Morey v Transurban City Link Ltd & Anor [1997] FCA 47 (7 February 1997)

CATCHWORDS

COSTS - power to award costs against non-party - whether non- party the real or motivating party behind the litigation where applicant a man of straw.

COSTS - trade practices litigation - whether public interest litigation - whether usual order as to costs should apply.

Caboolture Park Shopping Centre Pty Ltd (In Liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471; (1993) 45 FCR 224

Knight v F P Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178

Microcorp Pty Ltd v Terran Computers Pty Ltd (No VG 258 of 1991) 28 June 1992, unreported.

MOREY v TRANSURBAN CITY LINK LIMITED and CITY LINK MANAGEMENT LIMITED

No VG 124 of 1996

NORTHROP J

MELBOURNE

7 FEBRUARY 1997

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY No VG 124 of 1996

GENERAL DIVISION

B E T W E E N:

PHILIP JAMES MOREY Applicant

A N D:

TRANSURBAN CITY LINK LIMITED

and

CITY LINK MANAGEMENT LIMITED Respondents

COURT: NORTHROP J

PLACE: MELBOURNE

DATE: 7 FEBRUARY 1997

MINUTES OF ORDERS

1. The applicant pay the respondents' costs of the application, including costs of and incidental to the making of submissions that the applicant pay the costs of the proceeding.

2. The respondents' motions, notices of which are dated 30 May and 17 June 1996 respectively, be refused with costs.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY No VG 124 of 1996

GENERAL DIVISION

B E T W E E N:

PHILIP JAMES MOREY Applicant

A N D:

TRANSURBAN CITY LINK LIMITED

and

CITY LINK MANAGEMENT LIMITED Respondents

COURT: NORTHROP J

PLACE: MELBOURNE

DATE: 7 FEBRUARY 1997

REASONS FOR JUDGMENT

On 22 May 1996 the Court ordered that the application by Mr Morey be dismissed and published its reasons for making that order. At the same time the Court adjourned the further hearing of the application to allow submissions to be made on the question of costs. On 18 June 1996, pursuant to notice, the first respondent ("Transurban") moved the Court for orders that its costs be paid by the Public Transport Users Association ("the PTUA"). Transurban moved the Court also that the applicant ("Mr Morey") pay its costs. On the same day, pursuant to notice the second respondent ("City Link Management Ltd") moved the Court for similar orders but apart from adopting the same submissions its legal advisors took no further part in the proceeding. The PTUA appeared by counsel to oppose the orders sought against it. Mr Morey opposed the orders sought against him. The hearing of the motions extended over two days.

In support of the motion against the PTUA, counsel for Transurban relied upon the following grounds:-

1. Mr Morey, although the named applicant on the record, was not in fact the real or motivating party behind the proceeding.

2. The PTUA had played an active part in the instigation and prosecution of the proceeding.

3. The PTUA had put forward Mr Morey as a man of straw, a person who clearly was unable to pay the costs of the litigation.

4. The PTUA had an interest in the subject of the litigation being the furtherance of its potential objectives of preventing the construction of the City Link Project.

In addition, counsel for Transurban submitted that the normal order that costs follow the event should be applied to justify the making of an order that Mr Morey pay its costs.

In support of its motion, Transurban relied on material contained in an affidavit sworn by a solicitor employed in the office of its solicitors. Essentially that material included evidence relating to the PTUA, some activities of Paul Andrew Mees, the President of the PTUA, and collected together parts of the earlier transcript in the proceedings relating to the position of Mr Morey. In opposition, the PTUA relied upon an affidavit sworn by Mr Mees. Mr Mees was cross- examined. On all the material, there is nothing to support the view that Mr Mees was not a witness of truth.

