Williamson v Service Corporation International

Williamson v Service Corporation International - [2003] NSWIRComm 221 - NSWIRComm 2003 case summary — Zoe

[4]

Unfair contract - Appeal - Practice and procedure - Application for security for costs - "Poverty rule" - Principles on appeal - Leave to appeal granted - Appeal upheld. Corporations Law s 1335 District Court Act 1973 s 156 District Court Rules Part 40 Rule 2 LEGISLATION CITED : Environmental and Planning Assessment Act 1979 s 123(1) Industrial Relations Act 1996 s 106 s 153 Industrial Relations Commission Rules r 89(5) Land and Environment Court Act 1979 Supreme Court Rules Pt 53 r 2(1) Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Aliba v John Hearder Pty Ltd (1986) 15 IR 36 Antonakopoulos v State Bank of New South Wales (1999) 91 IR 385 Bell v Macquarie Bank Limited (No 4) (1999) 93 IR 191 Caltex Petroleum Pty Limited v Harmer (1999) 92 IR 264 Dubbelde v Smolle (1987) 24 IR 262 Gough & Gilmore Holdings Pty Ltd v Caterpillar of Australia Ltd (No 9) [2001] NSWIRComm 260 Hall Autotorium Pty Ltd (in liq): Re (1984) 53 ACTR 3 Hallford Pty Ltd v Caltex Petroleum Pty Ltd [2000] NSWIRComm 81 House v The King (1936) 55 CLR 499 Integral Energy v Allen (2001) 107 IR 456 Jackson v Stirling Industries Limited (1987) 69 ALR 92 Jeffcoat Carpets & Vinyls Pty Ltd v NSW Land & Housing Corporation [2000] NSWIRComm 88 Kenoss Contractors Pty Ltd v Allied Constructions Pty Ltd (No 2) (2001) 104 IR 218 Knott v Signature Security Group Pty Ltd (2001) 104 IR 84 Knowles v The Anglican Property Trust (No 2) (1999) 95 IR 380 CASES CITED : Koprivnjak v Body Corporate Services (NSW) Pty Ltd (unreported, Peterson J, 3 September 1999) Melville v Craig Nowlan & Associates Pty Ltd (2001) 54 NSWLR 82 Merribee Pastoral Industries Pty Limited v ANZ Banking Group Limited (1998) 193 CLR 502 Metrocall Inc v Electronic Tracking Systems Pty Limited (No 2) (2000) 102 IR 309 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Morris v Hanley [2001] NSWCA 957 Morris v Hanley [2000] NSWSC 374 Nutshack Franchise Pty Ltd v Smith (1999) 90 IR 355 Orr v Lusute Pty Ltd (1987) 72 ALR 617 Pacific Healthcare (Australia) Ltd v AHI Healthcare Systems Pty Ltd (2001) 112 IR 122 Pearson v Naydler [1977] 1 WLR 899 Perrott v Xcellenet Australia (1998) 84 IR 255 Phillips Electronics Australia Pty Ltd v Matthews (2002) 54 NSWLR 598 Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 Rennard v Fortron Automotive Treatments Pty Ltd (unreported, Cahill VP, 15 May 1997) Re Will of F B Gilbert (1946) 46 SR (NSW) 318 Stack v Brisbane City Council (1996) 71 FCR 523 Western Sydney Area Health Service v Gibson (2001) 109 IR 359 HEARING DATES: 03/24/2003 DATE OF JUDGMENT: 07/18/2003

[41]

22 In this jurisdiction, Wright J in Knott v Signature Security Group at 92, after considering the authorities dealing with applications for security for costs, summarised the relevant principles (at least for the particular circumstances of that case) in the following terms: [28] Without seeking to limit the expression of principles in the judgments respectively of Williams J [in Shannon v Australian New Zealand Banking Group Ltd (No 2) (1994) 2 Qd R 564] and McHugh J [in P S Chellaram & Co v China Ocean Shipping Co (1991) 102 ALR 321] referred to above, I consider that the most important of those principles for the purposes of the present case are as follows. Making or refusing to make orders in this area involves the exercise of a discretionary judgment. The court exercising the discretion is required to weigh all the circumstances of the case, not only in terms of their own particular weight, but the weight that should be given to the circumstances in relation to each other. Nevertheless, an important consideration is the long standing view that where a plaintiff or applicant brings proceedings and is resident out of the jurisdiction and has no assets within it, that is a circumstance of great weight in favour of an order for security of costs . A plaintiff in that situation must be able to point to other circumstances which overcome the significance of that consideration. A further relevant consideration is whether the effect of the order sought would be that the proceedings might not be able to be pursued . If it be determined that an order should be made the amount of the security is also a matter within the discretion of the Court. Generally speaking, security would not be ordered on a full party and party basis. Although regard should be had to estimates of future costs, other factors must also be considered. These include, for example, that the proceedings may not continue or may be settled or that the plaintiff may be successful. In that respect, it may be appropriate to consider the strength of the plaintiff's case . (emphasis added)

