REASONS FOR JUDGMENT
1 Before the court is an application for security for costs by the second respondent, Commonwealth Bank of Australia ("the Bank"), in a proceeding in which the applicant, Dennis Maher, challenges a sequestration order made in relation to his estate by Phipps FM on 15 August 2008: Commonwealth Bank of Australia v Maher [2008] FMCA 1280. The first respondent, the Official Trustee in Bankruptcy ("the Trustee") has taken no part in the application for security, and will abide the outcome.
2 In the proceeding itself, which was commenced on 6 July 2011, the applicant relies upon ss 30 and 153B of the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act"). As to s 30, the applicant says that a question has arisen in his bankruptcy "as to the effect, if any, upon the commercial efficacy of administering an estate where one joint owner of a judgment has been a non-juristic entity at all times in the proceeding and this fact was known or ought to have been known to the [Trustee] at all times in the proceedings". As to s 153B, the applicant applies for the annulment of his bankruptcy.
3 The application for security was made by the Bank on 2 November 2012, since when the applicant has been discharged from his bankruptcy pursuant to s 149(4) of the Bankruptcy Act. As pointed out by counsel for the Bank, that event makes the applicant's invocation of s 30 moot. It does not, however, affect his standing to apply for the annulment of his bankruptcy: Re Oates (1987) 17 FCR 402.
4 The application for security is made pursuant to r 19.01 of the Federal Court Rules 2011 (Cth), subr (3) of which provides as follows:
(3) The respondent's affidavit should state the following:
(a) whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered;
(b) whether the applicant is ordinarily resident outside Australia;
(c) whether the applicant is suing for someone else's benefit;
(d) whether the applicant is impecunious;
(e) any other relevant matter.
In the present matter, it is common ground that the circumstances referred to in paras (a) and (d) of this subrule exist in relation to the applicant.
5 "The purpose in ordering security for costs is to provide protection to a party brought into litigation by a party who is unable to meet the costs of that other party, should the litigation be unsuccessful": Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 264 at [4]. It seems clear beyond argument that the applicant, if unsuccessful in this proceeding, would be unable to pay the Bank's costs. However, normally a court would be reluctant to order an individual applicant to provide security, if the effect would be to stultify his or her access to justice: Barton v Minister for Foreign Affairs (1984) 2 FLR 463, 469; and see the Federal Court authorities collected by Heydon JA in Melville v Craig Nowlan and Associates Pty Ltd (2002) 54 NSWLR 82, 102 - 106 [84]-[94]. But this consideration is a discretionary one, rather than an absolute bar to the provision of security: Ninan v St George Bank Ltd (2012) 294 ALR 190, 197 - 198 [28]-[31]. One conventional instance in which the voice with which the consideration speaks is muted is where the individual appeals from a judgment at first instance which has gone against him or her: Cowell v Taylor (1885) 31 Ch D 34, 38. The policy consideration which informs that practice is that, prima facie at least, the need for the individual to have access to justice will have been satisfied by the hearing at first instance, and that the successful respondent would, therefore, have a stronger claim for security on the appeal: Ng v Van Der Velde [2010] FCA 89 at [28].
6 The present proceeding is not an appeal, but the background facts are such as to provide strong justification for the taking of an analogous approach. I should commence by referring to this relevant background.
7 The applicant has a long history of litigation both in this court and in the Federal Magistrates Court. He commenced a proceeding in this court in 2001, claiming that, among other things, the Bank unlawfully interfered with his possession of premises at 384 Spencer Street, Melbourne and was wrongly proposing to sell those premises in its capacity as mortgagee. This was VID 204 of 2001 in the files of the court, and I shall refer to it as "the Spencer St proceeding". In addition to the Bank, the respondents were Greg Firth, a staff member of the Bank, "Gray & Johnson (A Firm)", the Registrar of Titles (Vic) and the Trustee. The applicant's claim was dismissed as hopeless by Finkelstein J on 26 September 2001, but that decision was reversed on appeal, the Full Court remitting the matter to his Honour for further hearing: Maher v Commonwealth Banking Corporation [2002] FCAFC 104.
8 On 2 February 2004, the Spencer St proceeding came on for hearing. The applicant did not appear, and Finkelstein J dismissed the action with costs. On 5 February 2004, his Honour upheld a cross-claim by the Bank, with the result that judgment was entered against the applicant for possession of the property at 384 Spencer Street.
