No TasWind Farm Group Inc v Hydro-Electric Corporation

Federal Court of Australia|2014-03-04|Before: Mr J, Kerr J

The applicant as a nominal plaintiff 46 The applicant brings these proceedings consistently with the objects listed in its constitution. That the applicant otherwise has no interest in these proceedings is immaterial. Incorporated association and companies can bring proceedings in the asserted public interest under the Australian Consumer Law: see No TasWind Farm Group Inc v Hydro-Electric Corporation (No 1) [2014] FCA 347. 47 The respondent seeks to distinguish that ordinary circumstance from the present on the basis that the applicant was incorporated merely as a device to avoid the members of the previously unincorporated group (who are now its members) being exposed to the risk that if they pursued this litigation in their own names costs orders might be made against them. 48 There is considerable evidence consistent with that proposition. Mr Graham, who was one of the key leaders of the former unincorporated Group and a member of the applicant, was cross-examined. He did not dispute having said that if there was a (financial) risk he would not bring these proceedings in his own name. The respondent's written submissions of 4 February and 19 February refer to many examples of other similar statements. Given the overwhelming nature of that evidence I do not think it useful or necessary to set out point by point everything in the evidence that points to Mr Graham and other members of the formerly unincorporated group having acted to incorporate the applicant with the intention that this litigation could proceed without any risk to their personal financial positions. Ultimately that seems uncontentious. It is true that under cross-examination Mr Graham maintained that another reason for the incorporation of applicant was to improve the organisation of those who opposed the wind farm proposal but he conceded that the applicant was incorporated "in essence" to bring these proceedings. 49 That circumstance is a relevant factor in favour of the Court making an order in favour of security for costs. However, in my opinion it would be wrong to make too much of this point so as to regard it as decisive. A very great proportion of modern trade and commerce and even some private activity is now undertaken through the agency of bodies deliberately established to take advantage of the limited liability that incorporation provides for. The respondent itself is an incorporated body such that, save in exceptional cases such as were it to be trading whilst insolvent, those who carry on its business as its directors have no personal liability for its debts. Even accepting as I do that the applicant was incorporated with a view to obtaining similar protection for the former members of the unincorporated Group it is difficult to see why, without more, that circumstance should be regarded as something as more than one factor in evaluating whether or not to make an order for security for costs. 50 That is not to deny that security for costs will usually be awarded (and should be) where any third person uses an impecunious plaintiff (whether incorporated or not) as a vehicle to pursue a matter in which they, rather than the impecunious litigant, are in truth the moving actor whose interests will be vindicated by the litigation which has been commenced. However the cases in which this principle has been applied appear to be limited to those in which litigation has been brought for a third party's "benefit". A 'benefit' in this context is usually understood to be something in the nature of a personal right in property or in interest having economic value. 51 I acknowledge that in Andrews v Caltex Oil (Australia) Pty Ltd (1982) 60 FLR 261 Lockhart J stated (in obiter) that it was not necessary to confine the notion of benefit to a financial benefit. That may be correct but I have found no instance where, when the asserted interests are no more than vindication of public rights, the principle has been applied. I have not been referred to any case in which a corporation pursing "public interest" litigation has been held to be litigating for a third party just because the individual members of the community who are its members might themselves also have taken individual legal action. I am not prepared to hold that the notion of interest should be expanded to that degree. 52 In Friends of Hinchinbrook Society Inc v Minister for Environment (1996) 69 FCR 1 at 21, Branson J stated: The applicant is an incorporated association of persons concerned with the environment. In one sense, every association is a front for its members: they stand behind it and may be assumed themselves to support the objectives of the association and, generally speaking, the association's actions in intended advancement of those objectives. There is, however, in my view a very real difference between the relationship of a member of a non-profit association formed to advance a public interest to the association of which he or she is a member, and the relationship of a shareholder to the company in which he or she holds shares. The benefit which a shareholder might expect to obtain from litigation conducted by a company will ordinarily be, whether directly or indirectly, financial. Members of a non-profit association will not ordinarily benefit financially from litigation instituted by the association. The benefit which they might obtain from such litigation is likely to be constituted by intellectual or emotional satisfaction. 53 In cross-examination Mr Graham acknowledged that the campaign against the respondent's proposed wind farm had received financial support from the owner of a national tourism business Mr James. Mr James (who Mr Graham said runs a national business 'Flight Centre") is not a member of the applicant. He had paid $76,000.00 to a public relations company in support of the campaign. 54 This was the high point of any evidence that might suggest the litigation is being pursued to advantage a third party. In my view the evidence does not come close to establishing that this case is being pursued to vindicate Mr James's economic interest and for his benefit. What I have received by way of evidence at this stage is limited and my conclusions must be only "impressionistic." However no injustice will be done if I am wrong. If it is established at the hearing that contrary to the impressions I have formed that this litigation has been conducted for the benefit of any third party the court has the power to award costs against any non-party in whose interests the proceedings are found to have been brought. There is no suggestion that Mr James is relevantly impecunious or that an order of that kind could not be made and enforced. 55 That remote prospect aside I can identify nothing to justify a finding on my part that any member of the formerly unincorporated Group possesses a relevant interest which will be vindicated by the proceedings brought by the Applicant. And as Lockhart J also noted in Andrews v Caltex Oil (Australia) Pty Ltd at 266: It must not be forgotten that there are two aspects of "benefit", namely, first that the proceeding is not brought for the benefit of the applicant, and, second, that it is brought for the benefit of some other person. Proof of the former does not necessarily establish the latter. 56 Had their standing to bring proceedings been in issue and had any member of the former unincorporated Group chosen to litigate in his or her own right, on the limited evidence before me, I would have been compelled to find that he or she could not point to their having any interest in the subject matter of the litigation beyond that which they held in common with every other resident of King Island. 57 It is because the relevant provisions of the Australian Consumer Law allow any person to bring proceedings without any requirement of such an interest that permits this litigation to be brought. 58 On the state of the evidence as I conceive it, none of the members of the formerly unincorporated Group had any relevant interest in the litigation and neither they nor any of its current members were using the applicant to pursue the litigation for their benefit. 59 I am entitled to take the circumstances of the applicant's incorporation into account as a relevant consideration in favour of the respondent's application for security for costs (see Byron Shire Businesses for the Future Inc v Byron Shire Council (1994) 83 LGERA 59 at 61 per Pearlman J) but for the reasons I have explained at [50] given the ubiquitous use of the corporate form for such purposes it is simply one of the factors relevant to the exercise of the Court's discretion and, as with all such factors, is not necessarily decisive. The governing consideration remains what the justice of the case requires. 60 I reject the respondent's proposition that these proceedings should be found by this court to have been brought by the applicant as a nominal plaintiff for the benefit of the former members of the unincorporated Group, or any of them or the benefit of any other third party.

