Williamson v Service Corporation International

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

APPELLANT Dr J P Berwick of counsel Solicitors: Craddock Murray Neumann (Mr K Gourlie)

LEGAL REPRESENTATIVES: RESPONDENT Mr J N West QC with Mr D Chin of counsel Solicitors: PricewaterhouseCoopers Legal (Mr S Skyring)

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice-President KAVANAGH J Friday 18 July 2003

PETER ROBERT WILLIAMSON v SERVICE CORPORATION INTERNATIONAL (AUSTRALIA) PTY LIMITED

Application by Peter Robert Williamson for leave to appeal and appeal against a decision of Justice Marks given on 18 October 2002 in Matter No IRC 4316 of 2001

JUDGMENT OF THE COURT [2003] NSWIRComm 221

1 This is an application for leave to appeal, and subject to leave being granted, an appeal against the interlocutory judgment of Marks J delivered extempore on 18 October 2002 in which his Honour ordered the appellant to provide security for costs in proceedings brought pursuant to s 106 of the Industrial Relations Act 1996.

2 In the judgment at first instance Marks J referred to the recent judgment of the Court of Appeal in Melville v Craig Nowlan & Associates Pty Ltd (2001) 54 NSWLR 82 as a judgment in which the well known basic principles which apply to applications for security for costs were discussed and considered. His Honour said: There is great reluctance to order security for costs against an individual plaintiff or applicant in proceedings who resides within the jurisdiction. Such an order for costs should only be made in exceptional circumstances.

3 His Honour concluded that the main issue in the proceedings was whether exceptional circumstances existed in the proceedings. In reaching the conclusion that an order for security should be made his Honour considered the circumstances of the matter in the following way: I take into account in coming to a conclusion about this application that the applicant was admittedly guilty of embezzling moneys from the employer and that the employer is thereby out of pocket by a considerable sum of money. This employer is then met with an application brought under s 106 of the Act some time after the events which gave rise to the conviction, that is some time after the embezzlement occurred. It is being repaid at the rate of $50 per month, or so I shall assume from the material before me. I have not found the resolution of the competing submissions put by counsel for the respondent and the applicant easy to determine however on balance having regard to the totality of the circumstances of these proceedings I have concluded that it is appropriate to make an order that the applicant provide security for the respondent's costs.

4 In determining the amount of the security and the method of providing it, his Honour said: However, that amount should in all the circumstances be limited to the sum of $7500, such an amount will equate to some extent with money admittedly owing by the applicant to the respondent arising out of criminal conduct carried on by him as an employee of the respondent. It is obvious that if that conduct had not occurred and the applicant had not been so indebted to the respondent that an order for security for costs could not have been justified in all the circumstances given the authorities in this area. The security for costs may be provided in any form acceptable to the respondent and in this regard the respondent should act reasonably in determining whether the security is appropriate. If the matter cannot be resolved by agreement between the parties then under the liberty to apply, which I hereby grant, the appropriate form of security may be revisited before the court.

5 The appellant submitted that leave should be granted for the following reasons. First, having regard to the observation in Knott v Signature Security Group Pty Ltd (2001) 104 IR 84, 95 - 96, that no case has been put before the Court where an application for security for costs was granted against a former employee, the decision of Marks J seems therefore to be unprecedented and suitable for review by the Full Bench. Second, the present case allows the Full Bench to review the application of the principles set down in Pearson v Naydler [1977] 1 WLR 899 in this jurisdiction.

6 As to the nature of appeal, the appellant submitted that Marks J committed errors in terms of the approach in House v The King (1936) 55 CLR 499, 504 - 506 when his Honour held: It is obvious that if that conduct had not occurred and the applicant had not been so indebted to the respondent that an order for security for costs could not have been justified in all of the circumstances given the authorities in this area Further, that this conclusion essentially rested on a double jeopardy, imposing on the appellant a burden which had already been properly discharged by his plea of guilty and his making of payments in the Local Court.

