Merribee Pastoral Industries & Ors v ANZ Banking Group
[1998] HCATrans 203
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S18 of 1998
B e t w e e n -
MERRIBEE PASTORAL INDUSTRIES PTY LIMITED, R.J. GILBERT INVESTMENTS PTY LIMITED and WEST MERRIBEE PTY LIMITED
Plaintiffs
and
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Defendant
Application for security for costs
KIRBY J
(In Chambers)
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON TUESDAY, 2 JUNE 1998, AT 9.30 AM
Copyright in the High Court of Australia
MR J.E. THOMSON: May it please the Court, I appear with MR B. McMANUS for the defendant, the moving party on the summons before the Court today. (instructed by Norton Smith & Co)
MR N. PERRAM: May it please the Court, I appear for the plaintiffs who are the respondents on that summons. (instructed by Jackson Smith).
I should formally point out that there is a summons on foot from the Commonwealth of Australia. The proceedings between the Commonwealth and my clients have now been settled and a discontinuance has, I believe, been filed. So, that summons will not be proceeded upon this morning.
HIS HONOUR: There was a proceeding against the State of New South Wales. Is that proceeding or not?
MR PERRAM: That has been discontinued as well. The only parties to the litigation now are the three plaintiffs and the third and only defendant.
HIS HONOUR: Yes, very well. Thank you very much. What is your attitude to the application for security for costs?
MR PERRAM: It is resisted. There is no dispute as to the quantum of the security if your Honour is minded to make such an order but it is disputed that an order should be made. It is also conceded at the outset that the companies are insolvent.
HIS HONOUR: You say it is conceded?
MR PERRAM: It is conceded, yes.
HIS HONOUR: Yes, very well. I will just make a note of those concessions.
Yes, Mr Thomson, perhaps we could put the record in order if you would. You place before me those matters that you rely on.
MR THOMSON: Yes, thank you, your Honour. Your Honour, the summons on which I move is dated 27 April 1998 and seeks orders for security for costs in the sum of $53,700. In support of that summons I read, firstly, the affidavit Temogen Peter Hield, dated 27 April 1998.
HIS HONOUR: Let me see if I have that. There are a lot of documents here about the discontinued proceedings so just bear with me for a moment. Yes, I have the affidavit of Temogen Peter Hield, solicitor, sworn 27 April 1998. Have you seen that, Mr Perram?
MR PERRAM: I have, your Honour.
HIS HONOUR: Do you have any objection to the affidavit?
MR PERRAM: No objection to the affidavit.
HIS HONOUR: Do you wish to cross-examine Mr Hield?
MR PERRAM: No, not at all.
HIS HONOUR: Yes, very well. I read that affidavit.
MR THOMSON: If it please the Court. I read also the affidavit of David Ross Nicholas, dated 28 April 1998.
HIS HONOUR: Yes, I have the affidavit of David Ross Nicholas, legal cost consultant, sworn 27 April 1998. Have you seen that, Mr Perram?
MR PERRAM: I have, your Honour.
HIS HONOUR: Do you have any objection to that?
MR PERRAM: No objections.
HIS HONOUR: Do you wish to cross-examine Mr Nicholas?
MR PERRAM: No.
HIS HONOUR: Very well, I read that affidavit too.
MR THOMSON: Thank you. Might I have your Honour’s leave to file in Court and read an updating affidavit of Temogen Peter Hield, dated 1 June 1998?
HIS HONOUR: Yes, hand it up.
MR THOMSON: It simply updates the correspondence, your Honour.
HIS HONOUR: Any objection, Mr Perram?
MR PERRAM: I have not read it yet, your Honour.
HIS HONOUR: Very well. Well, take a moment to look at the affidavit of 1 June 1998 of Temogen Peter Hield, solicitor.
MR PERRAM: No, I have no objection to that, your Honour.
HIS HONOUR: I read the further affidavit of Temogen Peter Hield, solicitor, sworn 1 June 1998.
MR THOMSON: Thank you, your Honour. One of the exhibits to Mr Hield’s first affidavit is marked TPH1, and comprises an affidavit of Gary Culmer sworn in the Federal Court proceedings, dated 9 March 1998. If your Honour could locate that I would seek to tender it.
HIS HONOUR: Have you seen this, Mr Perram?
MR PERRAM: Many times, your Honour. I will object on this basis: the reason I made the concession that it was insolvent was because, as I understand it, that is what the affidavit of Mr Culmer demonstrates at long and laborious length. It is a very substantial affidavit. If there is something more from it that is to be obtained - - -
HIS HONOUR: Is there anything more that you wish to establish, Mr Thomson?
MR THOMSON: Yes, I would wish to establish also, through that affidavit, the lengthy history of litigation between the parties, the outcome of that litigation being ongoing; the failure on the part of the plaintiffs and the circumstances where it appears the directors of the plaintiffs became bankrupt and therefore disqualified from acting but apparently continued on as directors.
HIS HONOUR: I did not hear the last statement.
MR THOMSON: They became bankrupt and were therefore disqualified from acting but apparently continued on as directors.
HIS HONOUR: But how will that help me in relation to the matter before me?
MR THOMSON: It may be of assistance inferentially if your Honour has to decide that these proceedings are an abuse of process as opposed to the usual basis on which security for costs is ordered.
HIS HONOUR: Well, what do you say, Mr Perram?
MR PERRAM: The first of three matters my friend referred to, namely the long history of the proceedings and probably the unsuccessful nature of those proceedings so far as my clients are concerned, I will concede from the Bar table. The third matter to which my learned friend made reference, namely the bankruptcy of the directors and their continuing relations with the company is not a matter which I was necessarily expecting to have raised. I think if that is a point my friend is going to rely on, he had better read the affidavit. I will make a submission at the end of the day that it does not really go to very much and the proposition that this is an abuse of process, the commencement of these proceedings, is a difficult one to sustain but that is something for submission, I think.
HIS HONOUR: I will allow you to read the affidavit.
MR THOMSON: If it please the Court.
HIS HONOUR: I have not read it. Are there are particular parts that you wish to take me to?
MR THOMSON: I think it largely explains itself. If I could just walk your Honour through it briefly.
HIS HONOUR: This was an affidavit which was prepared in the Federal Court proceedings before Justice Hill, is that right?
MR THOMSON: Before Justice Hill, that is right.
HIS HONOUR: Just take me to the parts of the affidavit of Gary Culmer, bank officer, sworn 9 March 1998, which is TPH1, being referred to in the affidavit of Temogen Peter Hield, sworn 27 April 1998, which I have already read.
MR THOMSON: Yes, thank you, your Honour. Paragraphs 2 through to 7 effectively demonstrate that these companies are assetless and have been so for some many years now. They also demonstrate that the Bank is owed something in the order of $3½ million which is the subject of judgment against two of them, and is otherwise, I understand it, undisputed.
HIS HONOUR: But will this not be true of any case of a company which wishes to challenge the cross-vesting legislation? Was it not the case in Gould v Brown, that there were allegedly insolvent companies?
MR THOMSON: Indeed.
HIS HONOUR: If you are being hauled into the High Court of Australia on a great constitutional case then it is going to be of the nature of the issues that are raised by insolvent companies challenging the cross-vesting legislation that they are insolvent.
MR THOMSON: That is true.
HIS HONOUR: However, you press on. You tell me the other matters then I would like you to tell me the power that I have to order security for costs.
MR THOMSON: Yes, thank you, yes. The statutory information is tendered through paragraphs 8 through to 10. Paragraphs 11 and 12 indicate the Bank’s attitude to seeking to have a liquidator appointed to investigate the affairs of the company, and then paragraph 13 furnishes an assessment of the amount owed. Past litigation is covered in paragraphs 15 and following, and paragraph 20 refers to the bankruptcy searches. Paragraph 21 indicates that so far as we are aware we believe these companies have been funding this extensive litigation from sources other than their own assets.
