Consideration and assessment - Order 4 of 23 January 2012
53Order 4 of 23 January 2011 was, in terms, an order that the defendant pay $20,000 to the defendant "on account of" the costs the subject of Order 3, this being a "condition of" the granting of the adjournment to 9 March 2011 and the grant of leave for the defendant to file and serve by 6 February 2012 an affidavit as referred to in Order 1.
54In the course of the hearing on 23 January 2012, Judge Rolfe stated the intention underlying the order as being that, if the sum of $20,000 was not paid during the adjournment he was about to grant, he would dismiss the defendant's application. The purpose of the order was stated by the judge in a somewhat different way in the course of the hearing on 16 March 2012 (the words were addressed to counsel for the defendant):
"That order I made was to put the plaintiff in the same position it would have been in if your client had filed his defence on time."
55On either basis, the requirement to pay the plaintiff $20,000 on account of costs was portrayed as a price the defendant had to pay if he was to be allowed to progress his motion to have the default judgment set aside.
56It is because of that quality of the order that counsel for the defendant in this Court likened it to an order for security for costs. There are, it seems to me, both similarities and differences when one recognises that, although his counsel preferred to portray his client as merely a party responding to the principal claim, the defendant was in reality the moving party throughout the long period after the filing of the motion to have the default judgment set aside. The effect of the order was similar to that of an order for security for costs because it required the defendant, as applicant, to put up money as a condition of being permitted to progress his application. It was unlike an order for security for costs because the money would be irrevocably lost to the defendant whatever might be the outcome of his motion and regardless of the costs order made upon its determination; and because the plaintiff would be the immediate and direct recipient of the funds and would be permitted to keep them regardless of the result of any future facet of the litigation.
57The judge did not specifically resort to any provision of legislation or the rules of court in formulating and making the order. He did, however, make it clear that it was not his intention to make an order for the payment of costs in a specified gross sum pursuant to s 98(4)(c) of the Civil Procedure Act 2005. That is understandable when it is recognised that the order was not an order for the payment of costs but an order for a payment "on account of" costs ordered but not yet agreed or assessed.
58It is useful to set out s 98 of the Civil Procedure Act in full:
"(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount."
59Counsel for the plaintiff emphasised that, under s 98(1), costs are in the discretion of the court which has full power to determine by whom, to whom and to what extent costs are to be paid while, under s 98(3), an order as to costs may be made at any stage of the proceedings.
60The question of power to order payment of a specified sum on account of costs yet to be quantified was considered by the Full Federal Court in Keller v LED Technologies Pty Ltd (No 2) [2010] FCAFC 160. In that case, the proceedings had come to a conclusion. A costs order was made in favour of the respondent. The respondent sought, in addition, an order requiring the parties liable under the costs order to make a payment on account, even though the costs had not been taxed. The respondent relied on an English case, Mars UK Ltd v Teknowledge Ltd [1999] EWHC 226 (Pat), but it was clear that the order for payment on account had been made in that case under a rule of court dealing specifically with the question. As Jacob J said (at [3] of the supplementary judgment):
"Before the CPR, if costs were sent off to taxation there was no power to order interim payment but now there is such a power."
61In the Full Federal Court, Emmett and Jessup JJ, with the concurrence of Besanko J, noted that there was no like power in the rules of the Federal Court and that they had not been directed to any case in which any such power had been exercised. The order sought was refused.
62The question whether the Supreme Court has power to make an order of this kind was addressed by Campbell JA in Guttershield Systems Australia Pty Ltd v LBI Holdings Pty Ltd (No 2) (2009) NSWSC 1409. In that case, the plaintiffs estimated that their costs in uncompleted proceedings exceeded $150,000 and sought an order that the defendants pay $50,000 immediately. After noting that the application was advanced under s 98 of the Civil Procedure Act and the submission of that counsel for the plaintiffs that that section authorised an order for interim payment of costs, Campbell JA said (at [56] - [57):
"[56] I observe that while section 98(4) refers to certain specific types of orders for costs that the Court has power to make, an order for payment on account of costs is not specifically referred to. I also observe that when the Court was given power to make orders for interim payment of damages, by sections 81 to 84 of the Civil Procedure Act, specific power was conferred upon it to do so.
[57] I propose to proceed on the basis of assuming, without deciding, that the Court has power to make an interim order for payment of costs."
63In the event and after reviewing the merits, his Honour declined to make the order, saying (at [58]):
"On that basis, in my view the circumstances of the present case do not call for the making of any such order. The proceedings have been on foot since 2002. No special reason is put forward for making what is, even assuming that there is power to make it, an unusual order, beyond the fact that costs have been mounting up. I decline to make the order for interim payment of costs."
64In Williamson v Scarano [2012] NSWCA 432, by contrast, this Court accepted without question or discussion the power of the Supreme Court to make an order for the payment of a particular amount on account of costs. It is sufficient to quote the following parts of the judgment of Meagher JA (with whom Hoeben and Ward JJA agreed) at [32] - [33]:
"[32] ......The appellant submits that the primary judge did not have power to order him to make a payment of $20,000 to the respondent on account of costs incurred or to be incurred in the proceedings. ......
[33] The primary judge had power to impose the term as a condition of the grant of leave. However, he erred in exercising his discretion to impose such a term because he took into account the wrong consideration identified by the appellant. ......."
65At first instance in those proceedings (Williamson v Scarano [2011] NSWSC 1318), Bryson AJ had made an order as follows:
"Leave to amend is granted upon terms that the plaintiff is to pay to the defendant within 28 days of this order the sum of $20,000 on account of costs ordered and any costs to be ordered to be paid by the plaintiff to the defendant in these proceedings, credit to be given by the defendant when final costs orders are made."
