Knott v Signature Security Group Pty Limited [2001] NSWIRComm 12 (23 February 2001)

Last Updated: 20 March 2001

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Knott v Signature Security Group Pty Limited [2001] NSWIRComm 12

FILE NUMBER(S): IRC 5468

HEARING DATE(S): 01/02/2001, 14/02/2001

DECISION DATE: 23/02/2001

PARTIES:

APPLICANT

Thomas A Knott

RESPONDENT

Signature Security Group Pty Limited

JUDGMENT OF: Wright J President Walton J Vice-President Glynn J

LEGAL REPRESENTATIVES

APPLICANT

Ms K M Dulhunty of counsel

Harmers Workplace Lawyers

(Mr Stephen Boatswain)

RESPONDENT

Mr R M Goot SC

Andersen Legal

(Mr Paul Almond)

CASES CITED: Allstate Life Insurance Co v Australian and New Zealand Group Limited (No.19) (1995) 134 ALR 187

Barton v Minister for Foreign Affairs (1984) 54 ALR 586

Connop v Varena Pty Limited [1984] 1 NSWLR 71

Cooper v Sithe Energies Australia Limited [2000] NSWIRComm 176

Hallford Pty Limited v Caltex Petroleum Pty Ltd [2000] NSWIRComm 81

Interchase Co Ltd v Colliers Jardine & Ors [1995] QSC 124

J H Billington Limited v Billington [1907] 2 KB 106

Jeffcoat Carpets & Vinyls Pty Ltd v NSW Land & Housing Corporation [2000] NSWIRComm 88

Koprivnjak v Body Corporate Services (NSW) Pty Ltd (unreported, Peterson J, 3 September 1999)

P S Challaram & Co v China Ocean Shipping Co (1991) 65 ALJR 642

Pasdale Pty Ltd v Concrete Constructions (1995) 131 ALR 268

Pearson v Naydler [1977] 1 WLR 899

Qintex Australia Limited v Anzcap Nominees Limited [2000] QSC 394

Rennard v Fortron Automotive Treatments Pty Ltd (unreported, Cahill VP, 15 May 1997)

Shannon v Australian New Zealand Banking Group Limited (No.2) [1994] 2 Qd R 563

Van Roy Machinery Pty Limited v WorkCover Authority of New South Wales (Inspector Wolf) (2000) 97 IR 436

Younan-Sedrak v State of New South Wales (Department of Public Works and Services) (unreported, Hungerford J, 19 August 1999)

LEGISLATION CITED: Industrial Relations Act 1996 s 106 s 109 s 181

Industrial Relations Commission Rules 1996 r 18A r 89

Supreme Court Rules 1970 Pt 53 r 2

JUDGMENT:

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: WRIGHT J, President

Friday, 23 February 2001

Matter No IRC 5468 of 2000

THOMAS A KNOTT v SIGNATURE SECURITY GROUP PTY LIMITED

Application under s.106 of the Industrial Relations Act 1996

JUDGMENT

[2001] NSWIRComm 12

1    Thomas Knott is an American citizen. According to the application filed in this matter, between 1991 and 1997 he was an Executive Assistant State's Attorney in the State's Attorney's Office in Chicago, Illinios. In January 1997 he was approached by a Mr Jim Covert to become part of a new business in the United States. Certain representations were made. Although details of the subsequent employment of the applicant are of some complexity, as is the factual background to the application generally, it is nevertheless clear that they involved initial employment in the United States and then a subsequent requirement to move to Australia. The arrangements between the applicant and those representing the respondent, which was later to become his employer, involved, inter alia, the applicant acquiring shares in the respondent on the basis of a loan from the respondent and his arrival in Australia. He was joined approximately eight months later by his wife and family. To do this, his wife had to "shrink" her business in the United States. This apparently occurred on the basis of representations that she was to handle the respondent's public relations business in Australia.

2    It was not until September 1999 that the applicant received a written contract of employment detailing the terms and conditions of his employment and a document setting out the terms of the loan arrangement as to the shares he had acquired in December 1997.

3    The subsequent circumstances of the employment and the termination of it are also somewhat complicated. They included the departure of Mr Covert from the management of the respondent. The applicant complains of certain conduct in the nature of harassment from certain senior executives of the respondent. On 1 September 2000, certain matters were discussed between the applicant and Howard Watson, the respondent's Chief Financial Officer. The applicant said to Mr Watson,

My position has become untenable: I'm totally fed-up and exhausted by the abuse I have suffered from Pierce and I can no longer handle the situation.

