Consideration
26 Section 56 of the FCA Act provides:
56 Security
(1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.
(2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.
(3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.
(4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.
(5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.
27 Rules 19.01 and 19.02 of the 2011 FCRs provide:
19.01 Application for an order for security for costs
(1) A respondent may apply to the Court for an order:
(a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and
(b) that the applicant's proceedings be stayed until security is given; and
(c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed.
(2) An application under subrule (1) must be accompanied by an affidavit stating the facts on which the order for security for costs is sought.
19.02 Matters to be addressed by the respondent
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; and
(e) any other relevant matter.
28 The Court's power to order security for costs under s 56 of the FCA Act is a broad discretion which must be exercised judicially (Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1). Part 19 of the 2011 FCRs supplements the primary power conferred by s 56. It does not limit the exercise of the broad discretion which arises under s 56 of the FCA Act.
29 The relevant principles guiding the exercise of the discretion whether or not to order security for costs in this case may be summarised as follows.
30 First, there can be no doubt that the decision whether or not to order security for costs involves the exercise of a discretionary judgment. As McHugh J said in P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 at 323:
To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed.
31 Secondly, it is relevant to consider whether the parties against whom security for costs is sought is a natural person or a corporation. The traditional view has been that there is a "basic rule" to the effect that "a natural person who sues will not be ordered to give security for costs however poor he is" (see Pearson v Naydler [1977] 3 All ER 531 at 533 per Megarry V-C citing Lord Justice Bowen in Cowell v Taylor (1885) 31 ChD 34 at 38). There has been some debate as to whether that "basic rule" applies in this Court (see, for example, the discussion by Jessup J in Goodman v Thomson Maloney & Partners Pty Ltd trading as Charter Keck Cramer [2010] FCA 1264). It is evident, however, that merely because the applicant is a natural person and is impecunious is not determinative of the question. Other relevant considerations may, when considered individually or collectively, outweigh the disinclination of the Court to order a natural person to pay security for costs where the outcome may be to jeopardise the substantive matter ever coming to a final hearing.
32 In Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [32] and [33] Lindgren J helpfully described the historical disinclination of courts to order natural persons to provide security and also identified the kind of circumstances in which security for costs has been ordered against natural persons (of course merely because one or more of those kind of circumstances is present is not necessarily determinative):
Many cases can be cited for the proposition that there is a disinclination to order an applicant who is a natural person to provide security, at least, in the absence of some factor in addition to impecuniosity. Cases which can be cited against the ordering of security and in favour of allowing natural persons, even impecunious ones, free access to the courts, include Hinde v Haskew (1884) 1 TLR 94; Pearson v Naydler [1977] 1 WLR 899 (Megarry VC) at 902; Orr v Lusute Pty Ltd (1987) 72 ALR 617 (Sheppard J) at 622: Morris v Hanley [2000] NSWSC 957 at [15]; The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 (Branson J) at [22]; Chang v Comcare Australia [1999] FCA 1677 (Moore J) at [25]; James v Australia and New Zealand Banking Group Ltd (No. 1) (1985) 9 FCR 442 (Toohey J) at 445; Weston v Beaufils (1993) 43 FCR 292 (Burchett J) at 298; Famel Pty Ltd v Burswood Management Ltd (1989) 11 ATPR 40-962 (French J) at 50,514; Cameron's Unit Services Pty Ltd v Kevin R Whelpton and Associates (Australia) Pty Ltd (1986) 13 FCR 46 (Burchett J) at 53; Gartner v Ernst & Young (No. 3) [2003] FCA 1437 (Mansfield J) at [36].
In the cases in which natural persons have been ordered to provide security, some factor in addition to impecuniosity has been present; cf Barton v Minister for Foreign Affairs (1984) 2 FCR 463 (Morling J) at 594 (impecuniosity and residence outside Australia); Cunningham v Olliver (unreported, Burchett J, 21 November 1994) (but for delay, security would have been ordered on ground of impecuniosity and bringing of claim to a significant extent for benefit of others); Chang v Comcare Australia [1999] FCA 1677 (Moore J) at [32] (impecuniosity and lack of prospects of success); Loque v Hansen Technologies Ltd [2003] FCA 81 (Weinberg J) (impecuniosity and residence outside Australia); Morris v Hanley [2000] NSWSC 957 (Young J) at [21], [38] and [39] (but for delay, Young J would have ordered security on grounds of impecuniosity and lack of prospects of success and large costs involved to defendants. Young J's decision was reversed on appeal on the ground that defendants had not adequately explained their delay in moving for security, but the Court of Appeal did not consider other aspects of his Honour's reasons: see Morris v Hanley & Ors [2001] NSWCA 374 at [30]- [31]); Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82 (CA) at [132] (per Heydon JA) (impecuniosity and applicant's failure to show that order would stultify proceeding and sum ordered by primary Judge not oppressive) (original emphasis).
