Amalgamated Commercial Holdings Pty Ltd v Compas Pty Ltd

[2011] FCA 696

FEDERAL COURT OF AUSTRALIA

Amalgamated Commercial Holdings Pty Ltd v Compas Pty Ltd [2011] FCA 696

Citation:	Amalgamated Commercial Holdings Pty Ltd v Compas Pty Ltd [2011] FCA 696
Appeal from:	Amalgamated Commercial Holdings Pty Ltd v Compas Pty Ltd [2011] FMCA 116
Parties:	AMALGAMATED COMMERCIAL HOLDINGS PTY LTD v COMPAS PTY LTD and AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
File number:	ACD 16 of 2011
Judge:	STONE J
Date of judgment:	21 June 2011
Catchwords:	PRACTICE AND PROCEDURE – application for security for costs by second respondent – matters relevant for consideration – prospect of applicant’s claim ultimately succeeding – degree of risk that second respondent would not be reimbursed for costs if successful – whether costs order would prevent applicant from proceeding with claim – whether applicant’s impecuniosity attributable to second respondent – no particular discretionary matters peculiar to the circumstances of the case
Legislation:	Federal Court of Australia Act 1976 (Cth) s 56 Independent Contractors Act 2006 (Cth) s 17
Cases cited:	Equity Access Pty Limited v Westpac Banking Corporation (1989) ATPR 40-972 Spencer v Commonwealth (2010) 241 CLR 118 Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1
Date of hearing:	16 June 2011
Place:	Sydney (via video link to Canberra)
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	25
Appearing for Applicant:	G Forsyth, Director, with leave
Counsel for the Respondent:	D O'Donovan
Solicitor for the Respondent:	Australian Government Solicitor

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION	ACD 16 of 2011

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	AMALGAMATED COMMERCIAL HOLDINGS PTY LTD Applicant
AND:	COMPAS PTY LTD First Respondent
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Second Respondent

JUDGE:	STONE J
DATE OF ORDER:	21 JUNE 2011
WHERE MADE:	SYDNEY (VIA VIDEO LINK TO CANBERRA)

THE COURT ORDERS THAT:

1.The Applicant provide security for the Second Respondent’s costs by payment of the sum of $10,000.

2.Payment be made to the Federal Court Registry by 4 pm on 24 June 2011 in the form of a bank cheque in favour of the Federal Court of Australia.

3.If the Applicant fails to provide security as ordered in paragraphs 1 and 2, this proceeding thereupon be dismissed.

4.If the Applicant provides security as ordered in paragraphs 1 and 2 and is granted an extension of time and leave to appeal:

4.1the Applicant provide security for the Second Respondent’s further costs by payment of an additional sum of $13,000;

4.2payment be made to the Federal Court Registry, in the form of a bank cheque in favour of the Federal Court of Australia, within 7 days of leave to appeal being granted; and

4.3if the Applicant fails to provide security as ordered in paragraphs 4.1 and 4.2, this proceeding thereupon be dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION	ACD 16 of 2011

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

AMALGAMATED COMMERCIAL HOLDINGS PTY LTD
Applicant

AND:

COMPAS PTY LTD
First Respondent

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Second Respondent

JUDGE:	STONE J
DATE:	21 JUNE 2011
PLACE:	SYDNEY (VIA VIDEO LINK TO CANBERRA)

REASONS FOR JUDGMENT

1. By orders made on 3 March 2011 the Federal Magistrates Court summarily dismissed an application brought by the applicant, Amalgamated Commercial Holdings Pty Ltd (Amalgamated), on the basis that it had no reasonable prospects of success: Amalgamated Commercial Holdings Pty Ltd v Compas Pty Ltd [2011] FMCA 116. The application for summary dismissal was brought by the Australian Competition and Consumer Commission, which was the second respondent to the application brought by Amalgamated. The applicant was ordered to pay the Commission’s costs “either as agreed or taxed”.

2. On 28 April 2011, Amalgamated filed an application in this Court for leave to appeal from the Federal Magistrate’s decision and for an extension of time in which to do so (preliminary application).  The proposed appeal is limited to a challenge to the costs order made in the Commission’s favour by the Federal Magistrate.  On 10 June 2011 the Commission filed a notice of motion seeking security for costs both in relation to the preliminary application for leave and extension of time and, if that application is successful, in relation to the appeal.

3. The application in the Federal Magistrates Court was initially brought against Compas Pty Ltd as first respondent and the Commission as second respondent.  The dispute with Compas was settled between the parties prior to the hearing in the Federal Magistrates Court and consequently that hearing concerned only issues in dispute between the applicant and the Commission.  As his Honour expressed it at [4]:

   [T]he sole contest that remains is between the Applicant and the Second Respondent and concerns (a) whether or not there existed a contract between those parties, and if so, (b) did it come into existence by virtue of an [alleged] agency as between the Respondents.