Mr Pierce was another senior executive of the respondent. Mr Watson agreed there was a problem and that he and the applicant would discuss the matter with other senior management on the following Monday. Again, there were extensive dealings between the applicant and senior executives of the respondent. These events led to Watson advising the applicant on 21 September 2000:

We are accepting your resignation as of today. You resigned on 1 September 2000, so we are going to pay you four months as per your contract and you can finish today.

A letter was then provided by the respondent to the applicant which purported to accept his "resignation" of 1 September. There is likely to be an issue in the proceedings as to which party terminated the employment.

4    The grounds of unfairness alleged in the application are as follows:

88. The contract and/or collateral arrangements between the Applicant and the Respondent under which the Applicant performed work in the industry was and is unfair, harsh and unconscionable and contrary to the public interest in that:

(a) It permitted the Applicant to be the victim of bullying by a senior member of staff in circumstances where the Respondent was aware of but failed to address this behaviour.

(b) Invested the Respondent with significant discretionary powers that may have been used to the substantial disadvantage of the Applicant, particularly in the circumstances relating to both the making, variation and termination of the contract and/or collateral arrangements.

(c) It permitted the Respondent to fail to honour representations and commitments relating to the benefits and other financial returns that the Applicant would receive from his employment.

(d) It permitted the Respondent to mislead the Applicant concerning his comparative position relating to his level of remuneration.

(e) The Applicant was at all material times in a position of unequal and inferior bargaining power in respect of his dealings with Respondent and was specifically in such a position at the time of the contract's termination.

(f) It failed to provide for adequate or equitable terms of separation to be granted to the Applicant by the Respondent upon the termination of the Contract.

5    After the cessation of the applicant's employment, he departed from Australia. It was his understanding that as the respondent was his sponsor in Australia, once his employment was terminated, he could not remain in Australia because of the terms of his visa (which was subject to conditions and limitations as to work). Further, the applicant's Australian visa was cancelled by the Immigration Department in response to a letter from the respondent, sent by it in December last year. The evidence before the Court also raises an issue as to whether the applicant's family departed Australia for the Christmas period last year and for activities in association with the applicant's graduation with an MBA degree from Duke University on a return or one way ticket. I doubt that it is necessary to resolve this issue, but if necessary, I would find that the version proffered by the applicant should be accepted.

6    On 10 November 2000, the applicant filed the present application pursuant to s 106 of the Industrial Relations Act 1996. On 14 December 2000 (the penultimate day of the law term), the Respondent filed the motion the subject of the present judgment seeking, inter alia, an order for security for costs against the applicant. The matter was listed for directions during vacation and by consent an order was made that the relevant parts of Rule 18A of the Industrial Relations Commission Rules 1996 be dispensed with pending the determination of the application for security. Directions were also given for the hearing of that application. The hearing of the application commenced on 1 February 2001, but for reasons which are immaterial, the parties were not in a position to continue the argument on that day and the hearing continued on 14 February 2001.

7    The respondent advances its application for security on the ground that the applicant is a person ordinarily resident outside the State. It also relies on the fact that the applicant has no real property situated in New South Wales and that he is not the director of any corporation in Australia. At one stage it appeared that the application was also to be advanced on the basis that the applicant had included a false address in the application. Not surprisingly, given the circumstances of the requirement on the applicant to return to the United States, that aspect has not been pursued.

8    Before turning to the submissions of the parties and the principles to be considered in relation to the application, it is necessary to set out one or two other factual matters. The first is that the applicant now resides in Indiana, in the United States of America. It appears that he will soon return to live near Chicago. The applicant no longer resides in Australia because of the cessation of his employment. He has limited assets in Australia and this accords with what appears to be the respondent's business approach, whereby its executives had little or no indicia of Australian domiciled residents for taxation reasons and this is reflected in the fact that apart from Mr Watson (who is not an American citizen) no executive of the respondent has significant assets in this country.

9    As to his assets in the United States, the applicant has assets in the order of US$1.2 million, less the value of mortgages or securities over those assets. Although the value of the securities is significant it is not necessary to quantify them. The respondent accepts that the respondent is not "a man of straw " financially. He is currently earning US$100,000 per annum, although there is an additional salary amount which is currently deferred for business reasons, as the business in which he is currently involved is a start-up venture. On the basis of instructions his solicitor has sworn that "any order requiring security for costs would have a serious negative impact upon his capacity to prosecute these proceedings, as well as hinder the establishment of this business venture".

