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[2023] ACTCA 9
Court of Appeal (ACT)
2023-02-16
Baker J
Original judgment source is linked above.
Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Quach v ATM Residential Pty Ltd Citation: [2023] ACTCA 9 Hearing Date: 7 December 2022 Decision Date: 16 February 2023 Before: Baker J
Parties: Dr Michael Van Thanh Quach (Appellant) ATM Residential Pty Ltd trading as McGrath North Canberra (Respondent) Representation: Counsel Dr Quach (Appellant) J Moffett (Respondent) Solicitors Self-represented (Appellant) Thomson Geer Lawyers (Respondent) File Number: ACTCA 42 of 2022
Decision under appeal: Court: ACT Supreme Court Before: Chief Justice McCallum Date of Decision: 19 August 2022 Case Title: Quach v ATM Residential Pty Ltd [2022] ACTSC 210
BAKER J: Introduction
This is an application for security for costs by ATM Residential Pty Ltd (“ATM”) against Dr Michael Van Thanh Quach (“the appellant”).
The substantive dispute between the parties arises in proceedings commenced by the appellant in this Court on 10 March 2022 against ATM trading as McGrath North Canberra. In brief, the appellant alleges that in 2019, he inspected a property that was for sale and made an offer for the purchase of that property. The appellant contends that, although he made the highest offer for the property, the property was later sold to another person at a lower price. The relief sought by the appellant includes annulment of the contract of sale of the property; an order that the contract of sale be awarded to him; compensatory damages; interest; and costs.
The appellant’s Statement of Claim dated 8 February 2023 attributed all relevant conduct comprising the complaint to a real estate agent, Mr Michael Fay. The Statement of Claim did not plead that there has ever been any connection between Mr Fay and ATM. Despite this, ATM was the only named defendant on the Statement of Claim.
Shortly after ATM was served with the Statement of Claim, ATM wrote to the appellant and advised that Canberra City Holdings Pty Ltd (“CCH”) t/as McGrath Estate Agents Dickson were the entity responsible for Mr Fay’s employment, that ATM had never employed Mr Fay, and that ATM had not been involved in the sale of the property.
On 19 July 2022, ATM filed an application in the Supreme Court seeking an order that it be removed as a party from the proceedings pursuant to r 230 of the Court Procedure Rules 2006 (ACT); that summary judgment be given for ATM against the appellant pursuant to r 1147 of the Court Procedure Rules; or that an order be made in its favour for security for costs in the sum of $130,000 (“the interlocutory application”).
On 19 August 2022, McCallum CJ determined that ATM should be removed as a party from the proceedings. As there was no other named defendant, her Honour dismissed the proceedings: Quach v ATM Residential Pty Ltd [2022] ACTSC 210. In those circumstances, it was unnecessary for her Honour to consider the alternative relief sought on behalf of ATM.
On 23 August 2022, the appellant filed a Notice of Appeal against McCallum CJ’s decision removing ATM as a party and dismissing the proceedings. On 17 October 2022, the appellant filed an Amended Notice of Appeal. In the Amended Notice of Appeal, the appellant seeks to put further evidence before the Court of Appeal, namely that Mr Fay admitted to working “under the CCH/ATM banner” in relation to the property and “evidence in rebuttal of Affidavit of Craig Ian Chapman.”
The grounds of appeal particularised in the Amended Notice of Appeal are: (i) ATM’s interlocutory application for its removal as a party was filed late and in contravention of the Registrar’s order as to the timing of any application for interlocutory relief. (ii) Ms Suzi Wells, Director of ATM Residential t/as McGrath North Canberra said “that Chris Dixon sold his Property Management rental roll to Ray White Belconnen. Canberra City Holding Pty Ltd was not sold to Ray White Belconnen.” (iii) In answer to a subpoena, Mr Fay admitted to working “under the CCH/ATM banner.”
The Amended Notice of Appeal seeks orders setting aside McCallum CJ’s orders, as well as orders seeking the relief that was claimed at first instance (namely annulment of the contact, the award of the contract to the appellant, compensatory damages, interest, and costs).