66The reasons of Bryson AJ for making this order (at [21] and [23]) were as follows:
"[21] I am prepared, subject to terms, to allow the plaintiff to amend so as to allege facts relating to disposition of the property by the defendant, receipt by the defendant of proceeds and the claim to a charge over the proceeds. However, I am prepared to do so only on stringent terms relating to costs. By this stage costs in the litigation must be considerable. The parties had a day in court in August 2010 before White J, the plaintiff was ordered to pay the costs but those costs are not yet payable; enforcement is deferred until disposition of the proceedings. Significant time has passed since then, enough time, with better conduct of the litigation, for the proceedings to have been heard and disposed of. Most of the time lost should be attributed to the conduct of the proceedings on behalf of the plaintiff; time taken to decide to amend and to amend, time taken to produce the plaintiff's affidavit evidence, time taken to produce the plaintiff's next amendment proposal in the face of impending Summary Disposal.
...
[23] In my opinion I should grant limited leave to amend on terms which require the plaintiff, if he is to take advantage of leave to amend, first to pay a significant sum to the defendant on account of costs incurred and potentially to be incurred in these proceedings. ..."
67As I have said, this Court accepted without question the power of Bryson AJ to make the order he made. The source of the power was not discussed. It did not arise from s 98 which is wholly concerned with costs, not estimated amounts on account of costs. Nor did the source lie in provisions about security for costs, such as rule 47.21 of the Uniform Civil Procedure Rules 2005.
68It may readily be accepted, however, that the Supreme Court possesses such a power. A superior court of record has an inherent jurisdiction which was held in Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 to be sufficient to enable the Supreme Court to order security for costs in circumstances not provided for in the rules of court. An order for security was there made against a plaintiff who was not within any of the categories contemplated by the rules. Holland J said (at 447):
"Courts have frequently asserted inherent power to regulate their own practice and procedure to procure proper and effective administration of justice and prevent abuse of process."
69The District Court, however, is a court of limited statutory jurisdiction and not a superior court of record. That being so, the following words of Herron CJ, Wallace P and Manning JA in Ex parte Currie; Re Dempsey (1969) 70 SR (NSW) 443 (at 447), quoted by Kirby P in Palmer v Clarke (1989) 19 NSWLR 158 at 166-167, are apposite:
"... The jurisdiction of an inferior court is defined by the Act of Parliament by which it is constituted or such general provisions of statutes which extend such jurisdiction. It is in connection with jurisdiction that lie the chief distinctions between superior and inferior courts. Prima facie, no matter is deemed to be beyond the jurisdiction of a superior court unless it is expressly shown on the face of the proceedings that the particular matter is within the cognizance of the particular court: Halsbury's Laws of England, 3rd ed, vol 9, p 349. Such a tribunal is not invested with those powers which are commonly exercised by courts of supreme judicature such as the Supreme Court of this State or higher tribunals. Such powers have their origin in tradition and their procedures are often dictated by convention."
70In making Order 4 of 23 January 2012, Judge Rolfe did not refer to any power made available to the District Court by statute or the rules of court. But if some relevant power did exist, the fact that it was not explicitly mentioned is beside the point. Rule 2.1 of the Uniform Civil Procedure Rules is in these terms:
"The court may, at any time and from time to time, give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings."
71The transcript shows that Judge Rolfe was concerned about the delay that occurred in the matter and the costs that had consequentially been incurred. His reasons reveal an intention to make an order consistent with rule 2.1. It may therefore be accepted that there was resort to an available power of the court.
72I am nevertheless of the opinion that the particular exercise of the available power should be set aside as being made on a wrong principle: House v The King (above). There are three reasons for this.
73First, the costs "on account of" which the payment was ordered were costs that the court had ordered should be payable forthwith. There was therefore a displacement of rule 42.7(2) which would otherwise have made the costs payable only at the conclusion of the proceedings. Because of the displacing order, it was open to the plaintiff, as the beneficiary of the displacement, to proceed immediately to obtain quantification of the costs through the assessment process and, subject only to that, to register the certificate of assessment as a judgment and to proceed to enforcement accordingly. There was no other or further need to provide assurance for the plaintiff regarding payment of costs.
74Second, such an order may not properly be based merely on what is relayed, as to quantum, by a party's counsel as a figure provided by the party's solicitor. Upon an application for security for costs, it is necessary that the court have before it evidence by reference to which the relevant assessment can be made; and the evidence should be given in the usual way that allows any challenge or testing to be undertaken by the other party. The same principle applies to any other case where the court's decision depends on the formation of an opinion as to the amount of costs incurred or likely to be incurred, such as where a fixed sum costs order is sought: see, for example, Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738.
75Third, the order operated, in relation to the defendant's notice of motion, in the same way as an order for security for costs. The defendant, as the moving party on the notice of motion, was, in an immediate sense, akin to a plaintiff and therefore a party against whom security might be ordered. On a broader view, however, the notice of motion was in reality part of the machinery the defendant was deploying to resist the plaintiff's principal claim in the proceedings.
76To the extent that the judge's order had an effect similar to that of an order for security for costs against a moving party, it would have been appropriate to have regard to factors to be taken into account in such a case, particularly where that moving party is a natural person. There was no clear addressing of those factors, although the judge did, in his assessment of financial resources, give some indirect consideration to the question whether the order might stultify the pursuit of the motion. To the extent that the order took effect in a broader way as an order for security for costs made against a defending party, there is an objection of principle since, in general, the ability of a defending party to defend proceedings to which he or she is involuntarily subjected should not be made to depend on the outlay of money.
77Order 4 of 23 January 2012 should be set aside.