10    Mr Paul Dudley Almond, the solicitor with the conduct of this matter for the respondent, has provided an affidavit which, inter alia, sets out an estimate of the costs that his client would have to expend for the purposes of defending this litigation should it proceed to trial. The estimate is a figure slightly in excess of $170,000. On the basis of the experience of Mr Almond, as set out in his affidavit, I accept that evidence, subject to the following considerations as to its weight. It is plain that the estimate is an estimate on a solicitor and client basis and it is necessarily based on fairly broad assumptions as to the costs that might be incurred. For example, it assumes that there may be a contested hearing of six days. Because of the principles that are appropriate in arriving at amounts that should be awarded for security of costs and the assumptions that understandably Mr Almond has made for the purposes of his calculation, I consider that the figure provided by the respondent has significant limitations for present purposes. However, the evidence as to this matter from the applicant's solicitor, Mr Stephen James Boatswain, is to be accorded more weight. His evidence concentrates on the practical aspects of costs in litigation under s 106 of the Industrial Relations Act, and related or comparable litigation, rather than in providing a monetary figure. After setting out his extensive experience in the practice of employment and industrial law, and also in litigation in other jurisdictions (which I accept qualifies him to give useful evidence as to this matter) Mr Boatswain deposes:

20. In my opinion, the costs contained in Annexure PA6 considerably exceed the costs that the Respondent would likely recover from the Applicant in the event that the issue costs ever arose. The Schedule of Costs contained within Annexure PA6 appears to have been prepared on a solicitor/client basis calculated on current corporate rates and not a party/party basis, based on any appropriate scale of costs. Therefore, the Schedule does not provide an accurate estimate of the costs that could be recovered by the Respondent, should the issue ever arise.

21. While conceding it is difficult to rely on any specific experience on the taxation of Respondent's costs in an unfair contract application given that it is extremely rare that the issue of Respondent's costs ever arises in unfair contract proceedings, from my experience in taxations in the Federal Court of Australia, the Australian Industrial Relations Commission and the Supreme and District Courts of New South Wales, I would consider it unlikely that the costs associated with senior and junior counsel being retained for the purpose of pre-conciliation pleadings, particularly of the nature required by Rule 18A of the Industrial Relations Commission Rules 1996, would be regarded to be party/party costs. It would also be unlikely that the costs associated with senior counsel attending conciliation would be recognised as a party/party cost. From my experience, it is also highly unusual for senior counsel to be retained to appear at a conciliation of an unfair contract application.

22. From my experience it is taken as a general rule of thumb that the costs recovered on a party/party basis generally represent approximately one half to two-thirds of the actual costs incurred in the conduct of the proceedings. This is particularly the case when the costs have been based on corporate levels.

23. It is also my experience that the vast majority of applications pursuant to s 106 of the Industrial Relations Act 1996 are resolved by agreement prior to arbitration and the issue of the Respondent's costs does not feature as a term of such settlements.

11    Mr Boatswain also deposes that he has been specifically instructed by the applicant that he will return to Australia for the purpose of attending at any conciliation before the Commission pursuant to s 109 of the Act.

Respondent's submissions

12    The respondent relies heavily on the judgment of McHugh J in P S Chellaram & Co v China Ocean Shipping Co (1991) 65 ALJR 642 on the basis that the applicant is ordinarily resident outside the State and there is a presumption that a person in such situation would be required to secure costs of the action. Although a court may refuse to order a non-resident party to provide security where a final costs order can be enforced as readily as if the final order was against a resident (Connop v Varena Pty Limited [1984] 1 NSWLR 71 at 74), the applicant resides in the United States and because Australia does not have reciprocal arrangements with the United States for the enforcement of judgments, a final costs order cannot be enforced as readily in the United States as if the costs order were against a resident of New South Wales.

