Philips Electronics Australia Pty. Ltd. v. Matthews [2002] NSWCA 157

Court of Appeal (NSW)|2002-03-20|Before: Mason P, Sheller JA, Hodgson JA

CITATION : Philips Electronics Australia Pty. Ltd. v. Matthews [2002] NSWCA 157 FILE NUMBER(S) : CA 40504/01 HEARING DATE(S) : 20 March 2002 JUDGMENT DATE : 29 May 2002

PARTIES : Philips Electronics Australia Pty. Limited - claimant Clive Matthews - opponent JUDGMENT OF : Mason P at 1; Sheller JA at 14; Hodgson JA at 26

LOWER COURT JURISDICTION : District Court LOWER COURT DC10435/00 FILE NUMBER(S) : LOWER COURT Karpin DCJ JUDICIAL OFFICER :

COUNSEL : Mr. C. Leahy for claimant Mr. K. Andronos for opponent SOLICITORS : Deacons, Sydney for claimant B.A. Chora & Company, Parramatta for opponent CATCHWORDS : PROCEDURE - District Court - Security for costs - Stay of proceedings - Abuse of process - Whether stay can be ordered unless security provided, in cases outside categories in respect of which security may be ordered. LEGISLATION CITED : District Court Act ss.8, 9, 156, 161 District Court Rules Part 40 Anthony Hordern & Sons Ltd. v. Amalgamated Clothing & Allied Trades Union of Australia (1932) 47 CLR 1 Australasian Memory Pty. Ltd. v. Brien (2000) 200 CLR 270 Barton v. The Queen (1980) 147 CLR 75 Castanho v. Brown & Root (UK) Ltd. [1981] AC 557 David Grant & Co. Pty. Ltd. v. Westpac Banking Corp (1995) 184 CLR 265 Director of Public Prosecutions v. Shirvanian 91998) 44 NSWLR 129 Doyle v. The Commonwealth (1985) 156 CLR 510 Federal Commission of Taxation v. Citibank Ltd. (1989) 85 ALR 588 Grassby v. The Queen (1989) 168 CLR 23 Jago v. District Court of New South Wales (1989) 168 CLR 1 CASES CITED: John Fairfax & Sons Limited v. Police Tribunal of NSW (1986) 5 NSWLR 465 John Fairfax Group Ltd. v. Local Court of New South Wales (1992) 26 NSWLR 131 Lane v. Willis [1972] 1 WLR 326 Melville v. Craig Nowlan & Associates Pty. Ltd. [2002] NSWCA 32. Merribee Pastoral Industries Pty. Ltd. v. ANZ Banking Group Ltd. (1998) 193 CLR 502 Morris v. Hanley [2000] NSWSC 957 Morris v. Hanley [2001] NSWCA 374 Palmer v. Clarke (1989) 19 NSWLR 158 Pearson v. Naydler [1977] 1 WLR 899 Powell v. Taylor (1885) 31 Ch D 34 Rajski v. Computer Manufacture & Design Pty. Ltd. [1982] 2 NSWLR 443 S v S [1972] AC 24 DECISION : 1. Leave to appeal granted 2. Subject to a Notice of Appeal being filed within 7 days, appeal allowed; 3. Orders of Karpin DCJ made on 21st June 2001 set aside, and matter remitted to the District Court for further consideration in accordance with these reasons as to whether the second order sought in the Notice of Motion should be granted 4. Opponent to pay claimant's costs of the appeal, and to have a suitors fund certificate if otherwise entitled.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40504/01 DC 10435/00

