Christofidellis, Stelios v Zdrilic, Ned & Visinga

[1997] FCA 668

FEDERAL COURT OF AUSTRALIA

COSTS - security for - application dismissed - inappropriate where applicant a natural person.

Bankruptcy Act 1966 (Cth), s 121(1)

Federal Court of Australia Act 1976 (Cth), s 56
Evidence Act 1995 (Cth), ss 59(1), 131(1),(2)

Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1

P.T. Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515
James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442

Pearson v Nayalev [1977] 1 WLR 899

STELIOS CHRISTOFIDELLIS & ANOR v
NED ZDRILIC and VISNGA ZDRILIC & ORS
NG 772 of 1995

JUDGE:        BRANSON J
PLACE:        SYDNEY
DATE:          28 JULY 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  NG 772 of 1995
)
GENERAL DIVISION	)

BETWEEN:	STELIOS CHRISTOFIDELLIS and MARCIA SEIXAS CHRISTOFIDELLIS Applicants
AND:	NED ZDRILIC and VISNGA ZDRILIC First Respondents TERRY PFEIFFER REAL ESTATE PTY LIMITED (ACN 001 486 951) Second Respondent TERRENCE STANLEY PFEIFFER Third Respondent TOSS JAMES JOHNSON and TINA DI BELLO Fourth Respondents

JUDGE:	BRANSON J
PLACE:	SYDNEY
DATED:	28 JULY 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The application by the fourth respondents for the applicants to provide security for costs is dismissed.

1. The fourth respondents are to pay the applicants’ costs of the notice of motion of 19 June 1997 on the basis that 50% only of the applicants’ costs of the hearing on 27 June 1997 are to be regarded as costs of such notice of motion.

1. The application by the second and third respondents for the applicants to provide security for costs is dismissed.

1. The second and third respondents are to pay the applicants’ costs of paragraphs 3, 4 and 5 of the notice of motion of 27 June 1997 on the basis that 50% of the applicants’ costs of the hearing on 27 June 1997 are to be regarded as the costs of such paragraphs.

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

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)   NG 772 of 1995
)
GENERAL DIVISION	)

BETWEEN:             

STELIOS CHRISTOFIDELLIS and
MARCIA SEIXAS CHRISTOFIDELLIS
Applicants

  AND:  

NED ZDRILIC and VISNGA ZDRILIC
First Respondents

TERRY PFEIFFER REAL ESTATE
PTY LIMITED (ACN 001 486 951)
Second Respondent

TERRENCE STANLEY PFEIFFER
Third Respondent

TOSS JAMES JOHNSON and
TINA DI BELLO
Fourth Respondents

JUDGE:	BRANSON J
PLACE:	SYDNEY
DATED:	28 JULY 1997

REASONS FOR DECISION

In this matter two applications for the applicants to provide security for costs were heard together on 27 June 1997.  Pursuant to a notice of motion dated 19 June 1997 the fourth respondents moved the Court for an order that the applicants provide security for costs in favour of the fourth respondents in the sum of $80,000 and for ancillary orders.  Pursuant to a notice of motion dated 27 June 1997 filed in Court that day, the second and third respondents moved the Court, first that the notice of motion be returnable instanter, secondly that the applicants provide security for costs in favour of the second and third respondents in the sum of $80,000 or such other amount as the Court deems appropriate, and thirdly ancillary orders.

With the consent of the applicants and on certain conditions as to the evidence to be relied upon, leave was granted for the notice of motion dated 27 June 1997 to be returnable instanter.  At the conclusion of the hearing both applications for security for costs were dismissed.  I said that I would publish my reasons at a later date.  What follows are those reasons.

The proceeding relates, first to alleged misrepresentations said to have been made by the second respondent as the agent of the first respondent, by its agent the third respondent, concerning characteristics of certain land, and secondly to alleged negligent conduct of the fourth respondents who are both solicitors.  It is pleaded that in reliance upon, and as a result of, the misrepresentations and the negligent conduct of the fourth respondents, the applicants agreed to purchase the land at a price substantially higher than its value and thereby suffered loss and damage.