13    The respondent accepted that, as a practical consideration, the applicant could rely upon the findings of Boland J in Cooper v Sithe Energies Australia Limited [2000] NSWIRComm 176 at [33] - [44]. However, if the Court accepted his Honour's findings as being evidence in this case (and there was no objection to that occurring) the judgment represented only a finding as to the State of New York and there was no evidence as to the applicant having any property in that State. Apart from the reference to the real property in the State of Illinois, the inference is that any assets may be held in different States and this may involve recovery in a number of different overseas jurisdictions. Although the applicant has through his solicitor provided evidence that he has some Australian assets, the material in that respect is not specific. For example, there has been no specification of the amount of funds in his Australian bank account nor the value of his motor vehicle. Further, the shares that the applicant holds in the respondent is subject to a loan due to the respondent. No undertaking has been offered by the applicant as to retention of assets in Australia. The only connection the applicant has with New South Wales is some small or otherwise unidentified assets in Australia and the maintenance of these proceedings. Reference was made to the fact that the applicant, contrary to Rule 18A, had not personally verified the application filed, but had relied on a solicitor's affidavit. It was said that the weight to be given to the evidence on instruction and belief was severely limited.

14    It is submitted that, apart from a bald assertion that an order requiring security for costs would have a serious negative impact upon the applicant's capacity to prosecute these proceedings, there is no evidence of prejudice were an order of security to be made. The respondent relies upon its evidence as to the likely costs of the proceedings and says that, even if the challenges to the respondent's quantification of costs is accepted, it still results in a figure for costs of the respondent in the order of $160,000. Further, citing the judgment of Lindgren J in Allstate Life Insurance Co v Australian and New Zealand Group Limited (No.19) (1995) 134 ALR 187 at 197 - 200, it submits that:

(a) the amount of security is the sum which the court thinks fit having regard to all the circumstances of the case;

(b) the amount of security is ordered by reference to party-party costs and is not intended to provide a full indemnity;

(c) although there have been suggestions that the amount of security to be ordered against the non-resident is two-thirds of the likely party-party costs, this approach has been doubted;

(d) in the circumstances of this case and in the light of relevant authority, 50 per cent of the likely solicitor-client costs of the proceedings would be the amount to be the appropriate order for security.

In the alternative, if the Court considers that there should be an order only until the conciliation occurs pursuant to s 109 of the Act, the amount ordered as to security should be $23,500.

15    The respondent submits, in conclusion, that the Court should order the proceedings be stayed until the applicant provides security for costs in an appropriate amount and that costs of the motion should follow the event.

Applicant's submissions

16    The applicant seeks to counter these submissions in a number of ways. He emphasises that the power to order security is a discretionary power and should not be used as an instrument of oppression to shut out a genuine claim being made against a respondent: Pearson v Naydler [1977] 1 WLR 899 at 906 - 907. There is no evidence that the applicant's claim is unlikely to succeed or is not genuine. The respondent is seeking security of costs in the order of $80,000 to $85,000. Such an order would place the applicant in an untenable position whereby his ability to prosecute his claim against the respondent would be unduly stultified. It would be oppressive and security should not be granted in those circumstances: Pasdale Pty Ltd v Concrete Constructions (1995) 131 ALR 268 at 273 - 274. Reference is made to the evidence adduced by the applicant in relation to his income, assets etc to support this proposition.

17    Further, the applicant contends that there are elements of abuse of process in that the respondent is seeking to have his motion heard before the conciliation process occurs under s 109 of the Industrial Relations Act. In this respect, reliance is placed upon the judgment in Younan-Sedrak v State of New South Wales (Department of Public Works and Services) (unreported, Hungerford J, 19 August 1999). The applicant further submits that the respondent in attempting to have this motion dealt with in circumstances where it is not challenging the merits of the applicant's claim is attempting to avoid putting its case in reply as required by Rule 18A. Rule 18A provides a mandatory procedure and the respondent should be required to comply with that procedure before the motion was brought or is determined. He also submits that "the fundamental position is that security of costs will not be awarded against the natural person prosecuting his/her claim."

18    As to the ground that the applicant is "ordinarily resident outside the State", the applicant submits that the Court has a discretion to order or refuse to order security in those circumstances: Barton v Minister for Foreign Affairs (1984) 54 ALR 586. It is emphasised that the Court is not required to order an applicant to provide security merely because the applicant is ordinarily resident outside the jurisdiction.

19    There is also considerable reliance upon the circumstances whereby the applicant was required to come to Australia. It was not part of the original terms of his employment which were subsequently, at least on a factual basis, altered so that he and his family had to come to Australia. The respondent's conduct was what led to the applicant coming to Australia and also why the applicant had to leave Australia and return to the United States. The respondent should not be permitted to rely on this ground in order to obtain an order for security.