4. In considering the Commission’s application for summary dismissal, the learned Federal Magistrate applied the principles articulated by Lord Hope in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2 AC 1 at [95] which were approved by French CJ and Gummow J in their joint judgment in Spencer v Commonwealth (2010) 241 CLR 118 at [21] and [26]. His Honour held that the facts before him precluded the existence of any contractual relationship between the applicant and the Commission either directly or via the agency of Compas.  Accordingly, the applicant’s claims against the Commission had no reasonable prospect of success.  In conclusion his Honour said:

   In such circumstances, the relief sought by the [Commission] under s 17A of the Federal Magistrates Act should be granted.  It is so ordered, with costs to be agreed or taxed.

5. Jurisdiction to grant security for costs is given under s 56 of the Federal Court of Australia Act 1976 (Cth). Section 56 gives the Court a broad and unfettered discretion and should be exercised having regard to all of the relevant facts. In Equity Access Pty Limited v Westpac Banking Corporation (1989) ATPR 40-972 Hill J, having reviewed relevant authorities, stated that they indicated that the following matters should be considered:

   ●    the chances of success of the applicant; whether the applicant’s claim is bona fide or a sham;

   ●    the quantum of risk that the applicant cannot satisfy a cost order;

   ●    whether the use of the power would shut out a small company from making a genuine claim against a large company, ie is the power being used oppressively;

   ●    whether the impecuniosity arises out of the Act [sic] in respect to which relief is sought;

   ●    whether there are aspects of public interest which weigh in the balance against the making of an order;

   ●    whether there are any particular discretionary matters peculiar to the circumstances of the case.

6. Mr O’Donovan, who appeared for the Commission, addressed each of these issues.  In the present circumstances it is Amalgamated’s prospects of success in its preliminary application and any in consequent appeal that loom largest.  I shall address this issue later in these reasons.

7. It was not in contention that Amalgamated is impecunious.  This was conceded by Mr Forsyth, the principal of Amalgamated and who, with the leave of the Court, appeared for the company.  In any event, this much is clear from the fact that in filing its application for leave and for an extension of time Amalgamated sought an exemption from the usual filing fee on the grounds of impecuniosity.  Given those concessions, the risk that the company would not be able to satisfy a cost order made against it, must be rated as high.

8. Mr Forsyth did not make any submission that the company would be unable to satisfy any order for security for costs although the general tenor of his submissions implied that this was the case.  There is, however, no basis on which the Court could conclude that the Commission, in seeking security for costs, was intending to act oppressively and exclude the applicant from making a genuine claim.

9. Similarly, although Mr Forsyth sought to argue that Amalgamated’s impecuniosity has arisen, at least in part, from the actions of the Commission there was no evidence to support such a claim and no basis on which I would be prepared to make such a finding.  On the other hand, I am also not disposed to attach weight to Mr O’Donovan’s submission that the applicant was impecunious because it had made payments to Mr Forsyth.  Mr Forsyth’s evidence was that the payments were in respect of a salary to which he was entitled.  He said that he drew this salary as and when he could, depending on the state of the company’s finances.  Mr O’Donovan invited me to infer from this, that the “payment of salary was effectively discretionary on the part of the company”.  In my view Mr Forsyth’s evidence is equally consistent with the company having a legal obligation to pay a salary but Mr Forsyth not enforcing that obligation in recognition of the practical circumstances of a company.

10. The question of public interest and discretionary matters peculiar to the circumstances of the case can both be discussed in conjunction with the main issue in considering the Commission’s claim.  This requires the Court to form some view as to the likelihood of the preliminary application being successful which, in turn, requires the Court to make an assessment of the likelihood of any appeal succeeding.

11. The draft notice of appeal prepared by the applicant lists 3 bases, only the second of which warrants more than perfunctory consideration here.  The first takes issue with the Federal Magistrate requiring the applicant to lodge a statement of claim instead of proceeding on an application supported by an affidavit.  This order was made at the request of the Commission which, in a letter sent to Amalgamated on 14 July 2010, had advised the company that it considered a statement of claim would mean that “the dispute between the parties will be more clearly articulated” than in affidavits.  The letter stated that Amalgamated’s application “as currently framed does not outline the nature of your claim against the ACCC and we consider that a statement of claim would more clearly do so”.

12. It would appear that the Commission’s view was accepted by the Federal Magistrate who, on 19 July 2010, ordered that Amalgamated file and serve a statement of claim that “clearly sets out the facts and law to be relied upon”.  This is clearly a procedural decision with which this Court would not interfere. 

13. The third ground takes issue with the “quantum of the costs award” made by the Federal Magistrate.  The Federal Magistrate’s order was that the applicant pay the Commission’s costs “either as agreed or taxed”.  This order does not address the issue of quantum and therefore any challenge on that basis could not succeed. 

14. The second ground of appeal should be addressed in more detail. The applicant contends that the cost order made by his Honour is invalid because his Honour failed to apply s 17 of the Independent Contractors Act 2006 (Cth). Section 17 provides:

    (1)A party (the first party) to a proceeding (including an appeal) in a matter arising under this Part must not be ordered to pay costs incurred by any other party to the proceeding unless the first party instituted the proceeding vexatiously or without reasonable cause.

    (2)Despite sub-section (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Part is satisfied that a party (the first party) to the proceeding has, by unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first party to pay some or all of those costs.

    Section 17(3) defines “costs” as including all legal and professional costs and disbursements and expenses of witnesses.