Capacity for the applicant to meet an order for costs if unsuccessful: Impecuniosity 61 It is common ground that the applicant has limited financial resources currently available to it. Its balance sheet (DG 3) discloses current net assets of only $21,244.31. 62 The applicant has a duty to the court to make full disclosure of its financial position. It may be doubted that it complied with that obligation. Mr Graham's affidavit states at paragraph 48 that "the Association has been able to raise the sum of $20,000 that could be paid into Court to meet a portion of Hydro Tasmania's costs if our action is unsuccessful and a costs order is made against the Association". 63 Under cross examination it emerged that that sum was not held by the Association. Rather it represented pledges that had been made by unidentified members of the King Island community to meet various amounts to that total if called upon to do so in the event of the litigation being unsuccessful. 64 There is also no evidence before the court as to what might be the terms of the applicant's counsel's retainer but Mr Graham suggested that some part if not all of the current net assets of the Association were held in anticipation of their being applied to counsel's fees. Despite that there is nothing in the accounts the applicant disclosed that speaks to any such present or contingent liability. 65 I do not suggest any want of honesty on Mr Graham's part but the picture he and the applicant presented was not complete. 66 The evidence as to the likely costs of these proceedings to trial is equally unhelpful - albeit for different and more understandable reasons. The respondent filed an affidavit sworn by Mr Roy Nicholas Wallace, a partner of Page Seager Lawyers with carriage of the matter for the respondent. Mr Wallace gave an estimate of the total party and party costs inclusive of counsel's fees as within the range of $225,730.00 to $240,730. Mr Wallace was not required for cross-examination. 67 The applicant filed a responding affidavit sworn by James Brisdon Walker. Mr Walker was not then but is now solicitor on the record for the applicant. Under cross examination Mr Walker did not dispute the validity of Mr Wallace's general calculations. 68 However as with all such estimates their reliability depends on the assumptions that underlie them. The court raised two particular matters with Mr Barclay where the assumptions upon which that evidence had been given appeared to the court to no longer be justified. First, that it had been agreed as between the parties that there would be no utility in requiring attendance at mediation such that the costs estimated for the attendances in that regard should be disregarded. Second that with active case management and with the proceedings now streamlined following the court's summary judgment in favour of the respondent on the s 236 issues that an estimate of 10 days for the length of the trial was unsupportable and that much of the materials relevant to the proceedings could be put in evidence on affidavit without requiring the attendance of witnesses. 69 Mr Barclay very properly conceded both points. He indicated that he thought two days would be required for expert evidence but, with the s 236 issues resolved that the whole trial would be likely to take no more than five days. 70 I do not propose to substitute my own estimate of what as a result of those concessions the party and party costs might amount to following a five days trial. Whatever the amount I accept, even on those different assumptions, it will be substantially in excess of the funds the applicant currently has to hand. I have no evidence to suggest that the applicant is likely to have possession of or to seek a significantly larger amount in the near future absent it being required by an order of this court to engage in fundraising in order to provide sufficient security for costs to meet any order that it might make. 71 Despite the unsatisfactory state of the evidence discussed above I am prepared to conclude that the applicant is relevantly impecunious. The material before the court establishes reasonable grounds for the respondent to be fearful that if the action proceeds to trial the applicant will not be able to satisfy an order for costs if it were to lose.

