Re Thomas Barton v the Minister of Foreign Affairs [1984] FCA 89; 2 FCR 463 / 54 ALR 586 (6 April 1984)

FEDERAL COURT OF AUSTRALIA

Re: THOMAS BARTON
And: THE MINISTER FOR FOREIGN AFFAIRS
No. G 101 of 1984
Practice and Procedure
[1984] FCA 89; 2 FCR 463 / 54 ALR 586

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Morling J.(1)

CATCHWORDS

Practice and Procedure - security for costs - whether court has a discretion to order security for costs when applicant ordinarily resident outside Australia - comparison with English rule - exercise of discretion - impecuniosity of applicant - cost of registering and enforcing judgment outside Australia

Federal Court of Australia Act 1976 s.56

Federal Court Rules, Order 28 Rule 3

Rules of Supreme Court (Imp) Order 23 Rule 1

Rules of Supreme Court of New South Wales, Part 53 rule 2(1)

Foreign Judgments (Reciprocal) Enforcement Act 1933 (U.K.)

s. 2

Practice and Procedure - Security for costs - Whether the court has a

discretion - Applicant ordinarily resident outside Australia - Exercise of discretion - Impecuniosity of the applicant - Costs of registering and enforcing judgment outside Australia - Comparison with English rules for security for costs - Federal Court of Australia Act 1976 (Cth), s. 56 - Federal Court Rules 1979 (Cth), O. 28, r. 3 - Rules of Supreme Court (Imp.) O. 23, r. 1 - Rules of Supreme Court of New South Wales Pt 53, r. 2(1) - Foreign Judgments (Reciprocal Enforcement) Act 1933 (U.K.), s. 2. When considering an application for security for costs the court has a discretion to refuse to make such an order. The power given to the court by virtue of s. 56 of the Federal Court of Australia Act 1976 (Cth) and the provisions of O. 28, r. 3 of the Federal Court Rules 1979 (Cth), to make an order that an applicant give security for the respondent's costs, is a power to make or refuse an order in the court's discretion.

Although the English courts have commonly made orders for security for costs when the plaintiff has been ordinarily resident overseas, this is not sufficient reason for the Federal Court to adopt an inflexible practice. The court should exercise its discretion having regard to the facts of each case.

Whilst impecuniosity on the part of an applicant is not sufficient reason to make such an order, where the applicant is ordinarily resident overseas the court may have regard to the expense which the respondent may have to incur to enforce a judgment or costs order overseas should he be successful in the proceedings.

Bell Wholesale Co. Pty Ltd v. Gates Export Corporation [1984] FCA 34; (1984) 2 F.C.R. 1; Lucas v. Yorke (1983) 58 A.L.J.R. 20; Connop v. Varena Pty Ltd (1984) 1 N.S.W.L.R. 71; Kohn v. Rinson & Stafford (Brod) Ltd (1948) 1 K.B. 327; Aeronave S.P.A. v. Westland Charters Ltd (1971) 1 W.L.R. 1445; Pearson v. Naydler (1977) 1 W.L.R. 899; King v. Commercial Bank of Australia Ltd [1920] HCA 62; (1920) 28 C.L.R. 289; Finance Facilities Pty Ltd v. Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 C.L.R. 106.

HEARING

Sydney, 1984, April 5, 6. 6:4:1984

APPLICATION.

Application for security for costs in an application for an order of review

under the Administrative Decisions (Judicial Review) Act 1977 (Cth).

N. Hutley, for the applicant.

L. Katz, for the respondent.
Cur. adv. vult.

Solicitors for the applicant: Ferrier & Associates.

Solicitor for the respondent: T. A. Sherman, Acting Commonwealth Crown

Solicitor.

S.W.

ORDER

1. The applicant to give security in the sum of
$2,000 for the payment of the respondent's
costs.

2. The costs of the application for security of
costs should be costs in the substantive
application.

Orders accordingly.

