Tyne v UBS AG

REASONS FOR JUDGMENT 1 On 3 October 2014, I published a judgment which considered an interlocutory application filed by the respondent, UBS AG ("UBS"), seeking an order that the first applicant (Mr Tyne in his capacity as trustee of the Argot Trust) give security for the costs UBS will incur in defending the principal proceedings, which costs might be awarded against the first applicant: Tyne v UBS AG [2014] FCA 1073 (the "October reasons"). 2 The reasons published today in support of the orders made today should be read together with the October reasons. 3 In the October reasons, I consider in some detail the nature of the principal proceedings and the matters in evidence relevant to the exercise of the discretion in s 56 of the Federal Court of Australia Act 1976 (Cth) (the "Federal Court Act") to order the provision by a party of security for costs, including, in particular, the relevance (if any) of previous litigation relating to similar subject matter in Singapore and in the New South Wales Supreme Court. In the October reasons, after examining the submissions of the parties, I identify eight matters particularly important in the exercise of the s 56 discretion in the particular circumstances of this proceeding. At [156], I conclude: Having regard to all of these considerations and weighing them all in the balance, it seems to me that the proper course is not to order security for costs. I am satisfied that some of the factors I have discussed suggest that UBS's position ought to be protected by a security for costs order but weighing all of the factors in the balance overall and taking very particular account of the features to which UBS has pressed emphatic attention, it seems to me that the overall balance is such that the interests of justice are best served, in the context of the controversy between these parties in this proceeding, by not ordering security for costs, as things presently stand. 4 UBS contended that the Trust has no assets and that those standing behind the Trust are not capable of providing any security or undertaking in support of the proceedings. Although a highly relevant matter, it was difficult on the evidence to form a clear view about either the assets or the liabilities of the Argot Unit Trust or the strength of any indemnity available to Mr Tyne as trustee of the Trust, as the financial accounts for the most recent years had not been put into evidence. Although the respondent's application was substantially addressed in the extensive October reasons, I directed Mr Tyne as trustee of the Argot Unit Trust to file an affidavit within 30 days exhibiting a copy of the Argot Unit Trust Deed and a copy of the profit and loss statements and balance sheets for the Argot Unit Trust for the financial years ending 30 June 2013 and 30 June 2014, before making final orders. 5 On 17 October 2014, Mr Tyne filed an affidavit (affirmed by him on that day) which exhibited a copy of the deed establishing the Argot Trust (dated 26 February 1997) and copies of the accounts for the Argot Trust for the financial years ended 30 June 2013 and 30 June 2014. 6 In the October reasons (at [157]), I said that, on the assumption that the financial statements demonstrate that the Trust has no assets (leaving aside any question of an asset in the form of a claim against UBS in these proceedings), my inclination was to dismiss the application for security. If, however, it emerged on the basis of the financial statements that the Trust has assets, I said that I would consider further whether any of those assets ought to be made the subject of an order for security for costs in support of the trustee's right of indemnity. 7 The position revealed by Mr Tyne's affidavit is this. 8 The Trust's Financial Report for the year ended 30 June 2013 contains a declaration by Mr Tyne in his capacity as trustee (dated 16 October 2014) which states: "The Trustee declares that this special purpose financial report fairly represents the Trust's position as at 30 June 2013 and its performance for the year ended on that date in accordance with [particular described accounting policies]". The balance sheet for that year displays a total "Deficiency in Trust Funds" of $(10,990). The only liability is described as "Loan - S Tyne", in the amount of $10,990. The total "Excess of Liabilities over Assets" for 2013 is shown as $(10,990). On the profit and loss statement for that year, the only item of expenditure shown is "Filing Fees" in the amount of $11,000. 9 The Trust's Financial Report for the year ended 30 June 2014 contains a declaration by Mr Tyne in his capacity as trustee in essentially the same terms. The balance sheet shows a total "Deficiency in Trust Funds" for that year of $(11,790). The only liability is described as "Loan - S Tyne", in the amount of $11,790. The total "Excess of Liabilities over Assets" for 2014 is shown as $(11,790). On the profit and loss statement for that year, the only item of expenditure shown is "Filing Fees" in the amount of $800. 