Would the order for security for costs as sought stultify the action? 72 At paragraph 51 of his affidavit Mr Graham deposed that: If the Association is ordered to provide security for costs in more than a nominal amount or an amount exceeding the amount of the fund it has been able to raise deposed to in paragraph 48, [$20,000] it would be unable to proceed with the action. 73 I have earlier drawn attention at [63]-[65] to the unsatisfactory nature of the evidence regarding the applicant's financial position. However, Mr Barclay, despite cross-examining Mr Graham on other matters relevant to the Association's financial position did not put to him that the Association could be required to give security in the sums sought by the Respondent without that stultifying the action. 74 Taking a broad-brush approach to the evidence, I find that requiring the applicant to provide security in the sum of $165,000.00 would place the applicant in a position where it could not further proceed and would stultify the action. 75 However I do not think that the evidence rises so far as to establish that an order for security for costs in a lesser amount would necessarily do so. I conclude that it is reasonable to assume that the applicant could raise some additional funds were it required to do so.

Public Interest Litigation? 76 In his affidavit at [37] Mr Graham stated: The Association… says it is bringing its action in furtherance of the public interest in having a binding determination made as to whether Hydro Tasmania does have broad support of the King Island Community; whether it can represent that it has such support in the manner in which it is currently making such representations; and whether it is entitled to proceed with its Wind Farm Scheme. 77 Mr Wood accordingly submitted that the court should hold that these proceedings stand in a different light to ordinary commercial litigation for the purpose of ordering security for costs. The proceedings should be held to be public interest litigation. 78 On balance, albeit not without some hesitation, I am prepared to accept that these proceedings do stand in a different circumstance to ordinary litigation and that the applicant is entitled to be regarded as pursuing public interest litigation. My reason for that conclusion is not because these proceedings are being pursued in the interests of the environment or public health or some such factor. The case before me raises no allegation of failure by the respondent to take such considerations properly into account. Individual members of the applicant may believe that there is an underlying environmental or health issue at stake in whether or not the King Island wind farm proposal proceeds but no evidence to that effect was adduced and the pleadings before the court do not address that. Nor should the court be taken to be expressing any view as to the merits of the respondent's proposal - such considerations have no relevance to this decision. 79 I conclude that this litigation can be regarded as being public interest litigation in the context of this application for security for costs for two interrelated reasons. 80 The court has given summary judgement in favour of the respondent preventing the applicant claiming damages pursuant to s 236 of the Australian Consumer Law. There is thus no aspect of a commercial claim remaining on foot. 81 I also discern there is a public interest in the enforcement of the laws of the Commonwealth. The provisions of the Australian Consumer Law articulate enforceable norms of acceptable corporate behaviour capable of being brought before this court by any person, irrespective of any requirement on their part to establish standing. Assuming the respondent was acting in trade or commerce as I have concluded a trial judge would be likely to hold, the community to whom it made representations is entitled to expect it comply with those norms. I do not, of course, suggest that it did not comply with those norms: that is merely the applicant's assertion at this point and would be for the trial judge to determine if the matter proceeds. By passing the Australian Consumer Law, Parliament clearly intended that these standards be readily enforceable and that their enforcement would be consistent with the public interest. I accept that sometimes a person who seeks to enforce such standards may have a direct commercial interest - and may even be a competitor. In such a case it may well be more appropriate in the context of an application for security for costs to regard the proceedings they bring as no more than ordinary commercial litigation but in this instance no such suggestion can be made of the applicant.