DECISION

This is an application for security for costs in an application brought by Mr Thomas Barton for an order of review under the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act"). The decision which the applicant seeks to have reviewed is an alleged decision of the Minister for Foreign Affairs that the applicant be not issued with an Australian passport. The application raises an important question as to the ambit of the discretion of the Court to make an order for security for the payment of costs in a case where the applicant is ordinarily resident outside Australia.

2. It is common ground between the parties that the applicant is ordinarily resident outside Australia and that he lives and works in London. The respondent relies upon those facts as justifying the making of an order that the applicant give security for the payment of his costs. The respondent relies upon the provisions of Order 28 rule 3 (1)(a) of the Federal Court Rules and also upon s. 56 of the Federal Court of Australia Act 1976 as sources of the court's power to make the order sought.

3. It is beyond question that the court does have adequate power to make an appropriate order. See Bell Wholesale Company Pty. Limited v Gates Export Corporation (an unreported decision of a Full Court of this Court given on 16 February 1984). However, the respondent argues that in the circumstances of this case the court has no discretion but to make an order for security for the payment of his costs. It is his contention that the only area of discretion available to the court relates to the quantum of the security which should be ordered.

4. In order to understand the case it is necessary to refer to some matters relating to the applicant's past history. The facts to which I shall make reference are taken from affidavits filed on behalf of the applicant in support of an application for interlocutory relief. I accept those facts only for the purposes of dealing with the present application. I should not be taken as accepting them as being established for the purposes of the final hearing.

5. The applicant became an Australian citizen on 26 September 1955. He came to this country from Hungary. He was then aged 9 years. He lived in Australia until about 1973. He is married to a lady who is an Australian citizen. In 1974 he was in Brazil with his parents and his wife. At that time certain warrants were outstanding in Australia for the arrest of the applicant and his father. An application for the extradition of the applicant and his father was made by the Australian Government to the Brazilian Government. This application was unsuccessful. In circumstances which it is unnecessary to relate for the purposes of deciding the current application, the applicant and his wife went to live in Paraguay later in 1974. Between November 1974 and December 1975 the Australian Government sought the extradition of the applicant and his father from Paraguay. The extradition proceedings terminated unsuccessfully in or about December 1975.

6. The applicant and his father returned to Australia together on 5 January 1977. Between April 1977 and April 1979 the applicant made many attempts to secure the issue of an Australian passport. On 3 April 1979 he was issued with Australian passport No. P464177 valid for five years from that date.

7. The applicant has applied for a new Australian passport. On 14 March 1984 he was advised that the Department of Immigration and Ethnic Affairs had advised the Department of Foreign Affairs that a legal opinion had been obtained to the effect that he had ceased to be an Australian citizen under s.17 of the Citizenship Act "by virtue of your voluntary acquisition of Paraguan Citizenship on 12 August 1974." He was advised that as he was no longer deemed to be an Australian citizen it was not possible for him to be issued with a new passport.

8. The applicant presently resides with his wife in London. Between 1977 and approximately February 1983 when he took up employment in the United Kingdom he lived in Sydney. There is evidence, which I accept only for the purpose of the present application, that when he took up employment in London it was intended both by him and his employer that the employment would be of one or two years duration.

9. The applicant is an undischarged bankrupt. Since taking up his present employment the applicant has returned to Australia on two occasions for the purpose of giving evidence in legal proceedings at the request of the Official Receiver. On 2 February 1983 he wrote to the Official Receiver advising him that he had been offered employment and stating that he had accepted the offer "subject to your agreement that I remain out of Australia for the next year or two on condition that I return when required by you to give evidence in Court or for some other matter." He informed the Official Receiver that "I cannot see myself being able to earn a living in Australia for the next two years due to the terrible publicity". No doubt this was a reference to the considerable publicity which he and his father attracted in past years due to their involvement in certain business dealings and legal proceedings which attracted much publicity. There is no evidence of the Official Receiver's attitude to the applicant's request.