7 The appellant accepted that the Commission in Court Session, being a superior court of record, has the power to make an order for security for costs in the exercise of its inherent power to control its proceedings. However, the appellant submitted his Honour erred in not applying the general principle "that a natural person can sue without being required to give security for costs, unless he falls within one of the special categories set out in R.S.C., Ord. 23, r, 1. ... 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": Pearson v Naydler [1977] 1 WLR 899, 902 per Megarry V-C (the English rule referred to appears to be similar to that in Part 53 of the New South Wales Supreme Court Rules). This principle has been observed in this jurisdiction: for example, Knott v Signature Security Group Pty Ltd (2001) 104 IR 84, 95 - 96 and Dubbelde v Smolle (1987) 24 IR 262, 264.

8 The fact that there was considerable delay in bringing the security for costs application (approximately nine months between the filing of the original application and the security for costs application) should have been (but was not) a circumstance taken into account in his Honour's exercise of discretion: Stack v Brisbane City Council (1996) 71 FCR 523, 533.

9 It was submitted that it was unnecessary to consider in detail the now well settled principles as to leave to appeal since on any approach to this matter, leave should be granted: see, for example, Knowles v The Anglican Property Trust (No 2) (1999) 95 IR 380, 382. There was clear error in terms of the principles in House v The King and their statutory manifestation in s 191(2) of the Industrial Relations Act. The appeal also raised issues of principle concerning applications for security for costs in proceedings by employees against their employers or former employers pursuant to s 106 of the statute.

10 The respondent submitted that leave to appeal should not be granted because it is not demonstrated that the order was not within the proper exercise of Marks J's discretion. The respondent resisted the appeal on these alternative grounds:

1. Leave to appeal should not be granted because it was not demonstrated that the order was not within the proper exercise of Marks J's discretion;

2. The appeal should be dismissed upon the ground that it was not shown that the decision by his Honour was attended by appealable error.

11 The respondent contended that the appeal was an appeal in the strict sense and the power exercised by Marks J was, at least in part, an inherent power of the Commission in Court Session: Knott v Signature Security Group Pty Limited (2001) 104 IR 84, 93. For leave to appeal to be granted it would have to be demonstrated that the inherent power was wrongly exercised.

12 Further, the exercise of discretion by Marks J in making the order was uncontrolled or absolute: Merribee Pastoral Industries Pty Limited v ANZ Banking Group Limited (1998) 193 CLR 502, 513 - 514 (Kirby J). The principles in House v The King were applicable and, in the absence of the limited circumstances there identified permitting appellate intervention, any view of the Full Bench that it might have exercised the discretion differently is not sufficient to enable the Full Bench to substitute its own decision for that of his Honour: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45], Pacific Healthcare (Australia) Ltd v AHI Healthcare Systems Pty Ltd (2001) 112 IR 122; Western Sydney Area Health Service v Gibson (2001) 109 IR 359, 366 - 367 and Antonakopoulos v State Bank of New South Wales (1999) 91 IR 385, 392 - 393.

13 The respondent argued that the judgment under appeal did not reveal any relevant error since:

(a) his Honour recognised and referred to recent authority of the New South Wales Court of Appeal;

(b) addressed the discretionary nature of the task;

(c) clearly stated he was directing his mind to the weighing of relevant competing interests; and

(d) it was open to his Honour and within his discretion to determine the amount of the security.

14 In response to the appellant's submissions on the poverty rule as to natural persons, the respondent contended that the rule did not overcome the scope of the Court's inherent power to order security for costs; nor did it limit the Court's unfettered discretion: Merribee Pastoral Industries at 514. It was clear that Marks J was aware of the appellant's financial position.