For the purposes of determining the motions, the Court makes the following findings. The PTUA is a corporation being registered under the Associations Incorporation Act 1981 . It is a non-profit organisation. Its purposes are stated to be:-

"The objective of the Association is an environmentally sustainable transport system which incorporates:

(a) first class urban, interurban and interstate public transport systems;

(b) increased use of environmentally friendly rail for goods transport;

(c) government funding for public transport infrastructure on the same financial terms as roads;

(d) planning policies that support public transport, walking and cycling;

(e) efficiently managed operations with economical fares embodying normal consumer rights;

(f) user representation on the Boards of all public transport authorities."

Any person may become a member of the PTUA by applying in writing and paying the membership fee. Annual fees are charged and provision is made for corporate membership. Essentially the PTUA is a voluntary association of persons who support its objectives. It is incorporated as a matter of convenience but its members are separate and distinct from the corporate body. Often the activities of a member may become confused with the activities of the corporate body.

The management of the PTUA is vested in a committee elected at the annual general meeting consisting of the President, Secretary, Treasurer and up to nine additional members. Committee meetings occur as determined by the President. In addition to specific powers, the Committee has power to do anything reasonably required to advance the objects of the PTUA.

The PTUA has a very informed internal structure. It has no paid employees. No one person has executive powers and in particular the President has no executive powers apart from the power to call a meeting of the Committee. It has limited assets and no substantial reserves. It's bank account is no more than $8,000.00 in credit.

Although the PTUA has a somewhat informal method of management, the Court finds that its committee has power, in the name of the PTUA, to commence legal proceedings and to agree to expend the assets of the PTUA in providing financial assistance to a person, including a member of the PTUA, who has commenced legal proceedings. There is no evidence to show that the Committee of the PTUA:-

(i) had undertaken to finance the proceeding commenced by Mr Morey against Transurban;

(ii) requested Mr Morey, who is a member of the PTUA, to commence and prosecute the proceeding;

(iii) had undertaken to pay any order for costs made against Mr Morey.

The Court finds that Mr Morey had and has no assets to pay the legal expenses involved in commencing and prosecuting the proceeding and that he has no assets from which to satisfy any order for costs ordered to be paid by him. Mr Mees knew this before the proceedings commenced. Mr Morey was not in a position to give any undertaking as to damages at the stage he was seeking interlocutory relief. He has made no payment of fees to his solicitors who are acting on the basis of not charging him professional fees. Members of the PTUA have raised some moneys to reimburse the solicitors for disbursements incurred by them. At the time of the hearing of the application Mr Morey was a town planner. He is a young man and had difficulty in finding paid employment. He was working two days a week with a municipality.

It is clear that section 43 of the Federal Court of Australia Act 1976 confers a power on the Court to order that a non-party to proceedings in the Court pay the costs of a party; see Caboolture Park Shopping Centre Pty Ltd (In Liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471; (1993) 45 FCR 224. The power is similar to powers conferred by other statutes and rules of court applicable to proceedings in other courts. Very helpful considerations of the history and nature of the power appear in Knight v F P Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 in the joint judgment of Mason CJ and Deane J and in the judgment of Dawson J. In cases where a successful defendant is seeking an order for costs against a non-party, those judgments refer to the analogous power of the court to order the plaintiff to give security for costs.

In the present case, the grounds relied upon by Transurban have been set out earlier in these reasons. The basic ground is that Mr Morey was a "man of straw, a person who clearly was unable to pay the costs of the litigation". Transurban has established that fact. That, of itself, is not sufficient to justify the making of the order being sought. The principle to be applied is stated by Mason CJ and Deane J in Knight at 192-193 as follows:-

"Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made; see the discussion in Oasis Hotel Ltd v Zurich Insurance Co. (1981) 124 D.L.R. (3d) 455 at 458-459.

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made."