10. I turn now to consider whether I should make the order sought by the respondent. Order 28 rule 3 of the Federal Court Rules provides as follows: -

"Rule 3

Cases for security

(1) Where, in any proceeding, it appears to
the Court on the application of a respondent -

(a) that an applicant is ordinarily resident
outside Australia;

(b) that an applicant is suing, not for his own
benefit, but for the benefit of some other
person and there is reason to believe that
the applicant will be unable to pay the
costs of the respondent if ordered to do so;

(c) subject to sub-rule (2), that the address of
an applicant is not stated or is mis-stated
in his originating process; or

(d) that an applicant has changed his address
after the commencement of the proceeding
with a view to avoiding the consequences of
the proceeding,

the Court may order that applicant to give such
security as the Court thinks fit for the costs of
the respondent of and incidental to the
proceeding.

(2) (Intention to deceive) The Court
shall not order an applicant to give security by
reason only of paragraph (1)(c) if it appears to
the Court that the failure to state his address
or the mis-statement of his address was made
without intention to deceive."

11. Counsel for the respondent submitted that once it was shown that the applicant ordinarily resided outside Australia the court was obliged to make an order for security for costs. In support of his argument he referred to the decision of the High Court in Finance Facilities Pty. Limited v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 C.L.R. 106 particularly at p. 134 per Windeyer J. where his Honour considered whether the word "may" as used in sub-s. 46(3) of the Income Tax Assessment Act 1936-1967 (Cth) required that the power given to the Commissioner by that legislation must be exercised, given the existence of the facts which made the power exerciseable. His Honour said:

"While Parliament uses the English language the
word 'may' in a statute means may. Used of a
person having an official position, it is a word
of permission, an authority to do something
which otherwise he could not lawfully do. If
the scope of the permission be not circumscribed
by context or circumstances it enables the
doing, or abstaining from doing, at discretion,
of the thing so authorized. But the discretion
must be exercised bona fide, having regard to
the policy and purpose of the statute conferring
the authority and the duties of the officer to
whom it was given : it may not be exercised for
the promotion of some end foreign to that policy
and purpose or those duties. However, that
general proposition is irrelevant in this case.
Here the scope of the permission or power given
is circumscribed. Conditions precedent for its
exercise are specified as alternatives. The
question then is, must the permitted power be
exercised if one of those conditions be
fulfilled?

This does not depend on the abstract meaning
of the word 'may' but of whether the particular
context of words and circumstance make it not
only an empowering word but indicate
circumstances in which the power is to be
exercised - so that in those events the 'may'
becomes a 'must'. Illustrative cases go back to
1663: R v Barlow ((1663) Carth, 293 [1741] EngR 139; (90 E.R.
773); 2 Salk. 609 (91 E.R. 516)). Today it is
enough to cite Julius v Bishop of Oxford ((1880)
5 App. Cas. 214); and add in this Court Ward v
Williams ((1955) [1955] HCA 4; 92 C.L.R. 496, at pp. 505-506).
But I select one other reference out of a
multitude: Macdougall v Paterson ((1851) [1851] EngR 970; 11
C.B. 755 (138 E.R. 672)). There Jervis C.J.
said in the course of the argument ((1851) 11
C.B., at p. 766 (138 E.R., at p. 677)) 'The word
"may" is merely used to confer the authority:
and the authority must be exercised, if the
circumstances are such as to call for its
exercise'. And, giving judgment, he said
((1851) 11 C.B., at p. 773 (138 E.R., at p.
679):

'We are of opinion that the word "may" is
not used to give a discretion, but to confer
a power upon the court and judges; and that
the exercise of such power depends, not upon
the discretion of the court or judge, but
upon the proof of the particular case out of
which such power arises.'

[1971] HCA 12; (1971) 127 C.L.R. 106 at p.134.