20    Although there is no reciprocity between Australia and the United States under the relevant legislation, both countries are common law countries and the respondent will be able to sue the applicant in the United States and enforce a costs order, if any, made against the applicant by this Court. Reliance is placed on the judgment of Boland J in Cooper v Sithe Energies Australia Limited and in particular on the expert evidence which was before his Honour in that case and which his Honour accepted.

21    The applicant also relies upon the terms of s 181 of the Act which provides to the Commission discretion to award costs. Costs do not necessarily follow the event and even if costs were awarded against the applicant it would be on a party-party basis and not on a solicitor-client basis. In any event, he submits, on the basis of the evidence of Mr Boatswain, that costs orders against applicants in s 106 proceedings are relatively infrequent and that is an important consideration. Indeed, the Court is invited to make a finding that it is unlikely that a substantive costs order would be made against the applicant in this matter. Reliance is also placed upon the fact that the applicant has assets in Australia and assets of some substance in the United States. Similarly, it is emphasised that there is no evidence that the applicant is "a defaulter or has not paid his day to day debts or is unable to do so". Penultimately, the applicant relies upon public policy considerations which appear to be put on two bases. First, that it would be against public policy to allow parties to circumvent the Court's procedures and conciliation requirements set out in Rule 18A and s 109. Particularly so when:

40. More and more Australia and New South Wales in particular are part of the global market. The presence of foreign companies in Australia and foreign investment in Australia has increased greatly over the last decade. This means that more employees are being sent to work in Australia for various periods as the Applicant was. No doubt other workers will have restricted visas allowing them to remain in Australia only whilst in employment and having to leave the jurisdiction once terminated from their jobs.

41. Allowing employers to obtain orders for security for costs against former employees who have genuine claims against those employers in such circumstances because the employees would no longer be ordinarily resident in Australia would be against public policy and would be manifestly unfair. Many of those employees would be prevented from prosecuting their claims where they could not provide security.

22    It is said that this situation would allow employers to defeat the legitimate claims of employees by default and would allow employers to circumvent the industrial relations legislation and the Commission's jurisdiction.

23    Finally, the applicant submits that it is inappropriate for the respondent to bring the motion at this stage, thus constituting an abuse of process which should accordingly result in the dismissal of the motion with payment of the applicant's costs on an indemnity basis.

Principles to be applied

24    A useful starting point in the consideration of authorities in this area is the judgment of Williams J of the Supreme Court of Queensland in Shannon v Australian New Zealand Banking Group Limited (No.2) [1994] 2 Qd R 563. His Honour's judgment appears to be authority for three propositions. First, a court has inherent jurisdiction to order security of costs which is neither confined nor displaced by express powers conferred by the court's rules. Second, that only in exceptional circumstances would a court order natural persons who are plaintiffs to provide security for costs. Third, one of the few exceptional cases where a natural person would be so ordered is where he or she is "a foreigner or merely nominal plaintiff": citing the judgment of Lord Alverstone CJ in JH Billington Limited v Billington [1907] 2 KB 106 at 109. The reason why I use the qualification "appears" is that, although the headnote states that the second proposition represented the holding of the Court, I consider that his Honour, rather than holding to that effect, assumed that that was the situation. I do not consider that anything turns on that distinction. The three propositions, in my opinion, correctly state the law.

25    His Honour's judgment in Shannon is also useful authority as to the way in which the assessment of the amount of security of costs should be approached. His Honour held (at 569):

However, it is clear that the amount of security is a matter within the discretion of the Court. Generally it has not been the practice of the Court to order security for costs on a full party and party basis, nor on an indemnity basis. Whilst the Court has regard to estimates made of future costs, there are other factors which cannot be ignored: for example, the action may collapse, it may be settled, and the plaintiffs may well be successful. There is a good summary of the discretionary factors relevant in determining quantum in Colbran, Security for Costs (1993), at 288 - 289.

Bearing in mind that the litigation will probably result in a lengthy, rather complex, trial: that in the light of the pleadings the plaintiffs may well have a strong case; and that in this instance the Court is ordering security in rather exceptional circumstances, I have come to the conclusion that the appropriate order is to require the plaintiffs to provide security in the sum of $100,000.