MASON P SHELLER JA HODGSON JA

Wednesday 29 May 2002 PHILIPS ELECTRONICS AUSTRALIA PTY. LTD. V. MATTHEWS Judgment 1 MASON P: I have had the advantage of reading the judgments of Sheller JA and Hodgson JA. 2 Hodgson JA sets out the relevant provisions of the District Court Act and Rules. I agree with his reasons and the orders he proposes. 3 The question at issue is whether the District Court, in the course of exercising its jurisdiction to determine a civil claim, has power to order a stay until security for costs is provided, where the plaintiff's circumstances fall outside the categories specifically addressed in Pt 40 r 1 of the District Court Rules. 4 The language of s156(1) supports the existence of such a power. 5 Section 156 does not confer power to direct the giving of security in terms. But it does, in my view, empower a judge to impose a stay and to make the giving of security a condition of its removal. 6 Sheller JA explains why, in his view, it is not open to the District Court to exercise the power in question, notwithstanding the terms of s156(1). I acknowledge the force of what he has written. Nevertheless, for the reasons which follow, I have concluded that Pt 40 r 1 does not restrict the categories of plaintiffs against whom a stay may be ordered until security for costs is provided. (This is not to deny that Pt 40 r 1 might operate somewhat as a code in relation to the five categories of plaintiff which it addresses (cf eg r 1(3)), although I express no concluded view on that matter.) 7 The generality of the language of s156(1) argues against unexpressed limitations (see Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 279 [17]). So too does the learning as to the amplitude of the District Court's implied power to prevent abuse of process (see Director of Public Prosecutions v Shirvanian (1998) 44 NSWLR 129 at 133-5). 8 There would be a problem of validity if Pt 40 r 1 was inconsistent with the statute. It does not purport to be. Rather, it confers in positive terms particular powers which might otherwise be unavailable to an inferior statutory court of limited jurisdiction. In any event, the rule does not seek to confine the scope of s156(1) in any presently relevant circumstances. 9 The rule-making power in s161(1) expresses itself in enabling terms. That is not to assert that rules of practice and procedure may not inform, guide, channel, confine or curtail powers that might otherwise be capable of exercise by a court. After all, that is a function of rules and laws of every kind. But a rule of court cannot rise higher than or contradict the statute under which it is made. Here, the statute (s156) stands paramount; and the rule (Pt 40 r 1) does not relevantly intrude. 10 I do not regard Doyle v The Commonwealth (1985) 156 CLR 510 as authority to the contrary. In the first place, the passage at 518 addresses a submission that the Victorian Supreme Court had an inherent power or jurisdiction to dispense with service of a motion for committal. No reliance was placed upon Order 52 r 3 of the Victorian Supreme Court Rules (to which Sheller JA refers). Indeed, the passage (at 518) which Sheller JA and Hodgson JA quote acknowledges the propriety of reliance upon an express power of dispensation from rules. 11 Second, I do not view reliance upon s156 in a case such as the present as in any way infringing a principle of avoiding the conditions upon which a power is conferred, which was the gravamen of the problem in Doyle. As I have endeavoured to explain Pt 40 r 1 of the District Court Rules is not in this category, at least as regards the respondent. It does not purport to deal exhaustively with the power to grant a stay or even the power to order the giving of security for costs. At most it deals with five categories of plaintiff and the present case is not one of them. My reading of the passage in Doyle suggests that the High Court construed the Victorian rule in question as imposing a condition of personal service upon the power. 12 Third, the power actually conferred by Pt 40 r 1(2) is the power to "order the five categories of plaintiff to give such security as the Court thinks fit". An order for a stay on terms is different in form and substance. A stay order may seek to obtain by indirect means that which cannot be achieved by direct order (see eg Lane v Willis [1972] 1 WLR 326 at 332, S v S [1972] AC 24 at 46, Barton v The Queen (1980) 147 CLR 75 and the cases dealing with a stay based upon forum non conveniens). In some circumstances, a stay may be granted to prevent an abuse of process stemming from actual compliance with rules of court (Castanho v Brown & Root (UK) Ltd [1981] AC 557; Campbell, Rules of Court, 1985 pp 234-5). 