The existence of a power to order a plaintiff to give security for costs does not deny the existence of the power to order a non-party to pay costs, but the failure by a defendant to seek such security may be relevant to the exercise of the discretion to make the order. The principle is stated in Knight by Mason CJ and Deane J at 190- 191:

"The appellants contend that the availability of an order for security for costs where the plaintiff is suing on behalf or for the benefit of another is a strong reason for denying the existence of a jurisdiction to order costs against a non-party. Indeed, it has been said that the practice of making such an order for security for costs and of staying the proceedings until it is given is the appropriate remedy (Ram Coomar Coondoo (1876), 2 App. Cas., at p.211). No doubt it is an appropriate remedy in many cases but there are limitations attaching to the availability of security for costs. These limitations are such that security for costs is not a remedy in all cases in which justice calls for an order for the award of costs against a non-party. Security cannot be ordered against a defendant or a plaintiff who is an individual and who resides in the jurisdiction. The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient. And the availability of the remedy is scarcely a reason for denying the existence of jurisdiction to make an order for costs against the "real party" at the end of the trial of an action. The availability of an order for security for costs at an earlier stage of the litigation would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction."

On the same issue Dawson J said at 204-5:

"The only question raised in this appeal concerned the existence of jurisdiction to make an award of costs against a non-party. The question whether, given jurisdiction, an award ought to have been made against the receivers and managers in this case was not argued. There is some authority for making such an award. Having regard to the limited nature of the appeal, I should do no more than observe that an order for security for costs must ordinarily be the appropriate remedy where a receiver and manager conducts litigation through a company which will be unable to pay the costs of the defendant if the defendant is successful in his defence. Moreover, as Mason C.J. recognized in Devenish v. Jewel Food Stores Pty. Ltd. ((1990 [1990] HCA 35; 64 A.L.J.R. 533, at p.534), applications for security for costs should ordinarily be made promptly before significant expense is incurred. However, it is not possible to pursue these considerations in this appeal."

In the present case, the applicant is a natural person. Normally, security for costs is not ordered to be given by a plaintiff, being a natural person, because that person is impecunious. Under Section 56 of the Federal Court Act 1974 and O28 r 3(1)(b), of the Federal Court Rules, the Court has power to make an order for security for costs against an impecunious applicant if it appears to the Court that "the applicant is suing, not for his own benefit, but for the benefit of some other person"; see the discussion of the nature of the various sources of power to make orders for security for costs I gave in Microcorp Pty Ltd v Terran Computers Pty Ltd (No VG 258 of 1991) 28 June 1992, unreported.

In the present case, having regard to the urgency of the matter and the order for a speedy hearing, the Court does not have regard to the fact that Transurban did not seek an order for security for costs against Mr Morey as a fact to be taken into account in refusing to make an order for costs against the PTUA.

At the hearing of the motion, counsel for the PTUA made wide ranging submissions based on a large number of authorities which, in my opinion, are not relevant or helpful to the resolution of the matter before the Court. A number of the authorities related to the admissibility of evidence given at the hearing of the application at a time when the PTUA was not a party and thus did not have the opportunity of testing that evidence. Mr Mees gave evidence on behalf of the PTUA and was cross-examined. Most, if not all, of the matters relevant to the motion were given in this material. Insofar as the evidence given by Mr Morey and other witnesses at the trial is concerned, the Court is prepared, with one exception, to rely upon the findings made in the reasons for judgment published on 22 May 1996. In those reasons, the Court said that John Patrick Moriarty, a lecturer in the Department of Mechanical Engineering at Monash University, was a member of the Public Transport Users Association. In fact he was not a member and the Court was in error in making that finding. That finding does not affect the orders made since the issues to which his evidence was directed did not need to be decided. It is accepted that Mr Moriarty was sympathetic to the objects of the PTUA, that Mr Mees arranged for him to give evidence on behalf of Mr Morey and assisted in the preparation of his affidavits.

The Court makes a number of findings of fact. Mr Mees, in his personal capacity and as the President of the PTUA, strongly opposed the development being the City Link Project. He had been in consultation with persons of similar interests with respect to opposition to the M2 Tollway in Sydney and had discussed legal challenges to that project and to the City Link Project with staff members of the Faculty of Law at the University of Melbourne. Mr Mees is a lecturer in transport and land use planning in the Faculty of Architecture, Building and Planning at the University of Melbourne and is completing a PhD thesis on transport issues. The Committee of the PTUA had resolved not to take legal proceedings to challenge the validity of the City Link Project even though that decision had been made some three months before the prospectus was issued by Transurban.