[42]

23 His Honour's judgment continued at 94: [34] There perhaps is, however, a more important consideration which should be taken into account in the present application. No case has been put before the Court where an application has been granted for security of costs against a former employee of the respondent in relation to a claim brought by the former employee in relation to his employment . Although the significance of previous decisions is in the principles laid down in them, it is nevertheless not without importance that, at least in that particular respect, this application is, so far as counsel are aware, unprecedented and at 95 - 96 his Honour said: [38] ... The considerations as to one aspect of public policy are usefully collected by reference to relevant authorities in the judgment in [ Barton v Minister for Foreign Affairs (1984) 54 ALR 586], where, at page 592 ... Morling J said: "It has never been the case that impecuniosity on the part of a plaintiff is a ground for ordering him to give security for costs. In Pearson v Naydler (1977) 3 All E.R. 531 at 533, Megarry V-C said: 'The basic rule that a natural person who sues will not be ordered to give security for costs, however poor he is, is ancient and well-established. As Bowen LJ said in Cowell v Taylor ((1885) 31 Ch. D 34 at 38), both at law and in equity "the general rule is that poverty is no bar to a litigant". The power to require security for costs ought not to be used so as to bar even the poorest man from the courts.' " [39] Whilst noting that there are significant differences between the policy considerations in the passage cited and the present issues, the passage provides a useful analogy. It also emphasises the careful way in which the courts have developed principles in this area and the significance, in that context, of the right of a natural person to have access to the courts to vindicate alleged rights or correct perceived wrongs. Although I must and do limit the decision in this matter to the circumstances of this case, it nevertheless appears to raise an important issue and to do so in a particularly stark way, because the absence from the jurisdiction is apparently beyond the control of the applicant. I consider that it would be a rare case where, without more, an order for security of costs would be made against a personal applicant in s 106 proceedings where the employment occurred in Australia as a result of arrangements made in the context of prior employment outside Australia; where the employment was with an Australian company related to the previous overseas employer; and where the residence outside the jurisdiction arose from the subject matter of the litigation . This conclusion and the findings made earlier should result in the application failing. (emphasis added)

[52]

30 The judgment in Melville was delivered on 26 February 2002. The Court of Appeal delivered judgment in Philips Electronics Australia Pty Ltd v Matthews (2002) 54 NSWLR 598 a few months later. That case, which was decided by Mason P, Sheller JA and Hodgson JA, concerned an appeal from the District Court involving the inter-relationship between s 156 of the District Court Act 1973 and Part 40 of the District Court Rules. Section 156 empowered the District Court at any stage of the proceedings to order, on terms, the proceedings be stayed and also provided that nothing in the grant of that power limited any other power conferred on the court to stay the proceedings by any other provisions of the Act, or by any other statute or rule of law. Part 40 of the District Court Rules was in relevantly similar terms on the question of security for costs to Part 53 of the Supreme Court Rules. In Philips Electronics, Sheller JA dissented, the majority being therefore Mason P and Hodgson JA. The President essentially agreed with the reasons and orders proposed by Hodgson JA. His Honour added some further observations which included the following (600 - 602): [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 s 156(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.) ... [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).

[54]

31 Hodgson JA's judgment included the following passages (609 - 610): [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. ... [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. (emphasis added)

[55]

