Moltoni v Macks as trustee for the Bankrupt Estate of Peter Moltoni

Principles 3 The respondent's submissions set out the relevant principles. The Court is empowered to order security for costs pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth), and r 19.01 of the Federal Court Rules 2011 (Cth). 4 The basic requirement that enlivens the power to grant security for costs is that the evidence establishes that "there is reason to believe…that the plaintiff…will be unable to pay the costs of the defendant…if judgment goes against" the plaintiff: Beach Petroleum NL v Johnson [1992] FCA 110; (1992) 7 ACSR 203 at 205. Once this base requirement has been satisfied it is then a matter for the Court to exercise its discretion, having regard to the full range of relevant considerations. 5 The respondent has identified those relevant considerations in its written submissions. They include (see, eg,Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82 (Melville)): (1) the legal status of the applicant; (2) the fact that an application should be brought promptly; (3) the strength and bona fides of the applicant's case; (4) the cause of the applicant's impecuniosity; (5) the question whether the application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant the right to litigate; (6) whether there are any persons standing behind the plaintiff who are likely to benefit from the litigation and who are willing to provide the necessary security or an undertaking to be liable for costs; and (7) whether there are any public interest considerations in play. 6 In the present case, as I have said, the applicant is an undischarged bankrupt and has affirmed that he is being financially supported by his wife. There is a costs order against the applicant in Federal Court proceedings SAD49 of 2019, in respect of which the costs remain unassessed, and accordingly the applicant has paid no funds towards discharging those costs. The respondent has submitted, and I accept, that there is credible evidence which establishes that there is reason to believe that the applicant will be unable to meet the costs of the respondent if the applicant is unsuccessful in these proceedings. 7 The respondent and the applicant both refer to another principle which is important in this case. The applicant is an individual, and the principle is that, where a litigant is an individual, poverty should be no bar to bringing a matter before the Courts: Cowell v Taylor (1885) 31 Ch D 34 at 38 (Cowell). However, it has also been said more recently that this rule is not absolute. The respondent has referred to the decision of Heydon JA in Melville, in which his Honour described the interplay of the rule in Cowell and the broad discretion granted to the Court in relation to an order for security for costs. His Honour concluded that the discretion of the Court is broad and not constrained by the rule in Cowell, although that rule will remain a factor for consideration in determining whether security should be granted. 8 In support of its submission that an order for security should be granted the respondent made the following propositions, each of which I accept. 9 I am satisfied that in all of the circumstances the respondent had brought its application for security for costs promptly. The entirety of the dealing with this matter was expedited at the applicant's request, given that he wishes to travel overseas in very short order. The fact that the applicant was granted expedition does not mean that the respondent was dilatory in bringing its application for security for costs. 10 As to the strength and bona fides of the applicant's case, I accept the respondent's submission that I have insufficient evidence before me to make my own assessment at the present time. But it is not irrelevant that the applicant has apparently failed twice before the Administrative Appeals Tribunal in his attempts to overturn decisions of the Australian Taxation Office to force him to remain in Australia. 11 As to the cause of the applicant's impecuniosity, I accept that the respondent's submission that it cannot be said by any means that the respondent is the cause of the applicant's impecuniosity. The respondent would have it that the cause of the applicant's impecuniosity is his own conduct in failing to declare income, and causing the payment of money to an account in Luxembourg, failing to pay income tax on that amount, and thereby incurring taxation penalties which prompted the applicant to lodge his own bankruptcy petition. The applicant would have it that the Australian Taxation Office is the cause of his impecuniosity. What can be safely said is that the respondent is not the cause of the applicant's impecuniosity. 12 I am also not satisfied that the application is oppressive. 13 As the respondent has noted, the respondent has already incurred all of the preparation fees for the applicant's similar application to the present in 2019, and also has an order for costs in those proceedings against the applicant, who is a bankrupt who has declared he has no assets. Despite this the applicant has said in one of his affidavits in support of the current application that if the costs were taxed he would then pay the tax costs, but gives no indication of the source of those funds. 14 This may be related to the fact that is it apparent that there is at least one person standing behind the applicant, whom it may be inferred would obtain a benefit from the resolution of the proceedings in the applicant's favour. This is the applicant's wife who has financed the applicant's legal team in the 2019 proceedings. I accept the submissions for the respondent that the applicant's wife appears to be in a position to guarantee the respondent's costs in the event he succeeds in the current proceedings. 15 In terms of other relevant factors to the exercise of discretion, it is in my view relevant that the applicant commenced proceedings seeking similar orders in 2019, and the respondent incurred costs defending those proceedings, ultimately in circumstances where the applicant discontinued the proceedings a week before the two-day hearing was due to commence. 16 The respondent has said, and in my view not without some cause, that the respondent is concerned that the applicant will continue to bring applications against him with no recourse against the applicant for costs awarded against him, given the applicant's status as an undischarged bankrupt. 17 Further, the applicant's evidence in respect of the application does not indicate that an order for security cannot be met by himself or those supporting him. Accordingly, it is not apparent that the making of an order for security for costs would stultify the applicant's present application 18 The applicant's claim for relief is not one where I can necessarily judge the merits of the application, but it is plain that the applicant already owes a costs order from the 2019 application. 19 In terms of the submissions that the applicant made to the contrary, I have rejected the applicant's submission that the respondent has unreasonably delayed in the making of its application for security for costs. I do not consider that the respondent's evidence is marked by any form of inconsistency. On the evidence the applicant is prima facie impecunious. However, there is evidence that suggests that those behind the applicant would be capable of providing security for costs. That is, there is no inconsistency between being satisfied that the applicant is impecunious and also considering that there is evidence which suggests that the applicant would be in a position, because of those who stand behind him, to pay security, with the consequence that an order for security for costs would not stultify the proceedings. 20 I do not accept that the applicant is a person in the position of a defendant. There is a principle that a Court will not ordinarily order security against a party who is, in substance, a defendant: KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189. However, I do not see this principle as being applicable to the applicant's current proceedings. I have already said that it is not possible for me to be satisfied that the respondent was the cause of the applicant's impecuniosity. 21 Weighing up all of the discretionary factors I am satisfied that there should be an order for security for the respondent's costs. In terms of the quantum of security, the amount of $25,000 is sought. As the respondent has indicated, the object is not to give a complete indemnity, but to provide security in a reasonable amount. Having regard to the evidence, I am satisfied that the security which is sought is neither reasonable nor excessive. Accordingly, I am minded to make orders for the applicant to pay security for costs. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.