12. Counsel for the respondent sought to apply the reasoning in the above passage to Order 28 rule 3. He argued that once one of the matters referred to in clauses (a), (b), (c) or (d) was established the court was not only empowered but also obliged to exercise the power and could not, in the exercise of any discretion, refuse to make an order.

13. This argument was supported by reference to Order 23, rule 1 of the Rules of the Supreme Court (Imp) (see the Annual Practice 1982, Vol. I, p. 430). That rule now provides, in part, as follows: -

"1. (1) Where, on the application of a
defendant to an action or other proceeding in the
High Court, it appears to the Court -

(a) that the plaintiff is ordinarily resident
out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff
who is suing in a representative capacity)
is a nominal plaintiff who is suing for the
benefit of some other person and that there
is reason to believe that he will be unable
to pay the costs of the defendant if
ordered to do so, or

(c) subject to paragraph (2), that the
plaintiff's address is not stated in the
writ or other originating process or is
incorrectly stated therein, or

(d) that the plaintiff has changed his address
during the course of the proceedings with a
view to evading the consequences of the
litigation,

then if, having regard to all the circumstances
of the case, the Court thinks it just to do so,
it may order the plaintiff to give such security
for the defendant's costs of the action or other
proceeding as it thinks just."

(emphasis added)

14. Counsel pointed out that the words that I have emphasised did not appear in R.S.C. Order 65, rule 6A, which was in force until 1962 and which was replaced by R.S.C. Order 23, rule 1. R.S.C. Order 65, rule 6A provided only that a plaintiff ordinarily resident out of the jurisdiction might be ordered to give security for costs. That rule was, for relevant purposes, in much the same terms as the relevant part of Order 28 rule 3(1) . It was then submitted that under R.S.C. Order 65 rule 6A it was an inflexible and rigid rule that a plaintiff resident abroad was ordered to provide security for the defendant's costs. He referred to Demag-Lauchhammer Maschinenbau und Stahlbau G.M.B.H. v John Holland (1966) 85 W.N. (Part 1) (N.S.W.) 231 at 233-4. The argument then proceeded that as there were no words in Order 28 rule 3(1) equivalent to the words which I have emphasised in the R.S.C. Order 23 rule 1(1) the court should construe rule 3(1) so as to require the court to make an order whenever it is shown that an applicant is not ordinarily resident in Australia.

15. On general principle, I would not be disposed to accept this argument unless constrained by authority so to do. It is plain that s.56 of the Federal Court of Australia Act is intended to, and does, give a wide discretion to the court or a judge to make an order for the giving of security for the payment of costs. It seems to me inherently unlikely that it was intended that once a case was brought within Order 28 rule 3 (1) the court would have no discretion to refuse to make an order. It is not difficult to imagine circumstances in which such a construction of the rule could work a real injustice. Thus, a case can be envisaged in which it appears plainly to the court that an applicant has a very strong case and that his impecuniosity is solely due to the respondent's conduct, cf. Lucas v Yorke (1983) 58 A.L.J.R. 20 at p. 21 per Brennan J. It would be an unfortunate result in such a case if the mere fact that the applicant was ordinarily resident out of the jurisdiction effectively prevented him from prosecuting his claim before the court because he could not comply with an order that he give security for payment of the respondent's costs.

16. Order 28 rule 3(1) is almost identical with Part 53
rule 2(1) of the Rules of the Supreme Court of New South Wales, which reads as follows: -

"(1) Where, in any proceedings, it appears
to the Court on the application of a defendant -

(a) that a plaintiff is ordinarily
resident outside the State;

the Court may order that plaintiff to give such
security as the Court thinks fit for the costs of
the defendant of and incidental to the proceed
ings and that the proceedings be stayed until the
security is given."

17. In Connop v Varena Pty. Limited (13 March 1984) Rath J. said of this rule:

"It is apparent that this rule gives the
Court a discretion whether it will order
security or not, and as to the amount of
security, if the Court thinks fit to make an
order ....".