15 The respondent submitted that the strength of the appellant's case was relevant to the exercise of the discretion and the Court was therefore entitled to have regard to some extent to the criminal conduct of the appellant: Merribee Pastoral Industries at 514 and Knott v Signature Security Group at 92. Further, there is authority that an applicant should come before the Commission under s 106 with clean hands and that it is generally proper for the Commission to have regard for such equitable principles: Aliba v John Hearder Pty Ltd (1986) 15 IR 36, 38; Gough & Gilmore Holdings Pty Ltd v Caterpillar of Australia Ltd (No 9) [2001] NSWIRComm 260 at [54].

16 The respondent contested the appellant's assertion that there was considerable delay in bringing the security for costs application. In any event, the question of the timeliness of the application by the respondent was a question to be considered in the total mix of matters his Honour was to consider in the exercise of discretion.

17 We consider that leave to appeal should be granted. As we observe later, the appeal raises a number of important issues including consideration by the Full Bench of the bases upon which the Court has power to order security for costs. It also raises, in circumstances where the primary judge's decision is arguably incorrect, questions as to the nature of the reasons required in granting an application for security and the factors and considerations that should be taken into account in considering such applications.

18 The respondent shortly before the appeal was to be heard filed a notice of motion seeking to stay the appeal until there had been compliance with the orders of Marks J. This motion was, however, resolved at the hearing of the appeal by the Full Bench making orders, with the acquiescence of the parties, staying the orders and decision of Marks J and otherwise staying the proceedings before his Honour. The orders were made until further order of the Court and subject to liberty to apply on reasonable notice.

19 Several cases provide guidance as to the relevant factors for consideration in determining an application for security for costs. In Pearson v Naydler [1977] 1 WLR 899, 906 - 907, Sir Robert Megarry V-C stated: It seems plain enough that the inability of the plaintiff company to pay the defendants' costs is a matter which not only opens the jurisdiction but also provides a substantial factor in the decision whether to exercise it. It is inherent in the whole concept of the section that the court is to have power to order the company to do what it is likely to find difficulty in doing, namely, to provide security for costs which ex hypothesi it is likely to be unable to pay. At the same time, the court must not allow the section to be used as an instrument of oppression, as by shutting out a small company from making a genuine claim against a large company. For this reason, Mars-Jones J. was not prepared in the Parkinson case to make an order for security for costs for more than the £1,500 that the master had ordered: see [1973] Q.B. 609, 617. As against that, the court must not show such a reluctance to order security for costs that this becomes a weapon whereby the impecunious company can use its inability to pay costs as a means of putting unfair pressure on a more prosperous company. Litigation in which the defendant will be seriously out-of-pocket even if the action fails is not to be encouraged. While I fully accept that there is no burden of proof one way or the other, I think that the court ought not to be unduly reluctant to exercise its power to order security for costs in cases that fall squarely within the section. The above passage was cited with approval by Wright J in Kenoss Contractors Pty Ltd v Allied Constructions Pty Ltd (No 2) (2001) 104 IR 218, 221.

20 In Merribee Pastoral Industries, Kirby J provided the following non-exhaustive list and consideration of propositions relevant to the exercise of discretion in ordering security for costs: (at 513 - 514, footnotes omitted) Without any pretence to having conducted an exhaustive analysis of the decisions in this Court where orders for security for costs have been sought, in appeals, a number of propositions can be stated which it may be useful to collect: 1. There is no absolute rule to control the exercise of the discretion to order security for costs where that jurisdiction derives from the inherent power of the Court. The jurisdiction, as one reposed in a court, is to be exercised judicially and for the purpose for which it exists. An analogous discretion has been described as "absolute". It would be wrong to attempt to hedge the jurisdiction about by rules or practices, even where derived from a number of instances. This is because what should be done in each case depends entirely on the circumstances of the case. The governing consideration is what is required by the justice of the matter. 2. There is therefore no absolute rule (applicable statute apart) that the impecuniosity of a party will entitle its opponent to an order for security for its costs. Where the power to so provide exists in uncontrolled terms, it would be to fetter the jurisdiction impermissibly to adopt such a rule or even a prima facie entitlement. By the same token, the inability of a party to meet the costs of an unsuccessful proceeding is not irrelevant to the exercise of the jurisdiction. Litigation is inevitably expensive and burdensome. To add to the burdens of a party successful in the outcome, those of paying its costs with little or no prospect of recovery under an order for costs may, in particular circumstances, be a reason for offering a measure of protection to that party by way of security for costs.