HIS HONOUR: Yes.
MR THOMSON: Yes, thank you. That is the evidence of the applicants on the matter, your Honour.
HIS HONOUR: Do you have any evidence, Mr Perram?
MR PERRAM: We have no evidence, your Honour.
MR THOMSON: Your Honour asked the question about jurisdiction.
HIS HONOUR: Well now, you might direct me to the question of power.
MR THOMSON: Yes, thank you. Could I hand up a written outline, and address the question your Honour asked with reference to it. The three bases - - -
HIS HONOUR: It is curious to have to look for it, given that I, in another place, had it in abundance.
MR THOMSON: Yes, thank you. The three sources for jurisdiction ‑ ‑ ‑
HIS HONOUR: Can you suggest any reason why the Rules and originally the High Court Procedure Act did not provide for security in respect of the original jurisdiction of the Court? Does it suggest a decision of the Parliament back in 1903 that in matters involving the constitutional writs that there should be no impediment in their approach to the Court?
MR THOMSON: We think not, your Honour. There are a couple of matters about that. Part of the Rules which deals explicitly with security for costs in the context of appeals, Order 70 rule 7, comes in through the Rules.
HIS HONOUR: But only in respect of appeals.
MR THOMSON: Only in respect of appeals.
HIS HONOUR: That has been held not to include applications for special leave to appeal.
MR THOMSON: That is correct. That is Bahr v Nicolay. The cost provisions, Order 71, however, contain some broader references which appear, certainly in rules 5 and 6, as we perceive it, to contemplate or at least assume that the Court has jurisdiction.
HIS HONOUR: Yes, I wondered that but they may be referring back to Order 70, the jurisdiction which is undoubtedly conferred in the context of appeals. Unless it is for the protection of the direct right of access of everybody in Australia to the Court on constitutional questions, it is a gap in the Rules.
MR THOMSON: We are submitting that there is not a gap once one appreciates the implications behind rule 6 of Order 71.
HIS HONOUR: I have looked and I cannot find a single case where the Court has ordered security in original jurisdiction.
MR THOMSON: Neither can we, your Honour, and we assume that is because the issue rarely arises.
HIS HONOUR: Why has it not raised?
MR THOMSON: The question has not been considered either way.
HIS HONOUR: I mean plenty of people take constitutional points, more and more nowadays, and one would have thought it would have arisen before this. One would think that even outside vexatious cases, there would be cases which are not timely or not appropriate where it is reasonable to order security and yet it has not ever been done. The original Act did not provide it. The Rules do not expressly provide it. The inherent power has been said to be quite limited in Bahr’s Case. So, it is a curiosity to me, who is used to having unquestioned power.
MR THOMSON: Yes. Well, we were hoping to persuade your Honour that there is the power certainly in the inherent jurisdiction and in any event - - -
HIS HONOUR: Just let me take a moment read - you have gone to the trouble of your written outline, so I will just take a moment to read it because, to me, it is a puzzle. Just sit down for a moment and I will just read your written outline.
MR THOMSON: May it please the Court.
HIS HONOUR: Just help me on the Corporations Law provision. The definition of “Court”, secondly given, on page 6 of your - it does not mention the High Court of Australia.
MR THOMSON: No.
HIS HONOUR: Now, is that correct, “means any court when exercising the jurisdiction of this jurisdiction”?
MR THOMSON: - - -“this jurisdiction”, yes. That is quite correct and it does not include the High Court. Perhaps it is a little confusing the way it is put forward. The relevant definition is “court” with a little “c”, not “Court” with a capital “C” for the purposes of section 1335. You see, the legislation is drawn in such a way as to make a distinction.
HIS HONOUR: But where is - well, the capital “C” is not there. So, we are looking at the category of “court”.
MR THOMSON: That is right.
HIS HONOUR: And:
“court” means any court when exercising the jurisdiction of this jurisdiction.
MR THOMSON: That is right.
HIS HONOUR: It is a very odd expression.
MR THOMSON: It is a very strange expression.
HIS HONOUR: What is the jurisdiction of a jurisdiction? Is it the inner core that lies at the heart of jurisdiction?
MR THOMSON: Notionally, as I understand it - - -
HIS HONOUR: If you said, “exercising jurisdiction under this Act” I would understand it.
MR THOMSON: That would be a separate - yes.
HIS HONOUR: But I just do not understand that.
MR THOMSON: I understand that for practical purposes the idea is to achieve that outcome but the phrase “jurisdiction of this jurisdiction” reflects the fact that there are something like seven different jurisdictions, court jurisdictions, might be involved in exercising the powers under the legislation. So, it would appear, I believe, that for practical purposes “jurisdiction of this jurisdiction” is meant to convey the meaning “jurisdiction under this Act.”
HIS HONOUR: I will have to hear what Mr Perram has to say about that, but I do not understand the expression.
MR THOMSON: No. I had the same problem, your Honour.
HIS HONOUR: It has a meaning because it is in the Act and it is defined and there appears to be a juxtaposition between a “Court” and a “court”.
MR THOMSON: That is right.
HIS HONOUR: But if it means “any court when exercising the jurisdiction provided under this Act”, then that would appear, unless you have an expressio unius-type principle in our Rules, to include this Court in relation to a proceeding under the Act.
MR THOMSON: I believe that is right. Could I say, I should have put in a further submission in 18 that when the phrase in 1335 is used, the phrase “the court having jurisdiction in the matter” is a difference reference, once again, when construed in context and must be because it is a phrase intended to identify the court, whichever it is, which is the court in which the corporation is bringing proceedings. It may be that the legislature is using “court” in a different sense. In fact, my submission is it is using “court” in its more normal sense, its general meaning, when it is used in that phrase in 1335. With respect, that construction is the one best able to allow 1335 to do the work it is obviously intended to do.
HIS HONOUR: Yes, very well.
MR THOMSON: So that whether we are within the definition of “court” for section 58AA purposes would not matter on that construction. I think that should be my primary submission.
HIS HONOUR: On the discretionary considerations, various things have been said to be relevant: the speed with which you bring the proceedings - well, you cannot be criticised on that score. The inability of the other party to pay its debts. That has been said not to be a governing factor but it is relevant. On the other hand, Justice Toohey, in a case, said that the public importance of a matter and the arguability of the point are matters relevant not to keep a party out and then there is at least the possibility, occurring to my mind, that the reason why neither the original Act nor our Rules provide for security in cases of the constitutional writs is to ensure that there is no impediment to upholding the Constitution of Australia. So, what do you say on how I am to approach the balance of those various factors, given that my discretion is absolute, as Justice Brennan said in one case?
MR THOMSON: The first point: on the probability of success, the likely outcome. It does seem to us that the proceedings are misconceived and obviously so even on the approach which was taken by the statutory minority in Gould v Brown. That that is the case is apparent when one sees what Justice Gummow said - and the other members of the statutory minority relevantly agreed - in relation to the prayers for determination of questions which affected the validity of the Corporations Law, given that the questions were being raised in proceedings other than the proceedings in which the winding‑up order had been obtained.
In the ALJR reports it is at page 433. The paragraph reference is 244. As his Honour Justice Gummow explains there, the Court will simply refuse to entertain proceedings which involve an attempt at collateral challenge other than through the appeal route to a winding‑up order made by a superior court. In doing so, he is relying on a long line of authority, including perhaps most pertinently Cameron v Cole, headnote 317, all of which goes the same way.
HIS HONOUR: If the court that has made the order is without jurisdiction under the Constitution, then does that not strike at the heart of the validity of the order?
MR THOMSON: No, that is the significance of the Federal Court having been held in Cameron v Cole to be a superior court. Its orders are fully effective and valid until set aside.
HIS HONOUR: Effective until set aside.
MR THOMSON: Indeed.
HIS HONOUR: And why is not a procedure for setting it aside that it acted without jurisdiction?