The proceeding was initiated on 12 October 1995 by the applicants filing an application and statement of claim.  Appearances were filed on behalf of all respondents in early November 1995.  The proceeding has thus been on foot for approximately twenty months.  The proceeding, including certain cross-claims, is listed for hearing for two weeks commencing on 28 July 1997; that is, approximately one month from the time when the Court was moved for orders for security for costs.

The claims initially made by the third applicant in the proceeding, Belrake Pty Limited, are not to be pursued.  The applicants whose claims are to be pursued are individuals.  There is no suggestion that either of them is acting as a “front” for another party.

The fourth respondents were apparently stimulated to seek an order for security for costs against the applicants by their solicitors’ receipt of a letter dated 9 May 1997 from the solicitors for the first respondent which includes the statement -

“we have been advised that the Applicants will be in no position to satisfy any judgment by the date of the hearing of this matter ...”

A request by the solicitors for the fourth respondents to the solicitors for the first respondent for further information as to what the applicants’ solicitors had told them concerning the applicants’ financial position was refused.  By letter dated 16 May 1997 the solicitors for the first respondent advised that they could not provide -

“any further information regarding the Applicants’ financial position as the information provided to us by the Applicants’ Solicitors was without prejudice and for the purpose of attempting to enter into settlement negotiations.”

The applicants argued before me that I ought not to receive in evidence a copy of the letter dated 9 May 1997 on the basis that the information in it concerning their financial position was entitled to privilege as a “without prejudice” statement.  Although no reference was made to the Evidence Act 1995 (Cth) (“the Evidence Act”), reliance was presumably placed on s 131 of the Evidence Act. Subsection (1) of that section provides:

“Evidence is not to be adduced of:

(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or

(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.”

Section 131(2) lists a significant number of circumstances in which subs (1) does not apply.

The applicants’ argument in this regard faced a significant hurdle.  They chose to place no evidence before the Court on the two applications for security for costs.  There was before me no evidence as to the circumstances in which the applicants had disclosed, or caused to be disclosed, to the solicitors for the first respondents the information that they would be in “no position to satisfy any judgment by the date of the hearing of this matter” - if, indeed, they had made, or had caused to be made, any such disclosure.  Even assuming that the applicants were entitled before me to place reliance on the conclusion drawn by the solicitors for the first respondent that “the information provided to [them] by the Applicants’ Solicitors was without prejudice and for the purpose of attempting to enter into settlement negotiations”, the material before me does not establish that the statement in the letter of 9 May 1997, as opposed to certain further information regarding the applicants’ financial position apparently in their possession, was part of the information so provided to the solicitors for the first respondent.  Nor is the position taken much further by the statement contained in a letter from the solicitors for the applicant to the solicitors for the fourth respondent that -

“Mr Jeweller was authorised by us to put certain limited information to you respecting our clients’ financial position on the basis that it was, and remained, ‘without prejudice’, and for the strict purpose of exploring settlement prospects.”

Even if it may be assumed that the “limited information” referred to in the above statement is that set out in the letter of 9 May 1997, s 59(1) of the Evidence Act provides that -

“Evidence of a previous representation made by a person is not admissible to prove the existence of a fact that the person intended to assert by the representation.”

If the applicants wished to challenge the right of the fourth respondent to adduce evidence of the letter of 9 May 1997 they were, in my view, obliged to place before the Court evidence of the circumstances surrounding the preparation of the letter. They did not do so. I am not able to be satisfied on the material that is before me that s 131(1) of the Evidence Act has application to the letter of 9 May 1997.

By letter dated 14 May 1997 the solicitors for the fourth respondent sought advice from the applicants’ solicitors as to the applicants’ financial position and as to whether they would be in a position to satisfy any costs orders made against them.  The solicitors for the second and third respondents sought similar advice from the applicants’ solicitors by letter dated 23 May 1997.  The response received in each case was that “we are now instructed that our clients will be in a position to meet any adverse judgement”.  The response was apparently regarded as inadequate by the fourth respondents and by the second and third respondents.