13 None of this suggests that a judge of the District Court has a free-wheeling discretion to ignore the gravitational force of Pt 40 r 1. The cases in which the power to order a stay conditional upon the grant of security in categories falling outside the five addressed in that rule remain exceptional (as Hodgson JA points out). It is of course open to the District Court to amend Pt 40 to enlarge or restrict the exceptional power addressed in the present case. 14 SHELLER JA: I have had the benefit of reading in draft Hodgson JA's reasons for judgment. His Honour has set out the relevant parts of the District Court Act 1973 and the District Court Rules made by the Rule Committee pursuant to s161(1) of that Act. 15 Section 156(1) of the Act does not express any limit on the power of the Court to order that proceedings be stayed or any limit on the terms the Court may impose in ordering a stay. Subsection (2), the point of which escapes me, suggests that the power to stay may be enlarged by other provisions of the Act or any other Act or rule of law. 16 Section 161(1) provides for the making of rules "not inconsistent with the Act". Rules may be made with respect to any matter that by the Act or any other Act or law is required or permitted to be prescribed by rules or that is necessary or convenient to be prescribed by rules. The purposes of the rules are the exercise by the Court of its civil jurisdiction under the provisions of the Act or any other Act or law for the carrying of any such provisions into effect. Particular mention is made of providing for procedure and practice to be followed in the Court. 17 Section 161(2) provides that, without limiting the generality of sub(1), rules may be made under subs(1) for or with respect to (j) prescribing the cases or circumstances in which security may be required in relation to proceedings. 18 Part 40 r2 of the Rules enables the Court to order that a plaintiff gives security for the costs of the defendant of and incidental to proceedings "and that the proceedings be stayed until the security is given". The rule on its face appears to limit the circumstances in which the Court may order security to those mentioned in sub-para (a), (b), (c), (d) and (e). The one relevant here is (e): "that there is reason to believe that a plaintiff being a body corporate will be unable to pay the costs of the defendant if ordered to do so". No doubt in so limiting or appearing to limit that circumstance to that where the plaintiff is a body corporate, the Rule Committee was mindful of the rule that generally "poverty is no bar to a litigant": Powell v Taylor (1885) 31 Ch D 34 at 38. 19 The problem is that s161(2)(j) allows rules to be made which "prescribe", that is to say, lay down or ordain the cases or circumstances in which security may be required. The present case and the present circumstances are not those so prescribed in which security may be required. (The language is similar to that of s124(1)(m) of the Supreme Court Act 1970 and see Pt 53 r2 of the Supreme Court Rules.) But does the Act by this means limit the power of the Court under s156(1) to order that proceedings be stayed on any terms including terms that security be given? Part 1 r5(2) of the Rules enables the Court if it thinks fit on terms to dispense with compliance with any of the requirements of the Rules. 20 Doyle v The Commonwealth (1985) 156 CLR 510 concerned a challenge to an order for committal made on an ex parte application. Order 53 r3 of the Victorian Supreme Court Rules governed the power of the court to proceed to hear ex parte a motion for committal. At 518 the High Court said: "However, with the greatest respect, a judge cannot dispense with the requirements of the Rules of the Court unless the Rules give him power to do so, and when a power is expressly conferred on the court subject to a condition, a judge cannot, by relying on inherent powers, escape from the necessity of ensuring that the condition has been fulfilled." The appellant accepts that the District Court had no inherent power to make the order sought; compare Rajski v Computer Manufacture and Design Pty Ltd (1982) 2 NSWLR 443 at 447 and see John Fairfax & Sons Limited v Police Tribunal of New South Wales (1986) 5 NSWLR 465 at 476. When Doyle was decided Or 70 r1A of the Rules of the Supreme Court of the State of Victoria in Chapter 1 "General Rules of Procedure and Civil Proceedings", which included Or 52 r3, enabled the court or a judge "to relieve any parties from the consequences of non compliance with any of these Rules or with any rule of practice for a time being enforced." Part 1 r12 of the Supreme Court Rules and importantly Pt 1 r5(2) of the District Court Rules speak only of dispensing with compliance with any of the requirements of the Rules. Though no mention was made in Doyle of Or 70 r1A of the Victorian Supreme Court Rules quite clearly the High Court did not consider it a rule which enabled a judge to dispense with the requirements of the Rules in so far as the rules put conditions of limitation on the court's power. Such rules are directed to non compliance by the parties. In the words of the High Court they do not permit the court to escape from the necessity of ensuring that a condition subject to which a power is expressly conferred on the court has been fulfilled. The power conferred by Pt 40 r2 is made subject to the court being satisfied of the matter set out in one of the paragraphs (a) to (e). 21 In David Grant & Co Pty Ltd (receiver appointed) v Westpac Banking Corporation (1995) 184 CLR 265 at 276, Gummow J, with whose judgment the remainder of the Court agreed, cited Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7 where Gavin Duffy CJ and Dixon J said: When the Legislature explicitly gives a power by a particular provision which prescribes the mode in which it shall be exercised and the conditions and restrictions which must be observed, it excludes the operation of general expressions in the same instrument which might otherwise have been relied upon for the same power. 22 Gummow J continued: McTiernan J (20-21) spoke to the same effect. This reasoning has been applied in subsequent decisions of this Court.