MR THOMSON: That is a collateral challenge which the court has refused to entertain under the doctrine in Cameron v Cole and under the authorities which Justice Gummow has refused ‑ ‑ ‑
HIS HONOUR: I would need a lot of convincing that that was right, because the Constitution hovers overs us all and it is the rule of law of this country and if by reason of the Constitution, contrary to my view, the Federal Court has no jurisdiction, I do not regard that as a collateral challenge; I regard that as central to its power to do anything that affects the rights and obligations of parties. But did any other Justice refer to that point?
MR THOMSON: Justice McHugh relevantly agrees with that portion of the judgment and, from memory, so does Justice Gaudron.
HIS HONOUR: Which paragraphs do they mention ‑ ‑ ‑
MR THOMSON: The relevant references - I am sorry, your Honour, I do not have those to hand. I will pull those out.
HIS HONOUR: Why would that not have led Justice Gummow in that case, the attack being collateral, to have concluded that the attack was misconceived and to have ordered the appeal to be dismissed?
MR THOMSON: Because he was content to answer the other questions which did not fall foul of this Rule. You see in the second column, about point 3:
Moreover, no order for discharge, as distinct from relief which is declaratory in nature, has been sought in these proceedings. In all the circumstances, the interests of the appellants are sufficiently vindicated in this Court by a favourable answer to Question 3. Even if, which it is unnecessary to decide, the appellants had standing to seek declaratory relief in respect of the winding‑up order and the appointment of the respondent, I would, as a matter of discretion, not grant such relief.
HIS HONOUR: That was because, in those proceedings, there was still some balance of proceedings still to be determined whereas here, Justice Hill has completed his part and the plaintiff in this Court is seeking to strike at the validity of what his Honour has ordered.
MR THOMSON: I think Justice Gummow’s reasoning goes a little beyond that. It includes the proposition that a large number of people have interests in the winding up, including all creditors, contributories, et cetera, and that, in those circumstances, it is simply inappropriate to allow winding‑up orders to be impugned in collateral proceedings.
HIS HONOUR: Even though made by a court allegedly without jurisdiction?
MR THOMSON: Yes. That is what his Honour is saying, as I understand ‑ ‑ ‑
HIS HONOUR: And you say Justice McHugh and Justice Gaudron agreed with that?
MR THOMSON: Justice McHugh agreed with the order proposed by Justice Gummow at paragraph 146.
HIS HONOUR: But that is simply to save having to repeat all of those answers to the questions.
MR THOMSON: Yes. And it includes the proposition “unnecessary to answer”.
HIS HONOUR: What paragraph is that in Justice McHugh’s reasons?
MR THOMSON: Paragraph 146.
HIS HONOUR: You say that although he does not deal with it in terms, it is inherent in the answers that he agreed in that he took the same approach.
MR THOMSON: Yes, that is right, your Honour. Justice Gaudron, at paragraph 91.
HIS HONOUR: The same position?
MR THOMSON: Not quite. In fact, at 90, she explicitly adopts what Justice Gummow says:
the order for Amann’s winding up must be taken to be valid until discharged on appeal by a competent party. That being so, it is inappropriate to answer any but question 3 -
HIS HONOUR: Yes.
MR THOMSON: So our strong point on likely probability of success is that, at least so far as those Judges are concerned, and certainly so far as the authority from which that rule is derived, including Cameron v Cole, is concerned, all of those authorities say these proceedings are incompetent and will not be entertained and therefore they must fail.
HIS HONOUR: Where is Cameron v Cole reported?
MR THOMSON: It is at 68 CLR 571, a decision in 1944. The relevant passages, if I can indicate, are at 590, Justice Rich’s decision; 594 Justice Starke; 598-9 Justice McTiernan and 605 Justice Williams.
HIS HONOUR: What do you say those passages are authority for?
MR THOMSON: They are authority for the proposition that the winding‑up order is an order of a superior court and valid until set aside, and the proposition that a challenge to such an order will not be entertained in proceedings other than on appeal from that court. That is the rule that Justice Gummow is applying and the statutory minority all adopt it. So we say the authority is very strong and all one way. That applies, notwithstanding ‑ ‑ ‑
HIS HONOUR: Does it not contradict the scheme of the Constitution which permits anybody to come directly to this Court. It is a great weapon for upholding the Constitution.
MR THOMSON: If the Constitution overrides the rule, then your Honour must be right. On the other hand, none of the Judges who have looked at the matter to date have thought so.
HIS HONOUR: Of course maybe those principles were stated before the Court had the power to remit matters to be dealt with, if they thought it was more convenient, but if one looked at this problem, assume you have a challenge to the cross-vesting legislation in circumstances where there has been a significant change in the composition of the Court and where the Court could not secure a majority on the last occasion, one might say that the sooner that question which affects thousands of cases is resolved, the better.
MR THOMSON: One may well say that. All we say is it should not be this case, unless we have security for costs. That is what we are trying to say. No doubt there are plenty of other cases coming through that will appropriately raise the question in an appropriate way in proceedings which are not incompetent.
As to the possible application of the Cameron v Cole rule being no longer applicable, with respect, your Honour, Justice Gummow and the other two Justices applied it in February of this year.
HIS HONOUR: The point concerning the cross-vesting legislation was raised before Justice Hill but not argued, pending the outcome of the decision in Gould v Brown.
MR THOMSON: That is right.
HIS HONOUR: Then after Justice Hill’s decision, he stayed the operation of his decision until a certain time after Gould v Brown was delivered.
MR THOMSON: That is right.
HIS HONOUR: Then, when it was delivered, there was not the majority to resolve the matter clearly one way or the other ‑ ‑ ‑
MR THOMSON: And these proceedings were started, that is right.
HIS HONOUR: So theoretically, at least, I suppose it would be open to the present respondents, the plaintiff, to bring the proceedings by way of appeal to the Full Court of the Federal Court where it would be subject to the Corporations Law and to the powers of that court to order security for costs.
MR THOMSON: Theoretically that is quite right, and we say that is the only avenue through which the relief being sought here could be available to them.
HIS HONOUR: Yes, very well.
MR THOMSON: And, of course, in that context we would be entitled to make the application. This question would not arise as to the jurisdiction to make an order for security for costs.
The next part of your Honour’s question some time back now raised the question of why is it not, in effect, a case where the High Court has no jurisdiction to make such an order because of the policy that anyone who wishes to could get access to the Court, this being the constitutional court for the country. If I can answer that in two ways: firstly, that factor is one which properly should be a factor considered in the exercise of discretion, not in the question of jurisdiction. Secondly, on the question of jurisdiction, it would be quite inappropriate, in our submission, if the Court does not have the usual inherent jurisdiction, which arises because of a right on the part of a superior court to control what is done through its own procedures, and even if that factor your Honour has mentioned confines the jurisdiction to one which is to be exercised where there is an abuse of process occurring, nevertheless the jurisdiction must be there, with respect.
HIS HONOUR: But how do you explain the fact that neither the original Act of 1903, the High Court Procedure Act, nor the Rules themselves deal with security except in the context of appeal. I know that we have said that you have to be careful of expressio unius, but here is a particular case where it is regulated with express provisions in the context of appeal, but not in the context of proceedings.
MR THOMSON: I have not checked when the Rules relating to security for costs in appeals first came in ‑ ‑ ‑
HIS HONOUR: 1903, in the High Court Procedure Act, unless it was changed. My copy of the Act contains a provision which is rather like Order 70 rule - whatever it is ‑ ‑ ‑
MR THOMSON: Order 70 rule 7. I suppose the submission is expressio unius does need to be handled carefully and it would be ‑ ‑ ‑
HIS HONOUR: I am handling it as carefully as I can. I have looked through the books and I cannot find a single case in a century.
MR THOMSON: Except that Bahr v Nicolay explicitly recognised that the Court had inherent jurisdiction where there was an abuse of its own process occurring and that that could be reflected in an order for security for costs.
