Manning v Arafura Pearls Holdings Ltd (No.2)
[2010] FMCA 830
•19 October 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MANNING v ARAFURA PEARLS HOLDINGS LTD (No.2) | [2010] FMCA 830 |
| INDUSTRIAL LAW – Application brought by the respondents seeking security for costs – whether the applicant in the substantive application is capable of satisfying a costs order – whether impecuniosity could be attributable to the conduct on the part of the respondent – sufficiency of material detailing costs sought. |
| Fair Work Act 2009 |
| Equity Access Ltd v Westpac Banking Corporation and Others (1989) 11 ATPR 40‑972 Security For Costs, Stephen Colbran, Longman Professional 1992 |
| Applicant: | RAMAH MANNING |
| Respondent: | ARAFURA PEARLS HOLDINGS LTD |
| File Number: | BRG 206 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 19 October 2010 |
| Date of Last Submission: | 19 October 2010 |
| Delivered at: | Brisbane |
| Delivered on: | 19 October 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Hibble |
| Solicitors for the Applicant: | Stevenson McNamara Lawyers |
| Counsel for the Respondent: | Mr Roper |
| Solicitors for the Respondent: | De Silva Hebron Lawyers |
ORDERS
That Mr Manning make payment of $14,000.00 to the Court by way of security for costs of Arafura Pearls Holdings Ltd.
That in the event that Mr Manning fails to pay that sum within twenty-eight (28) days of today’s date, the proceedings be stayed.
That Mr Manning pay Arafura Pearls Holdings Ltd’s costs of and incidental to today’s application assessed in the sum of $4,500.00.
That the parties have liberty to apply.
That the matter be listed for mention at 9.30am on 20 April 2011 in the Federal Magistrates Court of Australia at Brisbane.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 206 of 2010
| RAMAH MANNING |
Applicant
And
| ARAFURA PEARLS HOLDINGS LTD |
Respondent
REASONS FOR JUDGMENT
(Ex Tempore)
Introduction
This application in a case is brought by the respondent in the principal proceedings, Arafura Pearls Holdings Ltd (Arafura). It seeks orders:
a)First, for the payment by the applicant in the principal proceedings, Ramah Manning (Manning), of a sum of $64,077, or such other amount as the court considers appropriate, as security for Arafura's costs of the proceeding.
b)Second, in the event that Manning fails to pay the amount the subject of order 1 within 28 days of the date of the order, the proceedings be dismissed and/or stayed.
c)Third, that Manning pay Arafura's costs of, and incidental to, this application, either fixed in the amount of $7,500.00, or such other amount as the court considers appropriate, and/or as agreed or taxed.
d)Fourth, that Arafura have leave, so far as leave may be necessary, to proceed to a taxation of costs, of any order that may be made in the application in a case and to enforce any fixed award of those costs forthwith.
e)Finally, any such further order as the court may consider necessary.
Background
By way of background, the principal application prosecuted by Manning is one for remedies against Arafura for termination of his employment, allegedly in contravention of the Fair Work Act. He principally seeks compensation. The original application was made on 11 March 2010. It was subsequently amended on 28 May 2010 and there has, most recently, been an application brought by Arafura to have the application struck out. That application was brought on 17 September 2010 and, as a consequence of orders made on that occasion, Arafura has now brought this application for security for costs.
Without descending into detail concerning the merits of Manning's application against Arafura, there is one matter of moment which requires some consideration, and which I will address in the course of a consideration of the discretionary factors. Otherwise, there is nothing special about the principal application. It is an application brought by an employee for compensation for alleged wrongful termination of employment.
Security for costs – principles
The principles governing applications for security for costs are well settled and there is no disagreement between the parties as to the appropriate principles to be applied. Ultimately, the matter is one which calls for the exercise of a discretion. Subject to the court exercising its discretion judicially, the court's discretion is largely unfettered. An examination of the approach that is considered appropriate in an application of this kind can be seen by reference to the decisions referred to, they being Equity Access Ltd v Westpac Banking Corporation and Others (1989) 11 ATPR 40‑972, and Kp Cable Investments Pty Limited v Meltglow Pty Limited [1995] FCA 76.