33 It is to be noted that one of the examples cited by Lindgren J where security for costs has been ordered against a natural person involved the combined circumstances of impecuniosity and residence outside Australia. The relevant examples given by his Honour were Morling J's decision in Barton v Minister for Foreign Affairs (1984) 2 FCR 463 at 594 and Weinberg J's decision in Logue v Hansen Technologies Ltd (2003) 125 FCR 590. Those are matters of some relevance here given the applicants' circumstances.
34 Thirdly, I do not consider that the approach reflected in the cases referred to by Lindgren J requires modification in the light of the current 2011 FCRs. Many of the earlier cases were concerned with s 56 of the FCA Act and the predecessor rule (Order 28, r 3), which conferred a discretion on the Court to order security for costs in specified circumstances, including where "an applicant is ordinarily resident outside Australia". It is to be noted that under the 2011 FCRs, the matter is dealt with less directly. Rule 19.01 supplements the general and unfettered power under s 56 of the FCA Act to order security for costs and does so without direct and express reference to the circumstance of an applicant being ordinarily resident outside Australia. The current approach is to require the respondent's supporting affidavit to state various matters, including whether the applicant is ordinarily resident outside Australia. Accordingly, that circumstance arises indirectly. Despite that change, however, I consider that the earlier principles still apply. The respondents generally relied on Part 19 of the 2011 FCRs in advancing their applications for security for costs and only passing reference was made to s 56 of the FCA Act.
35 Fourthly, as Weinberg J observed in Logue at [18], the purpose of ordering security for costs against an applicant who is ordinarily resident outside Australia "is to create a fund within this country against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant's claimed country of residence". McHugh J had the following to say about such a circumstance in Chellaram at 323:
However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.
(It might be noted that McHugh J was not dealing there with a natural person).
36 Given that the historical basis for requiring a foreign-based applicant to give security for costs is to recognise that the respondent who succeeds in proceedings and obtains a judgment has to enforce that judgment in the applicant's foreign country of residence, it is also relevant to take into account whether or not that foreign country is covered by the Foreign Judgments Act 1991 (Cth). The list of countries to which the Foreign Judgments Act 1991 applies are set out in the Schedule to the Foreign Judgments Regulations 1992 (Cth). The United Arab Emirates is not included in that list, with the consequence that the Foreign Judgments Act 1991 is inapplicable. If, unlike the circumstances here, a particular country is covered by that legislation, security for costs might still be ordered, but, the quantum may simply reflect the costs of enforcement under such a statutory scheme (as was the case in Barton). But if the foreign country is not covered by such legislation, that is a factor weighing in favour of ordering an applicant (even a natural person) to pay security for costs commensurate with the reasonable costs of preparing and conducting the proceedings, at least up until an appropriate point which might, in some cases, be the commencement of the trial (see, for example, Aussie Protection Inc v Hy-Way Sunvisors (Sales) Pty Ltd, unreported decision of Gummow J, 23 December 1987, pp 7-8 and Austin, Nichols & Co Inc v Lodestar Anstalt [2009] FCA 1228).
37 Fifthly, impecuniosity on the part of the applicants needs to be established by the respondents because it relates to the question whether the respondent parties will be at risk as to costs should they succeed in defending the proceedings. But even where impecuniosity is established (or effectively conceded, which is the position here), another relevant consideration is whether such impecuniosity has been caused by the conduct of the respondents which is the subject of the substantive proceedings (see, for example, Aussie Protection at p 8 and Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 52). An applicant wishing to resist security for costs on the basis that there is a cause or connection between their impecuniosity and the respondent's conduct needs to substantiate that claim by appropriate evidentiary material, not mere assertion or submissions (see, for example, Aussie Protection at p 9 per Gummow J and Australian Equity Investors, An Arizona Ltd Partnership v Colliers International (NSW) Pty Ltd (No. 5) [2011] FCA 1041 at [31]-[34] per Cowdroy J).