HIS HONOUR: How could one say there is an abuse of process in this case where a party has reserved the jurisdiction of a court to make an order against it and where that question arose on the last occasion, in an analogous situation of an insolvent company, and is likely to arise against in those cases, subject to the collateral attack point, is an entirely legitimate way whereby a party can defend itself from an order which it says is unconstitutional. It is very hard to say that that is an abuse of process.
MR THOMSON: Those factors alone would not make it an abuse of process, no. We accept we need to go much further than that to demonstrate it is an abuse of process and we have sought to summarise the additional factors at the end of our written submissions. But I am endeavouring to deal with the question of jurisdiction at this point. So the submission is that the Court must have inherent jurisdiction of that type. If that submission is wrong, and even if that submission cannot ultimately succeed because one needs to go so far as to show an abuse of process, and we have not done so, nevertheless the statutory jurisdiction under 1335 of the Corporations Law is, in our respectful submission, plainly available and is an occasion where the legislature has explicitly said the Court having jurisdiction in the matter has the power to make an order for security. So that must be there and available to us.
HIS HONOUR: That, of course, is only subject to whether or not the provisions in our Rules and in the Judiciary Act and the Constitution are a separate scheme.
MR THOMSON: Clearly they are a separate scheme, but the question would be whether the scheme is such as to in some way oust the application of that section in this context and our submission is simply, no.
HIS HONOUR: Yes.
MR THOMSON: Now, the matters which we say would move your Honour to make an order for security for costs in this context include not only the fact that these companies appear to be worthless and owe large debts, certainly to us, which have not been paid, but also one has a history of litigation occurring in precisely the same circumstances, namely no apparent assets but owing large debts to us, which the only inference to be drawn is that someone else is funding these companies to run this extensive litigation, this litigious warfare, against us over quite some time now.
HIS HONOUR: Why would they be doing that?
MR THOMSON: We have been wondering that ourselves but we are anxious, and we are prepared to fund a liquidator, to carry out investigations into the companies’ affairs to establish whether there are assets undisclosed and certainly to establish the circumstances of the management of these companies which left them with such a large deficiency. Those who know the answer to your Honour’s question are not in my camp. We do not know why. All we can see is that this behaviour is occurring. It is fairly obvious it has been a very extensive expensive exercise for them, as it has been for us, and it is also obvious to all concerned, we would perceive, that the actions are not being funded by the companies.
That has a couple of components - a couple of matters follow from that. The first thing that follows from that is that an order for security for costs would not prevent ‑ ‑ ‑
HIS HONOUR: Did you have an order for security before Justice Hill?
MR THOMSON: No, we have not.
HIS HONOUR: Has an appeal been lodged from Justice Hill’s order to the Full Court of the Federal Court?
MR THOMSON: No, it has not. There has been, I should say, an application for leave to appeal from his decision to stay the winding‑up orders and, as I understand it, that is due to be heard in the sittings at the end of June by a Full Court and if leave is obtained, it is anticipated the question will be determined.
HIS HONOUR: He continued the stay, did he, the period that he originally allocated?
MR THOMSON: Yes, until the conclusion of these proceedings effectively. Now, the point I was trying to get to is that in that context the Court would not be of the view that making an order for security for costs would in some way result in these proceedings being stymied or the plaintiffs losing their opportunity. The appropriate conclusion to draw is that it would require that those standing behind the plaintiffs be prepared to fund the proceedings to the extent of paying our costs if we are ultimately successful and get a costs order.
HIS HONOUR: Is it a relevant consideration to take into account the fact that this is not litigation between a litigant who is impecunious and another party who is relatively impecunious? In this case it is between a litigant who is conceded to be insolvent and a very well resourced Bank. Is that a relevant factor to take into account? It seems to me to be, but tell me if I am wrong. If you have a balance of poverty, then you would be more astute to provide an order for security if you have the power, than you would in the case of a bank, or is that an unfairness to a bank, treating it less than equal before the law.
MR THOMSON: That is an unfairness, because it treats litigants differently according to their means.
HIS HONOUR: I was about to say it is not a negative factor but you lack the positive factor. You would, in the event that you were an impecunious litigant who was going to actually be greatly inconvenienced if the litigation went ahead without an order for security, is that a fair way to approach it?
MR THOMSON: Yes, your Honour, that is a fair way to approach it. We cannot say we are going to be destroyed if a costs order is made ‑ ‑ ‑
HIS HONOUR: You should not be in a lesser position simply because you are a Bank.
MR THOMSON: That is right. The other point I was going to make is perhaps allied to that. We submit it is important that the applicant is a corporation, an artificial entity - the plaintiffs, rather, here are corporations, artificial entities, not individuals, not citizens of the country in the ordinary sense. In that regard, we would suggest to your Honour that the Court’s approach to its exercise of its jurisdiction, assuming it has it, may well be different where one has a citizen of the company or a person who is a natural person who wishes to have some constitutional issue determined from the way the exercise of discretion would be approached where it is a corporation or an artificial entity which is bringing the proceedings.
We would draw an analogy with the different rules which apply to privilege against self-incrimination, for example. Justice McHugh, in Environmental Protection Authority v Caltex Refining 178 CLR 477 made the point quite strongly at 548 to 550 of that judgement. His Honour analysed the significance, the difference between organised group or corporate entities on the one hand and individuals on the other. We would say that inherently in the nature of corporations and the concept of organised endeavour, which they represent, the Court would be more ready to expect them to be able to honour their commitments or honour their obligations, in this context, than perhaps might be the case if it is an individual involved.
So we would say there is a difference but the difference turns not on relative poverty but on the nature of the plaintiff that is seeking to invoke the Court’s jurisdiction.
HIS HONOUR: Yes. Is there anything else? All of this would have been over in about 10 minutes in another place.
MR THOMSON: Absolutely, your Honour. Just bear with me. There is nothing further that I would want to urge on your Honour.
HIS HONOUR: If I were against you on the discretionary elements, is it necessary to resolve the question of jurisdiction?
MR THOMSON: No, it should not ‑ ‑ ‑
HIS HONOUR: I suppose a court should always satisfy itself that it has jurisdiction before it embarks on other matters.
MR THOMSON: That might be a counsel of perfection, your Honour. If, as a matter of discretion, the orders would not be available assuming jurisdiction, then the first question is, in that sense, certainly academic.
HIS HONOUR: Yes. I am a little troubled by the point that you have made concerning the approach of the other three members of the Court in Gould v Brown so we will just hear what Mr Perram has to say about all that.
MR PERRAM: If I could just deal with the question of jurisdiction first. For reasons which are not the same as those advanced by my learned friend, the respondent to the summons, that is the plaintiffs, take the view that there is jurisdiction to make the orders and I might just briefly explain why that is the case because it might be of assistance to your Honour. In so far as section 1335 is concerned, it is submitted on behalf of the plaintiffs that that has not conferred jurisdiction. The reason for that is a number, in fact. If one goes to the definition section of the Corporations Law, your Honour will see that the Delphic expression “jurisdiction” is usefully defined to mean:
a State or the Capital Territory and, in the case of a State, includes the coastal sea of the State;
So that when, in the small “c” definition of ‑ ‑ ‑
HIS HONOUR: What is the phrase that is defined?
MR PERRAM: The word “jurisdiction”.
HIS HONOUR: I see.
MR PERRAM: So when one goes to the small “c” definition of the word “court” and it says “the jurisdiction of this jurisdiction”, in an unfortunate use of the English language what is occurring is the word “jurisdiction” is, in the first use, being used to mean the traditional legal concept of jurisdiction and, in the second appearance, is being used by reference to that statutory definition.
HIS HONOUR: Read me the statutory definition again. I do not have the Corporations Law here.
MR PERRAM:
“jurisdiction” means a State or the Capital Territory and, in the case of a State, includes the coastal sea of the State;
HIS HONOUR: But that would therefore exclude the Federal Court.