Further assistance as to the general approach can be gleaned by reference to the text, Security For Costs, Stephen Colbran, Longman Professional 1992, generally addressing those matters commencing at chapter 14, page 233. Each of the parties have relevantly addressed the various discretionary factors which they submit are applicable in this case. Broadly they are these: the merits of the case brought by Manning against Arafura; second, the risk that Manning will not be able to satisfy a costs order; third, the question of whether or not the application constitutes an oppressive use of economic power; fourth, the question of impecuniosity, and fifth, the question of delay.
A number of other matters were identified by the parties, in the course of submissions, but I think those matters, including matters of public interest and general discretionary matters, do not of themselves assist in the resolution of the application.
Dealing with the first of the discretionary matters: merit. As a matter of principle, the merits or prospects of success of a claim may be considered in the exercise of the discretion whether or not to order security for costs at first instance.
In this case, a significant issue as to merits arises. Broadly, Manning prosecutes his claim on the basis of what was said to be a written agreement, in part constituted by an offer to be found in a letter said to have been addressed to him on 28 July 2008, purportedly by Chris Barnard, General Manager operations, and signed by him. That letter included the relevant terms of the offer of employment, which, it is contended by Manning, were breached by Arafura, giving rise to his remedies.
At the heart of the dispute is the letter of offer. The letter of offer, having allegedly been sent out by Arafura to Manning, ultimately led to the preparation of a contract which Manning refused to sign, on the basis that it did not reflect the terms of the offer, he says, were made to him in the letter of 28 July 2008. It follows that the authenticity of the letter of 28 July 2008 is a matter of some moment.
An application had been brought and orders had been made in June this year for the production of the letter so that it could be subjected to forensic examination. The letter was purportedly sent by Manning to the solicitors acting for Arafura, but upon receipt of an envelope allegedly containing the letter, the letter was not to be found. An application brought in respect of the failure by Manning to comply with an earlier order was dismissed. Manning had deposed to having forwarded the letter in compliance with the court's orders. No other order was open on the papers.
The letter, it would seem, will not be available for trial and cannot be subject to any further examination except by copy. Accordingly, credit will be very important in the resolution of the issues surrounding that letter and whether or not it was indeed genuine and authentic, as alleged by Manning, or whether it is a fraud as alleged by Arafura. For Manning's part, there is only his word, but for Arafura there is some reason to doubt the authenticity of the letter.
In particular, Arafura have placed before the court evidence to demonstrate that, as at the date of the letter – that is 28 July 2008 – the company’s head office was located at level 3, 22 Railway Road, Subiaco, West Australia. It is significant to note that the company informed the Australian Securities Exchange of a change of address on 17 August 2007; that is almost 12 months before the purported letter of offer. That address appears on letterhead shortly following the notice to the ASX of change of address.
The address of the company prior to August 2007 was, otherwise, level 1, 338A Hay Street, Subiaco; that, coincidentally, is the address of the corporate office shown on the letter dated 28 July 2008. That, of course, is not to say that the company, by some accident, had retained old stationery and had accidentally used old stationery in the instance of Mr Barnard's letter of 28 July, but it does raise considerable doubt in this case as to whether or not the letter is authentic, as contended by Manning, or whether it is indeed a fraud, as is contended by Arafura.
That matter, of course, cannot be resolved in the context of this application, but presents as a significant issue to be resolved on the merits of the case which, no doubt, will have, in turn, a significant bearing on the outcome in respect of the application for either Manning or Arafura. It could not be said that, in this instance, the claim is not meritorious, although there is, for reasons advanced by Arafura, a good basis to doubt whether indeed the letter is authentic. Ultimately it is a matter which can only properly be resolved at trial and as I have noted, cannot be the subject of resolution on an interlocutory hearing.
However, it is, by reason of the matters raised by Arafura not the case that this case presents as a situation where Manning has, what could be described as, a strong and apparently meritorious claim in the sense that the effect of any order would be to shut him out; see generally the comments in J & M O'Brien Enterprises Pty Ltd v The Shell Co of AustraliaLtd (1983) 70 FLR 261 at 264. This case is one which is far more finely balanced than that, which was evident in the O'Brien Enterprises case.
Next then is the risk that Manning will not be able to satisfy a costs order. The evidence demonstrates that requests have been made for Manning to present a statement of financial circumstances. These requests have gone unanswered, and I accept, as was submitted by counsel for Arafura, that the failure by Manning to provide that information permits the drawing of an unfavourable conclusion; that is that Manning would not be able to satisfy a costs order, except if he were successful.
