Dillon v Baltic Shipping Company

[1991] HCA 37

HIGH COURT OF AUSTRALIA

Gaudron J.

JOAN NORMA DILLON v. BALTIC SHIPPING COMPANY

1 October 1991

Decision

GAUDRON J. Mrs Dillon brings this application on behalf of herself and, it is said, on behalf of 146 other persons who were on board the Mikhail Lermontov when it sank off the coast of New Zealand on 16 February 1986. They, like Mrs Dillon, brought action against the Baltic Shipping Company ("the Company") for loss and damage suffered on that occasion. The various actions were either commenced in or transferred to the Admiralty Division of the Supreme Court of New South Wales. Liability, although at first contested, was admitted in the various actions. Damages were assessed in Mrs Dillon's case and judgment entered. That judgment was the subject of an unsuccessful appeal to the Court of Appeal and is now the subject of an appeal to this Court. Damages have yet to be assessed in the actions of those on whose behalf Mrs Dillon claims to bring this application. For one reason or another and pursuant to the Admiralty Rules (N.S.W.), their actions have been joined or otherwise caught up with Mrs Dillon's action. They have, on that account, been constantly referred to as "Mrs Dillon's co-plaintiffs". It is convenient to continue with that course.

2. Mrs Dillon seeks security for her claim and the claims of her co-plaintiffs, including costs of their actions in the Supreme Court, and security for her costs of the Company's appeal to this Court. The precise amount sought by way of security is $8,944,031, made up as follows:
Damages for co-plaintiffs,
estimated, on average, $50,000 X 146 ... $7,300,000 Costs and Disbursements in the actions of the co-plaintiffs estimated, on average, $7,500 X 146 ... $1,095,000 Mrs Dillon Judgment $ 51,396 Interest on Judgment 11,135 Costs - First Instance 300,000 Interest on Costs 108,000 Appeal 35,000 Interest on Appeal Costs 3,500 Leave to Appeal to this Court 15,000 Appeal to this Court (Estimate) 25,000

...$549,031

3. The evidence concerning the Company is not comprehensive. For some years now, its ships have visited Australian ports and they continue to do so. Until recently it was a trading entity of the Union of Soviet Socialist Republics (U.S.S.R.) with its headquarters in Leningrad. It was on that account thought by those advising Mrs Dillon that the Company was underwritten (de facto, if not de jure) by the U.S.S.R.

4. It seems from newspaper articles, supplied in the main by Reuters News Agency, that the Company was caught up in the process of change even before the revolutionary events of the past few months: it was decided in September 1990 that the Company should, in terms which are in vogue in this country, "be privatized", in the sense that it should operate independently of the Ministry of Merchant Marine ("Morflot"); independence was achieved in July of this year on terms involving payment of rental to the U.S.S.R. for the ships and other assets used in the business, although some assets may have passed into the Company's ownership.

5. Those advising Mrs Dillon believe that the Company's independence from Morflot had the consequence that it ceased to be underwritten by the U.S.S.R. They also believe that, in all probability, the Company has limited assets and that, in the main, those by which it carries on business are owned by Morflot. It is argued that recent events have made it clear that the economic problems of the U.S.S.R. are such that its backing of the Company would, in any event, be of little practical significance. It is also said that the problems of the U.S.S.R. must affect the Company. And in this regard, reference was made to a report by Reuters News Agency in June 1991 that the Company was then owed R270,000,000 by the U.S.S.R. Government. These matters formed the basis of the application for security.

6. Order 70, r.7(1) of the High Court Rules ("the Rules") provides:
"The Court or a Justice may, at any time on the application of a respondent to an appeal, order that the appellant give security, within a time to be limited by the order and in such amount as the Court or a Justice may fix, for the prosecution of the appeal without delay and for the payment of such costs as may be awarded by the Court to the respondent."

7. It was argued that O.70, r.7(1) authorizes an order for security, not only for the costs of the appeal, but for the claims of Mrs Dillon and her co-plaintiffs and the costs of their actions in the Supreme Court. It does not. It deals only with security for the expeditious prosecution of the appeal and the costs of the appeal. The present application is not based on want of expedition. Thus, to the extent that the application travels beyond the costs of the appeal, O.70, r.7(1) does not support it.

8. It was accepted by counsel for Mrs Dillon that, O.70, r.7(1) aside, no provision of the Rules authorizes an order for security as sought. It was argued that, to the extent, if any, that the application is not supported by O.70, r.7(1), there is power to order security pursuant to the principle of admiralty law applied by Hill J. in The Lord Strathcona (No.2) (1) (1926) p 18.

9. In The Lord Strathcona, charterers intervened after judgment was obtained by default in an action in rem on a mortgage. They claimed that the mortgagee was bound by their charter. An order was made against them for security for the loss, if any, occasioned by delay in selling the ship, interest under the mortgage and expenses. That order was complied with. The charterers were not successful in their claim. Judgment was entered against them and they were ordered to pay the costs of and occasioned by their intervention. The ship was sold at a lower price than if it had been sold when judgment was first obtained. A summons was taken out for further security. It was argued on behalf of the charterers that they were liable for loss only to the amount of the security previously given. And, it seems, it was indicated that the amount of the loss was disputed. Further security was ordered for costs and expenses on the basis that -
"the interveners are taking a very active interest
in the case, and attend by counsel to contest the present summons and show that they will vigorously dispute the plaintiffs' claims against them. I think the matter is now open." (2) ibid., at p 23. And it was indicated that, if the charterers were to continue as active parties, the Registrar could order further security with respect to the loss occasioned by the delay in selling the ship.