MR PERRAM: On the small “c” definition of court, possibly. If your Honour goes to section 58AA:
“court” means any court when exercising the jurisdiction of this jurisdiction;
The Federal Court is caught up by “Court”, not by “court”. So the expression “court” essentially means any court which is exercising the jurisdiction of New South Wales, so far as this Court is concerned, not jurisdiction under this Act but the jurisdiction ‑ ‑ ‑
HIS HONOUR: Why is the High Court of Australia not exercising its jurisdiction in New South Wales?
MR PERRAM: It is not “in” New South Wales, it is “of” New South Wales.
HIS HONOUR: Why is it not of New South Wales? We are part of the court structure of New South Wales.
MR PERRAM: The first point is that, in my submission, the jurisdiction this Court is exercising is the jurisdiction conferred by section 76(i) of the Constitution in combination with section 30 of Judiciary Act. That is the jurisdiction before this Court today. There was originally, I think, 75(iii) jurisdiction when the Commonwealth was a party. They having fallen out, we would not contend that that is still there. The only jurisdiction is the 76(i)/section 30 route under the Judiciary Act. In my submission, it is not possible to describe jurisdiction conferred by a federal Act, namely the Judiciary Act, as being jurisdiction of New South Wales. That is the first point.
The second point is: in so far as it appears that 1335 confers power, no power is capable of exercise without a conferral of jurisdiction. If the proper effect of section 1335 is to confer upon this Court power and jurisdiction to make an order for security for costs, then the same issue which lies at the heard of the cross‑vesting debate arises on this application. If section 1335 authorises this Court to grant security, it is the submission of the plaintiffs that it does so unconstitutionally because section 1335 is contained in a State law, not in a federal law, and a State law, in the submission of the plaintiffs, is incapable of so conferring such jurisdiction. That is the unpleasant answer to the 1335 point.
The pleasant answer is that simply looking at the use of the words “jurisdiction of this jurisdiction”, it is impossible to describe the jurisdiction conferred by section 30 of the Judiciary Act as jurisdiction of New South Wales. That is the pleasant answer to the problem. Those are the two ‑ ‑ ‑
HIS HONOUR: Answers are not pleasant or unpleasant, Mr Perran; they are either good or bad law. One does not find them more or less pleasant.
MR PERRAM: The reason I say unpleasant is ‑ ‑ ‑
HIS HONOUR: You say it is involved - inherent in the issue you want to debate?
MR PERRAM: Precisely, and we say it is unpleasant, too, because I cannot raise that argument without sending out section 78B notices on this summons. That is a difficulty. It is not impugned anywhere else.
HIS HONOUR: Yes.
MR PERRAM: So we say no jurisdiction arises under section 1335, either as a matter of construction or because, if you be against me on the construction issue, it is invalid for the same reason the cross‑vesting mechanism is invalid.
My learned friend attempted to demonstrate that Order 71 conferred a jurisdiction in the original jurisdiction to order security for costs. In my submission, when one looks at what the clear purpose of Order 71 is, it does not confer any such jurisdiction. It is obviously concerned with appeals.
HIS HONOUR: Why should the Rules be read in such a way, unless their words require it, that confines the provision of security in appeals, which are only part of the jurisdiction of the High Court?
MR PERRAM: Because, for the very reason I am about to advance, it is apparent, on a proper reading of the authorities, that the Court has an inherent jurisdiction, quite apart from Order 71, and there is no need, in those circumstances, to torture Order 71 into providing a basis for the granting of such a power. Prior to 1900, when this Court was created, there was only one type of superior court of record and that was a prerogative court, set up by the Crown. There was no such thing, at that stage, as a statutory superior court of record. Without looking into the position in other members of the Commonwealth, the High Court ‑ ‑ ‑
HIS HONOUR: Did Judicature Acts continue the prerogative courts in England as previously established by the Crown?
MR PERRAM: In the same manner that the 1970 Supreme Court Act does, so that the font of jurisdiction does not come from those reconstructing Acts, rather it acts merely as a conduit which continues the jurisdiction which already existed. I hesitate to make the submission, but this Court must have been one of the very first statutory superior courts ever created. I hesitate to use the word “statutory” because the statute which creates it is a most unusual statute.
HIS HONOUR: But the Court has held that it has the inherent jurisdiction which is involved in being such a Court.
MR PERRAM: Precisely, and it was no doubt the case prior to 1900 that in their original jurisdiction the prerogative courts, which were superior courts of record, had power to order security for costs. I can give your Honour a reference to a case which determines that: J.H. Billington Ltd v Billington (1907) 2 KB 106 at page 109 per Lord Alverstone. Perhaps more usefully, all the authorities on the topic of the inherent jurisdiction of prerogative superior courts to order security for costs is collected by his Honour Mr Justice Rogers in BIL (NZ Holdings) Ltd v ERA House Limited (1991) 23 NSWLR 280 at page 283. So there is no doubt that a prerogative court has the inherent power to order security for costs.
The difficulty which has arisen is that the cases also held that, in their appellate jurisdictions, the prerogative courts did not have that power and that was because the appeal was a creature of statute and, therefore, if the statute wanted to confer not just the appeal but the right to security, it had to confer that separately as well. It was that learning which was assumed at 1900 when this Court was created and I think that may go part of the way to answering your Honour’s question of my learned friend which was, “Why are there provisions in relation to appeal, and at a later date special leave, but nothing in relation to the original jurisdiction?” The answer to that, subject to some matters I will come to in a moment, must be that those who did it assumed that obviously a superior court of record had inherent jurisdiction in relation to its original jurisdiction but needed to have a statutory supplement in relation to its appellate jurisdiction.
HIS HONOUR: Thank you for that. But my understanding is, in New South Wales - my recollection is that a court there is given express power, both in respect of appeal, which is statutory, but also in respect of original jurisdiction.
MR PERRAM: It has all three. It has, in matters involving corporations, both the Corporations Law provision; it has the express statutory provision in relation to its original jurisdiction and in relation to its appellate jurisdiction. It has been held that they are not codes so it has been held that the inherent jurisdiction has not been excluded in that court, so it continues to exist. A contrary position obtains in the Federal Court. This whole topic, for those who are interested in this sort of thing, has been analysed very thoughtfully by Mr Justice Olney in a case called Thunderdome Racetiming and Scoring v Dorian Industries. That was a case where his Honour ultimately found that because of the very detailed provisions which had been put in place in respect of security for costs in the Federal Court, its inherent security power had in fact been removed. So the position which the Federal Court has arrived at is a different ‑ ‑ ‑
HIS HONOUR: It seems to be similar to Justice Toohey’s approach in Bahr.
MR PERRAM: Yes, I might come to his Honour’s judgment in a moment. It is not without some, in my submission, difficulty. If I thought that I could urge an argument upon your Honour that it excluded the making of security in this case, I would urge an argument on that basis, but I do not think it is really open, at the end of the day. I will come to Bahr in a moment.
His Honour’s judgment is useful for a number of reasons. The first is, so far as your Honour is concerned with the question of power, starting at page 304 his Honour starts by referring to Billington. But his Honour’s discussion is very useful to your Honour because he looks precisely at the question of the High Court’s power in its original jurisdiction to grant security. You will see at page 305, midway down the page, he refers to the High Court Procedure Act. Very usefully, over the page, he refers to the old High Court Rules in 1928 and Order 28 in those High Court Rules in fact empowered the Court, in its original jurisdiction, to grant security. So it has not always been as it at the moment.
A little bit further down he refers to Willey v Synan 54 CLR where, as he says, the Chief Justice appears to have assumed the existence of that inherent power. We say that inherent power does exist in this case. I am sorry to labour a point which, in effect, the parties are not at issue on, but it just seems to be an important one worth labouring.