3. Another consideration that has sometimes been judged to be relevant is the strength of the case of the party resisting an order that it provide security for costs and an evaluation (necessarily tentative) of its prospects of success. Thus, the fact that a party has secured special leave to argue its case on appeal has been thought a relevant consideration in some circumstances. Similarly, if a proceeding appeared hopeless and such as was bound to fail, the lack of apparent merit in a party's case might be a reason for ordering it to provide security for the costs to which, it appears, it is needlessly putting its opponent. Such a consideration would need to be exercised with care, given that the real merits of a case might not emerge until the final hearing or might not sufficiently emerge in the necessarily brief proceedings typically involved in an application for security for costs. Furthermore, if a party asserts that its opponent's proceedings are manifestly lacking in legal merit, other remedies are available to it to protect it from needless vexation. In appeals there is the barrier of leave or special leave.

4. Further considerations which, in the particular circumstances of the case, have been held relevant to the grant or refusal of an order for security for costs in relation to a proceeding in the Court have been: (a) That the hearing of the proceeding is close at hand or that the moving party has delayed its application for such an order. (b) That the parties or some of them are legally aided. (c) That the proceeding raises matters of general public importance quite apart from the interests of the parties. (d) That the nature of the proceeding is such that, even if unsuccessful, an order for costs in favour of the winning party might not be made or might be limited. (e) That the costs orders made earlier in the proceedings have followed an unusual course or have involved countervailing orders which must be weighed against those liable to be made in the proceedings in question. (f) That a party to the proceedings is, or will at judgment be, or be likely to be, absent from the jurisdiction and has no or few assets within the jurisdiction. (g) That if an order were made it would effectively shut a party out of relief according to law in circumstances where that party's impecuniosity is itself a matter which the litigation may help to cure. Doubtless there are as many further considerations as there are cases. The foregoing help to illustrate some of the matters which courts, including this Court, have felt to be relevant to the exercise of the discretion to order security for costs, where that discretion is invoked.

21 It must be stressed that his Honour was dealing with the situation in the High Court where there are no specific provisions in the statute or the rules on the issue. Although certain of his Honour's observations are very significant (for example, the emphasis on each case depending entirely on its own circumstances as the "governing consideration is what is required by the justice of the matter"), for reasons we elaborate subsequently, we consider the situation in this jurisdiction is different as there are particular provisions or rules in place and that fact affects the way in which the discretion is approached and exercised.

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)

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)

24 In Kenoss (No 2) Wright J refused an application for security for costs against a corporation in s 106 proceedings, the application being made under s 1335 of the Corporations Law. His Honour held at 221 that: Notwithstanding that there is some debate in the authorities as to whether the power of the Court to make an order for security of costs in the case of a plaintiff's impecuniosity, is entirely discretionary, I consider that the matter should be approached in that way. See for example the judgment of Lord Denning MR in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609 at 625 - 626. I do not consider the dicta of Street CJ in Buckley v Bennell Design and Constructions Pty Limited at 305 should be seen as a "fetter" on the discretion in any relevant sense: see, for example, the analysis of that judgment by Phillips JA in Ariss v Express Interiors Pty Ltd (in liq) [1996] 2 VR 507 at 514; also the judgment of the Full Court of the Supreme Court of South Australia in Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (in liq) (1979) 4 ACLR 492 at 497.

25 His Honour considered that in light of the available authority, the relevant discretion ought not to be fettered by any special rules or regulations. The proper approach to be adopted is for the Court to ensure the proper administration of justice (at 222).