In fairness, that is a matter that Mr Hibble, counsel for Manning, did not seriously challenge and, in fact, I think he was prepared to concede could properly be inferred from the material. In any event, the evidence I think demonstrates that. For instance, there is an earlier order made in the Local Court, in respect of related proceedings, which were discontinued, and although those costs were costs to be assessed, one can infer from any lack of discussion concerning those matters that Manning is in no hurry to see the costs assessed and, in turn, subject himself to enforcement in respect of those costs orders.
Other factors which were identified by Arafura in support of its contention relate to Manning's personal circumstances. There is no evidence of him owning any property or any other assets against which enforcement could be levied. He is a man who has changed address on a regular basis. For instance, these proceedings originally commenced in Darwin. They are presently in Townsville. There is reference to Manning residing in Bundaberg, although that may not be his present position, but he has certainly been present in Bundaberg during the course of this application.
The only constant address available is his Hotmail account for electronic transmission. There is, I think, a reasonable basis to conclude that he would not be able to satisfy a costs order.
Next, as a related issue, is the question of his impecuniosity. There is, as I earlier noted, no evidence as to his financial position. It is well accepted that, particularly in the corporate context, a lack of means of a plaintiff company and its likely inability to meet an order for costs would always be a consideration of great weight and will frequently be the determining factor; see generally the observations of the Full Court of Queensland in Harpur v Ariadne Australia Limited (1984) 2 Qd R 523.
A related matter to the issue of impecuniosity is the question of whether or not the impecuniosity could be attributable to any conduct on the part of Arafura. The claim, prosecuted by Manning, is one in respect of damages for breach of an employment contract which came to an end approximately two years ago. There is no evidence before the court by Manning to demonstrate any causal link between his present state of impecuniosity and any termination of his employment.
It is well settled that while a court will have regard to the whole of the plaintiff's financial circumstances in identifying the factors to which the plaintiff's impecuniosity is attributable and the nexus between those factors and the defendant's conduct, the plaintiff bears the onus of demonstrating a nexus between his current impecuniosity and the conduct alleged by him against Arafura. Manning has not discharged that onus.
The next discretionary consideration relevant is that of oppression. Unquestionably, courts ought to be cautious to ensure that they are not permitted to be used as instruments to unreasonably oppress the rights of litigants, to prosecute their legitimate claims. Courts have long sought to achieve a balance between preventing security for costs for being used as a means of shutting out or stifling a claim of a small, as against a large, well resourced litigant, and not being overly reluctant to make an order for security for costs against an impecunious plaintiff, who can use the inability to pay costs, as a means of putting unfair pressure on a more prosperous defendant; they being the two principal competing interests.
Courts are keen to strike a balance in the context of all the circumstances of the case, including the motives of those behind litigation. No less applies here. Clearly, Manning is an individual who has marketable skills but, notwithstanding those marketable skills, is a man of a limited means and he seeks to take on Arafura, which is a listed public company.
Notwithstanding that matter, the evidence which has been adduced does not, to my mind, demonstrate that the company seeks to do any more than protect its legitimate interests against an applicant in respect of whom they have a bona fide basis for concern and to legitimately defend the claim that is brought. It has a bona fide basis to be concerned about the applicant’s prospects of successfully prosecuting his claim.
That has to be measured against the costs which Arafura would incur in defending its claim, bearing in mind that it might only receive taxed costs if successful. The company, as a public company, has corporate responsibilities to engage counsel and conduct these proceedings appropriately, and it would seem that costs – even after allowing for travel expenses – are going to be something approaching $30,000.
That is a significant sum when considered against a possible outcome in terms of Manning's prospects of success in his application. The facts, in my view, do not lend support to the suggestion that the application is one which is premised on an intention by the company to oppressively use its economic power.
Next is the question of delay. It is complained that Arafura has been tardy in prosecuting this application. First, it needs to be noted that the response by Arafura has not yet been delivered. To that end, at least from a pleading perspective, the case has not yet crystallised. In part, the reason for the delay in the response has been occasioned by difficulties associated with the production of the letter which the company contends is a fraud. Without attributing blame to any party for that fact, that matter did not resolve itself until 17 September 2010, when Arafura's application in respect of the non-production of the letter was disposed of. An order was made on that occasion, in respect of application for security, and although not strictly complied with, the application was made in early October 2010.
There is an explanation for why the application was not filed by the date set in the timetable pronounced by the court but, in any event, that matter aside, in the overall context of the application I think the delay is in the nature of a de minimis factor.