38 Sixthly, consideration needs to be given to whether the effect of making an order for security for costs will, or will be likely to, bring the proceedings to a premature end, because of the applicants' lack of means to comply with the order. That is a matter of particular concern where public interest issues arise in the proceedings (see, for example, Aussie Protection at p 9).
39 Seventhly, although the parties' respective prospects of success may be a relevant consideration, as a general rule there should not be a major hearing on that issue in the context of an interlocutory application for security for costs (see, for example, Appleglen Pty Ltd v Mainzeal Corporation Pty Limited (1988) 79 ALR 634 at 635 and High Tower Pty Limited v Island Motel Pty Limited, unreported decision of von Doussa J, 12 April 1989 at p 14). That is particularly so in a case such as the present, where the respondents have highlighted so many deficiencies and shortcomings in the applicants' statement of claim and to date only two of the six defences have been filed.
40 Eighthly, while it is appropriate to give some weight to the fact that the applicants are self-represented and have not had the advantage of legal advice and assistance in drafting their pleadings, I respectfully agree with the following observations of Applegarth J in Mbuzi v Hall [2010] QSC 359 at [27]:
A court is entitled to extend some latitude to a self-represented litigant who is not familiar with the forms and procedure, providing in doing so injustice and prejudice is not occasioned to other parties, and also provided the court is able to achieve a just and expeditious resolution of the real issues of the proceeding at a minimum of expense. A self-represented litigant should not be permitted to disregard rules and to conduct litigation in a manner which is unjust to other parties and contrary to the interests of justice. As Keane JA (as his Honour then was) observed in Robertson v Hollings [2009] QCS 303 at [11]:
… litigation is not a learning experience. The Courts do not permit litigants, even unrepresented litigants, to prosecute claims which cannot proceed fairly to the other parties.
41 Finally, it is well established that an application for security for costs must be made promptly (see, for example, K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197 per Beazley J).
42 I do not mean to suggest that the principles summarised above will arise in every case in which security for costs is sought. Rather, those appear to be the primary relevant principles to be applied in the particular circumstances here. With those relevant principles in mind, I turn now to consider them in the context of those circumstances.
43 First, it was common ground that the applicants were both impecunious and also ordinarily resident outside Australia. It was not disputed that the applicants would be unable to pay the respondents' costs if they were successful in defending the proceedings.
44 Secondly, the applicants placed great weight on the fact that they were natural persons. I accept that this is an important consideration to be borne in mind in considering the proper exercise of the discretionary judgment whether or not to order security for costs. I have referred above to the historical disinclination of courts to order security for costs against natural persons. However, that disinclination needs to be kept in a proper perspective. As Justice Heydon observed in Jeffery & Katauskas at [91]:
Mere impecuniosity is not an absolute barrier to ordering security for costs against a natural person, although it is a factor against doing so.
(It is also to be noted that French CJ, Gummow, Hayne and Crennan JJ acknowledged in that case at [39] that security for costs will sometimes be ordered against an impecunious plaintiff).
45 There are two particular features here which I believe weigh heavily in favour of making orders that the applicants pay security for costs even though they are natural persons. The first is that the applicants accept that they are not ordinarily resident in Australia. That is one of the matters which has been recognised as justifying a departure in an appropriate case from the traditional disinclination (see Barton). This consideration assumes even greater significance in these proceedings here because the applicants' country of residence is not covered by the Foreign Judgments Act 1991 (see the authorities referred to in [32] above).
46 The second factor which has weighed heavily with me relates to the patent deficiencies in the applicants' statement of claim. Some of those deficiencies have been highlighted above. This is not the time to embark upon a detailed assessment of the parties' respective prospects of success, but I consider that the stark deficiencies in the applicants' existing pleadings cannot be ignored in the context of the respondents' applications that they be ordered to pay security for costs. The statement of claim contains extensive scandalous and embarrassing material, is drafted in a way which makes it difficult for defences to be drawn (although it is to be noted that two defences have in fact been filed), and in both form and substance appears not to comply with relevant requirements of the 2011 FCRs. The applicants have declined to address the many deficiencies in their pleadings. The significance of these matters lies in the fact that the Court cannot properly proceed on the basis of the general rule that, where a claim is prima facie regular on its face and discloses a cause of action, it is appropriate (in the absence of evidence to the contrary) to proceed on the basis that the claim is bona fide and has reasonable prospects of success (see Jazabas Pty Ltd v Haddad (2007) 65 ACSR 276 at [74] and Cashflow Finance at [8] per Jacobson J). The applicants cannot have the benefit of that approach here. I do not doubt the genuineness of the applicants' subjective belief that they have genuine grievances, but that is not the relevant test in the context of the interlocutory applications before me.