HIS HONOUR: Were the Rules relevantly changed when the old Rules were replaced?
MR PERRAM: When the old rule of 1928, that is Order 28, was removed, it was not replaced in so far as the original jurisdiction was concerned. So that on the face of it, a lacuna opened up in the Rules. But, in my submission, there was no lacuna. Order 28 never did anything that the inherent jurisdiction of the Court did not already have. It was not one of those cases, like the one in the Federal Court, where the provisions could be said to form a code. So, in this situation, this Court finds itself in much of a same position as the Supreme Court of New South Wales. It has the provisions to order security, but its inherent jurisdiction has not been defeated.
HIS HONOUR: Which is the case that holds that the Supreme Court’s jurisdiction has not been expelled by the ‑ ‑ ‑
MR PERRAM: This Court’s?
HIS HONOUR: No, the Supreme Court of New South Wales.
MR PERRAM: It does not hold it, but it collects all the cases usefully, the BIL Case which I referred your Honour to.
HIS HONOUR: That is the one of Justice Rogers?
MR PERRAM: Yes. I do not refer to that so much as authority. It is just a very useful collection of the authorities on the topic. The proposition that the Supreme Court of New South Wales has that inherent jurisdiction is scarcely controversial these days. The times for the exercise of the inherent jurisdiction do not arise very often because of the very common circumstances in which the statutory provisions suffice.
So for those reasons, in my submission, this Court has jurisdiction, but the jurisdiction it has is inherent. It is not statutory and it is not under Order 71.
HIS HONOUR: Chief Justice Latham in Willey v Synan seemed to think that the power to make an order for security in the original jurisdiction of the Court under the rule as then provided was at large, simply to make a rule where it would be just. Is that the position now under the present Rules?
MR PERRAM: Under the present Rules, in relation to Order 71, I am afraid I cannot assist your Honour. I have not turned my mind to what Order 71 security required.
HIS HONOUR: Because if that is so, then the approach, for historical reasons that you have outlined, is in the case of appeal, you have, being a creature of statute, to conform to the Rule. In the case of original jurisdiction, being inherent in the nature of the Court, as a court of superior court, you are at large and you just have to do what is just.
MR PERRAM: In my submission it is the latter and can I take your Honour to page 307 in his Honour Mr Justice Olney’s judgment as to one of the factors to be taken into account. Starting at point 1:
In the exercise of the inherent power to order security for costs the courts developed a “rule” that a defendant or a party in the position of a defendant shall not be compelled to give security.
He refers there to the Tomlinson Case and then to another case where - I shall simply refer to it as the Shell Transport and Trading Co Case.
HIS HONOUR: Are you not here in the position of a plaintiff? You are moving the Court.
MR PERRAM: In a procedural sense, yes, but the truth is, in my submission, that we are a defendant before the Federal Court of Australia. The Bank is the moving party. It seeks to wind us up. We seek to defend ourselves in this Court by evoking this Court’s jurisdiction to prevent that occurring. That theme is fleshed out in Visco v Minter which is referred to on that page where His Lordship Ormrod said:
There is no dispute as to the basic principles, which are clearly set out in the judgment of Scrutton LJ in what I might call the Shell Transport and Trading case [1923] 2 KB 166 at 176 et seq. The court will not order a defendant resident abroad to give security for the plaintiff’s costs because the plaintiff has chosen to institute the suit against him in this country where he has no assets. The defendant is entitled to defend himself here without the added embarrassment of having to find security for the plaintiff’s costs.
HIS HONOUR: But surely that does not apply in a case where it is demonstrated, and indeed conceded, that the defendant has (a), commenced a new proceeding, (b), is engaged in a collateral attack on an order of a superior court of record, and (c), accepts that it is insolvent.
MR PERRAM: Dealing with (c), that is the premise upon which this conversation takes place, so it takes the matter no further. Dealing with (b), the Cameron v Cole question - I will come to that in a moment, for reason I will explain, hoping not to deter your Honour. Coming back to (a), the question posed by a Shell Transport and Trading Co situation is always one of, “Is the plaintiff really a plaintiff, substantially a plaintiff?” That test assumes that the plaintiff will always ‑ ‑ ‑
HIS HONOUR: So far as this Court is concerned, you are a plaintiff.
MR PERRAM: But that is always going to be the case where this test is concerned. It always deals with the situation that the plaintiff is the plaintiff. That is what this entire line of authority deals with. It deals with situations where security ought not to be ordered against the plaintiff because, although it is nominally the plaintiff, substantially it is the defendant. That is what this line of authority is concerned with.
There is a corresponding line of authority in relation to statutory demands and winding ups where, for example, a creditor issues a statutory demand and the plaintiff debtor goes to court to set the statutory demand aside. There is a line of cases which say it is not appropriate to order security there because, although the debtor is the plaintiff on the proceeding, all it is really doing is responding to the instrument of the compulsory mechanism of statutory demand which it is the creditor who has invoked. That is a closely analogous situation to this one, in my submission. The Bank invokes the insolvency provisions of the Federal Court of Australia. The defendant says, no, that is unconstitutional, and it seeks to ventilate that defence in this Court. Now, it does that nominally in the name of plaintiff but, looking at the substantive position of the parties, we would not be here if the Bank were not seeking to wind my clients up. For that reason ‑ ‑ ‑
HIS HONOUR: The Bank would not be here, presumably, if you were not in the position that you were not either, (a) able, or (b), willing to pay the debt to the Bank.
MR PERRAM: I think that has to be conceded.
HIS HONOUR: So you are defending your position; the Bank is defending its position. It is the usual case before a court.
MR PERRAM: The defendant is always going to be defending something, but the question under this line of authority has to be is the plaintiff defending something. The defendant will always be defending.
HIS HONOUR: I think you have got as much blood as you are going to get from that particular stone.
MR PERRAM: Could I then deal briefly with the Cameron v Cole point. I think the first submission about the Cameron v Cole point has to be that none of the cases referred to by his Honour Mr Justice Gummow at page 433, nor indeed Cameron v Cole itself, deal with the situation where the excess of jurisdiction said to have occurred in relation to the superior court of record is one which is a constitutional excess of jurisdiction.
The learning in relation to the inviolability of superior courts of records orders is, of course, of old lineage and comes from all the learning from last century and the previous century in England. There are no statutory superior courts in England as such and the difficulty which arises under a federal system, where one has superior courts of record which are capable of being statutorily limited although otherwise perfect, is not one which has ever bedevilled English law. It really only bedevils Australian and American and, to a lesser extent, Canadian law. There is no equivalent to the provisions of Chapter III ‑ ‑ ‑
HIS HONOUR: Maybe India and there are other federations, you know, apart from federations of white Europeans.
MR PERRAM: I mentioned the United States because it has Article 3, which is so closely equivalent to Chapter III of our Constitution. The proposition that an order of a superior court of record is not capable of collateral attack is a sensible one but, in my submission, it was not argued before the Full Court of the High Court in Gould v Brown.
HIS HONOUR: Were you in Gould v Brown?
MR PERRAM: Not when it finally fell over the line, no. My part of Gould v Brown ‑ ‑ ‑
HIS HONOUR: You would have loved an opportunity earlier and you are determined, one way or the other, to get to us and argue the point, is that the case?
MR PERRAM: My unfortunate clients in that matter had the temerity to settle the proceedings.
HIS HONOUR: Anyway, you say that that is a point that you would want to argue in the High Court and suggest that the view taken was one apt for a different problem and not apt for constitutional invalidity.
MR PERRAM: That is precisely right. If the common law rule of superior courts of record come into conflict with the provisions of Chapter III of the Constitution, a question never looked at in Cameron v Cole or in any of those cases, then my submission would be that, surprisingly, the common law does not prevail but the Constitution does. That result, of course, is mandated by section 5 of the covering Act of the Constitution, the supremacy clause which provides that the Constitution is binding on all courts and people. Of course, the importance of that provision has been recognised in, I think, the Duck Shooting Case recently and, of course, it finds its genesis in Marbury v Madison 5 US 137 back in 1803. That is the short submission on that.