His Honour set out several of them. 23 I think like principle applies here. The legislature intended that the Rule Committee prescribe the cases and circumstances in which security may be required in relation to proceedings. When made a rule must be published and notice of it laid before each House of Parliament, either of which may by resolution disallow the rule; see ss 39-41 of the Interpretation Act 1987 and the definition of "statutory rule" in s21. Once the Rule Committee prescribes the cases and circumstances the general expression in s156(1) cannot operate or be called in aid to extend or vary the cases or circumstances. 24 For my own part I do not think that the power to dispense with compliance permits the judge not to comply with the conditions imposed by the Rules for the grant of security. Nor do I think, in light of the reasoning adopted in the cases to which I have just referred, it is possible to side-step those conditions by relying on the general power to stay proceedings upon terms. Effectively that makes a mockery of the limits on the exercise of the power prescribed by the Rules. 25 I would grant leave to appeal but, in my opinion, the appeal should be dismissed with costs. 26 HODGSON JA: On 21st June 2001, Karpin DCJ dismissed an application for security for costs brought by the claimant Philips Electronics Australia Pty. Ltd. against the opponent Clive Matthews. The claimant seeks leave to appeal from that decision. The matter was argued in this Court on the basis that, if leave be granted, the Court would proceed to determine the appeal.

CIRCUMSTANCES 27 On 21st December 2000, the opponent commenced proceedings in the District Court, seeking damages from the claimant for alleged misleading conduct in relation to the acquisition by the company Accalade Pty. Ltd. (Accalade) of a certain business from the claimant. The opponent claimed damages alleged to flow from the incurring by the opponent of legal expenses, the liability of the opponent under certain guarantees, and loss of income which the opponent would have earned as the New South Wales Service Manager of the claimant. 28 The claimant applied by Notice of Motion returnable on 18th May 2001 for the following orders: 1. That the plaintiff provide security for the defendant's costs. 2. That the proceedings be stayed until security for costs is provided. 29 The application was supported by affidavits which the claimant alleged supported two propositions: (1) the proceedings arose from identical facts and circumstances as dealt with in Supreme Court litigation between Accalade and the claimant, which was ultimately settled on terms recorded in a deed dated 20th October 2000 pursuant to which the claimant paid Accalade's liquidator $350,000.00, with judgment being entered in favour of the claimant; (2) the opponent has divested himself of assets, specifically by joining in a transfer dated 4th September 2000 from himself and his wife to his wife of real estate for a stated consideration of $95,000.00. 30 The affidavits also gave evidence of other liabilities of the opponent arising out of the liquidation of the opponent's companies including Accalade, such liabilities including a liability of over $500,000.00 to ANZ Banking Group Limited under a guarantee; and evidence that the likely costs of the claimant of the proceedings were about $70,000.00. 31 An affidavit filed on behalf of the opponent asserted that the opponent did not own a house or car or any other assets of any substance; that his income was about $78,000.00 per annum gross; that he had no substantial savings; and that, if he was required to provide security for costs, he would be unable to do so, thereby stultifying the proceedings.