On 29 August 2022, the appellant filed a motion seeking a stay of McCallum CJ’s orders. In a judgment delivered on 21 September 2022, Elkaim J dismissed the application for a stay: Quach v ATM Residential Pty Ltd [2022] ACTCA 47. In so holding, his Honour accepted that the appellant’s ground of appeal alleging that ATM had filed its application for interlocutory relief in contravention of the Registrar’s direction was “arguable”. However, his Honour refused the application on the basis that the appellant had not established that, absent the stay, the appeal would be of no effect or utility.
By an Amended Application filed 5 December 2022, ATM seeks an order for security for costs in the sum of $58,500, together with an order for costs on an indemnity, solicitor/client or party/party basis.
Relevant legislation and principles relating to an application for security for costs
In hearing this application, I am sitting as a single judge exercising the powers of the Court of Appeal pursuant to s 37J(1)(k) of the Supreme Court Act 1993 (ACT): Twining v Curtis [2014] ACTCA 19 at [11], citing Hughes v Janrule Pty Ltd (2011) 177 ACTR 1 at [61].
Security for costs for an appeal is not required unless the Court of Appeal otherwise orders: r 5302 of the Court Procedure Rules.
Rule 5001 of the Court Procedure Rules relevantly applies the civil rules relating to security for costs to appellate proceedings. Those rules include r 1900(1) of the Court Procedure Rules, which provides: 1900 Security for costs—application and order (1) On application by a defendant, the court may order the plaintiff to give the security it considers appropriate for the defendant’s costs of the proceeding. ...
Rule 1901 lists a number of circumstances in which the Court may make an order for security for costs. In the present application, ATM relies on r 1901(h), which provides: The court may order a plaintiff to give security for costs under r 1900 only if satisfied: … The justice of the case requires the order to be made.
Rule 1902 lists a number of discretionary factors which the court may take into account when deciding whether to make an order for costs: 1902 Security for costs—discretionary factors (1) In deciding whether to make an order for security for costs under rule 1900, the court may have regard to any of the following matters: (a) the means of the people standing behind the proceeding; (b) the prospects of success or merits of the proceeding; (c) the genuineness of the proceeding; (d) for rule 1901 (a)—the corporation’s lack of financial resources; (e) whether the plaintiff’s lack of financial resources is attributable to the defendant’s conduct; (f) whether the plaintiff is effectively in the position of a defendant; (g) whether an order for security for costs would be oppressive; (h) whether an order for security for costs would stop or limit the progress of the proceeding; (i) whether the proceeding involves a matter of public importance; (j) whether there has been an admission or payment into court; (k) whether delay by the plaintiff in starting the proceeding has unfairly prejudiced the defendant; (l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction; (m) the estimated costs of the proceeding. (2) This rule does not limit the matters to which the court may have regard.
The purpose of an order for security for costs on an appeal is to “protect a successful litigant from the injustice caused by being forced to contest a claim for a second time without a probability of obtaining the costs thus expended and thereby to provide a fund to defray such costs and to discourage frivolous and unmeritorious appeals”: Twining at [13].
As r 1902(2) makes clear, the discretionary factors set out in r 1902(1) are not exhaustive. In addition to the matters listed in r 1902, where security for costs is sought against an appellant in respect of appeal proceedings, it is also relevant to take into account the fact that the appellant “has had its day in court” and that judgment has been awarded against him: Twining at [14], citing Riverside Nursing Cafe Pty Ltd v Minister for Aged Care [2000] FCA 1054; 63 ALD 122 at 125 [14]. For this reason, an appellant’s impecuniosity becomes “a very relevant factor” when considering whether an order for security for costs should be made in respect of an appeal: Twining at [15] – [16] and Faris v Savage [2019] ACTSC 94 at [12], per McWilliam AsJ.
Jurisdiction: Constitutionality to grant security for costs
At the outset of his oral submissions opposing the application, the appellant challenged the Court’s jurisdiction to make an order for security for costs. He submitted that an application for security for costs would involve the Court impermissibly exercising a non-judicial function in contravention of the “Boilermakers’ Case”, referring to the Privy Council’s decision in Attorney-General of Australia v the Queen (1957) 95 CLR 529.