10. It was argued on behalf of the applicant that The Lord Strathcona is authority for the proposition that a court exercising admiralty jurisdiction may order any person invoking its assistance to provide general security, and not merely security for costs. So much may be accepted. Even so, the case was not concerned with security for the claims of persons not involved in the proceedings. First principles suggest that an order of that kind might well be beyond power: if not, security would be required only in the most exceptional of circumstances.

11. Even assuming that an order might be made for security for the claims of persons not involved in proceedings, in my view that would not be appropriate in this case. It was accepted by counsel for Mrs Dillon that the law and the Admiralty Rules governing the actions of her co-plaintiffs do not allow the Supreme Court to require security for their claims or their costs. The only circumstance which might permit that Court to take that course is if the Company were to institute an appeal or, perhaps, seek leave to appeal from an order or decision given in one or other of those proceedings. In that event, the principle in The Lord Strathcona, unless in some way excluded, would operate to the same extent as in this Court. It is not suggested that that circumstance has arisen.

12. In my view it would be incongruous and unfair for this Court to make an order giving an advantage to persons with respect to proceedings which are not before the Court when that advantage is denied by the law and the Admiralty Rules binding in the court in which their proceedings were instituted and in which they remain. The application must fail to the extent that it seeks security for the claims and the costs of Mrs Dillon's co-plaintiffs.

13. The application for security with respect to Mrs Dillon's judgment and her costs in the Supreme Court also encounters difficulty. An appeal to this Court does not operate as a stay of the judgment under appeal (3) See the Rules, 0.70, r.8(1). Thus, ordinarily and even in an admiralty matter (4) See The Annot Lyle (1886) 11 PD 114, at p 116, where it was said that the ordinary rules as to the grant of a stay pending appeal apply to admiralty cases. there is no occasion to require the giving of security with respect to the judgment under appeal. The Court of Appeal (Mahoney J.A.) granted a stay in the present case. In so doing, his Honour was following the course recommended by Brennan J. in Jennings Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. (No.1) (5) (1986) 161 CLR 681, at p 584. And, subject to one possible qualification, that course was clearly open in the circumstances. The qualification is that there may be a question as to the appropriateness of that course to the extent, if any, that it results in Mrs Dillon being kept out of costs incurred with respect to liability before that issue was admitted. That matter was not raised in argument and it does not bear on the present application.

14. The matters which were advanced in support of an order for security with respect to the judgment under appeal and the costs of the action in the Supreme Court are matters which go more directly to the stay granted by the Court of Appeal. It is not clear whether they were advanced in opposition to the stay. Whether they were or were not, it would be inappropriate to make an order for security when its consequence would be to limit the effectiveness of the stay. Thus, this part of the application must also fail.

15. As already indicated, O.70, r.7(1) authorizes the making of an order for security for the costs of a respondent to an appeal. Perhaps the matter most likely to result in an order for security is that the appellant, if unsuccessful, will be unable to pay the costs of the appeal. The evidence in this case does not establish that. However, that is not the end of the matter. The decision is one involving a discretionary judgment and the matters to be taken into account are not confined (6) See King v. Commercial Bank of Australia Ltd. (1920) 28 CLR 289, at p 292; Lucas v Yorke (1983) 58 ALJR 20, at p 21; 50 ALR 228, at p 229. What is established is that the appellant is a foreign corporation and there are grounds for thinking that its financial position may not be entirely secure. And, the uncertainties which attend the Company's affairs also raise the possibility that recovery of costs could entail difficulties that are not ordinarily encountered. Thus, in my view, it is appropriate that there be an order for security for the costs of the appeal.

16. The amount in which security should be ordered is a matter of contention. The application is made on the basis that the costs involved in the appeal will be of the order of $40,000. On the other hand, in an affidavit filed on behalf of the Company, Louise Mary Gillespie, a costs assessor retained by D.G. Thompson, Legal Costs Assessors, has sworn that she estimates the costs which would probably be allowed on taxation at $4,474.40 for the application for special leave to appeal and at $11,689.78 for the appeal. Even these figures seem high (7) See PS. Chellaram and Co. Limited v. China Ocean Shipping Company (unreported, High Court, 23 September 1991), where security was ordered for the costs of an appeal in the sum of $8,250. However, they are the figures advanced on behalf of the Company and, thus, it is not appropriate that security be ordered in a lesser amount. As the application has succeeded only in part, the costs of this application should be costs in the appeal. Those costs need not be and are not taken into account in determining the amount of security to be provided.
Order

17. I order that within 28 days from the date of this order Baltic Shipping Company provide security for Mrs Dillon's costs of appeal in the sum of $16,164.18 in a form acceptable to the Registrar. Costs of this application to be costs in the appeal. I certify for counsel.

Orders

Within 28 days from the date of this order, Baltic Shipping Company is to provide security for Mrs Dillon's costs of appeal in the sum of $16,164.18 in a form acceptable to the Registrar. Costs of this application to be costs in the appeal. Certify for counsel.