10 It seems clear therefore that the Trust has no assets which might be made the subject of an order for security for costs in support of the trustee's right of indemnity. Mr Tyne (in his personal capacity) is, as is set out in the October reasons, a bankrupt. I note that in submissions filed by UBS on 29 October 2014, UBS accepts that Mr Tyne's affidavit "confirms that the Trust has a deficiency of assets to liabilities". 11 For the reasons set out in the October reasons, the respondent's application for security for costs will be dismissed. 12 As to the costs of the security for costs application, I said in the October reasons that I was inclined to dismiss the application "with costs". UBS subsequently wrote to the Court seeking directions for the filing of submissions on the question of costs. On 22 October 2014, I made orders directing UBS to file and serve short written submissions in relation to the disposition of the costs of and incidental to its application for security for costs within seven days of that order, and Mr Tyne to file and serve short written submissions as to costs within a further seven days. Both parties have filed those submissions. UBS has also filed short submissions in reply. 13 UBS seeks an order that there be no order as to the costs of the security for costs application. Mr Tyne submits that, despite being self-represented in this proceeding, he, as the successful party on the present application, should be awarded "the analogue of professional costs". 14 On 5 November 2014, Mr Tyne filed an affidavit in support of his submissions seeking costs, in which he deposes that on 19 May 1989 he "was admitted as a Barrister of the Supreme Court of New South Wales". He also deposes, however, that he does not hold and has never held a "practising certificate issued by any legal professional association", and that he has never applied for "such a certificate". 15 The Court's power to award costs is found in s 43 of the Federal Court Act. Section 43(1) provides that the Court has "jurisdiction" to award "costs in all proceedings before the Court" subject to particular qualifications not presently relevant. Section 43(2) provides that except as provided by any other Act, "the award of costs is in the discretion of the Court or Judge". Although the discretionary power to award costs is broad and general, it must be exercised judicially, that is to say, in accordance with settled principle. Ordinarily, therefore, the discretion will be exercised to the end that costs follow the event (George v Fletcher (Trustee) (No 2) [2010] FCAFC 71 ("George v Fletcher") at [12]), subject to the particular circumstances of the case. 16 However, in George v Fletcher, the Full Court held (at [15]) that: The power to award costs conferred by s 43 of the [Federal Court Act] does not extend to the awarding to a litigant who is not a legal practitioner of any amount of costs in respect of time spent in the preparation of his or her case or in the presentation of that case in court: Cachia v Hanes (1994) 179 CLR 403. Insofar as the judgment of the Full Court in Secretary, Department of Foreign Affairs and Trade v Boswell (No 2) (1992) 39 FCR 288 stands for the proposition that a non practitioner party can recover an amount in respect of earnings shown to have been lost while preparing or presenting his or her case, that case is inconsistent with Cachia v Hanes and should no longer be followed. [emphasis added] 17 In George v Fletcher, the Full Court was considering an application by a successful appellant for her costs of conducting the appeal. Although the appellant adduced evidence showing that she was a mediator accredited by the Queensland Law Society, the Court observed that she did not introduce any evidence that she had been admitted to practise as a legal practitioner in any Australian jurisdiction or that she held a current practising certificate entitling her to practise as a barrister, solicitor or both in any such jurisdiction. The Court also observed that the appellant had not introduced any evidence that her name appeared on the Register of Practitioners kept by the Chief Executive Officer and Principal Registrar of the High Court of Australia pursuant to s 55C of the Judiciary Act 1903 (Cth) (the "Judiciary Act"), in circumstances where entitlement to practise as a barrister or solicitor or both before the Federal Court is dependent upon the entry of the name of the practitioner concerned on that roll: Judiciary Act, s 55B(1). 18 The Full Court concluded that because the appellant was "not a legal practitioner entitled to appear before this Court" [emphasis added], it was "unnecessary to consider whether, having regard to London Scottish Benefit Society v Chorley (1884) 13 QBD 872, she should, exceptionally, and perhaps questionably (Cachia v Hanes at 412-414), be allowed any amount in respect of legal professional costs in respect of the preparation for and presentation of her appeal". 