In any event, the passage at 433, Justice Gummow clearly contemplates that declaratory relief is not something which is caught by the rule and if your Honour goes to the statement of claim in this proceeding a number of declarations as to the invalidity of the legislation are sought. Specifically, I think, prayers 1 to 4 all seek declarations as to the invalidity of the law.
HIS HONOUR: But you would have no interest to secure those apart from the way in which they impinge upon your own position.
MR PERRAM: That is so.
HIS HONOUR: Under the order of Justice Hill.
MR PERRAM: But there is no reason why, armed with those declarations - assuming that we lost on the Cameron v Cole point in the High Court, there is no reason why if we won with the declarations we would not be able to go back to his Honour and say, “Look, there are the declarations.”
So, the Cameron v Cole point really only catches prayer 4 of the statement of claim, even if it is right. It speaks nothing about the first three prayers, as it did in Gould v Brown, and that is why they answered most of the questions which were posed there. There was no application before the High Court in Gould v Brown to set the winding-up order aside. There was a question posed about it but there was no application to set aside a winding‑up order as there is in this case. So, the whole issue of what the status of the rule in Cameron v Cole and its interrelation with Chapter III of our Constitution is - it has not been argued anywhere and in a situation - - -
HIS HONOUR: Do you say that the point that Justice Gummow’s final distinction of question 3 from the other questions was not a matter that was argued in the Gould v Brown Case as far as you understand it?
MR PERRAM: There was no application by any of the parties who were subject to the examination summonses in Gould v Brown to set aside the winding-up order. There was no application. There was a question posed as to whether the winding-up order was liable to be set aside but there was no application before the High Court or, for that matter, the Federal Court to set aside that winding-up order.
HIS HONOUR: It was, in form, an appeal from a unanimous decision of the Full Court of the Federal Court?
MR PERRAM: On questions which had been reserved by his Honour the Chief Justice of the Federal Court in that matter. But the proceedings in Gould v Brown which were, in the Federal Court, known as Amann, commenced by way of persons who were the subject of examination summonses in the winding up of the Amann Company seeking to avoid their examination and they sought declarations as to the invalidity of the provisions but they did not seek, by any process, to set aside the order.
HIS HONOUR: Was that on the basis that it was assumed that if the cross‑vesting legislation was invalid, the order would fall with the answers to the questions?
MR PERRAM: I think I can say the person who was running it at the time did not turn their mind to the issue. I think that is the proper answer to that. But the declarations having been made, it would, had they prevailed in the High Court, been a simple matter to set the order aside. It would not have required very little effort at all. A notice of motion would have been put on in the Victorian Registry of the Federal Court where the winding-up order was made and the authorities would have been one way on the proposition that the order should be set aside. But that was not one of the applications which was before the High Court.
HIS HONOUR: Very well.
MR PERRAM: Your Honour referred briefly to the fact that in so far as an appeal, if it were instituted - were taken from the judgment of his Honour Mr Justice Hill to the Full Court of the Federal Court, there would be in all likelihood an order for security, there being the statutory provisions in that court. That can be conceded to be correct. That is not necessarily the end of the matter, however, because the matter can come into this Court another way. It could come here by a section 40 removal application, if a motion were put on before his Honour Mr Justice Hill to take back his winding‑up order and then that motion were referred into this Court under section 40. The same conundrum which currently arises would then arise. Indeed, a more difficult conundrum because the extent of the inherent jurisdictions power to order security for costs on a removed application is more problematic than it is within the original jurisdiction. In so far as it might be put forward as being an argument that the party seeks to avoid here what it would be met with there, that is an answer to that point. We could be here another way if we chose to be.
My learned friend made some brief submissions that there were persons behind the plaintiffs who were funding the litigation and that therefore an order for security should be made on that basis. The traditional rule in that area is that where the plaintiff sues, not on its own behalf but on behalf of another, an order for security is sought. I suppose this really comes back to the point which I think your Honour described to me as “not getting any more blood from” but it really highlights why the plaintiff is not, in substance, a plaintiff. The plaintiff does not sue for anything other than an order to protect itself in the Federal Court of Australia where it is the defendant. It is not a case where it is suing for damages and one can say those damages, if awarded, will never go to the company, they will go straight through the company to people who were standing behind it, which is the traditional sort of situation one has in mind when that occurs.
There are absolutely no financial benefits per se which flow from this proceeding by itself in isolation. Viewed totally in isolation, this proceeding is largely meaningless. Some declarations are made and an order set aside in another case. One has to view the High Court proceeding as being directly related to the Federal Court proceeding. Once one reaches that, then one can say, (a) that one is not suing for the benefit of another to attract the operation of the traditional rule and, (b) one is not really suing at all, one is really, in substance, seeking to defend oneself by activating the constitutional mechanisms which were available.
HIS HONOUR: That is so? You are seeking to defend yourself, but you are seeking to defend yourself by a new initiated procedure in circumstances where you concede that you are insolvent and, in my earlier experience, it was not at all uncommon, indeed, it was quite common, where a party is insolvent and my impression is, particularly where a corporation party is insolvent, to order security for costs.
MR PERRAM: In a normal case where a corporation is insolvent it is almost invariably the case, yes. It does not lie as of right but the discretion in general is exercised against - - -
HIS HONOUR: Well now, if that is so, either under the Corporations Law or under the general rules of a court below this court or under the inherent power of a court below this court, why should it be different in this Court?
MR PERRAM: Because it is also part of the law of the other courts that where the plaintiff is not the substantive plaintiff, an order for security does not lie. That is the answer. Perhaps the other answer is - and this is one which perhaps only applies in this Court - that where matters of great public significance are concerned there is a broader community interest in the resolution of the proceeding which transcends the position of the parties.
HIS HONOUR: That may be so, but I would not think we are going to have to wait very long for the question of the cross-vesting legislation to come up.
MR PERRAM: I think there is a section 40 removal application on in relation to another proceeding.
HIS HONOUR: It does not have to come up in a case where a corporation has been named the subject of a winding-up order.
MR PERRAM: No, it does not.
HIS HONOUR: It can come up in any old proceedings where somebody wishes to raise the point who has been resistant to cross-vesting.
MR PERRAM: Another way of putting that submission is this way, which is to say that the power to order security arising in the inherent jurisdiction of this Court, it is appropriate for the Court to consider which particular part of its original jurisdiction it is exercising when considering the exercise of its discretion. For example, there was a time when this Court was a trial court in trademarks matters. That time has blessedly passed, as I understand it. That would be a circumstance in which the inherent power to order security, one might have thought, would be exercised in much the same way as it is exercised in any other court. Likewise, in what is essentially a personal injury matter, brought between residents of different States, assuming that if by some miracle it remained here without being remitted, one might have thought that was an appropriate case where the inherent jurisdiction would be exercised in accordance with general principles.
However, in my submission, when the jurisdiction which is referred to in either section 76(i), taken in combination with section 30 of the Judiciary Act, or section 75(v) of the Constitution is concerned, that is, namely, a situation which obtains where a party comes to this Court to seek a vindication of a constitutional position, that a different principle applies in the exercise of the inherent jurisdiction. That submission necessarily proceeds without any reference to authority, there being besides Synan v Willey no authority in this Court on the exercise of the inherent jurisdiction
to order security for costs in the original jurisdiction at all. But, in my submission, it is sound in principle that the purpose which section 75(v) and section 76(i) serve under the federal compact is best served by those who seek to vindicate their rights not being stiffled. Otherwise, the provisions of the Constitution and those constitutional provisions is put at naught by a procedural side wind.
HIS HONOUR: You are not going so far as to say that it can never be or should never be given?
