Allison v Murphy

Case [2021] FCA 1551

FEDERAL COURT OF AUSTRALIA

Allison v Murphy [2021] FCA 1551

Appeal from: Application for extension of time to appeal from: Murphy v Allison [2021] FedCFamC2G 184
File number(s): QUD 389 of 2021
Judgment of: DOWNES J
Date of judgment: 9 December 2021
Catchwords: COSTS – interlocutory application for security for costs – s 56 Federal Court of Australia Act 1976 (Cth) and r 36.09 Federal Court Rules 2011 (Cth) – whether order for security would stifle appeal – where proposed appellant impecunious – where grounds of appeal raise a substantive point of law – where point of law impacts applicant’s status as bankrupt – application dismissed
Legislation:

Bankruptcy Act1966 (Cth) s 58

Federal Court of Australia Act 1976 (Cth) s 56

Federal Court Rules 2011 (Cth) r 36.09
Cases cited:

Fard v Secretary, Department of Immigration and Border Protection [2016] FCA 1224

Hardingham v RP Data Pty Limited [2020] FCA 1062

Madgwick v Kelly (2013) 212 FCR 1; [2013] FCAFC 61

Nyoni v Shire of Kellerberrin (No 9) [2016] FCA 472

Pro Teeth Whitening (Aust) Pty Ltd v Parliamentary Secretary to the Treasurer, David Bradbury MP [2013] FCA 1103

Van Schoeler v Allen Taylor and Co trading as Boral Timber [2019] FCA 941
Division: General Division
Registry: Queensland
National Practice Area: Other Federal Jurisdiction
Number of paragraphs: 39
Date of hearing: 9 December 2021
Counsel for the Applicant: Mr J Frankcom
Solicitor for the Applicant: CCA Legal Pty Ltd
Counsel for the Respondent: Mr A J H Morris QC

ORDERS

QUD 389 of 2021
BETWEEN:

PAUL FRANCIS ALLISON

Applicant
AND:

JOHN PAUL MURPHY

Respondent

ORDER MADE BY:

DOWNES J

DATE OF ORDER:

9 DECEMBER 2021

THE COURT ORDERS THAT:

1.The interlocutory application filed by the respondent on 1 December 2021 is dismissed.

2.The respondent pay the applicant’s costs of the interlocutory application referred to in order 1.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

DOWNES J:

BACKGROUND

  1. This an application brought by Mr John Murphy, a barrister, for an order that Mr Paul Allison provide security for the costs of and incidental to an application for an extension of time for the filing of a Notice of Appeal by Mr Allison and, if time is extended, the appeal.

  2. Although the application for security is brought by Mr Murphy, he will be described as the respondent in these reasons and in the order which I will make (because he is the respondent to the proposed appeal), and Mr Allison will be described as the applicant.

  3. The application for security for costs was filed on 1 December 2021.  The application for an extension of time for the filing of the Notice of Appeal has been set down for hearing at the same time as the appeal, to be heard by the Full Court on 15 December 2021, which is next week.

    RELEVANT FACTS

  4. The following facts are taken from the decision of the primary judge and it…

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Allison v Murphy [2021] FCA 1551
Case
[2021] FCA 1551
Decision Date

CaseChat Overview and Summary

In Allison v Murphy, the Full Court of Australia was called upon to decide an interlocutory application filed by the respondent for security for costs in relation to an appeal. The applicant, Allison, had become bankrupt following a judgment debt owed to the respondent, Murphy. The appeal in question related to the status of Allison as a bankrupt, which was impacted by the outcome of the appeal. The application for security for costs was filed on 1 December 2021, and the hearing was set for 15 December 2021. The central issue before the court was whether the applicant, who was impecunious and faced bankruptcy, should be required to provide security for the respondent's costs of the application for an extension of time to lodge the Notice of Appeal and any potential appeal. The court had to weigh the competing considerations, including the prospects of success of the application for extension of time, the potential merit of the appeal, the likelihood that an order for security would stifle the appeal, and the impact of the appeal on Allison's status as a bankrupt.

The court considered the relevant legal principles, including the stringent view taken by appellate courts against ordering security for costs in circumstances where substantive questions of law are in contention, points of law raised in appeal may affect matters of public importance, and where the appeal had penal consequences. The court also referred to the decision in Fard v Secretary, Department of Immigration and Border Protection, which highlighted the appellate courts' approach to security for costs in such situations. Ultimately, the court was not persuaded to order that the applicant provide security for the respondent's costs of the application for extension of time to lodge the Notice of Appeal and, if allowed, any appeal. The principal reasons for this decision were that the application for extension of time had reasonable prospects, the appeal had sufficient potential merit to tell against a grant of security for costs, any order for security would likely stifle the appeal, and the appeal related to the status of the applicant as a bankrupt.