The respective capacity of the parties: proportionality 82 The applicant drew the Court's attention to Gunns Limited v Tasmanian Conservation Trust [2012] TASSC 51. In that case the Supreme Court of Tasmania recognised that the proportionality between the security sought and the total project cost was a relevant factor to take into account. Mr Wood submitted in the present case, the respondent's project has an estimated value of 2 billion. That is its own estimate it seeks an order for security for costs totalling $165,000. The proportion of the estimated overall cost of the project in this case is roughly 0.00825% or approximately half that in the Gunns Case. He submits that no injustice would be done to the respondent in refusing to order security for costs. 83 The court accepts that the proportionality principle has been established in a number of cases. Whatever the estimated value of the respondents project (and I have been unable to find a statement in the evidence which clearly establishes it) the evidence is consistent with the Court concluding that as a proportion of the total costs of the project overall, were it to proceed, any unmet costs in these proceedings would be of trifling significance. Mr Barclay did not suggest otherwise. I accept this to be a relevant factor in favour of the position argued for by the applicant to be weighed in the overall discretionary decision the Court must make.

Conclusions 84 The court must consider and weigh the totality of the circumstances. Some of the factors I have addressed above favour an order being made for security for costs. Others favour the contrary. In the end, applying a broad brush judgement, I am satisfied that I should make an order for security for costs. The considerations that have influenced the court most significantly in that regard are the failure of the applicant to fully disclose its financial position and the fact that it can be understood that the former members of the unincorporated Group (who are now its members) facilitated the applicant's incorporation essentially as a device to avoid their being exposed to the risk that if they pursued this litigation in their own names had costs orders been made against them. 85 However, I am not persuaded I should make the orders sought by the respondent. The orders sought by the respondent would, on the findings I have made, stultify the litigation and prevent a case which I have found to have been brought in the public interest and which has not been held to be without possible legal merit going to trial. 86 I am satisfied that the resources available to the applicant are greater than it put before the court. The evidence establishes that neither the applicant nor its members have made attempts to increase the resources held to satisfy any adverse costs order. Balancing that conclusion I have found that to require the applicant to raise the further funds sought by the respondent would be unrealistic and would lead to the litigation being stultified. 87 I also take into account that the length of the trial will be substantially less than the respondent initially contended for. 88 In the interlocutory proceedings earlier disposed of by this court by its order for summary judgement the parties agreed as between themselves that a reasonable but modest amount for the court to award by way of a global figure for the costs of those proceedings was $7000.00. Those interlocutory proceedings took up substantial court time and preparation from the parties equivalent, in my estimate, to at least a full day. When security for costs is awarded it is rarely a full indemnity even for predictable party and party costs. Given that the length of a trial is now estimated to be no more than five days I am prepared to use the sum of $7000.00 per day as a fair estimate of what is reasonable for this court to award by way of a modest requirement for security for costs. 89 For five days of trial that would amount to $35,000.00. 90 The applicant currently has to hand funds in excess of $20,000. In the absence of any evidence that any part of those funds are due and owing to its counsel or any other party I think it reasonable for the court to expect that the applicant could make payment into court in at least that sum without delay. 91 I also think it reasonable to infer that the members of the applicant have not exhausted their capacity to raise further funds and that given their success in the past in raising funds for their campaign a modest additional amount of money could be raised by them should they decide to continue with these proceedings. 92 Subject to any submissions from counsel regarding the precise terms of these orders I therefore propose to order that the applicant provide security for the respondent's costs of the originating application on the following terms (a) that the applicant make payment into Court of $20,000 within seven days of these orders and (b) a further $15,000 prior to the court allocating a date for the trial of the application and that the application be stayed pending the applicant's compliance with that order. 93 The parties have leave to file short written submissions as to what orders should be made with respect to costs of this application. I certify that the preceding ninety-three (93) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kerr.