26    It is significant that his Honour reached this conclusion notwithstanding that the application sought the sum of $236,000 as the amount of security and his Honour had made findings that the plaintiffs had divested themselves of assets so that such assets would not be at risk if the plaintiffs should be unsuccessful in the litigation and have an order for costs made against them. His Honour's judgment has been followed and applied on a number of subsequent occasions: see, for example, Interchase Co Ltd v Colliers Jardine [1995] QSC 124 and Qintex Australia Limited v Anzcap Nominees Limited [2000] QSC 394 at [20].

27    The next important authority is the judgment of McHugh J of the High Court of Australia in P S Chellaram & Co v China Ocean Shipping Co. In that judgment, at 643, his Honour held:

To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the Court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction.

In the present case, not only is the appellant resident out of and without assets within the jurisdiction but the evidence establishes that it is hopelessly insolvent. Nevertheless, it does not necessarily follow that an order for security for costs should be made against it. Special leave to appeal is ordinarily not granted in this Court unless there is an arguable case that the decision below is erroneous and involves a question of public interest extending beyond the immediate interests of the parties. That seems to be the situation in the present appeal. In those circumstances, I would hesitate to make an order for security for costs if the effect of that order would be that the appeal could not be pursued because neither the appellant nor those who stand behind it could provide security for the costs of the appeal.

28    Without seeking to limit the expression of principles in the judgments respectively of Williams J and McHugh J referred to above, I consider that the most important of those principles for the purposes of the present case are as follows. Making or refusing to make orders in this area involves the exercise of a discretionary judgment. The court exercising the discretion is required to weigh all the circumstances of the case, not only in terms of their own particular weight, but the weight that should be given to the circumstances in relation to each other. Nevertheless, an important consideration is the long standing view that where a plaintiff or applicant brings proceedings and is resident out of the jurisdiction and has no assets within it, that is a circumstance of great weight in favour of an order for security of costs. A plaintiff in that situation must be able to point to other circumstances which overcome the significance of that consideration. A further relevant consideration is whether the effect of the order sought would be that the proceedings might not be able to be pursued. If it be determined that an order should be made the amount of the security is also a matter within the discretion of the Court. Generally speaking, security would not be ordered on a full party and party basis. Although regard should be had to estimates of future costs, other factors must also be considered. These include, for example, that the proceedings may not continue or may be settled or that the plaintiff may be successful. In that respect, it may be appropriate to consider the strength of the plaintiff's case.

29    It was common ground between the parties that the Court has power to make an order for security for costs. This was put on various bases: for example, as arising from the inherent or implied power of the Court; referring, for example, to Rennard v Fortron Automotive Treatments Pty Ltd (unreported, Cahill VP, 15 May 1997 at 9) Koprivnjak v Body Corporate Services (NSW) Pty Ltd (unreported, Peterson J, 3 September 1999 at 5). Another basis was the incorporation into the procedures of the Commission by Rule 89 of the Industrial Relation Commission Rules 1996 of Part 53 Rule 2 of the Supreme Court Rules 1970. I consider that the relevant power exists and it is not necessary to identify more particularly the source of the power except to note that Rule 2(1)(a) of Part 53 of the Supreme Court Rules expressly refers to the plaintiff ordinarily being resident outside the State as a ground which may lead to the grant of an order. The authorities make plain that that consideration is a highly relevant one, even where the applicable rule of the court is silent on the issue. I consider that, in any event, a superior court has relevant power as an incident of its authority to control its own process. After all, the normal corollary of an order for security of costs is that the proceedings be stayed until the order is complied with. The power to grant a stay in such circumstances is, I consider, a normal incident of the power of the court to control its own process and, where necessary, to prevent an abuse of it.

Consideration and Conclusions

30    It is clear that the Court has a wide discretion on the issues presently before it notwithstanding the traditionally prima facie or presumptive situation where the plaintiff or applicant in the proceedings is ordinarily resident outside the jurisdiction. However, this case does raise particular or unusual features because of the particular circumstances which have led to the applicant being presently resident outside the jurisdiction and where it may now be correct to say that he is domiciled in the United States. As with most discretions reposed in courts or tribunals, the discretion is provided in order to ensure that justice is achieved between the parties and their respective interests, and also to ensure the proper administration of justice: see, for example, the judgment of Hungerford J in Van Roy Machinery Pty Limited v WorkCover Authority of New South Wales (Inspector Wolf) (2000) 97 IR 436 at [33]. An examination of recent decisions on the question of security for costs before this Court also serves to emphasise the breadth of the discretion. For example, in Hallford Pty Limited v Caltex Petroleum Pty Ltd [2000] NSWIRComm 81 Marks J took into account a broad range of considerations including that there was an arguable correlation between the applicant's financial position and its dealings with the respondent; the fact that the claim was a bona fide claim; and, perhaps most significant for present purposes, that:

there is no evidence that any inability to pay the costs of the respondent if successful existed prior to or independently of the relationship between the applicant and the respondent, the subject of the substantive proceedings.

