Powell Navel Pty Ltd as trustee for the Irwin Superannuation Fund v Airline Services Pty Ltd - [2023] FCA 279 - FCA 2023 case summary — Zoe

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Powell Navel Pty Ltd as trustee for the Irwin Superannuation Fund v Airline Services Pty Ltd

[2023] FCA 279

Federal Court of Australia|2023-03-29|Before: McEvoy J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2023-03-29

Before

McEvoy J

Source

Original judgment source is linked above.

Judgment (16 paragraphs)

[1]

Background and Procedural History 5 For reasons which it is unnecessary to explain on this application, there has been a division in the conduct of the proceeding between Talbert and the other applicants. Nonetheless, both Talbert and the other applicants opposed Mr Ko's application before the Registrar principally on the basis of delay. They contended that the application for security for costs was an attempt to re-litigate, re-agitate or hear afresh an application for security that Mr Ko had made previously in September 2019, which was dismissed. A Registrar determined that delay in bringing the September 2019 security application was fatal to it. 6 Mr Ko submitted on the present application for security that circumstances had changed. He contended that after delays occasioned by uncertainties about aspects of the applicants' pleadings, and delays in the provision of security by the applicants to the second respondent, the trial date had been vacated to enable the determination of a dispute between Talbert and the applicants' solicitors. Because that dispute was yet to be resolved, and a new trial date would need to be set once it was resolved, Mr Ko submitted that the proceeding was at a turning point and that in this context he would suffer real prejudice if security was not ordered. 7 The Registrar accepted that a significant reason for whatever delay there had been could be attributed to the fact that the proceeding had been stayed against the second respondent for extended periods pursuant to security for costs orders which had been made and not satisfied. The Registrar's reasons granting Mr Ko's second application for security were essentially that there was no impediment to Mr Ko making a fresh application for security for costs, that the delay in bringing the application was not inordinate or substantial and was susceptible of explanation, that there was no evidence of any actual prejudice that the applicants would suffer if a security for costs order was made, and that there could be no reliance by the applicants on "presumed" prejudice. 8 Insofar as the quantum of the security was concerned, the Registrar disagreed with the calculations propounded by Mr Ko, and for reasons he explained ordered that an amount of $185,000 be provided to Mr Ko by the applicants by way of security in the form of a bank guarantee.

[5]

The other applicants' submissions 16 The other applicants submit that the Registrar erred in granting Mr Ko's application for security in the following ways: (a) by failing to refuse the application because it was brought too late (having been brought after the September 2019 application which was itself refused because it was brought too late); (b) by failing to refuse the application in the circumstances where the delay was inordinate and unexplained, with no material change in circumstances; (c) by failing to find that there was actual prejudice to the applicants caused by ordering security, namely, their continued prosecution of the claim absent any further application brought by Mr Ko for security or any announcement of an intention to bring such a claim until 15 March 2022; (d) by not applying established principles regarding the inherent prejudice to claimants if an application for security for costs is brought late in proceedings; (e) by failing to find that significant resources of the applicants were expended on advancing their claims in the proceeding before the security application was brought; (f) by finding that a significant portion of Mr Ko's delay was attributable to the stay of the proceeding, whereas there was delay before the stay and there was no notification by Mr Ko during the period of the stay that he intended to make the security application once the stay was lifted; and (g) by failing to have any or any sufficient regard to principles governing a re-agitated second interlocutory application when the first had been refused (and absent a material change in circumstances). 17 The other applicants also submit that from September 2019 to 20 May 2022 they incurred nearly $700,000.00 in costs, and by 20 May 2022 they had incurred $2,149,962.57 in costs and disbursements. Thus they contend that they have suffered significant prejudice by preparing the matter for trial while Mr Ko delayed making the second security application. 18 In relation to apportionment, the other applicants contend that if security is ordered, Talbert should be required to make the relevant payment because it has not previously provided security whereas the other applicants have provided some $529,735.79 by way of security in favour of the second respondent.

