Application for leave to appeal: Kelly v Willmott Forests Ltd (in liquidation) [2012] FCA 1446
Parties:
JONATHAN DAVID MADGWICK and MARCUS DERHAM and JAMES WILLIAM ANTONY HIGGINS and HUGH THOMAS DAVIES and RAYMOND MAXWELL SMITH v DAVID KELLY and MARGARET KELLY and AARON GRANT
File number:
VID 31 of 2013
Parties:
WILLMOTT FORESTS LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 063 263 650) and BIOFOREST LIMITED (ACN 096 335 876) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) v DAVID KELLY and MARGARET KELLY and AARON GRANT
File number:
VID 33 of 2013
Parties:
MIS FUNDING NO 1 PTY LTD (ACN 119 268 905) v DAVID KELLY and MARGARET KELLY
File number:
VID 34 of 2013
Parties
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) v AARON GRANT
File number:
VID 35 of 2013
Judges:
ALLSOP CJ, JESSUP & MIDDLETON JJ
Date of judgment:
14 June 2013
Catchwords:
COSTS – security for costs in a class action – whether proceedings defensive – independent operation of s 43(1A) and s 33ZG(c)(v) of the Federal Court of Australia Act 1976 (Cth) – whether the applicant’s solicitors are ‘standing behind’ the litigation – relevance of possible availability of litigation funding – whether an order for security would stifle the proceedings – onus of proof – commercial nature of the litigation – relevance of the characteristics of the group members, including their unwillingness to provide security
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Madgwick v Kelly [2013] FCAFC 61
Case
[2013] FCAFC 61
Decision Date
CaseChat Overview and Summary
In the matter of Madgwick v Kelly, the respondents appealed against an order of the primary judge in the Federal Court of Australia, which dismissed the applicants' application for security for costs in a class action. The applicants sought security for costs from the respondents, who were the class representatives in the proceeding. The primary judge dismissed the application on the basis that the proceedings were defensive and that an order for security would stifle the proceedings.
The court was required to determine whether the primary judge erred in dismissing the application for security for costs. The court had to consider whether the proceedings were defensive and whether an order for security would stifle the proceedings. The court also had to consider the relevance of the possible availability of litigation funding and the willingness of the group members to provide security.
The court found that the primary judge misapplied the principle in his reasoning and failed to balance the relevant factors. The court held that the finding of stifling could not be supported and that the submission that the question of stultification should not be analysed by reference to whether the group proceedings under Pt IVA would be stultified was flawed. The court also held that the mischaracterisation of the proceedings as defensive was not an error. The court allowed the appeal, set aside the orders of the primary judge, and remitted the matter to the primary judge for reconsideration. The court ordered that the applicants in the primary proceeding provide security for the costs of the respondents in a sum and in a manner to be assessed by the primary judge. The court also ordered that the costs of the application for security for costs before the primary judge be remitted to the primary judge and that the respondents pay half the applicants' costs of the appeal and application for leave to appeal.
Orders
Orders of the court
1. Leave be granted to appeal from the orders of the Court made on 17 December 2012.
2. The applicants file and serve a notice of appeal in the form of the draft notice of appeal the subject of argument before the Full Court on 22 May 2013.
3. The appeal be allowed.
4. The orders of the Court made on 17 December 2012 be set aside.
5. Subject to any terms imposed by the primary judge and in an amount directed by the primary judge, the applicants in the primary proceeding provide security for the costs of the respondents in a sum and in a manner to be assessed by the primary judge.
6. The interlocutory application be remitted to the primary judge for the fixing of the sum of any security and the manner and term of its provision, such remitter and consideration to be on the basis of the evidence adduced already in the application, unless the primary judge orders otherwise.
7. The costs of the application for security for costs before the primary judge be remitted to the primary judge.
8. The respondents to the application and appeal (the applicants in the primary proceeding) pay half the applicants’ costs of the appeal and application for leave to appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. Leave be granted to appeal from the orders of the Court made on 17 December 2012.
2. The applicant file and serve a notice of appeal in the form of the draft notice of appeal the subject of argument before the Full Court on 22 May 2013.
3. The appeal be allowed.
4. The orders of the Court made on 17 December 2012 be set aside.
5. Subject to any terms imposed by the primary judge and in an amount directed by the primary judge, the applicants in the primary proceeding provide security for the costs of the respondent in a sum and in a manner to be assessed by the primary judge.