26 In the judgment under appeal Marks J referred to Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 81. In that case, the Court of Appeal dealt with an appeal against an order for security for costs from the Land and Environment Court. The Court considered the impact on the general rule (that poverty is no bar to a litigant), of the very wide provisions as to standing in s 123(1) of the Environmental and Planning Assessment Act 1979 and the power in the Land and Environment Court Act 1979 for the court to order security for costs. The Court (Heydon JA and Young CJ in Eq, Stein JA dissenting), in determining the proper construction of the relevant statutory provisions, held that litigation under s 123(1) is of a different kind to the type of litigation in which the courts worked out the general rule that poverty did not bar access to the court. The majority of the Court held that an order for security for costs against an impecunious natural person bringing proceedings under the relevant provision did not deprive such a person of any fundamental right since there are many others who might prosecute the case by reason of the standing provisions of the legislation. The recent cases

27 The issue of security for costs has been considered in a number of recent judgments in this Court and also in the Court of Appeal: for example, in this Court, in Hallford Pty Ltd v Caltex Petroleum Pty Ltd [2000] NSWIRComm 81, Jeffcoat Carpets & Vinyls Pty Ltd v NSW Land & Housing Corporation [2000] NSWIRComm 88, Knott v Signature Security Group Pty Limited (2001) 104 IR 84, Kenoss Contractors Pty Limited v Allied Constructions Pty Limited (No 2) (2002) 104 IR 218; and, in the Court of Appeal, Morris v Hanley [2001] NSWCA 957 (reversing Morris v Hanley [2000] NSWSC 374 - Young J), Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82 (as noted earlier), Phillips Electronics Australia Pty Ltd v Matthews (2002) 54 NSWLR 598. The cases in this Court have, in general, not required close consideration of the particular provisions which provided the relevant power whereas in the Court of Appeal that question sometimes required close attention as the provisions relevant varied in each case and the terms of the particular provision were significant to different degrees for the outcome of the cases. The Supreme Court provisions were relevant in Morris, whereas Melville and Phillips Electronics depended respectively on the provisions applying in the Land and Environment Court and the District Court.

28 As indicated earlier, Melville was a judgment in which of the Court of Appeal, by majority, dismissed an appeal from the Land and Environment Court as to litigation under s 123(1) of the Environmental Planning and Assessment Act. The majority also considered the so-called "general rule" that poverty is no bar to a litigant. In this respect, Heydon JA said (109): [101] By "basic rule" Sir Robert Megarry V-C [in Pearson v Naydler [1977] 1 WLR 899, 902] meant, and by "general rule" Bowen LJ [ Cowell v Taylor (1885) 31 Ch D 34, 38] meant, that the rule is a strict one, though it is subject to specific exceptions (eg in relation to appeals, and nominal plaintiffs). They did not mean that generally insolvent plaintiffs will not be ordered to provide security, unless in the specific circumstances of a particular case a court thinks it just to make the order. As Baggallay LJ said in Cowell v Taylor at 37: "the rule is that any one may sue without giving security, in any but certain excepted cases." While it is possible that the "rule" is less absolute than these formulations would suggest, and while there may be room for debate about the true nature of the rule ( Morris v Hanley [2000] NSWSC 957 at [11]-[21]), whatever the scope of the rule, the claimant contends that it has not been abolished by s 69(3). In considering that submission, it is convenient to assume that the rule is an absolute rule, and that it is a rule of fundamental importance.

29 Young CJ in Eq dealt with the matter in a slightly different way. His Honour said (119): [135] As to what Heydon JA has termed the first two arguments on construction, I analysed the history of the so called rule that poverty is no bar to a litigant in Morris v Hanley [2000] NSWLR 957. It is unnecessary to repeat fully what I said there to which I adhere. I noted that the poverty doctrine came into the law because these types of cases originally occurred when a pauper sued and the court was asked for de-pauperisation; see eg Wagner v Mears (1829) 3 Sim 127; 57 ER 947. In such case, the pauper prima facie had the right to sue in forma pauperis, but if the process was vexatious, leave to sue as a pauper would be withdrawn.