REASONS FOR JUDGMENT 1 This is an application by the respondent Hydro-Electric Corporation for the applicant No TasWind Farm Group Inc to provide security for costs. The respondent's application was brought in the same interlocutory proceedings as those in which the respondent sought other relief. In respect of those other issues the court has concluded that the applicant had no reasonable prospects of success in respect of its claim for damages pursuant to s 236 of the Australian Consumer Law and has given summary judgment with costs in favour of the respondent in respect of that aspect of the proceeding: see No TasWind Farm Group Inc v Hydro-Electric Corporation (No 1) [2014] FCA 347. These reasons interrelate with my earlier interlocutory decision but concern only the respondent's seeking security for costs. 2 The respondent seeks orders that the proceedings on the Originating Application be stayed unless security be provided on the following terms: (a) $50,000.00 within 7 days of order; (b) a further $15,000.00 within 14 days of the Respondent filing a defence (since filed); and (c) a further $100,000.00 prior to the Court allocating a date for trial. 3 The respondent says the applicant should not be permitted to burden the respondent with the potential costs of these proceeding were it to be unsuccessful. It submits that the applicant is relevantly impecunious in that it will be unable to satisfy an order for costs were it to lose. It submits that the applicant's case has low prospects of success and argues that the respondent should not be put to needless expense. 4 It also submits that the applicant, as an incorporated association, is merely a nominal plaintiff and that it is its members who stand to benefit from the litigation. It submits that they elected to incorporate the applicant strategically to avoid personal liability. 5 In response the applicant submits that there were good reasons other than avoiding personal liability which motivated the members of the previous unincorporated Group to incorporate the applicant and that in any event the alternative to conducting this litigation through an incorporated association would have been to conduct the action as a representative proceeding which would have been inconvenient, slow and organisationally inefficient. The applicant submits that this litigation should be regarded as a public interest proceeding. It submits that the Australian Consumer Law is legislation which was intended to confer rights irrespective of standing on parties in order to enforce federally legislated norms of corporate behaviour. It denies that those who are members of (or who are otherwise standing behind) the applicant have any relevant personal interests distinct from the public interest articulated by the applicant. It says that its objects specifically envision it taking action of the kind now before the court. 6 The applicant accepts that its resources will not enable it to meet in full any costs order if it is unsuccessful following a hearing but submits that it has obtained pledges in the sum of $20,000.00 towards any such adverse order. It submits that any shortfall in costs that the respondent would suffer if it won would be derisory by comparison with the overall cost of the project and declining to order security for costs would not work any substantial injustice to the respondent. 7 It submits that if the court was to order security for costs in the sum sought by the respondent ($165,000.00) that would effectively terminate these proceedings.

Consideration 8 The law that governs an application for security for costs is well settled and is not in dispute. A decision to make such an order involves the exercise of discretion and is to be exercised where it is necessary or appropriate to the performance of the functions of the court. As was held by Holt AsJ in Tasmanian Conservation Trust v Gunns Ltd [2012] TASSC 18 (upheld on appeal), there are no rigid rules of practice that must be followed. 9 Even if security is ordered it will not necessarily be in the sum sought. The court's power to order security may require a broad-brush approach and a balance between ensuring that adequate and fair protection is provided to the party seeking security and avoiding injustice to the other party: Pathway Investments Pty Ltd v National Australia Bank [2012] VSC 97 at [55] per Davies J. 10 The respondent's written submissions at [10] and [11] dated 4 February 2014 referred the court to the judgment of Kirby J in Meribee Pastoral Industries Pty Ltd v Australian and New Zealand Banking Group Ltd (1998) 193 CLR 502 at [26]: 10. In Meribee, Kirby J noted that while it would be wrong to attempt to hedge the jurisdiction by adherence to rules and practices, there are certain factors which the Court should consider. They included: whether a party could meet an adverse costs order; whether the litigation raised issues of general public importance apart from the interests the plaintiff; that a party has limited or no assets in the jurisdiction; and the strength of the plaintiff's case. Kirby J noted that "Doubtless there are as many further considerations as there are cases". 11. The governing consideration is what the justice of the case requires. 11 The applicant accepted those propositions and I proceed on the basis that they conveniently summarise the law that governs the exercise of the discretion that I am called upon to exercise. Where other cases appear to assist I refer to them in the course of these reasons.

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