47 Thirdly, and related to the views I have expressed immediately above, I do not consider that any significant weight should attach to the applicants' claim that their case will be stultified if they are ordered to pay security for costs. As several of the respondents pointed out in argument, the Court should not be influenced in the exercise of its discretionary judgement by the risk of stultification of proceedings which are currently based on such seriously deficient pleadings.
48 Fourthly, I attach no weight to the applicants' assertion that their impecuniosity is totally attributable to the conduct of the respondents which is the subject of these proceedings. The applicants carry the onus of making good that proposition by way of admissible evidence. No evidence was placed before me by the applicants establishing their financial circumstances at the time the relevant events occurred. There is simply no proper evidentiary material before me which substantiates their assertion. The assertion is no more than that.
49 Fifthly, and despite the applicants' submissions to the contrary, I cannot accept that this is a case which, as currently pleaded, raises matters of sufficient public interest to tilt the balance in the applicants' favour. The defective pleadings do not allow any such conclusion to be safely drawn.
50 Finally, and for completeness, it should be noted that the applicants did not raise any issue concerning any delay on the part of any of the relevant respondents in bringing the applications for security for costs.
51 For all these reasons, I consider that the applicants should be ordered to pay security for costs in favour of the relevant respondents.
52 The question then arises as to what the quantum should be. Each of the relevant respondents asks that orders be made based upon their affidavits in support setting out their estimates as to their legal costs up to the commencement of the trial of the substantive proceedings. The applicants took no issue with the reasonableness of those estimates. But, as I pointed out in argument, in circumstances where each of those respondents has indicated that they propose to seek to have the applicants' pleadings struck out or summarily dismissed, it would be more appropriate to order the applicants to pay an amount which represents the relevant respondents' legal costs only up until that point. Liberty could be given for any affected respondent to apply on notice to vary the amount of security for costs. That is what I propose to do.
53 Each of the respondents who sought security for costs also applied for a guillotine order to be made in their favour in the event that applicants fail to comply. In other words, they sought an order at this stage that in the event of non-compliance the proceedings would be dismissed. I do not think it appropriate to make such an order at this time. In the event that there is non-compliance the affected respondent can make an application at that time to have the proceedings dismissed insofar as they are affected.
54 According, for all these reasons I make the following orders:
1. The applicants are to provide security for the costs of and incidental to the proceedings in respect of each of the following respondents and in the sum set out below in the form of a bank guarantee from an Australian trading bank (or in such other form as is acceptable to the District Registrar) to be lodged with the District Registrar and a copy of which is to be served on the solicitor for each of the relevant respondents:
(a) in the case of the second respondent, an amount of $16,600;
(b) in the case of the fourth and fifth respondents, an amount of $21,500;
(c) in the case of the sixth respondent, an amount of $23,500;
(d) in the case of the seventh and eighth respondents, an amount of $22,500;
(e) in the case of the ninth respondent, an amount of $29,000; and
(f) in the case of the tenth respondent, an amount of $35,730.
2. Each of the bank guarantees required by order 1 be lodged with the District Registrar by 31 December 2012.
3. The proceedings be stayed as against any of the affected respondents until the relevant security for costs has been provided in respect of that respondent in accordance with the order of the Court.
4. Each of the respondents referred to in order 1 above have liberty to apply, on seven days notice, to vary the amount of security for costs required to be provided in accordance with the order of the Court.
5. The applicants are to pay the costs of each of the respondents who have been successful in their interlocutory applications for security for costs (including the second respondent), save that, in the case of the second respondent, the second respondent is to pay the costs of providing the video conferencing facility for that part of the hearing held on 21 August 2012 in respect of its interlocutory application for security for costs.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.