The applicants are the registered proprietors of three parcels of land, one parcel comprising three lots.  Each parcel is subject to a mortgage.  A caveat in favour of a member or members of the applicants’ family has been lodged with the Land Titles Office, in respect of two of the parcels.  A solicitor who, subject to supervision, has the carriage and conduct of this matter on behalf of the fourth respondents has expressed her belief that the applicants have taken or are taking steps to prevent their assets from being available to satisfy any judgment or order for costs against them in this proceeding.

The jurisdiction of the Court to make orders for security for costs derives from s 56 of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”). Section 56, so far as is here relevant, provides as follows:

“(1)The Court or a Judge may order an applicant in a proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him or her.

(2)The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

...

(5)This section does not affect the operation of an provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.”

As the Full Court of the Federal Court pointed out in Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 3, the wide discretionary power given to the Court by s 56 of the Federal Court Act must be exercised judicially but that is its only limitation. It is not limited by the terms of O 28 r 3 of the Federal Court Rules.

I am not in the circumstances of this case able to conclude that the orders for security for costs sought will, if made, frustrate the applicants’ litigation against the second, third and fourth respondents.  The applicants have put no evidence before the Court on the present applications.  Moreover, letters have been written on behalf of the applicants which assert that they will be in a position to meet any adverse judgment.

I am, however, prepared to conclude that the applicants have limited financial means presently available to them having regard to the likely cost of the forthcoming two week hearing.  In the absence of any alternative explanation being offered by the applicants, I am prepared to so conclude on the basis that they have recently entered into deeds of loan with members of their family and given equitable charges over land owned by them as security for the repayment of such loans.

The failure of the applicants to place any evidence before the Court on these applications may be thought to provide some support for a suspicion that the applicants may be seeking to prevent their assets from being available to satisfy any judgment or orders for costs that might be made against them. To be weighed against such suspicion is their obvious need to fund the current proceeding. Moreover, it is not to be overlooked that if the suspicion should prove a reality, the respondents may well benefit from the protection against fraudulent dispositions provided by s 121(1) of the Bankruptcy Act 1966 (Cth) (see P.T. Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 526).

As Toohey J pointed out in James v Australia and New Zealand Banking Group Ltd (No 1) (1985) 9 FCR 442 at 445, the law is clear that a natural person is not to be required to provide security for costs simply because he or she is impecunious. His Honour quoted the following passage from Megarry V-C in Pearson v Nayalev [1977] 1 WLR 899 at 902:

“The basic rule is 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’.”

Whilst recognising the wide discretion given to the Court by s 56 of the Federal Court Act, I am not satisfied that the circumstances of this case are such as to warrant departure from this well established practice of the courts. Moreover, the closeness of the trial date, in my view, suggests against the making of an order for security for costs at this stage of this protracted hearing.

For the above reasons each of the applications for security for costs was dismissed.

The fourth and the second and third respondents respectively are to pay the applicants’ costs of the notice of motion of 19 June 1997 and pars 3, 4 and 5 of the notice of motion of 27 June 1997 to be taxed if not agreed.  The taxation of such costs is to be conducted on the basis that 50% of the applicants’ costs of the hearing of 27 June 1997 are to be allocated to each of the notices of motion.

I certify that this and the preceding four (4)
pages are a true copy of the Reasons for
Decision herein of the Honourable Justice Branson.

Associate:

Date:

Counsel for the applicants:  Mr P.T. Taylor
Solicitors for the applicants:  Gells

Counsel for the first respondent:  Ms M.A. Gilmour
Solicitors for the first respondent:  Jeweller Peetz

Counsel for the second and third respondents:         Mr R.J. Webb
Solicitors for the second and third respondents:       Holman Webb

Counsel for the fourth respondent:  Mr P. Greenwood
Solicitors for the fourth respondent:  Phillips Fox    

Date of hearing:  27 June 1997.