Section 78B of the Judiciary Act 1903 (Cth) relevantly provides where a cause pending in a court of State or a Territory: … involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys-General, of the question of intervention in the proceedings or removal of the cause to the High Court.
However, it is well-accepted that s 78B of the Judiciary Act “does not impose on the Court a duty not to proceed pending the issue of a notice no matter how trivial, unarguable or concluded the constitutional point may be”: Re Culleton [2017] HCA 3; 91 ALJR 302 at [29] – [30] (Gageler J), citing Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [1999] FCA 1151; 95 FCR 292 at [14] (French J, as his Honour then was).
I accept ATM’s submission that the appellant’s constitutional argument should be rejected and further, that the constitutional argument is so lacking in merit that the argument may be rejected without the issuing of a s 78B notice.
It has been accepted that there is no strict separation of powers in the Australian Capital Territory (“ACT”): Lewis v Chief Executive Department of Justice and Community Safety (ACT) [2013] ACTSC 198; 280 FLR 118 at [334] – [335], per Refshauge ACJ; see also D Mossop, The Constitution of the Australian Capital Territory (Federation Press, 2021) at 9.6. However, even if a strict separation of powers doctrine applies in the ACT, the appellant’s constitutional argument must fail because the grant of security for costs is a judicial function. As Toohey J held in Bahr v Nicolay [1987] HCA 32; 163 CLR 490 at 493, the power of a court to regulate its procedure and to prevent the abuse of its process includes “the awarding of costs and the provision of security”; see also Merribee Pastoral Industries Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] HCA 41; 193 CLR 502 at [25], per Kirby J. Should an order be made for security for costs?
ATM’s application
The grounds on which ATM makes its application for security for costs are: (i) ATM has requested further and better particulars from the appellant as to the appellant’s ability to pay legal costs in the event that his appeal is dismissed. The appellant has not responded to these requests. (ii) The appellant has a significant litigation history in New South Wales and the Australian Capital Territory. ATM has real concerns that the appellant would not be in a position to meet its costs and disbursements. (iii) The appellant is listed as a vexatious litigant in New South Wales. (iv) The appellant has very limited (if any) prospects of success in the appeal. (v) During the hearing before McCallum CJ, the appellant said that he had previously been paid $1,000,000. The appellant told McCallum CJ that he could pay an order for costs if the proceedings were unsuccessful. (vi) There is no genuineness of the proceeding. The substantive cause of action pleaded does not exist as a matter of law.
These grounds are interrelated. They essentially reduce to two considerations: first, the appellant’s prospects of success on the appeal and second, the appellant’s capacity to pay any costs order made against him in the appeal proceedings. These considerations are separately addressed below.
Prospects of success of the appeal
As Refshauge J observed in Twining at [34] – [35], whilst it can be difficult to assess an appeal’s prospects of success, it is an assessment which is necessary to make, and in some cases, it may be the determinative factor.
The appellant’s Notice of Appeal pleads three grounds of appeal. The first ground concerns a procedural complaint relating to ATM’s late filing of its interlocutory application. The second and third grounds each relate to the appellant’s substantive complaint that McCallum CJ erred in finding that there was no legal relationship between ATM and Mr Fay.
For the reasons outlined below, I am of the view that none of the appellant’s grounds of appeal pleaded have good prospects of success. Late filing of the interlocutory application
On 27 June 2022, at a listing before the Registrar, ATM’s counsel informed the Registrar that it intended to file an interlocutory application. The orders sought by ATM in the application were for (i) its removal as the defendant from the proceedings; (ii) summary disposal of the proceedings; (iii) strike out of the pleadings; (iv) security for costs and (v) strike out of a subpoena. The Registrar made directions that ATM must file any interlocutory application in the proceedings on or before 13 July 2022.
ATM did not comply with this direction. ATM filed its interlocutory application on 19 July 2022, which was six days after the date prescribed by the Registrar. ATM has not provided an explanation for their failure to comply with the Registrar’s directions.
On 1 August 2022, over two weeks after ATM filed the interlocutory application, McCallum CJ conducted a directions hearing to ensure that the appellant was “ready for the application and proceedings brought by [ATM].” At that directions hearing, the appellant did not make any complaint about the late filing of the interlocutory application and did not submit that he required further time to prepare.