RELEVANT STATUTORY PROVISIONS AND RULES 32 The matter was decided by the primary judge on the basis that the District Court did not have power to make the orders sought. The statutory provisions and rules relevant to this matter are as follows. 33 First, there are the following sections of the District Court Act 1973, namely ss.8, 9, 156, 161(1) and 161(2)(j): 8(1) There shall be a District Court of New South Wales. (2) The Court shall be a court of record. (3) There shall be a seal of the Court, and any document required by or under this or any other Act or law to be sealed or stamped with the seal of the Court shall be so sealed or stamped.

9(1) The Court shall have a civil jurisdiction, consisting of: (a) its jurisdiction conferred by Part 3, and (b) the jurisdiction conferred by or under any other Act or law on the Court, not being its jurisdiction referred to in subsection (2). (2) The Court shall have a criminal jurisdiction, consisting of: (a) its jurisdiction conferred by Part 4, and (b) the jurisdiction conferred by or under any other Act or law on the Court in its criminal jurisdiction.

156(1) At any stage of any proceedings, the Court may, on terms, order that the proceedings be stayed. (2) Nothing in subsection (1) limits any power conferred on the Court or a Judge by any other provision of this Act or by any other Act or rule of law to stay proceedings.

161(1) The Rule Committee may make rules, not inconsistent with this Act, for or with respect to any matter: - that by this Act, or by any other Act or law, is required or permitted to be prescribed by rules, or - that is necessary or convenient to be prescribed by rules, for the purposes of, or in connection with, the exercise by the Court of its civil jurisdiction under provisions of this Act, or of any other Act or law, or for carrying any such provisions into effect, and in particular for or with respect to: (a) providing for the procedure (including the method of pleading) and the practice to be followed in the Court in all proceedings in which, or with respect to which, the Court has for the time being civil jurisdiction, and regulating or providing for any matters incidental to, or relating to, any such procedure or practice, (b) subject to the provisions of any other Act, regulating and prescribing the procedure and practice to be followed in connection with the transfer of any proceedings to the Court from any other court or from the Court to any inferior court, and, where proceedings are transferred to the Court, the procedure and practice thereafter to be followed in the Court, and (c) subject to the provisions of any other Act, regulating and prescribing the procedure and practice to be followed in connection with the institution of any appeal to the Court, including: (i) the time within which, and the manner in which, the appeal is to be instituted, and (ii) the procedure and practice thereafter to be followed in the Court.

(2) Without limiting the generality of subsection (1), rules may be made under that subsection for or with respect to: … (j) prescribing the cases or circumstances in which security may be required in relation to proceedings, the form of any such security, and the manner in which, and the person to whom, it is to be given, 34 Next, there are the following provisions of the District Court rules, namely Pt.1 r.5 and Pt.40 r.1: Part 1 5(1) Subject to subrule (2), the practice in the Court shall be the practice provided by the Act or the rules. cf DCR r 444. (2) The Court may if it thinks fit on terms dispense with compliance with any of the requirements of the rules, either before or after the occasion for the compliance arises. SCR Pt 1, r 12. (3) The general practice of the Court prescribed by the rules shall apply to all proceedings authorised by any existing or future Act to be commenced or taken in the Court, except in so far as that practice is inconsistent with any provision of or under any future Act. DCR r 443.