[136] As I there noted, the underlying principle is that security will be ordered in cases where not to do so would allow proceedings which were vexatious or oppressive: McHenry v Lewis (1883) 22 Ch D 397, 408. The so-called rule about poverty being no bar is merely one of the factors the court takes into account when making its final assessment as to whether the proceedings, without security for costs, would be an abuse of the court's process.

[137] Although my decision was reversed in the Court of Appeal, see Morris v Hanley [2001] NSWCA 374, this was because the court considered that I had given insufficient attention to the factor of delay: the general principles I stated were in no way affected on appeal.

[138] That analysis sits well with the reasons of Heydon JA in the instant case. I note this matter because, whilst I agree with his Honour's construction of s 69 of the Land and Environment Court Act 1979, I do not wish to be thought, in agreeing with the assumption Heydon JA makes for the purposes of the instant case in [101] to have departed from what I have said previously on this subject.

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).

[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. (emphasis added)

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)

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.

Chronology 33 The following chronology is relevant to a consideration of the issues in these proceedings:

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.

34 The following matters should be noted as to the chronology. There is no evidence as to what occurred in the review sought by the respondent of the order for payment by instalments of $50 per month (presumably the respondent's objection was either withdrawn or decided against it). Nor was there any evidence that the appellant had not complied with the payment of the debt by the monthly payments required. 35 The question of delay was plainly raised by the appellant at first instance on the basis that there had been a delay in making the application between 27 June 2001 and 27 March 2002. The respondent in reply said it was only aware of the appellant's impecuniosity in September 2001 when it saw the affidavit of means filed by the appellant in the Local Court and that, notwithstanding the appellant's "sworn impecuniosity, he is here and has been for some time represented by solicitors and counsel". During this time the conciliation pursuant to s 109 of the Industrial Relations Act occurred, presumably resulting in the appellant incurring legal costs of some substance.

36 In Knott, it was not considered necessary to identify precisely the source of power under which the Court could make the order sought. This was for a number of reasons, including the fact that it was common ground between the parties that the Court had power to make an order for security for costs and Part 53 Rule 2(1)(a) of the Supreme Court Rules expressly referred to the plaintiff ordinarily being resident outside the State as a ground which might lead to the grant of an order. That was the basis upon which the order was sought in that case. Nevertheless, the Court did note one basis upon which it was contended the Court had power to order security derived from the inherent or implied power of the Court (referring, by way of example, to Rennard v Fortron Automotive Treatments Pty Ltd (unreported, Cahill VP, 15 May 1997, at 9) and Koprivnjak v Body Corporate Services (NSW) Pty Ltd (unreported, Peterson J, 3 September 1999, at 5). Another basis mentioned was the incorporation into the procedures of the Court by Rule 89(5) of the Industrial Relations Commission Rules 1996 of Part 53 Rule 2 of the Supreme Court Rules. Towards the conclusion of paragraph [29] of the judgment in Knott, in which the above matters were discussed, the Court concluded: I consider that, in any event, a superior court has relevant power as an incident of its authority to control its own process. After all, the normal corollary of an order for security of costs is that the proceedings be stayed until the order is complied with. The power to grant a stay in such circumstances is, I consider, a normal incident of the power of the court to control its own process and, where necessary, to prevent an abuse of it.

37 Part 53 Rule 2 of the Supreme Court Rules provides five grounds or circumstances where if it appears to the Court on the application of the defendant that one or more of the circumstances are present, the Court may order security for costs be given. The grounds, as set out in the rule, are:

(a) that a plaintiff is ordinarily resident outside the State; (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 (2), 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 rule also provides that an order will not be made under ground (c) if the mis-statement or failure to state was made without an intention to deceive.

38 There is a similar provision in the Corporations Law to that in paragraph (e) of Part 53 Rule 2 of the Supreme Court Rules. The provision is s 1335, the terms of which are set out in Kenoss (No 2) at [2].

