submit that those prospects are "low". 18 At a broad impressionistic level, in my view the grounds advanced are reasonably arguable, and raise a potentially important point in circumstances where, as the primary judge found at [59], the overwhelming majority of Australian real estate agencies use REA's platform. Although the case before the primary judge was conducted on the basis of transactions relating to 20 sample properties, and each of those sample transactions occurred after 9 April 2014 when the appellants had become aware of REA's usual terms and conditions, the findings could have broader implications. 19 Secondly, in the event that security for costs is ordered the appellants will be in no position to conduct the appeal. In this regard, I reject the submission advanced by the respondents to the effect that Mr Hardingham's evidence does not sufficiently address the likelihood that the litigation is likely to be stultified. I consider the statements in [26] of his affidavit sufficiently clear to address the point. Stultification will be a natural consequence of placing REMA in liquidation and Mr Hardingham applying for bankruptcy, and Mr Hardingham deposes those events will occur if security for costs is ordered. I regard as remote, having regard to the nature of the appellants' business, the prospect that their creditors might stand behind and fund the proceedings, in contrast to the position considered recently by Allsop CJ in All Class Insurance Brokers Pty Ltd (in liquidation) v Chubb Insurance Australia Limited [2020] FCA 840 at [52]. 20 Thirdly, in my view the fact that that the current COVID-19 pandemic has partly led to the impecuniosity of the appellants might be regarded as a factor that tends slightly against an order for security for costs, although that is a minor point. 21 Fourthly, in Pioneer Park the New South Wales Court of Appeal said (Basten JA, Tobias and McColl JJA) agreeing said: [56] It may be that a court will be more sympathetic to an application from a respondent with limited funds than a respondent which is a major corporation: see Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1992) 57 SASR 180 at 186 (King CJ) and Irwin Alsop Services v Mercantile Mutual Insurance Co Ltd [1986] VR 61 at 65 (Ormiston J), referred to by McClellan CJ at CL in Jazabas Pty Ltd v Haddad [2007] NSWCA 291 at [76]. Nevertheless, as implied by Brooking J in Prime Forme Cutting Pty Ltd v Baltica General Insurance Co (1989) 8 ACLC 29 at 32-33, large corporate defendants should not be seen as standing "outside the policy of the security for costs provisions". However, to accept that they do not, does not in turn require the Court to ignore the fact that they "stand in no special need of care and protection", as Brooking J expressed the point. Thus, it might be seen as oppressive to allow a large corporate defendant to obtain an order for security for costs which would be likely to stifle the litigation in circumstances where it could be seen that the claim had potential merit and that the quantum of costs would in any event be a relatively insignificant amount for the corporate defendant, though beyond the capacity of the corporate plaintiff to pay. To order security in such circumstances may constitute a form of "oppression". 22 RP Data is a wholly owned subsidiary of CoreLogic Inc which is listed on the New York Stock Exchange with a market capitalisation of US$7.7 billion, and REA is a wholly owned subsidiary of REA Group Pty Ltd, which is listed on the Australian Stock Exchange with a market capitalisation of about AU$14 billion. In my view the penultimate sentence of the above passage from Pioneer Park has relevance in the present case.

DISPOSITION 23 I will make the following orders: (1) The interlocutory application filed by the first respondent on 3 April 2020 and the interlocutory application filed by the second respondent on 3 April 2020 be dismissed. (2) The respondents pay the appellants' costs of the interlocutory applications referred to in order 1. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley.