Re David Murray Orr and Lusute Pty Limited (Cross-Claimant) v Lusute Pty Limited and Ors and David Murray Orr and Anor (Cross-Respondents) [1987] FCA 27 (10 February 1987)

FEDERAL COURT OF AUSTRALIA

Re: DAVID MURRAY ORR and LUSUTE PTY. LIMITED (Cross-Claimant)
And: LUSUTE PTY. LIMITED AND ORS. and DAVID MURRAY ORR AND ANOR
(Cross-Respondents)
No. G3 of 1984
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.

CATCHWORDS

Practice and Procedure - security for costs - application made on ground of applicant's impecuniosity - applicant within the jurisdiction and at all times impecunious - applicant not suing for the benefit of some other person - Court's general discretion to order security pursuant to its inherent or implied jurisdiction - delay in making application.

Federal Court of Australia Act 1976, s. 56.

Federal Court Rules, Order 28, rule 3(1)(b).

HEARING

SYDNEY
10:2:1987

Counsel for the Applicant: Mr. M.P. Sumner-Potts

Solicitors for the Applicant: Palmer Jourdain Noss & Howitt of Auburn by their city agents, P.W. Smyth King & Sons of Sydney

Counsel for the First Respondent: Miss M.J. Beazley

Solicitors for the First Respondent: Michael C. Marney & Co. of Caringbah until 3 February 1987 when ceased to act. The First Respondent then retained R.J. Benjamin & Co. of South Hurstville

Counsel for the Second Respondent: Mr. M.J. Meagher

Solicitors for the Second Respondent: Colin Biggers & Paisley of Sydney

No appearance for the Third Respondent

ORDER

The application that the applicant provide security for the first respondent's costs is dismissed.

The first respondent pay the costs of the application.

(Note: Orders were also made in relation to certain interrogatories and directions given for the future progress of the matter).

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

The matters immediately in question are three. They concern an application by the first respondent that the applicant provide security for the first respondent's costs; an application for further and better answers to interrogatories asked of the first respondent by the applicant; and the future management of the case. I deal first with the application for security.

2. In order that that matter may be dealt with it is necessary to understand something of the proceedings. The action is one in which the applicant sues the respondents on a number of causes of action one of which is within the jurisdiction of this Court because it is founded on s. 52 of the Trade Practices Act 1974. Others are said to be within its accrued jurisdiction. The essential allegations in relation to the cause of action under the Trade Practices Act are to be found in paras. 6 and following of the amended statement of claim. In substance it is alleged that the first respondent, by its servant and agent, a Mr. Levett, and the second respondent, who is an architect, requested the applicant to prepare a quotation for certain building work and, for the purpose thereof, provided to the applicant a set of plans. The applicant in reliance upon the plans prepared a quotation. It is alleged that on 15 January 1982 the applicant and the first respondent agreed in writing for the performance by the applicant of the work for an amount of $445,693.25. The agreement is alleged to have provided, (a) that a contract should be prepared by the second respondent in accordance with a form approved by the Master Builders Association and the Institute of Architects and, (b) that the quotation should form part of the contract between the applicant and the first respondent.

3. It is alleged in paragraph 9 of the amended statement of claim that the applicant commenced to perform the work pursuant to the agreement on 19 January 1982, notwithstanding that the contract referred to in (a) above was not then in existence. In paragraph 10 it is said that the second respondent on behalf of the first respondent and also on behalf of the third respondent, which is a company through which the second respondent carried on practice as an architect, prepared a contract in purported performance of the agreement in this regard. The applicant and the first respondent executed the contract on 10 March 1982.

4. Paragraph 11 alleges that the contract did not comply with the agreement for its preparation in the following respects:-

(a) it provided for the first respondent to pay the actual

cost of the works plus $480,898 to cover overheads;

(b) it provided for the applicant to be entitled to charge for

extras ordered by the first respondent only if they were
authorized in writing by the third respondent and contained
no provision whatsoever for overheads, commission or
builders profit;

(c) it provided that the cost of the works, including the

applicant's commission and overheads, and excluding
variations approved in writing by the architect should not
exceed $480,898 unless the said variations were attached to
the contract and signed by the applicant and the
respondent;

(d) it defined the cost of the works to include only costs

attributable to the contract as evidenced by a priced
builder's bill prepared by the builder and lodged with the
architect at a time nominated by him and did not otherwise
incorporate the quotation referred to in para. (b) above.

5. It is alleged in para. 12 that from time to time thereafter variations were requested and carried out. The first and third respondents were said not to have authorized the additional work in writing nor did they inform the applicant of any necessity for such authorization to be in writing. Rather each respondent represented to the applicant that it was unnecessary for the additional work to be authorized by the third respondent in writing and further, that he would be paid his "costs" together with overheads, commission and profit thereon.