9 The applicant subsequently applied to have the orders made by Finkelstein J on 2 and 5 February 2004 set aside. On 16 March 2004, Finkelstein J set aside his orders of 2 February 2004 on the condition that the applicant pay the sum of $2,000 to the Bank, to Mr Firth and to Gray & Johnson, and the sum of $450 to the Trustee, on account of costs thrown away, by 4:00 pm on 13 April 2004. His Honour refused to set aside his orders of 5 February 2004 on the basis that the applicant had no defence to the Bank's claim for possession: Maher v Commonwealth Bank of Australia [2004] FCA 248. The applicant did not pay the sums ordered and the orders made by Finkelstein J on 2 February 2004 remained extant.
10 On 9 February 2005, the respondents obtained an order for costs from a Registrar of the court. That order was based on certificates of taxation issued on 4 November 2004 with respect to the costs covered by the orders made by Finkelstein J on 26 September 2001, and on 2 and 5 February 2004. Pursuant to a notice of motion filed by the applicant, Finkelstein J set aside the order of 9 February 2005, and the certificates of taxation upon which it was based, on 26 July 2005. However, the costs orders made by his Honour on 2 and 5 February 2004 were not set aside, and, on 9 June 2006, a certificate of taxation issued in relation to the costs covered by those orders. On 24 July 2006, a Registrar of the court ordered the applicant to pay the sums specified in that certificate to the respondents. On 14 February 2007, I refused two motions by the applicant to set aside the order of 24 July 2006 and the certificate of taxation upon which it was based on the ground that the orders made by Finkelstein J on 26 July 2005 had not been entered until 20 September 2006: Maher v Commonwealth Bank of Australia & Ors [2007] FCA 113. On 20 April 2007, Tracey J refused the applicant leave to appeal from my decision: Maher v Commonwealth Bank of Australia & Ors [2007] FCA 560.
11 In the midst of these events, the Bank, Mr Firth and Gray & Johnson had jointly served a bankruptcy notice on the applicant, relying on the costs order made by the Registrar on 9 February 2005. Presumably due to the setting aside of that order, that bankruptcy notice was set aside by McInnis FM with the consent of the parties on 28 July 2005: Maher v CBA & Ors [2005] FMCA 1097. The federal magistrate also ordered the applicant to pay the respondents' costs of two previous adjournments caused by him, fixed in the sum of $2,000. On 11 July 2006, Marshall J dismissed an appeal by the applicant with respect to the costs order made by McInnis FM: Maher v Commonwealth Bank of Australia [2006] FCA 892.
12 The Bank subsequently served a second bankruptcy notice, such notice being based on the costs order made on 24 July 2006. The applicant applied to have that notice set aside, and his application was dismissed by O'Dwyer FM on 19 March 2007: Maher v CBA [2007] FMCA 400. The applicant subsequently appealed to this court and the Bank applied for an order that he provide security for its costs of the appeal. On 11 October 2007, a Registrar of the court ordered that the applicant provide security for the Bank's costs of the appeal, and that the appeal be stayed until such security was provided. The applicant then sought review of that decision, which application was dismissed by Sundberg J on 29 February 2008: Maher v Commonwealth Bank of Australia [2008] FCA 205. His Honour increased the amount of security to be paid by the applicant, and ordered that the appeal be dismissed if such security was not provided within the period specified in his orders. The applicant did not provide security and his appeal was consequently dismissed.
13 Shortly after the decision of O'Dwyer FM dismissing the applicant's application to set aside the second bankruptcy notice, the Bank, Mr Firth and Gray & Johnson filed a creditors' petition in the Federal Magistrates Court. On 19 December 2007, McInnis FM transferred the creditors' petition proceeding to this court pursuant to s 39 of the Federal Magistrates Act 1999 (Cth). But that proceeding was transferred back to the Federal Magistrates Court by Sundberg J pursuant to O 82 of the Federal Court Rules then in force on 27 February 2008. On 18 March 2008, Hartnett FM granted an application by the petitioners to extend the life of their petition: Commonwealth Bank of Australia & Ors v Maher [2008] FMCA 552. On 26 May 2008, Ryan J refused the applicant leave to appeal from the orders made by Hartnett FM: Maher v Commonwealth Bank of Australia ACN 123 123 124 [2008] FCA 773.