Mr Mees continued to take an active part in the opposition to the Project. He was the principal instigator of the litigation. He is and was a barrister and solicitor. Between 1985 and 1992 he worked as a solicitor in private practice and from 1989 to 1992 was employed by Maurice Blackburn & Co, the solicitors for Mr Morey. Mr Mees was aware of the expense likely to be incurred in commencing legal proceedings and the possibility of an unsuccessful applicant being ordered to pay the respondent's costs. These matters were discussed at meetings of the Committee of the PTUA and were relevant to the decision that the PTUA not commence legal proceedings. The Committee considered that the limited resources of the PTUA be directed to other activities in support of its objectives. Mr Mees anticipated the costs would be in the order of $50,000 or $100,000 excluding costs that could be awarded in favour of a successful respondent. Mr Mees believed that it was likely that a legal challenge would be successful. Mr Mees told Mr Morey that in his view the prospectus could be challenged successfully but warned him of the likely costs of any action. He suggested that Mr Morey obtain "financial counselling" but that it would be "a fantastic thing" if he took action. In addition he arranged for Mr Morey's solicitors to act without charging Mr Morey professional fees.

Mr Mees arranged the legal representations for Mr Morey. He assisted instructing solicitors in preparing and presenting the case. In fact, for part of the hearing, he presented as instructing solicitor. He assisted in the preparation of materials for the case, the finding of witnesses, the preparation of affidavit material and in the preparation of the formal documents.

On all the material before it, the Court finds that although acting willingly and freely, Mr Morey was in truth a figurehead performing at the direction of Mr Mees. Although not a puppet, Mr Morey knew that he did not have the assets to fund the legal proceedings or to pay the costs of the respondent if his application was dismissed. It appeared that he was not concerned with the costs aspect more or less on the basis that it could not affect him.

On all of the material before the Court, there is much to be said for the view that Mr Mees played an active part in the conduct of the litigation and had a real interest in the subject and outcome of that litigation commenced by Mr Morey. Mr Mees, however, is not the respondent to the motion for the order that a non-party be ordered to pay the respondents' costs. The motion is directed to the PTUA. Unless the Court is satisfied, on the balance of probabilities, that in so conducting himself, Mr Mees was acting for or on behalf of the PTUA by whom he had been appointed to act, either expressly or by implication, the motion must fail. This has been the most difficult question to decide.

The nature and legal structure of the PTUA has been described in the early part of these reasons. As the President, Mr Mees had no relevant executive power to bind the PTUA to any course of conduct. It would appear that any member of the PTUA could make statements to the media concerning the activities of the PTUA. In this regard, the President has powers no greater than any other member of the PTUA including any other member of the committee of the PTUA. The present motion illustrates the problems inherent in a non-trading or non-commercial corporation. In the present case there has been no formal decision taken by the committee of the PTUA to play an active part in the conduct of the litigation by Mr Morey. In my opinion, the facts do not support an implication or inference that Mr Mees was authorised, on behalf of the Committee of the PTUA or the PTUA itself, to play the active part in the conduct of the litigation which in fact he played. In my opinion, in so conducting himself he acted in his capacity as an individual attempting to give added weight to his actions and conduct by making use of the name, and status, of the PTUA. This is a course of conduct often adopted by members of a single interest group in an attempt to influence public opinion to support the objectives of the group. In so acting, it must be remembered that the member, albeit an office bearer, is not acting as the agent of the group. The existence of the power of the member to bind the group must be considered. If legal proceedings are commenced by an impecunious person who may or may not be a member of that group, the group, in its corporate capacity, cannot be made liable for costs unless it is established that the group in truth is the party pursuing the litigation. On the facts of this case, the Court is not satisfied that in engaging in the conduct he did, Mr Mees was acting on behalf of the PTUA in the exercise of powers expressly or by implication conferred upon him by the PTUA.