31    In the result, that consideration, in the light of other important considerations including the possibility that the applicant might be deprived of its claim under the Act if an order for security was made, led his Honour to refuse the application for security. His Honour's approach to the relevant principles was adopted in terms by Peterson J in Jeffcoat Carpets & Vinyls Pty Ltd v NSW Land & Housing Corporation [2000] NSWIRComm 88.

32    It is also pertinent, in the light of the particular basis upon which the present application is advanced, to consider the historical basis for the traditional approach as to extra-jurisdiction plaintiffs, and also to have regard to the development in the approach which has occurred. As for the first aspect, and as observed by Morling J in Barton v Minister for Foreign Affairs at 592:

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.

His Honour had earlier (at 591 - 592) traced the development of the approach in the English courts from 1894 to 1971. It is clear that developments in communications and legal practice have proceeded apace since 1971 and the communication difficulties that would have contributed to enforcement in foreign jurisdictions being extremely difficult, do not exist to the same degree as they did 30 years ago.

33    Before leaving the judgment of Morling J in Barton, it is relevant to observe that his Honour limited the order for security of costs to the amount involved in registering any Australian judgment in the United Kingdom. In doing so, his Honour adopted the approach of Rath J in Connop v Varena Pty Ltd. Although the jurisdictions relevant in these cases had reciprocal enforcement legislation with Australia, a relevant question is whether, if security were considered appropriate, it should be limited to the cost of enforcement in the United States, particularly bearing in mind that the applicant appears to have assets of some substance in Chicago in the State of Illinois. Although there is no evidence of the relevant foreign law, it is undoubtedly open to this Court to take judicial notice of the fact that the State of Illinois is one of the most important commercial centres in the United States, and could be presumed therefore to have a legal system of some sophistication and efficiency such that, if necessary, the respondent would be able to recover in the courts of that State any verdict against the applicant in the present proceedings.

34    There perhaps is, however, a more important consideration which should be taken into account in the present application. No case has been put before the Court where an application has been granted for security of costs against a former employee of the respondent in relation to a claim brought by the former employee in relation to his employment. Although the significance of previous decisions is in the principles laid down in them, it is nevertheless not without importance that, at least in that particular respect, this application is, so far as counsel are aware, unprecedented. This consideration is emphasised when, on whatever view of the evidence that is taken at present, or at the trial, the reason why the applicant is now resident outside the jurisdiction is the circumstances of his employment or the circumstances of the cessation of it.

35    I make the following additional findings of fact in this matter:

(a) The applicant is a person ordinarily resident outside the jurisdiction;

(b) Should the respondent be successful in the proceedings, it may have some measure of increased difficulty in recovering its costs in a relevant United States jurisdiction or jurisdictions;

(c) The applicant, however, is a person of some financial substance and there is no basis to consider that he is a person who would be likely to refuse to pay his debts irrespective of the jurisdictions in which they were incurred;

(d) There is at least a possibility that the applicant's ability to litigate the current application would be impeded should the application be granted.

As with other findings of fact, I have accepted the respondent's submissions that limited weight should be given to some of the applicant's evidence.

36    I have given consideration to a matter raised with counsel during the course of argument. That is, to limit any decision on the question of security for costs to the period up to an including the finalisation of the conciliation process required under s 109. I do not, upon reflection, consider that that is an appropriate course, essentially for two reasons. First, a decision on that limited basis could have unintended effects in relation to the conciliation process. For example, it could render less likely the prospect of the matter settling at that stage. The second consideration is that the parties having argued this matter in full and on the basis of considered and cogent submissions by counsel on each side, finality on the issue is appropriate.