18. Counsel for the respondent argued that Rath J's decision did not pay sufficient regard to the approach taken by the English courts to former R.S.C. Order 65 rule 6A with which the New South Wales rule is broadly comparable. But when the English cases are looked at it is by no means clear that they proceed upon the basis that the English courts had no discretion to refuse to order a foreign plaintiff to give security for costs. The cases certainly establish that the English courts commonly, and perhaps invariably, made orders for security for costs in such cases. One such case was Kohn v Rinson & Stafford (Brod) Limited (1947) 2 All E.R. 839. Denning J. (as he then was) said in that case:

"It is plain that it is in the discretion of the
court to order security for costs, and it does
so as a matter of course when a plaintiff is out
of the jurisdiction, the reason being that, if a
judgment is obtained by the defendant against
the plaintiff for costs, such an order cannot be
enforced by the direct process of these courts."

19. Kohn's Case was decided in 1947 and accordingly Denning J. must have been referring to the practice under the now repealed English rule which did not contain the words which I have emphasised in the R.S.C. Order 23 rule 1. It is to be observed that Denning J. refers to the discretion of the court to order security for costs. When he said that the court made orders "as a matter of course" he must be taken to have meant that those orders were made as a matter of discretion. In a later case (Aeronave SPA v Westland Charters Limited (1971) 3 All ER 531 at 533) his Lordship made a reference to the earlier English practice. After noting that the current English rule gave a discretion to the court he said:

"In 1894 in Crozat v Brogden (1894) 2 Q.B. 30 at
35 Lopes L.J. said that there was an inflexible
rule that if a foreigner sued he should give
security for costs. But that is putting it too
high."

20. In the context of that case, it is possible that his Lordship was not intending to say that it was putting it too high that under the old rule a foreign plaintiff was obliged to give security for costs. But it is at least arguable that that was what his Lordship intended to convey.

21. Even if it be accepted that the English courts followed an inflexible practice of always making orders for security for costs when the relevant rule was in a form similar to the Federal Court rule, that is not a sufficient reason for this court to adopt a similar practice. Given that this court has a discretion in the matter, it should exercise that discretion having regard to the facts of each case.

22. In my opinion the court does have a discretion to refuse to make an order for security for the payment of costs even if an applicant is ordinarily resident outside Australia. I agree with the view taken by Rath J. of the equivalent Supreme Court rule. I can see no valid reason for reading down the word "may" in rule 3(1) so as to deprive the court of a discretion once a case is brought within the rule.

23. I must now consider whether, in the exercise of the discretion which I believe I have, I should make an order. I am of the opinion that the fact that the applicant is ordinarily resident outside Australia does warrant the making of an order. But I do not think the case calls for the making of an order for substantial security. There is no evidence before the court as to the likely costs of the action. However, I accept that they could be substantial. Counsel for the respondent stated, without objection, that the respondent's present estimate of his costs of the proceedings is about $15,000. I would have thought that this estimate is rather generous unless it be assumed that the respondent will find it necessary to bring witnesses to Australia from overseas or to take evidence overseas. Having regard to the nature of the issues which could arise in the proceedings, it may well be the case that the respondent will incur substantial additional costs in bringing witnesses to Australia, or in taking evidence overseas. But even if that proves to be the case, I do not think that the order which I propose to make should be in such an amount as to protect the respondent against the whole costs of the action.

24. 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, Megary 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."