6. In para. 13 it is said that the conduct of the respondents in paras. 10 to 12 above referred to was performed in trade and commerce and was misleading and deceptive. It related to the price of services, namely the applicant's work, and was false, related to the price of services and was misleading, concerned the existence or effect of a condition, warranty or right and was false and concerned the existence or effect of a condition, warranty or right and was misleading. No particulars are given of the respects in which the conduct of the respondents in paras. 10 to 12 was deceptive and misleading. Certain particulars of these allegations have, however, been furnished in correspondence.

7. There have been discussions during the directions hearings which have so far been held in this matter concerning the Court's jurisdiction to entertain this claim. Needless to say, if the cause of action based on s. 52 of the Trade Practices Act proves to be totally unfounded, in the sense that no colour of a case can be seen to be made pursuant to it, the Court will have no jurisdiction, not only in respect of that cause of action, but in respect of other causes of action said to arise under its accrued jurisdiction. At one stage a motion was taken out to have the proceedings dismissed for want of jurisdiction. I refused that relief because it did not seem to me to be possible to determine the question of jurisdiction until the facts of the matter were adequately before the Court. In my opinion this could only be done by embarking upon the hearing of the matter. In passing I should say that it will be most unfortunate if it emerges from the evidence which will be led that, after all, the Court does not have jurisdiction.

8. The application for security was made by notice of motion dated 9 September 1986. The motion was supported by two affidavits, the most important being that of Mr. K.W. Levett sworn on 4 September 1986. He deposed to having met the applicant on two or three occasions. He said that on 16 December 1982, at a meeting at the office of the third respondent at which he (Mr. Levett) and his solicitor, Mr. Marney, and Mr. James Orr and his solicitor, Mr. Noss, were in attendance. Mr. Noss said words to the effect, "We will apply for legal aid because David Orr is a pensioner. You will never be able to do anything to David Orr because his house is tied up in a war service loan". Mr. James Orr is one of the cross respondents and the son of the applicant.

9. Mr. Levett also said that prior to the signing of the building contract, he asked Mr. James Orr why he was not mentioned in the contract as the builder. Mr. James Orr said words to the effect, "I am using my father's licence as I do not have one". He also said, so Mr. Levett deposed, that his father had retired. Mr. Levett said that until the end of July 1982 he had been drawing cheques in respect of progress payments in favour of D.M. Orr, that is to say, the applicant. At the end of July 1982 Mr. James Orr said to him words to the effect, "Please make all future payments in my favour as it is a nuisance getting the cheques endorsed by my father".

10. According to the bank statements provided by the applicant and James Orr on discovery, no cheques were thereafter made payable to the applicant. No cheques made payable to him were ever credited to his account. Either Mr. Levett paid suppliers direct or made payment to James Orr.

11. The other affidavit is that of the first respondent's solicitor. It indicates the extent of the legal work which has been so far involved in the matter and makes some estimate of what is yet to come, including the time which will be occupied in the hearing. There is evidence otherwise that the applicant is a pensioner.

12. It follows that it would seem that, on the material that I have referred to, the applicant is unlikely to be able to meet the liability which would fall on him if an order for the payment of the first respondent's costs of the hearing of the matter were made against him. Neither the applicant nor Mr. James Orr gave evidence in the application. I accept the evidence led on behalf of the first respondent. There was no submission that I should not do so.

13. Historically there has always been jurisdiction to order that a plaintiff in a proceeding provide security for a defendant's costs. This concept has been carried forward into the jurisdiction of this Court. Section 56 of the Federal Court of Australia Act 1976 provides that the Court or a judge may order a plaintiff in a proceeding in the Court to give security for the payment of costs that may be awarded against him. But that broad grant of power has to be read in the light of the way the discretion to order security for costs has been exercised over the years. A commencing point for the consideration of the authorities is the decision of the Court of Appeal in England in Cowell v. Taylor L.R. (1885) 31 ChD 34, where Bowen L.J. said (p. 38):-

"The general rule is that poverty is no bar to a
litigant, that, from time immemorial, has been the
rule at common law, and also, I believe, in
equity".

He referred then to the exception which there is in the case of appeals and continued:-

"There is also an exception introduced in order to
prevent abuse, that if an insolvent sues as
nominal plaintiff for the benefit of somebody
else, he must give security".

The philosophy underlying that rule of the common law found expression in rules of court. The English rule is to be found in Order 23 rule 1 of the Supreme Court Rules, the particular provision being in para. (1)(b) which provides that security may be ordered where it appears to the Court 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. The rules of this Court are expressed in a somewhat different way but are to the same effect. Order 28, rule 3(1)(b) provides that where, in any proceeding, it appears to the Court on the application of a respondent 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, 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.