[6]

Mr Ko's submissions 19 In opposing the review application and pressing his application of 22 April 2022 for security for costs in the sum of $374,543, Mr Ko submits that: (a) the applicants' position relies on an erroneous exercise of the relevant discretion, is at odds with Full Court authority, and pays insufficient regard to the current facts and circumstances of the proceeding; (b) the discretion to order security is broad, must be exercised judicially, and aims to achieve a balance that "adequate and fair protection is provided to the defendants, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings": Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470 (Giles J); All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Ltd [2020] FCA 840 at [42] - [44] (Allsop CJ); (c) whether or not there has been delay does not provide a conclusive answer to the way the discretion is to be exercised, but it is a factor to be taken into account in the balancing exercise; (d) the proper exercise of the discretion requires consideration of the full context, including the effect of delay: All Class at [42]-[44] (Allsop CJ); PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [11] (Bell P and Simpson AJA); (e) it cannot simply be presumed that delay is prejudicial: United Commercial Projects Pty Ltd v PHHH Investments No2 Pty Ltd [2019] VSCA 192 at [39] (Whelan JA); PPK at [11] (Bell P and Simpson AJA); (f) the prejudice for him, if security is not ordered, is the real prospect that he would never recover his trial costs if he succeeds against the applicants; (g) the only prejudice occasioned by delay is that he would be denied the benefit of security for past costs; (h) there is no evidence to establish that any delay has caused any corresponding offsetting prejudice to the applicants; and (i) there is no evidence that the applicants would be unable to meet any order for security or that such an order would stultify the proceedings or otherwise cause prejudice to the applicants. 20 Mr Ko also contends that the September 2019 security decision did not establish a res judicata and was determined at a different point in the proceeding, on different facts, and in different circumstances. He submits that the applicants' position misconceives how the discretion should operate in the face of changed facts and circumstances.

[8]

The authorities 25 The principles governing the determination of an application for security for costs are uncontroversial. 26 In All Class, Allsop CJ essayed the relevant principles at [40] - [43] as follows: Where the applicant is a corporation, the Court is empowered to order security for costs pursuant to s 1335 of the Corporations Act if "it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant". Once this threshold is met, the Court will turn to the matters relevant to the exercise of its discretion to order security for costs: Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65; 98 ACSR 301. Section 56 of the Federal Court of Australia Act does not expressly impose any threshold to be met before the Court considers the various discretionary matters. However, the applicant's inability to pay the costs of the respondent remains an important consideration in the exercise of the Court's discretion. The Court's discretion to require the provision of security for costs is broad and the factors informing the exercise of that discretion cannot be stated exhaustively. The only limitation is that the discretion be exercised judicially: Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCAFC 29; 2 FCR 1 at 3. The matter which lies at the heart of the discretion is one of fairness, both in terms of whether security should be granted, and if so, in what amount: Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 at 21 [92]. The Court aims to achieve a "balance between ensuring that adequate and fair protection is provided to the defendants, and avoiding injustice to an impecunious plaintiff by unnecessarily shutting it out or prejudicing it in the conduct of the proceedings": Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 at 470 (Giles J). The Court's discretion should be exercised having regard to all of the circumstances of the case (see Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] HCA 41; 193 CLR 502 at 513 [26] (Kirby J)). There are a number of well-established factors relevant to the Court's exercise. These include (see KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; 56 FCR 189 at 197-198 per Beazley J): whether the application for security for costs has been brought promptly; the strength and bona fides of the applicant's case; whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim; whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate; and whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security. (Emphasis added) 27 Similar statements of principle are set out in Kayler-Thomson v Colonial First State Investments Ltd [2020] FCA 1867 at [8] (Beach J), Abbott v Zoetis Australia Pty Ltd (No 2) (2019) 369 ALR 512 at [15] (Lee J) and Concrete Mining Structures Pty Ltd v Cellcrete Australia Pty Ltd (No 2) [2016] FCA 360 at [13] (Edelman J). 28 Further, in relation to delay, in All Class the Chief Justice said as follows at [58]: Applications for security for costs ought to be brought promptly. Precisely how any delay in applying for security for costs will impact on the exercise of the Court's discretion will depend on the prejudice likely to be suffered by the respondent to the application and the reasons, if any, for the delay in applying for security: see Jianshe Southern Pty Ltd v Get Motor Cycles Pty Ltd (No 3) [2007] FCA 1078 at [30] (Besanko J). 29 In Jianshe Southern Pty Ltd v Get Motor Cycles Pty Ltd (No 3) [2007] FCA 1078 at [30] Besanko J observed: There are other authorities which suggest that the weight to be attached to delay by an applicant for security will depend on whether there is any prejudice to the party against whom security is sought (see the authorities referred to in GE Dal Pont, Law of Costs (LexisNexis Butterworths) at [29.129]). For present purposes, I will assume that delay is only of significance if prejudice to the applicant is shown.