14 On 15 August 2008, the creditors' petition was granted and a sequestration order made by Phipps FM: Commonwealth Bank of Australia & Ors v Maher [2008] FMCA 1280. The applicant appealed to this court, naming the Bank and Mr Firth (but not Gray & Johnson) among the respondents to the appeal. The Bank and Mr Firth applied for an order that the applicant provide security for their costs of the appeal. On 20 January 2009, a Registrar of the court granted that application and ordered that the appeal be stayed until such security was provided. The applicant sought a review of that decision, such application being dismissed by Bromberg J on 16 December 2009: Maher v Commonwealth Bank of Australia [2009] FCA 1589. The applicant did not provide security and it appears that he took no further steps to prosecute his appeal. As a consequence, his appeal was dismissed by motion of the court: Maher v Commonwealth Bank of Australia [2010] FCA 1178.
15 As these events were occurring, a third bankruptcy notice was served in the names of the Bank, Mr Firth and Gray & Johnson on 19 December 2007. That notice was based on the costs order made by McInnis FM on 28 July 2005 in the sum of $2,000. The applicant sought to have the bankruptcy notice set aside, such application being dismissed in default of appearance on 15 April 2008 by Burchardt FM. The applicant then applied for that decision to be set aside on the basis that he had no prior notice of the hearing. That application was dismissed by Burnett FM on 28 July 2008: Maher v CBA & Ors [2008] FMCA 1004. Quite what happened to the third bankruptcy notice after this point is not immediately apparent from the materials before the court and does not need to be explored further.
16 This procedural history is relevant at two levels when considering the Bank's application for security. In the first place, it sets the applicant apart from a litigant whose access to justice would be stultified by the requirement to provide security: the applicant's bankruptcy was based on his failure to pay the costs that were ordered against him, and he had the opportunity to contest those orders (and he has sought to do so) on a number of occasions. In the second place, the viability, and prospects, of the applicant's case (which should, if only provisionally, be taken into account on an occasion such as the present) may be affected by the series of orders, judgments and outcomes which the applicant has experienced over the years since the costs orders were first made. In order to give attention to this second aspect, it will be necessary to commence with the nature of the applicant's case in this proceeding.
17 The applicant has three grounds for the annulment of his bankruptcy under s 153B. Each relates to the particular circumstances of those in whose favour costs were ordered by the court on 2 and 5 February 2004 and 24 July 2006. With respect to the Bank, it is said that, because the relevant legal work was carried out by its in-house solicitor, it was effectively a self-represented litigant and was not, therefore, entitled to costs. With respect to Mr Firth, it is said that, as a member of the staff of the Bank, he had no costs additional to those of the Bank, and likewise should not have been the beneficiary of a costs order. With respect to Gray & Johnson, it is said that this was no more than a business name owned by a company which had been deregistered by the time the order of 24 July 2006 came to be made. Because of the timing of the relevant events, this third ground differs somewhat from the first two, and I shall return to it. I do take the view, however, that the applicant's first two grounds are likely to encounter serious, if not insuperable, difficulties.
18 The first ground - that which relates to the Bank itself - is covered by authorities that appear to leave little doubt as to the costs entitlement of a successful litigant, such as the Bank, for which professional legal work was undertaken by its in-house solicitor: Re Eastwood [1975] Ch 112, 132, Ly v Jenkins (2001) 114 FCR 237, 280 [160] and Maher v Commonwealth Bank of Australia [2008] VSCA 122 at [96]-[103].
19 With respect to the second ground, Mr Firth was sued by the applicant in the Spencer St proceeding. As a successful respondent to that proceeding, to the extent that he had costs, it was within the discretion of the court to order that he recover them. That is what happened. It seems that he was represented by the Bank's in-house solicitor in the Spencer St proceeding. The fact that Mr Firth happened to be an employee of the Bank does not, in my view, involve the necessary conclusion that no such costs should have been taxed or recovered. There may have been a question as to the quantum of these costs, but the second ground now taken by the applicant proceeds at the level of principle, rather than at the level of quantification. I view the applicant's prospects of making this ground good as quite weak.