14. I have reached the conclusion that this case does not fall either within the dictum of Bowen L.J. to which I have referred, or within para. 3(1)(b) of Order 28 of the rules of this Court. That is because the applicant here does not sue as a nominal applicant or on behalf of anyone else; cf. Andrews v. Caltex Oil (Australia) Pty. Limited (1981) 60 FLR 261. The realities may be that he was used, as a matter of convenience, as the party to a contract which was really a contract in which Mr. James Orr was interested. But the applicant is in fact the contracting party. The contract is not a sham and he sues, in relation to matters connected with it, in his own name and in his own right. The rules to which I have referred and the dictum of Bowen L.J. do not, therefore, have any application to this case.

15. It is to be emphasized that the applicant was always the contracting party and that his financial position is much the same now as it was when he entered into the contract. It may have been wise for those dealing with him to ascertain what his financial position was before they did business with him. People entering into building contracts regularly ascertain the financial position of the other party. Whether some attempt to ascertain the applicant's worth was made, I do not know, but, so it seems to me, the first respondent has not brought this case within the rule or within, as I say, the dictum of Bowen L.J. to which I have referred. The argument was put, however, on a wider basis.

16. I was referred to the decision of Holland J. in Raiski v. Computer Manufacture and Design Pty. Limited (1982) 2 NSWLR 443. Holland J. demonstrated in that case that the Supreme Court of New South Wales was not confined to the provisions of its own Act or rules when determining whether or not it should order an applicant or plaintiff to provide security for costs. The Court's jurisdiction was at large and it always had jurisdiction to act in an appropriate case. Holland J. was dealing with the powers of the Supreme Court of New South Wales and relied essentially on the inherent jurisdiction which that Court has. It has been said from time to time that this Court has no inherent jurisdiction because it is a creature of statute. This was a matter referred to by the Chief Judge of this Court in Jackson v. Sterling Industries Limited (1987) 69 ALR 92 where his Honour said (pp. 96-7):-

"Counsel for Jackson, in dealing with the question
whether the Federal Court had power to grant a
Mareva injunction 'otherwise' than pursuant to s.
23 of the Federal Court of Australia Act, argued
that the court being established by statute had no
inherent jurisdiction. The argument regarding the
existence or non-existence of inherent
jurisdiction is an awkward one to fit into a
Federal system. The High Court has its
jurisdiction conferred upon it by statute, namely
by the Constitution and by Acts of the Parliament;
the Federal Court of Australia is constituted by
an Act of the Parliament, namely the Federal Court
of Australia Act and has jurisdiction conferred on
it by various Acts of the Parliament; the Supreme
Court of New South Wales as formerly established
as the superior court of record in New South Wales
was continued by the Supreme Court Act 1970
(N.S.W.) (s. 22) and that Act conferred upon the
Supreme Court all jurisdiction which might be
necessary for the administration of justice in New
South Wales (s. 23). Although the Supreme Court
of New South Wales is spoken of as a court of
'general jurisdiction' and the statutory
establishment of the court is referential, the
fact is that the jurisdiction conferred on that
court by statute is necessarily subject to
subtraction due to constitutional limits and to
additions eg by the Judiciary Act 1903, in a way
not usually associated with courts of general
jurisdiction in a unitary State. In relation to a
statutory court such as the Federal Court it is
wise to avoid the use of the words 'inherent
jurisdiction'. Nevertheless a statutory court
which is expressly given certain jurisdiction and
powers must exercise that jurisdiction and those
powers. In doing so it 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 its process, is similar to, if
not identical with, inherent power".

17. Upon the basis of what the Chief Judge has said, there is no distinction between the position of this Court in relation to the exercise of jurisdiction of this kind and that of the Supreme Court of New South Wales which undoubtedly has the inherent jurisdiction to which Holland J. referred. That conclusion is in any event warranted by the express provisions of s. 56 of the Federal Court of Australia Act to which I referred earlier. Nevertheless, I have decided that I should refuse this application. It might be thought that it would be just if the application were granted, but it seems to me that I have to bear very much in mind the fundamental principle which was referred to by Bowen L.J. in the passage above cited from his judgment in Cowell v. Taylor, namely, "The general rule is that poverty is no bar to a litigant. That from time immemorial has been the rule of common law and I also believe in equity". It follows that this is not a case in which security for costs should be ordered because to order it would offend that fundamental rule. For those reasons I have decided that the application for security for costs should be refused.

18. There were two matters argued that I should mention in passing. One raised the question of delay. I was referred to the decision of Beach J. of the Supreme Court of Victoria in Aspendale Pastoral Company Pty. Limited v. W.J. Drever Pty. Limited (1983) 7 ACLR 937, particularly at p 942. There his Honour states the principle that delay in an application of this kind may indeed be fatal to its success; see also Miller v. Australian Record Co Limited (1955) 73 WN (NSW) 469. Undoubtedly there has been delay here, but I do not indicate one way or the other what my conclusion on the submission would have been had I been otherwise disposed to make the order which was sought in the motion.