6. The interlocutory application be remitted to the primary judge for the fixing of the sum of any security and the manner and term of its provision, such remitter and consideration to be on the basis of the evidence adduced already in the application, unless the primary judge orders otherwise.
7. The costs of the application for security for costs before the primary judge be remitted to the primary judge.
8. The respondents to the application and appeal (the applicants in the primary proceeding) pay half the applicant’s costs of the appeal and application for leave to appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. Leave be granted to appeal from the orders of the Court made on 17 December 2012.
2. The applicant file and serve a notice of appeal in the form of the draft notice of appeal the subject of argument before the Full Court on 22 May 2013.
3. The appeal be allowed.
4. The orders of the Court made on 17 December 2012 be set aside.
5. Subject to any terms imposed by the primary judge and in an amount directed by the primary judge, the applicant in the primary proceeding provide security for the costs of the respondent in a sum and in a manner to be assessed by the primary judge.
6. The interlocutory application be remitted to the primary judge for the fixing of the sum of any security and the manner and term of its provision, such remitter and consideration to be on the basis of the evidence adduced already in the application, unless the primary judge orders otherwise.
7. The costs of the application for security for costs before the primary judge be remitted to the primary judge.
8. The respondent to the application and appeal (the applicant in the primary proceeding) pay half the applicant’s costs of the appeal and application for leave to appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
ALLSOP CJ
For the reasons already given, we have concluded that the primary judge did misapply principle in his reasoning at [81] and in his failure to balance s 43(1A) with the prejudice to the respondents, but did not err in his characterisation of Macpherson and Kelley.Ground 4: Errors in the conclusion of stifling For the reasons already given, we consider that the finding of stifling could not be supported. One submission of the lenders should, however, be separately dealt with. It was submitted that the question of stultification should not be analysed by reference to whether the group proceedings under Pt IVA would be stultified, but by reference to whether the rights of the group members would be stultified. So, it was submitted, even if the proceeding under Pt IVA would be stultified, that would not be sufficient to resist an order; rather, it would be necessary to show that the group members’ substantive rights would be stifled. This submission has two principal vices. First, it places no weight on the significant statutory and public policy in proceedings under Pt IVA. The statutory provisions for group action are more than a procedural device.They comprise an important statutory mechanism for the vindication of the rights of the parties. A conclusion of stultification of an otherwise properly brought group proceeding may well be a reason to consider refusal to make an order for security for costs. Secondly, the submission is too mechanical in its approach.This reflected, to a degree, the approach the respondents took below and on appeal. Section 56 provides for a broad judicial discretion. Fairness as identified by Hodgson JA in Dae Boong, lies at the heart of the exercise of discretion under s 56 – fairness as to whether security should be ordered and, also, importantly, in what amount. The capacity of people to pay, their reasonable willingness to pay, the risk of stifling proceedings and many other factors may impinge on the consideration of these questions. One consideration relevant to consider, indeed important to consider, is whether an order for security would stifle a proceeding provided for by Pt IVA, even if this would leave all members free to pursue their rights individually.Ground 5: Mischaracterisation of the proceedings as defensive We have dealt with this complaint above. There was no error in the primary judge’s approach.Remedy For the above reasons, the order made on 17 December 2012 that the application for security for costs be dismissed with costs should be set aside. The question of what order should be made arises. The applicants urge remitter for reconsideration by the primary judge. The respondents urge that the Full Court deal with the applications. It is appropriate for this Court to decide whether security (that is some security) should be ordered. The submissions on relief and, to a degree, the approach of the respondents below to the argument, had a degree of inflexibility. In this hearing, at least the companies and the lenders recognised that any conclusion that an order for security was appropriate did not necessarily mean that the order would be in the sum for the full amount of the recoverable costs. On a daily basis, judges in practice courts deal with this kind of question on a robust and practical basis, taking into account the resources of the parties, the appropriateness of some security and balancing the respective interests of the parties. Further, in a court such as this Court, where case management is undertaken by a docket judge, close supervision of the ongoing requirements of the parties is possible. Security for costs is not necessarily a once only question. It can be managed, supervised and staged as part of case management, particularly to avoid injustice. The essential place of fairness referred to by Hodgson JA in Dae Boong relates not only to whether security will be ordered, but also in what amount, and on what terms.