20 Additionally to what I have already said, a major hurdle for the applicant in relation to his first two grounds is that the Bank's bankruptcy notice, and the sequestration order of 15 August 2008, were based upon the applicant's failure to comply with the Registrar's order of 24 July 2006, which in turn was based on the costs certificate of 9 June 2006. The existence of that order would seem to be a complete answer to the present s 153B application. There is no suggestion that the order was obtained by fraud, or in any other circumstance which might expose it to the prospect of being set aside. In any event, no application to set the order aside is made. Thus I consider that the prospect of the court holding that issues such as are proposed to be raised by the applicant's first and second grounds must, so long as the order of 24 July 2006 stands, be treated as closed events is a very strong one.
21 In an affidavit in support of the applicant's third ground, his solicitor gave evidence of searches which she had undertaken which revealed, in relation to the business name "Gray & Johnson" ("the name"), that -
the name commenced on 14 January 1938, then owned by Dorothy May Gray and Alexander Gray;
the Grays were joined as co-owners of the name by Malcolm Alexander Gray on 1 January 1964, by Maxwell Gordon Coote on 1 July 1973 and by Douglas Henry Ruben Wild on 10 October 1977;
Alexander Gray withdrew as co-owner of the name on 1 July 1987;
Gray & Johnson (No 2) Pty Ltd became a co-owner of the name on 1 January 1988;
Gray & Johnson (No 1) Pty Ltd became a co-owner of the name, and all the individuals mentioned above (to the extent that they then remained co-owners) withdrew as co-owners, on 20 June 1988;
Gray & Johnson (No 2) Pty Ltd withdrew as a co-owner of the name on 2 August 2002.
At the time of the commencement of the Spencer St proceeding, therefore, the name was owned by Gray & Johnson (No 1) Pty Ltd and Gray & Johnson (No 2) Pty Ltd. At the time of the orders made by Finkelstein J on 2 and 5 February 2004, and of the Registrar's orders of 24 July 2006, the name was owned (at least ostensibly) by Gray & Johnson (No 1) Pty Ltd.
22 However, on 4 June 2004 Gray & Johnson (No 1) Pty Ltd had been placed into liquidation, and was deregistered on 4 April 2006. Thus the applicant says that there was no basis in law for the order made on 24 July 2006 that he pay the costs incurred by Gray & Johnson in the Spencer St proceeding. This proposition, the correctness of which is not self-evident, will, on my provisional view of the matter, give rise to interesting, and possibly quite challenging, questions of law, even if the facts are as they appear to be on the applicant's solicitor's affidavit. It is sufficient to say two things. First, the complication introduced by the owner of the name not having an existence was raised both on the occasion of the making of the sequestration order - see [2008] FMCA 1280 at [11] - and on the occasion of the Bank's and Mr Firth's application for security in the appeal from that order, and resolved adversely to the applicant each time. In the present case there is, in my view, every prospect that the court would take the view that the question was res judicata. Secondly, what is most striking about the applicant's proposition is the complete absence of any potential injustice if he is effectively held out of being able to advance it because of his, presumed, insufficient means to satisfy an order for security. He sued Gray & Johnson, they instructed solicitors to represent them, they succeeded in the case and they had costs ordered in their favour. Taking a broad view of the matter, if it is the case that the applicant might escape from the conventional consequences of failing to pay those costs because the company which traded as Gray & Johnson subsequently went into liquidation, it would amount to a victory of a conspicuously unmeritorious character.
23 Although not articulated in his grounds as such, a further point was raised by counsel for the applicant during the course of argument on the Bank's application. It was said that the Bank, Mr Firth and Gray & Johnson were jointly entitled under the orders of 24 July 2006, but the Bank alone served the bankruptcy notice on which the subsequent petition, and the sequestration order of 15 August 2008, were based. It was submitted that this was irregular, counsel here relying on Australian Workers' Union v Bowen (1946) 72 CLR 575. One immediate point of distinction as between that case and the present case may be noted, however. There, the bankruptcy notice had been served in the names of three creditors, but this was done without the authority of two of them. That was one of two circumstances (the other being the absence of those other two creditors' authority for the filing of the petition) which led the court to dismiss the appeal from the order of the Bankruptcy Court to dismiss the petition. In the present case, by contrast, the bankruptcy notice was served in the name of the Bank alone. At least so far as the authority of AWU v Bowen runs, therefore, there was nothing obviously wrong with that notice.
