Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd

REASONS FOR JUDGMENT Ex-Tempore Judgment 1 In this matter the Commissioner of Taxation ("Commissioner") has taken out a Notice of Motion seeking orders that AT Holdings Limited ("AT") and Morlea Professions Services Pty Limited ("Morlea") give security for the costs of the Commissioner in the sum of $25,000 by way of an acceptable security. The application is in relation to defence of an appeal lodged by AT and Morlea. The application is resisted. 2 The question of security arises in the context of a notice of appeal and a notice of contention concerning a judgment of Emmett J given in this Court: Commissioner of Taxation v Macquarie Health Corp [1999] FCA 346. At first instance, a question did arise before his Honour in relation to security for costs against one of the appellants namely, AT. His Honour, having considered the authorities on the question, reached the conclusion that there should be no order for security for cost because, in substance, this was a case where the AT claim, in his Honour's view in the matter before him, could be categorised as a defence of claim: see Commissioner of Taxation v Macquarie Health Corp [1998] FCA 910, 13 July 1998. In reaching the conclusion which he did, his Honour had regard to the decision of the High Court Willey v Synan (1935) 54 CLR 175. In that case, the various members of the High Court said that one must look at the substance of the matter, and where the moving party is really defending its interest it should not be required to provide security for costs. In the course of his judgment in the matter, the Chief Justice, Latham CJ, said at 180: "But, as the collector has given him a notice under sec. 207, he is, in effect, forced into legal proceedings, not merely to enforce his claim, but to prevent his claim from being extinguished. He is therefore really in the position of a defendant." 3 It is submitted that the principles underlying the decision of his Honour, Emmett J, in relation to the AT application, which was brought by way of interlocutory proceedings during the course of the hearing, should be applied in the present case where we are concerned with an appeal from a decision of a primary judge. 4 In substance, it is said that the characterisation of the role of AT and Morlea, is really a continuation of their role as presenting a defensive case rather than being the initiating party. The question has arisen in this court previously in Riv-Oland Marble Company Victoria Pty Limited v Setteff SpA (1988) AIPC ¶90-503, before Jenkinson J. In the course of his judgment in that case, his Honour had to consider the effect of the decision in Willey v Synan in relation to an appeal. In paragraph five of his reasons, Jenkinson J said this: "I do not think that the principle expanded by Latham CJ (54 CLR at pp. 179 - 180) and by Dixon J (54 CLR at pp. 184 - 185) in Willey v Synan will ordinarily have any application in relation to a motion for security for the costs of an appeal. In Dence v Mason (1879) WN 31… an appellant urged as a consideration against ordering him to give security for the respondent's costs of the appeal the circumstance that he had been the defendant in the proceeding out of which the appeal had arisen. The Court of Appeal ... said that 'made no difference'". 5 A number of other cases have been cited to me including Yates Property Corporation v Boland [1997] FCA 1113, 7 October 1997, a decision of Davies J, particularly paragraph one of the judgment which says that even if a company is impecunious, the court ought to look at the persons who stand to benefit from the litigation and see what position they are in and whether they can provide security for costs. His Honour also referred to the principle that it is extremely difficult to advance an opinion as to the likelihood of success of an appeal in a complex commercial matter. 6 The thrust of the authorities is to the effect that where a party has a choice as to whether proceedings are initiated or not, then it is normally appropriate such party, if it is impecunious, should provide security as to costs. I think the position is considerably different in the case of an appeal to that in the case of a trial where a cross-claim does no more than raise the same issues as raised in the defence. That appears to have been the position at trial in the present case. However, once one comes to the question of an appeal, it seems to me that the initiating party having the carriage of the matter and forcing the other party into the litigation, or into the continuance of the litigation, is the appellant. In such circumstances, I agree with the conclusions expressed by Jenkinson J in Riv-Oland and also the English Court of Appeal in Dence, that in an appeal the position is different. In an appeal the appellant ought, where it is impecunious, provide security for costs unless there are particular circumstances which support a contrary conclusion. Moreover, on an appeal the respondent has the benefit of a considered judgment in his favour unlike the position before trial. 7 In the present case there has been no real debate as to the quantum of the security which ought to be provided. Nor has there been a great deal of discussion in relation to the question as to whether the companies are of any financial substance. I have had regard to the affidavits presented to me and I am satisfied on this material, that the appellants will be unable to meet the likely costs of the respondent Commissioner, and I think it is probable that the Commissioner will, unless security is provided, be left without any realistic prospect of recovering his costs. Allowing for the inherent uncertainties and contingencies in any estimate as to the amount of costs, I am of the view that an amount of $20,000 is an appropriate amount to require as costs for prosecution of the appeal to cover the event where the respondent Commissioner is successful. 8 I grant the application. The appellants are to pay the respondents' costs of this application. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.