19 Section 43 of the Federal Court Act confers the jurisdiction and discretionary power to award costs "in all proceedings before the Court". The term "costs" is not defined by the Federal Court Act. Section 59 of the Federal Court Act confers power on the Judges of the Court to make rules in relation to the costs of proceedings in the Court: s 59(2)(o). The Federal Court Rules 2011 (the "Federal Court Rules") define "costs", unless the context otherwise provides, to mean "costs as between party and party" which, in turn, means "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation". The phrase "costs on an indemnity basis" means costs, as a "complete indemnity" against the costs incurred by the party provided that any costs shown to have been unreasonably incurred do not fall within the notion of a complete indemnity: r 1.51 and Sch 1. 20 Part 40 of the Federal Court Rules addresses the topic of costs. Costs, the subject of an order for costs, are generally assessed on a party and party basis: r 40.01. A party entitled to costs may apply for an order that costs be paid on some other basis: r 40.02. Division 40.2 addresses the topic of the taxation of costs. Unless the costs are agreed, the costs are to be taxed (assessed) according to Pt 40. Rule 40.29 provides that costs for work done are to be allowed in accordance with either Sch 2 or Sch 3 to the Federal Court Rules, having regard to whether the costs are incurred before or after 1 August 2011. 21 The short point is this. 22 The defined terms in relation to costs, Pt 40 and Schs 2 and 3 of the Federal Court Rules make plain that "costs" for the purposes of the Federal Court Act and the Federal Court Rules contemplate a recoupment or partial indemnity (party and party costs) or a complete indemnity, of costs actually incurred by a party and do not contemplate, as a matter of statutory construction, reimbursement of a litigant for time lost or dedicated to preparation or presentation of the case. Costs, for the purposes of the Federal Court Act and the Federal Court Rules, are confined to money paid or liabilities incurred for professional legal services. Compensation for the loss of time of a litigant in person cannot be said to constitute costs within the meaning of the Federal Court Act and the Federal Court Rules. 23 In that sense, the Federal Court Act and the Federal Court Rules are entirely consistent with long standing principle that costs are awarded by way of partial indemnity for professional costs actually incurred and were never intended to be comprehensive compensation for any loss suffered by a litigant: Cachia v Hanes (1994) 179 CLR 403 at 410 and 411 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ. 24 A "somewhat anomalous exception" (Cachia v Hanes at 411) to the general principle is this. When a solicitor successfully acts for himself in proceedings, he or she is entitled to the same costs as if a solicitor had been retained. The rationale for the exception, recognised and accepted by the High Court (Guss v Veenhuizen (No 2) (1976) 136 CLR 47 at 51), is that each step taken by the solicitor acting in person is able to be precisely quantified by, in this case, reference to the Schedules to the Federal Court Rules. The exception is consistent with the Federal Court Rules as the Schedules identify items of costs by reference to a solicitor taking particular steps which would include a solicitor acting and appearing in person taking those steps. Plainly enough, the exception to the general principle does not extend to items of costs such as a solicitor in person taking instructions from himself or herself. 25 As to the origin of the exception, see London Scottish Benefit Society v Chorley (1884) 13 QBD 872 ("Chorley"). 26 Mr Tyne says he is within the exception to the general principle. 27 The Legal Profession Act 2004 (NSW) defines an "Australian legal practitioner" as an "Australian lawyer" who holds a current local practising certificate or a current interstate practising certificate: s 6. An "Australian lawyer" is a person who is "admitted to the legal profession" under the Act or a corresponding law: s 5. "Admission to the legal profession" means admission by a Supreme Court as a lawyer, a legal practitioner, a barrister, a solicitor, a barrister and solicitor, or a solicitor and barrister: s 4. Section 14 provides, with a number of particular exceptions, that "a person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner". A person's right to practise as a "legal practitioner" in that State is therefore dependant on the person holding a current local or interstate practising certificate. 28 Mr Tyne holds neither, and has, on his evidence, never held or applied for either. He is therefore not entitled to engage (and is in fact prohibited from engaging) in legal practice in New South Wales. A similar prohibition applies in the other States and Territories due to the uniform legal profession Acts in each of the Australian jurisdictions. 29 Section 55B(1)(a) of the Judiciary Act provides that "a person who is for the time being entitled to practise as a barrister or solicitor, or as both, in the Supreme Court of a State … has the like entitlement to practise in any federal court". As Mr Tyne is not entitled to practise as a barrister (or solicitor) in the Supreme Court of any State, he has no entitlement to practise in the Federal Court of Australia. He is therefore not a legal practitioner entitled to appear before this Court in the way described by the Full Court in George v Fletcher. 