25. The historical basis for requiring a foreign plaintiff to give security for costs was that to enforce a judgment a defendant had to sue on the judgment in the foreign country where the plaintiff resided, and having got his judgment, then to enforce it. But that will not be the position of the respondent should he succeed in these proceedings. In that event he will be able to enforce any judgment for costs in the United Kingdom by virtue of the provisions of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (U.K.) s. 2. The provisions of that Act apply to Australia - see Order in Council No. 1073 of 10 November 1933. Thus, if the respondent goes to the expense of registering in the United Kingdom any judgment for costs he may obtain in this court, he will be in no worse position than if the applicant had been resident in Australia. I have already referred to the fact that the applicant is an undischarged bankrupt. It may well be the fact that he has no significant assets. If this is so (and there appeared to be a tacit agreement at the bar table that it probably was the case) the reality of the situation is that the respondent would not be able to enforce any judgment for costs against the applicant even if he was ordinarily resident in Australia. Counsel for the applicant submitted, correctly in my view, that it would be an odd result if an impecunious plaintiff was ordered to give security merely because he was ordinarily resident outside Australia, although his absence from Australia had little, if any, prejudicial affect on the respondent's prospects of recovering his costs.

26. In Connop v Varena Pty Ltd. (supra) Rath J. dealt with a somewhat similar case. In that case the plaintiff was ordinarily resident in New Zealand. There is legislation in force in New Zealand which makes it possible to enforce (by registration in that country) a judgment of the Supreme Court of New South Wales. His Honour said that an order for costs against the plaintiffs in that case could be registered without difficulty in New Zealand although there might be some delay inconvenience and expense arising from registration of the judgment. Having referred to those matters he said:

"(B)ut apart from this I see no difference in
regard to the costs of the first and second
defendants between the circumstances of this
case and those of a similar case where a
plaintiff is not ordinarily resident outside
this State. With only minor reservations, a
judgment for costs will be as effective against
the plaintiffs here as it would be in the case
of a plaintiff who did not ordinarily reside
outside this State. (see: In re Percy and Kelly
(etc.) Company (1876) 2 Ch D 531 per Jessel
M.R. at p 531)."

27. His Honour made an order for security for costs, fixing the amount of security at $750. This sum was apparently an estimate of the cost of registration and execution in New Zealand of a judgment for costs in the Supreme Court of New South Wales in favour of the defendants in the action before him.

28. I respectfully agree with the approach adopted by Rath J. There is no evidence before me as to the costs of registering and enforcing a judgment of this court in the United Kingdom. But the most generous estimate would not, I think, exceed the sum of $2,000, and the applicant should be ordered to give security for payment of the respondent's costs of the proceedings in that amount.

29. In Lucas v Yorke (supra) Brennan J. adopted a dictum of Rich J. in King v Commercial Bank of Australia Limited [1920] HCA 62; (1920) 28 C.L.R. 289 at 292 as to the proper approach to be taken to an application for security for costs : Rich J. said:

"The Legislature, however, has left absolute
discretion to the court, and has done so without
prescribing any rules for it exercise. In these
circumstances no rules can be formulated in
advance by any judge as to how the discretion
shall be exercised. It depends entirely on the
circumstances of each particular case. The
discretion must, of course, be exercised
judicially, which means that in each case the
Judge has to inquire how, on the whole, justice
will be best served, ..."

30. In my opinion justice will best be served in this case by the order which I propose to make. If I were to order that security be given in a much larger amount the result may well be that the applicant will be effectively barred from prosecuting his claim. The consequences to the applicant of failure in the present proceedings are very grave. He left Hungary in 1955 as a young boy and Australia has been his home for the greater part of his life. Apparently he was treated as an Australian citizen in 1979 when he was issued with an Australian passport. The loss of his Australian citizenship would be a serious blow to him, more especially as his wife is a citizen of this country.

31. His apparent impecuniosity is no reason why he should be prevented from pursuing his application. The order which I propose to make will leave the respondent in no worse position than he would be in were the applicant to return to Australia and again become a resident of this country. His explanation for seeking employment in London is readily explicable in the light of the notoriety attaching to his name in Australia. Under all the circumstances justice will best be served by ordering the applicant to give security in the sum of $2,000 for the payment of the respondent's costs. If the parties are unable to agree as to the manner and terms of the security, I will make an appropriate order dealing with those matters.

32. Whilst the respondent has had partial success, he has not succeeded on his major argument. In these circumstances the costs of the application for security for costs should be costs in the substantive application.