As a result, the motions by Transurban and City Link Management that PTUA pay their costs of the application by Mr Morey must be refused with costs.

The remaining question is what order should be made with respect to the costs of the application.

Prima facie, an order for costs should follow the event. Here, the application was dismissed after a hearing on the merits. Prima facie, the applicant, should pay the costs of the respondents, Transurban and City Link Management. Counsel for Mr Morey has submitted that this practice should not be applied here and that there should be no order for costs.

The essence of the submissions made on behalf of Mr Morey was that Mr Morey was seeking to enforce obligations of public standards of commercial conduct which it is in the public interest to maintain under the Trade Practices Act. It was argued that the conduct complained of was not limited to claims affecting the legal relations between the parties themselves, but was directed to the public at large even though the public interest appears to have been identified with the interests of the members of a single interest group, the PTUA. This submission sits uncomfortably with other submissions that Mr Morey was acting on his own behalf only even though he had no interests apart from those of the public generally.

In support of those submissions counsel relied upon expressions of opinion in a number of authorities dealing with costs. None of those authorities or expressions of opinion is relevant to the matter before the Court.

In its reasons for judgment published on 22 May 1996, the Court said:

" The applicant has no intention and has never had any intention of applying for or purchasing Parcels as described in the Prospectus. He was, and is, a member of the Public Transport Users Association of Victoria. He commenced this proceeding at the request of members of that Association. That Association is opposed to the construction of the Project. Nevertheless, the applicant has a statutory right to bring this application in the Federal Court; see section 80 of the Trade Practices Act. The parts of that section presently relevant are:-

"80.(1)... where, on the application of the Minister, the Commission or any other person, the Court is satisfied that a person has engaged ... in conduct that constitutes ...:

(a) a contravention of Part ... V ...;

(b) ...

the Court may grant an injunction in such terms as the Court determines to be appropriate."

In addition the Court has power, in such a case, to make many other orders including declarations and the giving of directions.

Section 52 is within Part V of the Trade Practices Act. Subsection 52(1) provides:-

"52.(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."

The Court held that Mr Morey had standing to bring the action. He brought the action in his own right. The Australian Competition and Consumer Commission is a body corporate constituted under the Trade Practices Act. In addition to any other function conferred on it, the Commission has the functions conferred on it by section 7 of the Trade Practices Act. Section 80 confers upon the Commission the power to seek an injunction against a person who has engaged or is engaging in conduct in contravention of section 52 of the Trade Practices Act. To this extent, the Commission has the power to enforce obligations in the nature of public standards of commercial conduct which it is in the public interest to maintain. Experience shows that the Commission has brought actions under section 80 of the Trade Practices Act. The Court has been referred to no authority to suggest that no order for costs should be made against the Commission in cases where it has failed in an action brought under section 80 of the Trade Practices Act.

In my opinion it is not appropriate for Mr Morey to rely on the public interest argument where he has failed in an action brought under section 80. In an appropriate case, the Commission could have brought such an action. By commencing the litigation, Mr Morey was acting personally. He should be bound by the normal order for costs.

Accordingly, the applicant should pay the respondents' costs of the application including the costs of and incidental to the submissions relating to the costs of the proceeding being paid by Mr Morey.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment of the Honourable Justice R M Northrop.

Associate:

Date:

ATTACHMENT

Counsel for the applicant: Mr P Vickery QC with Ms F O'Brien

Solicitors for the applicant: Maurice Blackburn & Co

Counsel for first and second respondent: Mr T Walker

Solicitors for first respondent: Freehill Hollingdale & Page

Solicitors for second respondent: Blake Dawson & Waldron

Counsel for Public Transport Users Association: Mr M Dreyfus

Solicitors for the Public Transport Users Association: Grando & Breheny

Date of hearing: 18 and 20 June 1996