The first time that the appellant complained about the late filing was at the hearing of the interlocutory application on 8 August 2022 before McCallum CJ. His submission on this issue was limited to noting that the Registrar had made a direction that the interlocutory application be filed by 13 July 2022 and that ATM had not complied with the direction by filing the interlocutory application on 19 July 2022 without the Court’s leave. The appellant did not submit that he was not ready for the hearing, or that any procedural unfairness had arisen as a result of the late filing. Chief Justice McCallum suggested to the appellant that his “energy would be better spent addressing the central question of whether you have sued the right defendant.”
In his appeal, the appellant contends that because ATM did not file the interlocutory application within the time specified by the Registrar, McCallum CJ lacked jurisdiction or power to make the orders removing ATM as a party and dismissing the proceedings. When I asked the appellant whether he had been prejudiced by the late filing, the appellant responded that he “would’ve had more time and almost certainly it wouldn’t have been Justice McCallum who heard it.”
It is regrettable that ATM did not comply with the Registrar’s timetable, and that ATM did not notify the Registrar that it required further time to file its interlocutory application. It is essential to the just and efficient management of cases within the Court’s jurisdiction that the Registrar’s directions in relation to filing are complied with. This is particularly so where the opposing party is an unrepresented litigant. However, it does not follow that the consequence of filing an application in breach of the Registrar’s directions will be the invalidity of orders subsequently made by the Court on that application.
There is no evidence that the late filing caused any practical unfairness to the appellant in the present case. The appellant did not ask for more time to prepare his response when the proceedings were listed before McCallum CJ to confirm the readiness of the parties of hearing of the interlocutory application. After that directions hearing, the appellant had the benefit of another seven days of preparation. He has not identified any further evidence that he would have tendered, or any further submissions that he would have made if the interlocutory application had been filed on the date specified by the Registrar.
In essence, the appellant’s ground of appeal is limited to the proposition that a default of the Registrar’s directions for the time in which an interlocutory application should be filed of itself renders invalid any orders subsequently made by a judge on that application. The appellant did not provide any authority in support of the proposition.
The Registrar’s directions were made pursuant to r 1401(1)(c) of the Court Procedure Rules, which states that the Court may set a timetable for the conduct of the hearing or any steps in the proceedings. Rule 1450 of the Court Procedure Rules states that a failure to comply with any rule “is an irregularity” and does not render void the proceeding, or a document in the proceedings. Where a defaulting party has failed to comply with an order to “take a step” in the proceeding, the other party may apply to the Court for an order under r 1452, which include giving judgment against the defaulting party, the granting of an extension of time to comply with the order, or the making of further orders. An application for an order under r 1452 must set out the grounds on which it is based. The appellant did not seek an order under r 1452 at any time in the proceedings before McCallum CJ.
In these circumstances, even accepting Elkaim J’s conclusion that this ground of appeal is “reasonably arguable” (Quach v ATM Residential Pty Ltd [2022] ACTCA 47 at [18]), I consider that the ground of appeal does not have good prospects of success.
McCallum CJ’s decision
In her judgment, McCallum CJ carefully considered each of the appellant’s submissions in support of his contention that ATM was legally responsible for the conduct or representations made by Mr Fay: Quach v ATM Residential Pty Ltd [2022] ACTSC 210 at [6] – [16]. Her Honour concluded that it did not follow from any of the appellant’s arguments that ATM played any role in the sale of the property in question. Accordingly, McCallum CJ was satisfied (at [5]) that the appellant had “sued the wrong entity” and that ATM should be removed as a party to the proceedings.
The evidence in the proceedings before me demonstrates that: (i) ATM, CCH and ATM CCH Operations Pty Ltd (“ATM CCH”) are different corporate entities. The ASIC company extracts for those entities record that ATM was registered on 6 August 2003, CCH was registered on 16 August 2011, and ATM CCH was registered on 21 February 2020. (Another company, Canberra City Holdings Property Management Pty Ltd was registered on 1 May 2007.) ATM and CCH continued to exist as separate entities after the incorporation of ATM CCH. (ii) The Statement of Claim attributes all relevant conduct and representations to Mr Fay. The conduct and representations are alleged to have occurred in a six month period after 1 November 2019. (iii) ATM was not at any time the sales agent for the property that is the subject of the appellant’s Statement of Claim. (iv) The Sales Inspection Report and the Exclusive Agency Agreement for the property each record that CCH was the sales agent for the property that is the subject of the appellant’s Statement of Claim. (v) Mr Ian Chapman, a Director of ATM, has affirmed an affidavit in which he states that Mr Fay has never been an employee, contractor or otherwise an agent of ATM. (vi) At the time of the alleged conduct and representations, Mr Fay was an employee of CCH.