15. The Federal Magistrate gave no reasons for ordering that the applicant pay costs. This is not unusual where, as here, a party comprehensively succeeds and there is no apparent reason why the usual rule that costs follow the event should not apply. The applicant submits, however, that costs could not be awarded against him without his Honour having determined, pursuant to s 17, that the applicant had instituted the proceeding “vexatiously or without reasonable cause”.

16. I accept the applicant’s submission that it was given no opportunity to address his Honour on the question of costs and that his Honour gives no indication in his reasons that he had considered the IndependentContractors Act. The applicant further submits that the construction of s 17 of the Act is a matter of public interest and that this aspect should weigh against the making of an order for security for costs.

17. The Commission points out that, irrespective of whether the proceeding in the Federal Magistrates Court was initially brought under the Independent Contractors Act, by reason of the settlement of the proceeding with Compas Pty Ltd the Act was not at issue in the proceeding by the time it came before the Federal Magistrates Court for hearing and that therefore s 17 did not apply. In particular Mr O’Donovan drew my attention to Note 4 of paragraph 11 of his Honour’s decision which states:

    At the hearing of the three interlocutory applications on 30^th November 2010, it was acknowledged by Counsel for ACCC, and to which there was no demurrer, that, in the light of the resolution of the matters as between Compas and [the applicant], the alternative ground raised under the Independent Contractors Act was now moot. 

18. It is clear that his Honour proceeded on this basis, and in my view was correct to do so. It follows that the proceeding in the Federal Magistrates Court did not involve a matter under Part 3 of the Independent Contractors Act and therefore s 17 of that Act was not enlivened. Even if one were to hypothesise that his Honour was incorrect in concluding that the “alternative ground raised under the Independent Contractors Act” was “moot”, Amalgamated has not sought to appeal against his Honour’s substantive decision.  That being so it is difficult to see how a challenge to the costs order based on non-compliance with the Independent Contractors Act could succeed. 

19. In his submissions in reply Mr O’Donovan addressed a question which I had raised, namely whether the finding by the Federal Magistrate that the application had no reasonable prospects of success was equivalent to a finding that the proceeding was instituted “vexatiously or without reasonable cause”.  Mr O’Donovan referred me to a number of authorities including Brinsmead v Perfection Dairies Pty Limited  [2009] FMCA 1028 and Re Kanan v Australian Postal and Telecommunications Union [1992] FCA 366. At his request, Mr Forsyth was given leave to file additional submissions on this point no later than 20 June 2011. Submissions were duly provided however, as I have decided that the Independent Contractors Act does not apply to the proceeding, it is not necessary to consider the additional authorities cited by Mr O’Donovan or the supplementary submissions for Amalgamated.

20. In the circumstances the likelihood of the Commission obtaining a costs order in its favour which the applicant could not satisfy is very high and such as to warrant, in all the circumstances security for costs being awarded in favour of the Commission.  As there are no particular discretionary matters peculiar to the circumstances of this case, this brings me to a consideration of the amount of security sought by the Commission.

21. Evidence in support of the quantum of security sought by the Commission was given in the affidavit of Sarah Rosanne Wright affirmed on 10 June 2011.  Ms Wright is a Senior Executive lawyer employed by the Australian Government Solicitor (AGS).  She has close on 10 years experience as a solicitor and, since September 2003 has specialised in litigation.   She deposed that she has conducted “numerous matters on behalf of AGS” and is familiar “with the costs of and incidental to conducting litigation on behalf of government agencies”.  

22. Ms Wright gave details of the costs agreement between AGS and the Commission and, based on her experience, estimated that

    the likely solicitor/client costs which will be incurred by the [Commission] … up to and including the hearing of [Amalgamated’s] notice of motion on 30 June will be approximately $16,655.

    Ms Wright estimated that on a party/party basis approximately $12,767 would be recovered if a costs order were made in the Commission’s favour.  The amount sought by the Commission as security for those costs is $10,000.

23. Should Amalgamated succeed in its primary application and the matter proceed to appeal the Commission’s costs are estimated to be $18,986 of which, in Ms Wright’s estimation, $14,657 would be recoverable on a party/party basis.  The Commissions seeks security in the amount of $13,000 in respect of those costs. 

24. Mr O’Donovan conceded that Ms Wright is not a qualified costs assessor and that, to the extent that she offers a view, that view is derived from her experience as a solicitor.  On the unchallenged evidence in her affidavit Ms Wright has considerable experience as a litigation solicitor.  In her affidavit she sets out the hourly rates of solicitors and counsel involved in the proceeding and the calculations which underlie her costs estimates.  I have no reason to doubt the accuracy of the facts as stated and am satisfied that the calculations are accurate and the estimates reasonable.  I am therefore satisfied that the amount of security that the Commission seeks is appropriate.

25. I shall therefore order that Amalgamated provide security in the amounts sought by the Commission.  As the primary application is listed for hearing on 30 June 2011, the security in respect of that application is to be provided by 4 pm on Friday 24 June 2011 in the form of a bank cheque in favour of the Federal Court of Australia. 

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate:

Dated:       21 June 2011