[14]

Apportionment 40 I turn finally to the issue of how the $160,000 security amount should be apportioned between the applicants. As has been mentioned, the other applicants contend that Talbert should be responsible for the whole amount, recognising that it did not contribute at all to the payment of security for the costs of the second respondent. 41 Talbert's position is that any amount to be paid by way of security should be apportioned between the applicants based on the number of applicants. Talbert submits that there is insufficient information before the Court for an apportionment based on the fact that it did not contribute to the payment of security for the second respondent's costs; although of course it could have filed material on this subject. 42 Notwithstanding the extensive material in paragraphs [14]-[24] of Ms Lynch's 27 September 2022 affidavit on this issue, and accepting that Talbert has not provided any security in favour of the second respondent whereas the remaining applicants have provided security totalling some $529,735.79 in favour of the second respondent, I do not consider that this provides a proper basis for ordering on the present application that Talbert should be responsible for payment of the entire sum. It may be, for example, that the other applicants have rights against Talbert for equitable contribution (see, for example Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109) or other rights. 43 In all the circumstances the obligation to pay the sum ordered by way of security for costs must be regarded as being owed to Mr Ko by both sets of applicants now that there is a division between them. As the obligation to pay must be apportioned between both groups, I take the view in the exercise of my discretion and doing the best I can that a 50/50 apportionment would be appropriate. There will therefore be orders that Talbert give security for Mr Ko's costs in the proceeding in the amount of $80,000 within 30 days, failing which Talbert's proceeding against Mr Ko will be stayed; and that the other applicants give security for Mr Ko's costs in the proceeding in the amount of $80,000 within 30 days, failing which the other applicants' proceeding against Mr Ko will be stayed. 44 If, by operation of these orders, either Talbert's proceeding or the other applicants' proceeding against Mr Ko is stayed, there will be liberty for Mr Ko to apply for the balance of the security owing to be paid to him by the remaining applicants. Mr Ko is entitled to be paid the entire $160,000 awarded to him by way of security for his costs of the proceeding.

Parties

Applicant/Plaintiff:

Powell Navel Pty Ltd as trustee for the Irwin Superannuation Fund

Respondent/Defendant:

Airline Services Pty Ltd

Legislation Cited (3)

Corporations Act 2001(Cth)s 1335

Federal Court of Australia Act 1976(Cth)ss 35A(5), 56

Federal Court Rules 2011(Cth)rr 1.32, 19.01, 39.05(c)

Cases Cited (20)

MCEVOY J: 1 The present applications seek review of a decision of a Registrar of the Court granting the application of the fourth respondent, Mr Byron Ko, for security for costs. On 20 May 2022 the Registrar ordered that the first, second and fifth to tenth applicants provide Mr Ko with security for costs in the amount of $185,000. The second applicant (Talbert Pty Ltd) seeks review of that decision by an application dated 7 June 2022, and the first and fifth to tenth applicants (the other applicants) seek review of the Registrar's decision by an application dated 10 June 2022. These review applications seek to have the orders of the Registrar set aside and Mr Ko's application for security for costs dated 22 April 2022 dismissed. Talbert seeks, in the alternative, that there be an order requiring the obligation to pay security to be divided in equal shares between it and the other applicants. 2 As is well settled, an application for review of a Registrar's orders under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) proceeds as a hearing de novo: see Harris v Caladine (1991) 172 CLR 84; West International Pty Ltd v Ultradrilling Pty Ltd [2008] FCA 1443 at [6] (Gordon J). It is a complete rehearing at which the parties may adduce further evidence: West International at [6]. The court's power under s 35A(5) of the Act extends to reviewing questions of fact and law: Guildford International Group Pty Ltd, in the matter of Aviation 3030 Pty Ltd v Aviation 3030 Pty Ltd [2018] FCA 600 at [1] (O'Callaghan J). 3 Mr Ko opposes these applications and seeks that security be ordered in the manner set out in his interlocutory application dated 22 April 2022 and the accompanying affidavit of Mr Stents sworn on 22 April 2022 (Mr Stents' affidavit). Mr Ko seeks the provision of $374,543 by way of security. 4 For the reasons that follow I have determined that security should be ordered in the amount of $160,000. Talbert will be responsible for paying 50 per cent of that sum, and the other applicants will be responsible for paying the other 50 per cent. In the event the payments are not made the proceeding will be stayed as against Mr Ko. If the entire amount of the security is not provided, Mr Ko will have liberty to apply for the balance of the security owing to be paid.

[2019] VSCA 192

[1984] FCAFC 29

(2019) 369 ALR 512

(2004) 216 CLR 109

(1991) 172 CLR 84