Part 40 1(1) In this rule: (a) references to a plaintiff extend to any person who makes a claim for relief in any proceedings, and (b) references to a defendant extend to any person against whom a claim for relief is made in any proceedings. SCR Pt 53, r 1. (2) Where, in any proceedings, it appears to the Court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside the Commonwealth of Australia, (b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that that plaintiff will be unable to pay the costs of the defendant if ordered to do so, (c) subject to subrule (3), that the address of a plaintiff is not stated or is mis-stated in his originating process, (d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings, or (e) that there is reason to believe that a plaintiff being a body corporate will be unable to pay the costs of the defendant if ordered to do so, the Court may if it thinks fit order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the security is given. cf SCR Pt 53, r 2. (3) The Court shall not order a plaintiff to give security by reason only of subrule (1) (c) if it appears to the Court that the failure to state the address of the plaintiff or the mis-statement of the address was made without intention to deceive. (4) Where the Court orders a plaintiff to give security for costs, the security shall be given in such manner, at such time, and in such terms (if any) as the Court may by order direct, and in the absence of any such direction shall be given to the satisfaction of the registrar. cf SCR Pt 53, r 3. (5) Where a plaintiff fails to comply with an order under this rule, the Court may, on terms, order that any claim made by the plaintiff for relief in the proceedings be struck out or that the proceedings be dismissed. SCR Pt 53, r 4.

DECISION OF THE PRIMARY JUDGE 35 The primary judge noted concessions by the claimant that the opponent was not within any of the categories set out in Pt.40 r.1(2), and that the District Court did not have inherent jurisdiction to make an order for security for costs. 36 The primary judge noted submissions that, while the opponent's pleadings were not an abuse of process in the accepted sense, they took on the colour of abuse of process because they were harassing (in that they could have been part of the Supreme Court proceedings) and weak, and because the opponent has placed assets beyond the reach of creditors. 37 The primary judge noted the claimant's submissions that ss.9 and 156 invested the District Court with adequate power to make the orders sought, and that Pt.40 did not deprive the Court of that power; and the claimant's reliance on Morris v. Hanley [2000] NSWSC 957 and Rajski v. Computer Manufacture & Design Pty. Ltd. [1982] 2 NSWLR 443. 38 The primary judge held that, if the claimant could establish that the proceedings were an abuse of process, this would attract the Court's power to grant a stay; and she continued: There are no express statutory or regulatory powers which empower the court to make the order sought. Part 40 clearly defines the circumstances in which a natural person may be required to provide security for costs.

The only rational inference which can be drawn from a reading of those provisions is that other natural persons were intended to be excluded from the provisions. In the circumstances in which the regulatory power exercised pursuant to the legislation has specifically limited the class of litigants to whom the provisions will apply and where the application of those provisions, if extended to the plaintiff, would have the potential to stultify the proceedings and thus potentially deprive the plaintiff of his right to pursue his claim, the court is bound to give a narrow interpretation to any powers or implied powers which are argued for.

I am satisfied that the court does not have an implied power available to it, outside the expressed statutory powers, in the absence of which the court has no jurisdiction vested in it to make the orders sought.

PROPOSED GROUNDS OF APPEAL 39 The draft Notice of Appeal contains the following ground: The judge erred in finding that the District Court of New South Wales does not have power to make an order for security for costs against a natural person who does not fall within the categories set out in Part 40 Rule 1(2) of the District Court Rules. 40 However, in submissions Mr. Leahy made it clear that he was contending for a power to stay proceedings until security for costs is given, rather than a power to order security directly.