19. The remaining matter concerned a submission made on behalf of the applicant that there was an outstanding certificate in the sum of $30,000 which meant that the first respondent undoubtedly owed the applicant that sum. Affidavits were put on after the hearing concluded about the matter, but in the view that I have taken of the application itself it is unnecessary to reach a conclusion about the conflicting evidence which there is concerning this matter.

20. The next matter with which I should deal is the application for further and better answers to interrogatories administered by the applicant of the first respondent. A large number of interrogatories are in question but they may be conveniently grouped into two main categories. The first category, which I shall call group A, are those interrogatories which were objected to because they were said to seek information concerning the actions or words of the second respondent from whom the first respondent is said to be at arm's length. The second category are those which were objected to because they called upon the first respondent to make a judgment on questions of law or mixed questions of law and fact or upon the construction of documents. I shall call those interrogatories group B.

21. I have reached the conclusion that I should accept the submissions made by counsel for the first respondent in relation to the interrogatories in these two groups and I do not require the first respondent to make any further answer to them. The interrogatories which fall into category A are interrogatories 2, 5, 13, 27(d) and (e), 29, 34 and 36. Those which fall into category B are interrogatories 17(b) to (j) inclusive, 25, 27(b), (f), (g), (h), (i) and (j), 28, 30, 31 (because it is consequential upon 30 which I have disallowed), 33 (I mention that the word "authorized" is the word which creates the difficulty for the interrogatory), 35 (in consequence of my decision on 33), 38, 39, 40 (in consequence of my decision on 39), 42 and 43.

22. That leaves interrogatories 6 and 44 which are in a different category. Interrogatory 6 asks, "Did a meeting take place at the offices of Lang and Simmons in Kings Cross attended by Keith Levett on behalf of the first respondent, the second respondent, Rick Eason on behalf of Lang and Simmons, the applicant's construction manager, James Orr and Rodney Jamieson. The answer is, "The first respondent objects to answering this interrogatory on the ground that it is vexatious, oppressive and vague and uncertain in that it does not relate to any matter in issue between the applicant and the first respondent, and further in that it does not relate to any specified period of time". I regard an interrogatory of the type asked as relevant, but I have difficulty with it because it does not specify any period of time or any other fact or matter which would enable the first respondent to identify the occasion which is being spoken of. I would have overruled the objection based on the interrogatory not relating to any issue in the case and I am prepared to give consideration to allowing an interrogatory which is more specific in its terms, but as the interrogatory is presently drawn I think it should be disallowed.

23. Interrogatory 44 was partly answered in that paragraph (a) was answered, but the remaining paragraphs were not. They are as follows:-

"(b)was the work in each item a variation to the work
contracted for;

(c) was the work set out in each item set out in the
plans from which the applicant prepared a bill of
quantities;

(d) was the work set out in each item set out in the
plans from which the contract bearing No. CPO
3263 was based;

(e) is the price set out against each item a fair
price for the work set out in each item;

(f) what is a fair price for the work set out in each
item;
(g) does any part of the work set out in annexure D
hereto form part of the bill of quantities".

24. I have decided that for one reason or another all these interrogatories are objectionable, except that asked in paragraph (c). I would have thought myself that that was capable of being answered and should be answered; but because the remaining interrogatories call for answers to questions of law or mixed law and fact, or require the construction of a document, or because they ask for the exercise of a judgment on what a fair price for work is, they should be disallowed.

25. It follows, accordingly, that I have upheld the submissions of counsel for the first respondent in relation to the interrogatories except insofar as interrogatory 44(c) is concerned. That interrogatory I direct the first responent to answer within 14 days.

26. It remains to say something of the future management of the litigation. As the affidavit of the first respondent's solicitor shows, there have been innumerable directions hearings in this matter; Scott schedules have been prepared and other steps have been taken. There is hovering over the matter the doubt about jurisdiction to which I have referred. The matter is also clouded by what seems to me to be an inadequacy in the particulars supplied both in the Scott schedule and elsewhere, particularly by the applicant. This may not be a matter the applicant can do anything about because of the absence of records in its hands and the passage of time.

27. Having reflected on the matter, I have come to the clear conclusion that the time has come to fix a date for hearing for it. I think that the case is as ready as it will ever be, subject perhaps to one or two further steps being taken. I think the best way of handling it is to set aside a week initially for the hearing of it and to see where the case is at the end of that week. It may not be possible to go on with it into a second week if that should be required, and it may be wise to pause for a month or so to allow the parties to regroup, but I am satisfied that the only way in which this litigation will be brought to an end is by fixing a date for hearing and I propose to offer the parties a week convenient to them, but in the near future, during which the hearing may at least be commenced.

(For ensuing discussion see transcript).