In the proceedings before me, the appellant submitted that ATM merged with CCH to become the entity ATM CCH. He also submitted that because ATM had a franchise agreement with McGrath Ltd, neither CCH nor ATM CCH could sell the property. The appellant contended that there was “an agreement of sort between ATM Residential and CCH Pty Ltd that would allow each ATM Residential and CCH Pty Ltd to operate in each other’s business area.” He submitted that ATM CCH was “only a throughput.” The appellant submitted that ATM was liable for Mr Fay’s conduct pursuant to the “neighbourhood principle.”
The appellant also noted that Ms Suzi Wells, who was a Director of ATM (and also a director of ATM CCH), advertised the property on the website, realestate.com.au. He submitted that there was “a lot of overlap”.
The appellant’s submission that ATM merged with CCH is not supported by the evidence. Mr Chapman, a Director of ATM, has affirmed an affidavit in which he states that there were negotiations between ATM and CCH for the merger of the two entities. In accordance with the proposed merger, the corporate entity ATM CCH was created, and ATM left its premises in Gungahlin and moved into premises at Dickson. However, his evidence is that the merger did not proceed, and at all times ATM has remained a separate entity both from CCH and ATM CCH.
The appellant’s grounds of appeal include an allegation that Ms Suzi Wells, Director of ATM Residential t/as McGrath North Canberra “said that Chris Dixon sold his Property Management rental roll to Ray White Belconnen. Canberra City Holding Pty Ltd was not sold to Ray White Belconnen” and that, in answer to a subpoena, Mr Fay admitted to working “under the CCH/ATM banner”. In circumstances where the evidence is clear that at all times ATM has remained a separate entity from both CCH and ATM, neither ground of appeal is capable of demonstrating that McCallum CJ erred in removing ATM as a party from the Statement of Claim.
It is difficult to accurately assess the prospects of success of these grounds of appeal at this time, particularly in circumstances where the appellant has indicated an intention to apply for leave to adduce further evidence. However, on the basis of the evidence currently before me, it does not appear that the appellant’s contention that McCallum CJ erred in finding that ATM was not a proper party has reasonable prospects of success. There was no evidence before McCallum CJ, and there is no evidence before me, that demonstrates that there was any legal relationship between Mr Fay and ATM at the time of the pleaded representations and conduct.
The appellant’s capacity to pay any adverse costs order on the appeal
ATM has written two letters to the appellant requesting further and better particulars as to the appellant’s capacity to pay any adverse costs order made against him. In each letter ATM requested further and better particulars of the appellant’s financial means. Each letter also lists various decisions with which the appellant is involved, in some of which costs orders were made against him. The second letter identifies 56 cases in which the appellant is involved.
The appellant has not responded to either letter.
At the hearing of the interlocutory application on 8 August 2022, McCallum CJ asked the appellant about his failure to provide a response to ATM’s request for further and better particulars as to his capacity to pay any costs order made against him. In response, the appellant agreed that he had not responded to ATM’s request for a statement of assets and liabilities, but asserted that it was on the “public record” that he was paid $1 million by MLC. In this respect, the appellant referred to the decision of Rares J in Quach v MLC Limited (No 6) [2021] FCA 271 at [47] (which refers to MLC having agreed to pay the appellant $1,014,625.65). The appellant asserted that he has assets which he could divest if an order for costs were made.
In the proceedings before me, the appellant again made reference to the decision of Rares J as evidencing that he has previously received a $1 million from MLC. However, he declined to provide any evidence of the receipt of these funds or as to his disposition of any funds paid to him.