32 The terms of particular provisions may affect the way in which the discretion in a security for costs application is exercised and particularly so when, as in the present case, the application is made on a basis different to one of the usual or traditional bases such as those specified in the Supreme Court Rules Part 53 Rule 2 (cf District Court Rules Part 40 Rule 2) and s 1335 of the Corporations Law. Subject to the terms of the relevant statutory provisions or those under the particular court's rules, the following general principles may be extracted from the authorities referred to earlier and other cases: (a) Applications for security may have a significant impact on the substantive rights of plaintiffs because, if the order is made, the plaintiff may not be able to provide security where one of the grounds for the application is the plaintiff's lack of funds. In that situation, the plaintiff will be prevented from having a judicial examination of his or her case on the merits. It would therefore not be right to hold that there is no duty, or only a very exiguous duty, on a primary judge to give reasons for making an order as to security for costs, even though it is a matter of practice and procedure where the duty of the judge to give reasons is generally considered lower than where orders are made after a trial ( Morris v Hanley - on appeal, at [22]). (b) Delay in seeking an order for security for costs may well be a factor in deciding whether to grant or to decline such an order: Orr v Lusete Pty Ltd (1987) 72 ALR 617, 622; Stack v Brisbane City Council (1996) 71 FCR 523, 533. For example, although it is never easy for a defendant to succeed in an application for security for costs against a natural person where the application is in part based on the ground of the natural person's lack of funds, it becomes significantly more difficult for a defendant to succeed where it permits the plaintiff to throw money away on the litigation which will never be recoverable in a costs order against the defendants by reason of the successful application for security for costs: Morris v Hanley (on appeal) at [24] to [29]. (c) The usual concomitant of an order to provide security for costs is that proceedings are stayed until there is compliance with the order ( Phillips Electronics at [48]; Knott at [29]; Cairns, Australian Civil Procedure 4th edition 1996 p 629). (d) The judge considering whether to stay proceedings under a provision wider in scope than Part 53 Rule 2 of the Supreme Court Rules, or an equivalent provision in other jurisdictions, 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 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 not be subjected to a stay of proceedings until security is provided ( Phillips Electronics at [48]). (e) The expression in rules of Court of limited circumstances in which security for costs might be ordered such as those in Part 53 of the Supreme Court Rules does not displace the inherent jurisdiction of the Supreme Court to make orders for security for costs in other circumstances ( Rajski v Computer Manufacture & Design Pty Ltd (1982) 2 NSWLR 443; Phillips Electronics at [52]). (f) Even so, it is reasonable to take the existence of a Rule such as Part 53 Rule 2, or its equivalent in other jurisdictions where it exists, as indicative of the usual circumstances in which security for costs will be ordered, and it is also reasonable not to exercise the power to stay until security is given under a more general provision unless a strong case is made out that this course is necessary in the interests of justice. However, to suggest that it would be necessary to establish that the proceedings were an abuse of process, puts the test too high ( Phillips Electronics at [53]). (g) For the difference between "inherent jurisdiction" and jurisdiction "given by implication" see, for example, Jackson v Stirling Industries Limited (1987) 69 ALR 92, ( Bowen CJ) and Orr v Lusute Pty Ltd (1987) 72 ALR 617, 622 ( Sheppard J). (h) Although it is preferable to avoid the use of the words "inherent jurisdiction" in relation to a statutory superior court such as the Federal Court of Australia or this Court, nevertheless a statutory court which is expressly given certain jurisdiction or powers must exercise the jurisdiction and powers. In doing so the court must be taken to be given by implication whatever jurisdiction or powers may be necessary for the exercise of those expressly conferred. The implied power, for example, to prevent abuse of the court's process, is similar to, if not identical with, inherent power ( Jackson v Stirling Industries (1987) 69 ALR 92, 97). There is accordingly no distinction as to the scope of the relevant powers between the situation of the Federal Court (or this Court) in relation to the exercise of jurisdiction to that of the Supreme Court of New South Wales which has inherent jurisdiction in relation to the grant of an order for security for costs on grounds wider than those in rules such as Part 53 Rule 2 of the Supreme Court Rules.

[57]

Date Events Between 7.1.1999 & Appellant on eight different occasions during this period committed eight offences against s 157 of the Crimes Act 1900 "embezzle as a clerk or servant". 7.9.1999 6.2.2001 & Eight convictions recorded at Bathurst Local Court pursuant to s 157 of the Crimes Act 1900. Appellant sentenced to 150 hours community service and ordered to pay $9,550 compensation. 7.5.2001 27.6.2001 Summons issued by the appellant pursuant to s 106. 24.8.2001 Writ of Execution sought for the amount of $9,550 plus execution fee of $50 less $150 paid. Writ of Execution thus obtained in the sum of $9,450. 7.9.2001 Sheriff's Officers advised the respondent that a seizure of goods had been made pursuant to Writ of Execution. 19.9.2001 Respondent was advised that appellant had on 14.9.2001 made application for leave to pay debt by instalments and a stay of proceedings now operated under the relevant legislation. The appellant provided to the Local Court an affidavit of means which was apparently served on the respondent. 25.10.2001 After hearing the application for payment by instalments, the Registrar of the Local Court ordered payment of the debt at the rate of $50 per month. November 2001 Apparently notice of objection filed by respondent; stood over without any apparent demur from respondent. 6.12.2001 Appellant applied for callover in the Local Court to be adjourned to April 2002 because of conciliation of s 106 proceedings on 26 February 2002. At that stage the matter was stood over until 7 March 2002. 26.2.2002 Conciliation held pursuant to s 109 of the Industrial Relations Act. Conciliation unsuccessful. 27.3.2002 Respondent files notice of motion seeking orders for security for costs together with affidavit of a Mr Moses, an officer of Employers First (not in appeal papers). 28.8.2002 Affidavit of Ms Inverarity, solicitor for respondent, setting out facts and basis of the application for security for costs order.

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