37    If the Court were inclined to grant security for costs, it is considered that all of the pertinent circumstances would lead to a very small amount of costs being awarded. The appropriate amount may well be limited to, or a proportion of, the amount required to enforce any judgment in the relevant overseas jurisdiction or jurisdictions. However, there is no estimate given in that regard, although counsel for the respondent has, on the basis of the discussion in Cooper v Sithe Energies Australia Limited, submitted that the costs may be in the order of US$5,000 to US$10,000. The circumstances that are pertinent in this regard include the apparent strength of the applicant's case; the fact that he has, by circumstances connected with the litigation, been required to depart from this jurisdiction; the consideration that the amount claimed by the respondent is excessive on any view of what might be appropriate in this case should the security for costs be granted; and the nature of the litigation. However, when one reaches the conclusion that the amount that might be fixed would be, at least when compared with the amount claimed, nominal, an important consideration which then arises is whether the application should be granted at all. An examination of all relevant considerations raises considerable doubt whether the application should be granted in any respect.

38    The considerations include those referred to and particularly having regard to the apparently unprecedented situation that is before the Court whereby the claim is essentially between a former employee (albeit one who has a measure of share-holding in the respondent) and his former employer, which appears to be a corporation of some substance and where the reason for the applicant's residence outside the jurisdiction arises from the subject matter of the litigation itself. There is no suggestion that his residence outside the jurisdiction is for an inappropriate purpose, such as to evade a costs order. In those circumstances, I consider that the justice of the case would lead to a refusal of the application made by the respondent. By reference to the "justice of the case", I refer not only to the respective situations of the parties, but also to the conclusion most consistent with the proper administration of justice in the circumstances of the particular litigation. I have also had regard to public policy considerations. It has been a feature of litigation in this Court over the last few years, that there has been a number of cases where employees or former employees of corporations have commenced proceedings against Australian companies relying upon a factual matrix involving employment by an overseas corporation which directly or indirectly led to employment by an Australian corporation. In some of those cases, the application was made only against the Australian company; in others against both the Australian and the overseas company. This is undoubtedly a feature of the global economy which is the subject of submissions before the Court and to which reference has earlier been made. The considerations as to one aspect of public policy are usefully collected by reference to relevant authorities in the judgment in Barton, where, at page 592 (immediately prior to a passage earlier quoted), Morling J said:

It has never been the case that impecuniosity on the part of a plaintiff is a ground for ordering him to give security for costs. In Pearson v Naydler (1977) 3 All E.R. 531 at 533, Megarry V-C said:

The basic rule that a natural person who sues will not be ordered to give security for costs, however poor he is, is ancient and well-established. As Bowen LJ said in Cowell v Taylor ((1885) 31 Ch. D 34 at 38), both at law and in equity `the general rule is that poverty is no bar to a litigant'. The power to require security for costs ought not to be used so as to bar even the poorest man from the courts.

39    Whilst noting that there are significant differences between the policy considerations in the passage cited and the present issues, the passage provides a useful analogy. It also emphasises the careful way in which the courts have developed principles in this area and the significance, in that context, of the right of a natural person to have access to the courts to vindicate alleged rights or correct perceived wrongs. Although I must and do limit the decision in this matter to the circumstances of this case, it nevertheless appears to raise an important issue and to do so in a particularly stark way, because the absence from the jurisdiction is apparently beyond the control of the applicant. I consider that it would be a rare case where, without more, an order for security of costs would be made against a personal applicant in s 106 proceedings where the employment occurred in Australia as a result of arrangements made in the context of prior employment outside Australia; where the employment was with an Australian company related to the previous overseas employer; and where the residence outside the jurisdiction arose from the subject matter of the litigation. This conclusion and the findings made earlier should result in the application failing.

40    The application should therefore be dismissed.

Costs and orders

41    The applicant has strenuously submitted that the present application should be seen as an abuse of process and has sought an order for indemnity costs. Although I consider that the application upon analysis lacked merit, nevertheless seen in terms of the general principles it could not be said that there was no basis for making the application. The particular circumstances of the application, as earlier observed, appear to be unparalleled and have required the Court to attempt to refine the principles so far as they should apply to the particular circumstances before it in the present case. In those circumstances, although it is clear that costs should follow the event, there is no basis for the grant of costs on an indemnity basis.

42    The Court accordingly makes the following orders:

(1) The respondent's notice of motion seeking an order as to security for costs is refused.

(2) The respondent shall pay the applicant's costs of and in connection with the motion in a sum as agreed or, in default of agreement, as assessed.

(3) The Court shall now give directions for the preparation of the matter for conciliation pursuant to s 109 of the Industrial Relations Act 1996 and directions shall be given at 9:30am on Monday, 5 March 2001 for that purpose.

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LAST UPDATED: 26/02/2001