MR PERRAM: No, because the jurisdiction clearly accedes and where jurisdiction accedes, the exercise of a discretion judicially must concede the possibility that the discretion can be exercised in favour of the making of it. But, in my submission, it is an extraordinary case where, in the constitutional jurisdiction of the Court, if I can call it that - that is a sloppy expression because it apprehends a number of different heads of jurisdiction within 75 and 76 simultaneously ‑ but where that is the situation an order for security ought not to be made. Circumstances where it might well be made is where the constitutional point is without substance or where the constitutional point is considered by the Court to have very little prospects of success. They are matters which would justify, probably, the granting of security in the constitutional jurisdiction.
But once the Court arrived at the position that it formed the view that the argument being put was a reasonable argument which had some prospects of success, in my submission, a granting in the constitutional jurisdiction would almost invariably never be made.
HIS HONOUR: Yes, very well.
MR PERRAM: I think those are my submissions.
HIS HONOUR: Thank you very much. Is there anything in reply, Mr Thomson.
MR THOMSON: I do not think I need to add anything to what I said before, other than to re-emphasise the - - -
HIS HONOUR: What do you say about the section of the Corporations Law, 1335 I think it is, that in this jurisdiction is a formula that has been used to mean in the jurisdiction of which the law is operating, hence New South Wales?
MR THOMSON: Yes.
HIS HONOUR: So, “the jurisdiction of this jurisdiction” means the jurisdiction of New South Wales - - -
MR THOMSON: New South Wales for New South Wales companies.
HIS HONOUR: - - - and that for that reason it is not very apt to deal with the jurisdiction which is invoked which is a constitutional jurisdiction of this Court.
MR THOMSON: On reflection, I think that submission is right and I think the true reason why section 1335 is available in these proceedings is because the phrase “the court having jurisdiction in the matter” is an inconsistent reference. That phrase uses “court” in its ordinary natural meaning and it is inappropriate to import the statutory text. I suppose that is really demonstrated when you try and say it as meaning “the court having jurisdiction in this jurisdiction, having jurisdiction in the matter”, which is what one gets when one fits in the statutory definition.
HIS HONOUR: But that still leaves “in this jurisdiction” to be given some meaning. It is “the court having jurisdiction in the matter in this jurisdiction”, that is if you can incorporate the statutory definition into the phrase which, prima facie, you would do.
MR THOMSON: My submission is that, when one appreciates the implications of that, it has a result that the section only operates in a series of events which is plainly far too narrow from what is intended. If a company goes to the Local Court and seeks to recover a debt there, then the consequences of my friend’s analysis would be that the Local Court does not have jurisdiction under 1335 to order security for costs. With respect, that is plainly a situation which is meant to be covered.
HIS HONOUR: Why would the Local Court not have jurisdiction, it being a court having “jurisdiction in this jurisdiction”?
MR THOMSON: Because - - -
HIS HONOUR: This is “court”, not “Court”. The Local Court would not have jurisdiction under “Court”.
MR THOMSON: Because the jurisdiction which is being relied on is not any jurisdiction arising under the Act. It is just an ordinary action for debt.
HIS HONOUR: Well, if that is so, then section 1335 of the Corporations Law does not attach.
MR THOMSON: That is right.
HIS HONOUR: You are just in the realm of the power, if any, of a Local Court to give security for costs.
MR THOMSON: That is right. My submission is that that is really a far narrower operation for 1335 than plainly is intended. I am sorry, I have not brought the statutory materials up with me but it has always been understood as being, in effect, a general right - creating a general right for anybody being sued by a corporation to ask for security where the criteria is satisfied. That is the operation it should have in fairness and justice, and that is the way it should be construed.
HIS HONOUR: The point Mr Perram raises and is explained in Thunderdome seems to be the explanation for the failure to provide in the Rules for original jurisdiction. There is at least - - -
MR THOMSON: We are grateful for that research, yes.
HIS HONOUR: - - - that decision of Chief Justice Latham which suggests that he thought that, far from not having jurisdiction, he had a complete jurisdiction.
MR THOMSON: I am grateful for that reference, and we adopt that analysis. That would explain why Order 71 rule 6, for example, uses the word “plaintiff” in a fashion which is well adapted to address situations where security for costs is being sought in cases where the original jurisdiction of this Court is being invoked. If I can say so in passing, rule 6(2) makes it plain that if, in substance, the defendant is the moving party, then you can ask for security in that context as well.
With the assistance of that historical analysis set out in that case, then the operation of rule 6 has the operation or recognises the jurisdiction in the manner which I sought to rely on earlier in my submissions.
HIS HONOUR: But it is then said that you are, in effect, a plaintiff trying to destroy the defendant and it is entitled to defend itself. Formally, it is not that. On the record it is not that but it is said that, in substance, that is what it is.
MR THOMSON: No. Well, in substance and in reality these are proceedings, separate proceedings commenced by these plaintiffs to obtain separate relief, independent relief against us. True it is that the occasion for them being brought is that we have made claims and obtained relief in other circumstances but that is a purely routine - there is absolutely nothing
remarkable about that. That must be a very common occasion for a party to bring proceedings, but they are still the plaintiff and they are still the moving party. They are still the one seeking relief.
HIS HONOUR: On the dark suggestion that there are people standing behind the plaintiffs, you would really have to establish that, would you not? You cannot just make an assertion of that kind from the Bar table that there are people funding the litigation behind the plaintiffs. How could I possibly draw an inference of that?
MR THOMSON: Because you have, through Mr Culmer’s affidavit, the lengthy history of the litigation which has occurred, an indication of the extent of it, and one knows that throughout that period none of these companies had any apparent assets. Once one knows those things, the inference to be drawn, in our submission, is that there are people standing behind the plaintiffs who have been able and willing to fund substantial legal expenses. That is the only sensible inference that could be drawn. So, that is the way we say we have proved that. We have sought to address that as part of our case. We put forward what we can. Nothing has been put on in answer, so we cannot take it any further, but we do say the inference follows.
HIS HONOUR: In the order that you seek, you ask that the security be provided; alternatively, if it is not, that the proceedings be dismissed or, alternatively, stayed. That is not unusual in other places but I have not seen that in any of the orders of this Court. It is normal simply to order the security and then to require that if it is not provided a party moves the Court, which may have been an old-fashioned procedure that existed in the old days.
MR THOMSON: Yes, I understand what your Honour says. I think the usual order in this Court should be the appropriate one, so that if security is not lodged, then we would have to move the Court, which would need striking out those last phrases.
HIS HONOUR: Yes, very well. Is there anything else?
MR THOMSON: No, thank you, your Honour.
HIS HONOUR: Thank you both for your assistance. The Court will reserve its decision.
MR PERRAM: Your Honour, I am sorry, there was one matter I promised to mention to you - it does not affect my learned friend - which
was the position of the judgment of Justice Toohey in Bahr. Your Honour asked me about that briefly.
HIS HONOUR: Yes, you did say you would deal with that.
MR PERRAM: I think it is in error. It is the only explanation which could be said. His Honour held that the High Court - he appeared to hold that the High Court might have had inherent jurisdiction in its appellate provisions and then he held that he would not have exercised it because security was not necessary to preserve the subject matter of the litigation. In relation to the first limb, that is out of step with what every other case has ever said and none of those cases seem to have been referred to. In relation to the second step, the proposition that the inherent power does it under security also seems to be out of step with what every other case says and, again, those cases do not seem to have been referred to his Honour. So, it may be that Bahr v Nicolay is not correctly decided or, if correctly decided, not decided for the right reasons.
The second thing was I had some written submissions which I was going to hand up which had some typographical errors, I regret to say, and are of smaller compass than the issues we ranged on this morning.
HIS HONOUR: Yes, that would be helpful.
MR PERRAM: I am sorry I did not hand them up before.
HIS HONOUR: I repeat that I reserve my decision in this matter.
AT 11.03 AM THE MATTER WAS ADJOURNED
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