39 This appeal requires for its resolution the consideration of a number of important issues. These include:

(1) the precise source or sources of the Court's power to order security for costs;

(2) the extent of the duty of a judge determining to make such an order to give reasons therefore;

(3) the nature of the case required for an order for security to be made in proceedings pursuant to s 106 of the Industrial Relations Act between an employee and the employee's employer or former employer.

40 As to the first of those issues, Wright J made certain observations in Knott at [29], part of which was set above earlier in this judgment. His Honour did not consider it necessary to identify precisely the source of the power to make the order sought in those proceedings for two reasons. First, the unanimity of the parties that the Court had the necessary power and, second, the particular ground on which the order was claimed (that is, the ground that the applicant was ordinarily resident outside the jurisdiction) was expressly set out in Part 53 Rule 2(1)(a) of the Supreme Court Rules and was thus available whether the source of the Court's power was that rule incorporated by Rule 89(5) of this Court's rules or the existence of power on a more general basis.

41 Notwithstanding the limits of his Honour's conclusion we consider, with respect, that his Honour's approach was appropriate and that it also provides the conceptual basis for the broader question of the source of the Court's power as to this subject matter

42 It was common ground in the proceedings that there was no relevant express power in the Industrial Relations Act or the Industrial Relations Commission Rules. However, Rule 89 is to be found in Part 13 of the "General Procedure", of the rules. Rule 89 itself is entitled "Supplementary Practice before the Commission". Sub-rules (1) to (4) thereof empower the President of the Commission to promulgate Practice Directions to determine or change the practice, procedure or usage of the Commission in certain circumstances. The circumstances include where the statute or the regulation do not make any, or any adequate, provision for the procedure to be followed and there is no established practice or usage or it is desired to change any established practice or usage.

43 Sub-rule 89(5) is to be seen in the context of the other provisions of Part 13 including sub-rule (1) to (4) of Rule 89. It provides: (5) Where:

(b) there is no established practice, procedure or usage, and

(c) there is no Rule, order, direction or Practice Direction in force,

the practice, procedure or usage for the time being of the Supreme Court or, in the case of appeals, the practice, procedure or usage for the time being of the Court of Appeal or the Court of Criminal Appeal, as may be appropriate, is, as far as practicable, to regulate the practice, procedure or usage of the tribunal.

44 The sub-rule requires that the practice, procedure etc of the Supreme Court regulate this Court's practice or procedure if the three negatively expressed preconditions set out in paragraphs (a), (b) and (c) are satisfied. The only impediment raised to those matters being satisfied here was the submission of senior counsel for the respondent that the Court's power to make orders for security for costs arose from the fact that it was a superior court of record (see s 153 of the Industrial Relations Act), it thereby had such power as part of its inherent or implied power and the resulting existence of power negated the possibility of the precondition in paragraph (a) of Rule 89(5) being satisfied. The inherent or implied power was a "relevant provision" in terms of rule 89(5)(a).

45 We do not accept that contention. The words "provision" and "provisions" may have either the broad meaning of "the providing or supplying of something" or "something provided" or alternatively, the specific meaning of "a clause in a legal instrument, a law etc, providing for particular matter; stipulation" (see meanings numbered 1, 2 and 4 in Macquarie Dictionary, 3rd edition, 1997 page 1718). A legal context would normally involve the word being used in the latter, more specific, sense. See also Re Hall Autotorium Pty Ltd (in liq) (1984) 53 ACTR 3, 7. The context in which the relevant word appears and the evident purpose of the sub-rule mean that the more specific meaning is to be preferred. One of the purposes of Rule 89 is to provide a ready and straightforward means of ascertaining and, if necessary, supplementing the applicable practice, procedure or usage of the Commission in the practical conduct of litigation with regard to the "just, speedy and inexpensive determination of proceedings". It would be inconsistent with the context and purposes of these provisions to require either the Court, or those practising before it, to ascertain the extent of the Court's inherent or implied powers before reliance could be placed on the provision in the Supreme Court Rules which would otherwise be of great utility, particularly in resolving dilemmas or procedural uncertainties in proceedings under the Industrial Relations Act.