30 Since Mr Tyne is not a legal practitioner entitled to practise in the Federal Court, it follows that the exception in Chorley has no application. The relevant principle is that identified by the Full Court in George v Fletcher at [15] (in reliance upon Cachia v Hanes), namely, that the power to award costs conferred by s 43 of the Federal Court Act does not extend to the awarding to a litigant who is not a legal practitioner of any amount of costs in respect of time spent in the preparation of his or her case or in the presentation of that case in court. 31 Mr Tyne in his submissions refers to Guss v Veenhuizen (No 2) (1976) 136 CLR 47 ("Guss"), in which the successful appellant was a qualified solicitor (acting on his own behalf) who, although entitled to practise in the Supreme Court of Victoria, found that he was not entitled to practise in the High Court by reason of an oversight of the Registrar in omitting his name from the Register of Practitioners kept by the High Court. Nevertheless, the High Court held that the appellant fell within the principle in Chorley and was therefore entitled to his professional costs. Mr Tyne submits that "by analogy to Guss, the fact of my not being a registered practitioner is irrelevant". However, in Guss the appellant was entitled to practise as a solicitor in the State courts and indeed, throughout the conduct of the proceedings in the High Court he believed that he was entitled to practise in that Court also. At p 52, Gibbs ACJ, Jacobs and Aickin JJ said this: In these circumstances, s 55B of the Judiciary Act does not create a statutory bar to the allowance of professional costs because the appellant does not claim assessment of costs on the basis that they were in respect of work done in a capacity which by force of the statute he was not entitled to exercise. The work was done by him in person and the only question is whether in the special circumstances here existing he was entitled to the benefit of the rule of practice established by the authorities to which we have referred. The answer depends on the true basis of the rule. Since its basis is not one of privilege to a solicitor (in which case it might be argued that the precise qualification must be satisfied) but is that work done by a solicitor can be quantified on a taxation of costs, there is no reason why work done by the appellant whose lack of the precise qualification was the result of an error of an officer of the Court, should not have the benefit of the rule of practice. If the error had not been on the part of an officer of the Court but had been the fault of the party himself, the Court would not attempt to assess his capacity to do the work done by him. He would be regarded as in the same position as an ordinary layman. But when the lack of qualification cannot be regarded as a lack of capacity because it has occurred simply through the error of a Court officer, then the principle to which we have referred earlier in these reasons is applicable and the Court should treat him as though he had the qualification which brings him within the rule of practice. [emphasis added] 32 Thus, a person, whose lack of qualification to practise is a matter in their control and of which they are aware prior to undertaking legal work on their own behalf, should not be treated, for the purposes of the principles in Chorley, as being in the same position as a person who is a legal practitioner entitled to appear before the Court. In addition, the scope of the exception should be kept firmly within bounds having regard to the observations of the plurality in Cachia v Hanes at p 411 and the "questionable" nature of a "situation in which a successful litigant not only receives the amount of the verdict but actually profits from the conduct of the litigation" (Cachia v Hanes at p 412) where the litigant is a legal practitioner appearing in person. The plurality at p 412 also described the explanation for the exception as "unconvincing". 33 It might have been possible for Mr Tyne to seek to recover any amount he has paid in court costs actually incurred (comprising out of pocket expenses actually, necessarily and reasonably incurred in the conduct of the litigation) such as filing fees or the cost of copying appeal books: George v Fletcher at [17]; Von Reisner v Commonwealth (No 2) (2009) 262 ALR 430 at [24]. However, Mr Tyne's submissions do not seek orders that he be reimbursed any costs of this kind, nor is there any suggestion on the evidence of him having actually incurred any costs of this kind in relation to the respondent's security for costs application. What Mr Tyne seeks is "the analogue of professional costs". For the reasons above, the Court does not have power to award those costs to him. 34 For the sake of clarity, I will order that there be no order as to the parties' costs of the interlocutory application for security for costs filed by the respondent on 18 February 2014. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.