SUBMISSIONS ON APPLICATION 41 Mr. Leahy for the claimant submitted that s.156 did give the District Court power to stay proceedings on terms, and this extended to staying proceedings unless and until security for costs was provided. This power was not limited to cases where Pt.40 authorised an order for security for costs. He submitted that, just as the Supreme Court had an inherent power to make an order for security for costs outside the circumstances set out in the Supreme Court rules Pt.53 r.2 (Rajski, Morris v. Hanley), so also the District Court had an implied power under s.156 to order security for costs outside the circumstances in District Court rule Pt.40 r.1: cf.Grassby v. The Queen (1989) 168 CLR 1 at 16, Jago v. District Court of New South Wales (1989) 168 CLR 23 at 25ff and 74ff, John Fairfax Group Ltd. v. Local Court of New South Wales (1992) 26 NSWLR 131 at 161. 42 Mr. Andronis for the opponent submitted that there was no express power in the District Court Act to order security for costs, unlike the situation in relation to the Federal Court or the Land & Environment Court: cf. Melville v. Craig Nowlan & Associates Pty. Ltd. [2002] NSWCA 32. The District Court had no inherent power to order security for costs: see John Fairfax & Sons Limited v. Police Tribunal of NSW (1986) 5 NSWLR 465, Palmer v. Clarke (1989) 19 NSWLR 158 at 166-7, 173. In that way, the District Court was different from superior courts, which do have inherent powers or jurisdiction: see Rajski, Merribee Pastoral Industries Pty. Ltd. v. ANZ Banking Group Ltd. (1998) 193 CLR 502 at 513. 43 Mr. Andronis submitted that there was no provision of the District Court Act which carried an implied grant of power to order security for costs. Indeed, the combined effect of s.161 and Pt.40 r.1 was to make it clear that the circumstances specified in that rule are the circumstances, that is, the only circumstances, in which security can be ordered. At common law, there was a well-established rule that a natural person who sues will not be ordered to give security for costs, however poor he is: Pearson v. Naydler [1977] 1 WLR 899 at 902. This rule can be displaced only by inherent jurisdiction or clear statutory provisions: cf Federal Commissioner of Taxation v. Citibank Ltd. (1989) 85 ALR 588 at 614, Melville at par.110. 44 Mr. Andronis submitted that s.156 could not be the source of an implied power to order security, because a power to order security was not reasonably necessary for a power to stay proceedings.