In light of the decision not to order security for costs, the respondent accepted that, if the application for security for costs failed, costs should follow the event. Therefore, the Full Court dismissed the interlocutory application filed by the respondent on 1 December 2021 and ordered that the respondent pay the applicant's costs of the interlocutory application. This decision underscores the importance of carefully considering the various factors involved in interlocutory applications for security for costs, particularly in cases where the appeal has potential merit and the applicant is impecunious.

Orders

Orders of the court

1. The interlocutory application filed by the respondent on 1 December 2021 is dismissed.

2. The respondent pay the applicant’s costs of the interlocutory application referred to in order 1.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The application for security for costs was filed on 1 December 2021. The application for an extension of time for the filing of the Notice of Appeal has been set down for hearing at the same time as the appeal, to be heard by the Full Court on 15 December 2021, which is next week.RELEVANT FACTS The following facts are taken from the decision of the primary judge and it does not appear that they are in dispute, at least for the purposes of this application. A bankruptcy notice was served by the respondent on the applicant on 22 January 2021, based upon a judgment given by the Magistrates Court of Queensland at Brisbane. The judgment was for $28,758.60 plus $12,709.42 interest and $7,464 for costs. The total amount under the judgment was $49,032.02. There was no compliance with the bankruptcy notice. A creditor’s petition was then filed on 4 March 2021 which alleged that the applicant owed the respondent the sum of $56,757.92. It included a table which included a total amount of $57,234.92. The primary judge found that the petition overstated the amount owed by the applicant because it included, for example, the filing fee but the primary judge found that was an irregularity only which did not invalidate the petition. The creditor’s petition was heard by a registrar on 2 June 2021. The applicant sought an adjournment of that hearing on the basis that payment was soon to be made or could be made, but that adjournment was refused and the sequestration order was made. The applicant applied for a review of the registrar’s decision to make the sequestration order. The hearing before the primary judge was a hearing of that review. Before the primary judge was an affidavit of the applicant who deposed that:On 2 June 2021 I arranged for family members to pay to my solicitor CCA Legal Pty Ltd the sum of $47,384 to pay in reduction of the debt due by me to [Mr Murphy]. The primary judge also referred to an affidavit of the applicant’s solicitor in which the solicitor deposed that these monies were held by him in the trust account on 2 June 2021 and that he transferred an amount of $25,000 to the respondent on 19 June 2021 and a further amount of $22,384 on 21 June 2021. These transfers were by electronic bank transfer. A key issue before the primary judge was whether, because of those transfers, the amount owing to the respondent was less than the statutory minimum and that, as the hearing of the review was a de novo hearing, the sequestration order should be set aside. In the reasons for judgment, the primary judge stated: Upon the making of the sequestration order it is trite that the debtor’s property vests in his trustee in bankruptcy. As of the date of the making of the sequestration order, the funds that were held in the solicitor’s trust account were held on behalf of the debtor. They could not have been held on behalf of the creditor because the creditor was not the client of the solicitor. And according to the evidence of the debtor the funds that he gave to his solicitor were his funds. They were funds that he had borrowed from his relatives. It is not suggested in the evidence that the relatives paid the funds directly to the creditor or directly to the solicitor such that it might be said that the funds were never the property of the debtor.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

As observed by Collier J in Fard v Secretary, Department of Immigration and Border Protection [2016] FCA 1224 at [49]:Appellate courts have, however, taken a more stringent view against ordering security for costs in circumstances where substantive questions of law are in contention (Cummings v Lewis (1991) 32 FCR 534), where points of law raised in appeal may affect matters of public importance (Smail v Burton (1975) VR 776), and where the appeal had penal consequences (Hood Barrs v Heriot (1896) 2 QB 375).CONCLUSION In all the circumstances, and weighing the competing considerations, I am not persuaded to order that the applicant provide security for the respondent’s costs of the application for extension of time to lodge the Notice of Appeal and, if allowed, any appeal. My principal reasons are that the application for extension of time has reasonable prospects and the appeal has sufficient potential merit to tell against a grant of security for costs, any order for security will likely stifle the appeal and the appeal relates to the status of the applicant as a bankrupt. At the hearing, the respondent accepted that, if his application for security for costs failed, costs should follow the event.

Ratio Decidendi

Legal Principle Established

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