The appellant also submitted that any order for security for costs made against him would limit the progression of the appeal because he already has $40,000 deposited in the Federal Court (apparently in compliance with a security for costs order: Quach v MLC Limited [2022] FCA 586). When I asked the appellant whether he would be able to pay any security for costs, he responded that he would “rather not go down that path”.
The appellant did not dispute that a number of costs orders have been made against him by other courts, but submitted that “50 or so” of the proceedings listed in the affidavit are “invalid.”
In summary, there is evidence that the appellant is the subject of a number of adverse costs orders in other courts which he does not appear to have been paid, and the appellant has provided no evidence as to his capacity to pay any costs order made against him on appeal. In these circumstances, I consider that it is appropriate to draw an inference that it is likely that the appellant will be unable to pay any adverse costs order made against him. Further, as the appellant has been declared a vexatious litigant in New South Wales (Quach v Marks [2020] NSWSC 524), I am also satisfied that it is likely that he would not readily comply with any costs order made against him in the appeal.
Conclusion
As ATM acknowledges, in the present application, many of the considerations in r 1902 are neutral: (b) ATM does not submit that there are others “standing behind the proceedings” (r1902(1)(a)); (c) the proceedings are “genuine” in that the proceedings have not been brought for an ulterior purpose (although ATM contends that the proceedings are entirely lacking in merit) (r 1902(1)(c)); (d) any lack of financial resources of the appellant is not attributable to ATM (r 1902I); (e) the appellant is not a corporation (r 1902(1)(d)); (f) the proceedings do not involve a question of public importance (r 1902(1)(i)); (g) there has been no payment of monies into court (r 1902(1)(j)); (h) ATM does not submit that any delay by the appellant in commencing the proceedings has caused it prejudice. In her affidavit affirmed on 15 November 2022, Ms Mulherin explains that ATM was not able to file its application for security for costs until almost four months after the filing of the appeal because of a delay in the new solicitors receiving the previous solicitor’s file (r 1902(1)(k)); and (i) any order for costs made in favour of ATM would be enforceable in the ACT (r 1902(1)(l)).
The remaining factors weigh in favour of the making of an order for security for costs.
In particular, for the reasons outlined above, even if it be accepted that one of the appellant’s grounds of appeal may be “arguable”, I do not consider that they have good prospects of success (r 1902(1)(b)).
I am also satisfied that the appellant cannot pay any adverse costs order made against him on the appeal and that he will not readily comply with any such costs order. I note that the appellant’s lack of capacity to pay an adverse costs order may have weighed against an order for security for costs at first instance, as such an order may have been oppressive (r 1902(1)(g)) and may have had the effect of stopping or limiting the progress of the proceeding (r 1902(1)(h)). However, for the reasons outlined by Refshauge J in Twining, these matters carry less weight in an appeal in comparison to proceedings at first instance. The appellant has “had his day in court”. He has been provided with the decision of McCallum CJ which sets out comprehensive reasons for her Honour’s conclusion that ATM is not the proper defendant to the claim that he makes. In circumstances where the appellant’s grounds of appeal against this decision are not strong, ATM should not be “forced to contest [this] claim a second time without a probability of obtaining the costs thus expended.”
In all of the circumstances, I am satisfied that it is the “justice of the case” which requires that an order for security for costs order be made.
The appropriate amount of security
In her affidavit in support of the application dated 15 November 2022, Ms Mulherin estimated the costs of the appeal as being between $55,000 and $65,000.
In response, the appellant noted that Cheeseman J has recently made a security for costs order. That order was in the sum of $39,395 and was in respect of an appeal in which the respondent was represented by two counsel: Quach v MLC Limited [2022] FCA 586.
Ms Mulherin’s estimation of costs has afforded three return listings in respect of the appeal papers, and two interlocutory applications. At this stage of the proceedings, I consider that security should be limited to the costs of the hearing and preparation of the appeal itself. The issues in dispute are not complex and the appeal should be heard in less than a day.
I propose to grant security for costs in the sum of $30,000. In my view, this sum will ensure that the order is not overly oppressive to the appellant.
Costs of this application
Order
Quach
ATM Residential Pty Ltd [2023] ACTCA 9
(1957) 95 CLR 529