DECISION 45 I accept the submission of Mr. Andronis that the District Court has no inherent jurisdiction or power to order security for costs: see John Fairfax v. Police Tribunal, Palmer v. Clarke. I also accept that there is no express power to order security for costs in the District Court Act, as there is in the case of the Federal Court and the Land & Environment Court. 46 In my opinion also, a power to order the provision of security for costs is not implied in the general grant of jurisdiction to the District Court under ss.8 and 9 of the District Court Act, since it cannot be said that such implication is "necessary", in the sense required to imply such a power. 47 However, in my opinion, apart from any effect that Pt.40 r.1 of the District Court rules might have, s.156 of the District Court Act is wide enough to give the District Court power to make an order staying proceedings unless and until security for costs is given, where the judge considers this reasonably necessary in order to do justice between the parties. In my opinion, it is not a necessary pre-condition for making such an order that the proceedings are an abuse of process, or would be an abuse of process unless security for costs is given. However, I do not think s.156 would empower a District Court judge to make a positive order that security for costs be provided, so as to support punishment for contempt or the striking out of proceedings simply on the basis that this order is not complied with. This may not make a significant difference in the result: on the one hand, it is a usual concomitant of an order to provide security for costs that proceedings are stayed until the order is complied with; and on the other hand, even if the only order made is one staying the proceedings until the provision of security, persistent and long-lasting failure to provide this security could justify striking out the proceedings for want of prosecution. 48 A judge considering whether to stay proceedings under s.156 until security for costs is provided should certainly have regard to the common law rule that a natural person who sues will not be required to give security for costs on the ground of poverty (Pearson v. Naydler), but in my opinion that rule does not mean that there are no circumstances in which a natural person without assets will be required to provide security for costs, or subjected to a stay of proceedings until security is provided. For example, if a person with very substantial assets in New South Wales transferred them all overseas into the name of another person shortly before commencing expensive proceedings, that might possibly be considered sufficient justification to order security for costs (if the court has power to do so in those circumstances), or stay the proceedings until security for costs is provided. 49 The question then is whether the existence of Pt.40 r.1 means that the power to stay proceedings in s.156 cannot be used so as, in substance, to require the giving of security for costs. As noted above, s.161(2)(j) refers to "prescribing the cases or circumstances in which security may be required", possibly suggesting that what is prescribed are to be the only cases or circumstances in which security is to be required. Further, in Doyle v. The Commonwealth (1985) 156 CLR 510 at 518, the following appears in the joint judgment of Gibbs CJ, Mason J, Wilson J, Brennan J and Dawson J: However, … a judge cannot dispense with the requirements of the Rules of Court unless the Rules give him power to do so, and when a power is expressly conferred on the court subject to a condition, a judge cannot, by relying on inherent powers, escape from the necessity of ensuring that the condition has been fulfilled. 50 However, in my opinion the District Court Act and Pt.40 r.1 of the District Court rules do not manifest an intention to preclude the making of an order, that has the practical effect of requiring security for costs, in circumstances other than those referred to in that Rule. 51 Section 161(2) is expressed to be without limiting the generality of subsection (1), and provides that rules may be made "for or with respect to" various topics. A rule made with respect to prescribing the cases or circumstances in which security may be required does not necessarily have to prescribe the only cases or circumstances in which security may be required. Part 40 r.1 itself does not purport to do so. It purports to set out a number of circumstances in which such an order can be made, without either expressly or impliedly stating that no order having the effect of requiring security for costs may be made in any other circumstances. Plainly, the rule is not intended to displace other statutory sources of orders for security for costs, such as the corporations legislation. 52 Section 124 of the Supreme Court Act is in similar terms to s.161 of the District Court Act, and Pt.53 r.2 of the Supreme Court rules is in similar terms to Pt.40 r.1; and it is accepted that those provisions do not displace the inherent jurisdiction of the Supreme Court to make orders for security for costs in other circumstances: see Rajski. (Note that Morris v. Hanley [2000] NSWSC 957 was overturned in Morris v. Hanley [2001] NSWCA 374; but the relevant principle was not questioned). I think this supports the view that the similar provisions concerning the District Court do not displace any power the District Court may have under s.156 to stay proceedings if security is not granted, where such a stay is considered necessary to do justice between the parties. 53 I think it would be reasonable to take the Rule as indicating the usual circumstances in which security for costs would be ordered, and also reasonable not to exercise the power to stay proceedings under s.156, until security is given, unless a strong case is made out that this course is necessary in the interests of justice. However, the primary judge, in suggesting that it would be necessary to establish that the proceedings are an abuse of process, put the test too high. 54 For those reasons, in my opinion leave to appeal should be granted and the appeal should be allowed, and the matter remitted to the District Court for further consideration, in accordance with these reasons, as to whether the second order sought in the Notice of Motion should be granted. 55 In expressing the views I have, I am certainly not giving any indication that this would be an appropriate case to grant a stay unless and until security for costs is given. The circumstances may or may not be sufficient to justify that. The transfer to the opponent's wife of a property for $95,000.00 may have been a legitimate transaction, and in any event, may not have substantially altered the financial circumstances of the opponent so as to make him less able to pay any costs that might be ordered against him. The circumstance that these proceedings arise out of the same transactions as the previous Supreme Court proceedings does not necessarily make them either an abuse of process or inappropriately harassing of the claimant: although Accalade was a company controlled by the respondent, and although apparently the Supreme Court proceedings were commenced at a time when the opponent still had control of the company, the proceedings were taken over by a liquidator, and it may be that the opponent has a claim for damages quite separate and distinct from the claim of Accalade. Finally, I note that I am not in any position to express any view on whether the opponent's case against the claimant is a strong or a weak one. 56 For the reasons I have given, I propose the following orders: 1. Leave to appeal granted. 2. Subject to a Notice of Appeal being filed within 7 days, appeal allowed. 3. Orders of Karpin DCJ made on 21st June 2001 set aside, and matter remitted to the District Court for further consideration in accordance with these reasons as to whether the second order sought in the Notice of Motion should be granted. 4. Opponent to pay claimant's costs of the appeal, and to have a suitors fund certificate if otherwise entitled. **********

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