46 Accordingly, in respect of orders for security for costs, the preconditions in Rule 89(5)(a) to (c) are satisfied and Part 53 Rule 2 of the Supreme Court Rules is thus part of this Court's practice and procedure. Thus when this Court deals with applications for security for costs it has the powers set out in Part 53 of the Supreme Court Rules together with its implied powers such as those to control its process and to prevent an abuse of such process.

47 We accept that the principles in House v The King apply in this matter. However, we also consider that the trial judge's discretion miscarried in relevant respects. It must be acknowledged that his Honour gave an extempore decision and was sitting in a role analogous to that of a duty judge or a judge presiding in a practice list or practice court. An appeal court should therefore not be too meticulous as to the obligation to give reasons for an interlocutory or procedural decision. His Honour, however, failed to sufficiently deal with and provide reasons for all relevant matters argued by the parties.

48 His Honour, for example, failed to deal with the appellant's contentions as to the delay in the respondent bringing the application for security. Also, although accepting that "exceptional circumstances" were necessary for a security for costs order to be made against an individual applicant residing in the jurisdiction, his Honour's identification of the circumstances he relied on (which are extracted in full above in paragraph [3]) could not be said to involve the provision of appropriate or sufficient reasons in the particular circumstances since there was, for example, no analysis of the strength of the applicant's case.

49 The factors identified by his Honour depended for their significance on the strength of the application made under s 106. For example, if the conclusion was available on the material before the Court that the appellant's case was extremely weak or was being brought essentially to vex the respondent or as a form of retribution for his being charged by the Police, that is an entirely different situation to one where the applicant's case is arguable or there is no issue raised by the respondent as to the strength of the case. In the absence of any analysis of this aspect particularly where, as here, there was no relevant issue raised below by the respondent, the reasons given come close to the description given by counsel for the appellant, of a form of double jeopardy or double punishment for conduct which, whilst extraordinarily reprehensible, had been dealt with by the relevant part of the justice system and, in any event, could not lead to the applicant being precluded from litigating all reasonable legal issues arising from his employment. We do not consider that the respondent's statement before his Honour "[w]e say the case is unmeritorious ..." can be said to have seriously raised the issue. Any doubt on the matter is removed when it is observed that the statement is followed by the submission: "... but the factors in favour of the costs order dare I say are these ...".

50 Although the failure to deal with the issue of delay also affects his Honour's exercise of discretion, it must be accepted that there is scope for different views as to whether it would be appropriate to grant security (in an appropriate case) prior to conciliation occurring under s 109. We consider that it would be desirable for any application for security to be made prior to conciliation occurring but, except in rare cases, the application should not be heard prior to the conciliation, or if heard and granted, any security order should not preclude the Court discharging its obligations under s 109.

51 This Court is able to fashion its own approach as to security for costs and particularly so where the litigation is between an employee and the employee's (former) employer. The consideration that the litigation is between parties to the employment relationship is, we consider, material to an application for security for costs and may require some slight differences to the usual approach taken in the general courts as occurred before Wright J in Knott v Signature Security in a manner which we consider appropriate.

52 We do not consider any basis was made out at first instance to warrant the order for security for costs. As was the situation before his Honour, there is nothing before us to suggest the appellant's s 106 case is not arguable. Consequently, when this Court on appeal exercises its own discretion on the issue there is similarly no basis to make an order for security. We therefore decline the making of an order in the exercise of our discretion.

53 The appeal must therefore be upheld. The orders made by Marks J should be set aside and replaced by an order that the respondent's motion be dismissed. Prima facie, the respondent should pay the appellant's costs of the motion and the appeal. Orders will be made accordingly unless the respondent applies to be heard on the issue of costs within seven days. Any such application is to be accompanied by written submissions as to the costs orders the respondent seeks.

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