24 But the petition in the present case was filed in the name of all three presently relevant creditors - the Bank, Mr Firth and Gray & Johnson. The present application has proceeded on the basis that this was done by the Bank and, if so, it will be a matter for the trial whether it had Mr Firth's authority to do so and, if not, what would be the consequences. In relation to Gray & Johnson, however, it is pointed out on behalf of the applicant that, by the time the petition had been filed, the company which previously owned this business name had been deregistered. There could, therefore, be no question of authority. This does not follow, of course: assuming that the benefit of the costs orders of 2 and 5 February 2004 was an asset in the liquidation of Gray & Johnson (No 1) Pty Ltd, it is quite within the bounds of reasonable probability that that asset had been dealt with, and, both on 24 July 2006 and at the time of the petition, was held by someone. Whether that was so, and, if so, whether the holder had an arrangement with the Bank which effectively amounted to an authorisation to use the business name in the petition, may be questions which would need to be explored. Another possibility, of course, might be that, because of funding arrangements made as between the Bank and Gray & Johnson in 2001 and subsequently, the Bank was entitled in equity to Gray & Johnson's interest in the costs orders and in the order of 24 July 2006. These are all matters which would need to be investigated and resolved if the present case goes to trial.
25 What I have said to date, however, takes no account of what actually happened in the proceeding which led to the order of O'Dwyer FM on 19 March 2007. In his reasons of that date, his Honour made it quite clear that the very point now being advanced on behalf of the applicant was taken by him on that occasion (although without the added complication of the deregistration of Gray & Johnson). In those reasons, his Honour said ([2007] FMCA 400 at [32]-[35]):
32. In respect of the contention that the notice should have demanded that payment be made to all parties, the applicant relies on obiter from Spender J in Thompson, Re; Ex parte Thompson, Grimley Pty Ltd and Another (1995) 135 ALR 700; and Australian Workers Union v Bowen (1946) 72 CLR 575. In Thompson, Spender J observed:
"Where there is a joint order in favour of parties one party cannot demand payment under a bankruptcy notice unless authorised by the others to do so. Likewise, it can be said, in my view, the Bowen case stands for the same proposition that one can only act for the others with a joint order in their favour when all of the parties agree."
33. In this case the respondent asserts it was acting for all of the parties. The evidence for this was provided in two affidavits filed by the respondent, namely from Peter Pouki sworn 23 October 2006 at paragraphs 12 and 17, and that of Michelle Kumarich sworn on 22 July 2007 at paragraphs 3 and 5. Mr Pouki deposes at those paragraphs to the fact that the other parties were employed or acted for the respondent and the notice was applied for by Ms Alison Harewood Solicitor with the authority of the bank, Firth, and Johnson and Gray.
34. The applicant objected to the evidence on this issue because it was provided by people who, although they were employed by the respondent, gave their evidence from a perusal of the respondent's file. I am satisfied that this evidence is admissible and the matter deposed to, namely the authority of the solicitor for the respondent to issue the bankruptcy notice with a demand that full payment be paid to the respondent only, had the authority of the other parties entitled to that amount.
35. Bowen was determined on a question of fact, namely that two of the parties in whose name the notice was said to have been issued had not in fact authorised the issue of that notice. In contradistinction with Bowen, in this case I am satisfied as a matter of fact that the respondent was authorised to collect all of the costs on behalf of the other two. This ground also fails.
That the Bank was authorised by Mr Firth and Gray & Johnson was, therefore, a fact judicially determined in a proceeding to which the Bank and the applicant were parties. It is hard to see how the applicant could resist an argument that he is estopped from alleging the contrary in the present proceeding: Blair v Curran (1939) 62 CLR 464, 531.
26 For the above reasons, I am persuaded that the making of an order for security in favour of the Bank would satisfy the requirements of justice in the sense of providing some protection for it in the eventuality, which I consider to be a very real one, that it succeeds in the proceeding; and is unlikely to be the source of any apparent injustice to the applicant, even if it should be the case that his inability to raise the amount required would stand in the way of him further prosecuting the proceeding.
27 The Bank sought that I should order security in the sum of $59,085. This sum was vouched by a costs consultant, but she allowed for a 3-day trial, which may be somewhat pessimistic in the circumstances. A conservative approach should generally be taken in matters of this kind, and I think that $50,000 will be sufficient.
28 There will be a stay of the proceeding pending the provision of security.
29 It was accepted by counsel for both sides that there was no reason why costs should not follow the event. In the circumstances, the Bank should have its costs of the application for security.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.