Having regard then to each of the discretionary considerations, which are relevant in the context of this case, I am of the view that it is appropriate that there be an order for security for costs.
Quantum of security
The next question that arises then is that of quantum. Before descending into an assessment of the appropriate quantum, I wish to make one observation. Presently, the parties are speaking of a trial in Townsville. Although, as I have noted earlier, the application commenced in Darwin, the matter was transferred to Townsville because Manning was, at that time, unrepresented and was appearing for himself. He was then residing in Townsville and so it was convenient, particularly to him, that the matter be transferred to that registry. There has been some suggestion that it be transferred to that registry for trial, because it was expected Manning would be conducting the matter himself or with pro bono assistance in Townsville.
That matter is yet to be resolved, but in the interim, it is apparent that if the trial is to be heard in Townsville, there would be at least about $20,000 in travel and accommodation expenses incurred by the respondent for a trial at that venue. In the event the matter was to be heard in Darwin, then the travel and accommodation expenses for Arafura would be significantly less; probably something closer to $4000, having the regard to the need, then, only to transport two witnesses from Perth to Darwin for trial, and there being, then, no need for witnesses from Perth and Darwin, together with solicitors to travel from Darwin across to Townsville for trial. In addition there are accommodation and other attendant expenses.
So, for present purposes, until the matter of venue is finally resolved, I am inclined to ignore accommodation expenses and travel expenses in the context of the security for costs application, and reserve to Arafura the right to raise these matters in the context of a further application for security for costs, in the event the need arises because of an application that may be made in respect of the venue for the trial. So, in the event Manning seeks to prosecute a hearing venue in Townsville, the matter of travel and accommodation expenses can be revisited in that context.
Criticism is made of the detail of Mr De Silva's affidavit in terms of his estimate of fees, and I think the criticism is well based. Ordinarily, affidavits of this kind ought more particularly set out the manner in which costs are estimated. The affidavit does not require the deponent to descend into a detailed itemised account, but one would expect a little more than a lump sum figure, with a statement noting that the deponent is an experienced solicitor and accordingly one can trust him on his estimation. In my experience, that is simply not sufficient. Han Sens Pty Ltd v Adco Constructions Pty Ltd (Unrpt SC Qld No 2013 of 1990 27 Mar 1991, Master White) at pg 14.
But that is not the end of it from the perspective of this application. This court does have lump sum scales which, I think, can provide some guidance in relation to appropriate costs. The lump sum scale for a federal law hearing for two days is $7,940.00; that figure includes GST, and is for preparation. In addition, there are counsel's fees of $2,625.00 per day. Further, I should note that the lump sum is the lump sum allowable for preparation, and does not include the stage 1 initiating or opposing application up to completion of the first court day.
So, in other words, the lump sum is to deal with preparation from this point forward, recognising that, at this stage, there has been no response delivered, and one would expect no serious preparation has yet commenced on behalf of Arafura.
The next matter, then, concerns whether or not security should be permitted for the entire anticipated costs or just costs to the first day. That, again, is a matter which falls for determination by reference to broad discretionary factors.
My inclination is, having regard to a number of factors that are yet to be resolved in this case, and that includes the venue, that it is appropriate, at this time, to only require security up to and including the first day of trial. The application can be renewed in respect of second and third days at the commencement of the trial, if the orders I propose are adhered to.
It follows then, accepting the scale as providing a benchmark of costs which are satisfactory, allowing for accommodation and travel for the two witnesses from Perth, and allowing all those to the first day of trial assuming that Darwin is the venue, a sum of $14,000 ought be an appropriate allowance by way of security, and I will direct that sum be paid into court by way of security for Arafura’s costs of defending the proceeding.
It is appropriate, having regard to the first order, that in the event Manning fails to pay the amount, the subject of the order, within 28 days that these proceedings then be stayed. We will deal with what happens if the matter has to be stayed, if that eventuality arises.
The next matter which is then advanced by Arafura is in relation to the costs of, and incidental to, this application. Arafura has been successful in its application. Manning’s counsel made no submissions earlier on costs when called upon to make submissions generally. When invited, he advanced no reason why I ought not make the usual order that costs follow the event in the usual way in respect of this application. Accordingly, I order that Manning pay Arafura's costs of, and incidental to, the application, which I will assess at $4,500.00, based on my calculations explained earlier today.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 2 November 2010
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