Ogawa, Megumi --- "Security For Costs: An Overseas Student Advances Her Case" [2006] AltLawJl 12; (2006) 31(1) Alternative Law Journal 40

SECURITY FOR COSTS: An overseas student advances her case

• Overview of security for costs
• Issues in contention
• The decision
• Significance of the decision
  • Meaning of ‘ordinarily resident’
• Security for costs against an ordinary resident outside Australia
• Order for security against a natural person
• Conclusion

SECURITY FOR COSTS
An overseas student advances her case

MEGUMI OGAWA^[*] reports on a recent development in the Federal Court of Australia.

In 2004, the Federal Court of Australia rejected an application for security for costs in a case concerning an overseas student, Ogawa v the University of Melbourne.^[1] This is the first case in Australia where security for costs against an overseas student had been considered.

Overview of security for costs

The Federal Court may make an order for security for costs at any time in proceedings, normally against the applicant. In the case where an applicant is a natural person, the legislative basis of this order lies in two provisions. One is s 56 of the Federal Court of Australia Act 1976 (Cth) (‘the Act’), which gives the Court the power to order an applicant (or appellant) to give security for the payment of costs that may be awarded against them. The other is Order 28, rule 3(1) of the Federal Court Rules (‘the Rules’) which provides, in effect, where, in any proceeding, it appears to the Court on the application of a respondent —

• that an applicant is ordinarily resident outside Australia

• that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent if ordered to do so

• subject to sub-rule (2), that the address of an applicant is not stated or is mis-stated in his originating process, or

• that an applicant has changed his address after the commencement of the proceeding with a view to avoiding the consequences of the proceeding

the Court may order the applicant to give such security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding.

The objective of this order is to secure for the respondent the means of recovering the costs of the proceedings in order to protect the respondent should the applicant’s claim fail.^[2] Therefore, where there is no likelihood that the respondent will be unable to recover the costs of the proceedings if the respondent successfully defends the case, the order will not be made.^[3]

As inferred from Order 28 of the Rules, broadly speaking, ordinary residence outside Australia and an applicant’s intentional behaviour to avoid the possible payment of costs attract consideration of an order for security. In either of these cases, the chances of a respondent encountering difficulty in enforcing a costs order will plainly be higher than in other cases. Because of this provision, an overseas student’s action is a good target for an application for security for costs. This does not mean that the Court will not order security for costs to a natural person residing in Australia. This is because Order 28 of the Rules does not limit the generality of the Court’s power to order security pursuant to s 56 of the Act.^[4]

Issues in contention

The first uncertainty arises from the absence of the definition of ‘ordinarily resident’ either in the Act or the Rules. A relatively common consideration seems to be one of the two: a person who physically lives in Australia might be ordinarily resident in Australia; or a person who is a citizen or a permanent resident of Australia might be ordinarily resident in Australia.

Once an applicant is recognised as being ordinarily resident outside Australia, generally an order for security seems to be regarded as automatic.^[5] On the other hand, it appears to be a prevailing (mis)understanding that a natural person will not be ordered to give security for costs. This is because of the general rule of the common law that ‘poverty is no bar to a litigant’.^[6] If lack of funds cannot be the reason for an order for security for costs against a natural person, there is hardly any other occasion where an applicant is likely to be suspected to be unable to meet the possible costs. Consequently, where an applicant is a natural person but a foreigner nevertheless living in Australia, one tends to wonder which principle should be applied.

The issues in question for an overseas student’s case can be reduced to the following three:

• whether the overseas student was ordinarily resident in Australia

• whether ordinary residence was a decisive factor which would necessarily attract an order to provide security

• whether impecuniosity was a determining factor which could prevent an order being made to provide security.

The decision

First, on the issue of the applicant’s ordinary residence, Marshall J referred to Scargill v Minister for Immigration and Multicultural Affairs,^[7] in which case the applicant was a holder of a bridging visa but was recognised as one who ‘usually resided’ in Australia.^[8] Marshall J observed that ordinary residence would be considered to be ‘a matter of fact and degree’.^[9] The judge listed the factors for (the applicant’s residence in Brisbane and Melbourne for four and a half years) and against (the applicant’s status in Australia as a holder of a bridging visa) the applicant’s ordinary residence in Australia.^[10] Marshall J did not make a firm finding of the place of residence since it was irrelevant to this particular case as explained below, but suggested that the likely outcome would be that an overseas student was ordinarily resident outside Australia.^[11]

Second, Marshall J did not consider that ordinary residence outside Australia was the decisive factor for an order for security. He stated:

The only case that has really looked at it is Barton, isn’t it; measuring the two. Where there are only two factors to be weighed in the balance, impecuniosity and residence, that’s the only case where they have both been weighed in the balance and his Honour was reluctant to shut out — to stifle litigation but gave a small, relatively small, order for security.^[12]

The judge’s presumption was that the applicant in Barton^[13] was ordered to provide security of a small sum which would not impede the trial, given that he was seeking employment in London.^[14] Marshall J determined that any order would stifle the proceedings in this case since the overseas student was unable to work.^[15]

Marshall J concluded that the student’s:

impecuniosity outweighs the great weight that would ordinarily attach to the assumption that she is not ordinarily resident in Australia, combined with the firm finding that she has no assets in Australia. In summary, the Court is reluctant, in the exercise of its broad discretion under s 56 of the Act, to shut out an impecunious applicant from advancing her case.^[16]

Significance of the decision

Meaning of ‘ordinarily resident’

The decision did not define the meaning of ‘ordinarily resident’. Rather, it assumed a certain common understanding of ordinary residence and concentrated on demonstrating how to determine the place of ordinary residence. Although not clear, it would seem from the discussion and the references by the Court that the place of ordinary residence is recognised as a place where a person, apart from temporary absence, physically resides with plausible unlimited continuity at that moment.

A person’s physical existence is one of the factors that decides the place of ordinary residence but that on its own is not sufficient to constitute ordinary residence. Mere physical existence does not warrant unlimited continuity. Nationality or citizenship is also one of the factors as it is generally relevant to the ease of continuing to reside. However, that itself is not decisive. There are a number of Australians who have no intention to reside in Australia. A kind of visa is one of the factors indicating the degree of continuity.^[17] Again, that itself is not determinative. Even a bridging visa holder could be regarded as being ordinarily resident in that the holder is likely to obtain a permanent resident visa in certain circumstances. Since nationality or a kind of visa is not decisive, entry on the Australian electoral roll does not have much meaning.^[18] A person’s intention is taken into account. However, that is another mere factor amongst many others.

Security for costs against an ordinary resident outside Australia

As stated in the decision, usually great weight is given to ordinary residence outside Australia when considering security for costs.^[19] However, there is also an established principle that ordinary residence outside Australia does not necessarily attract an order for security.^[20] The difficulty in applying this principle to this case was that the applicant was impecunious and was almost certainly unable to meet the costs order, while examples of this principle were found in foreign corporation cases where the companies were unlikely to be unable to furnish the costs.^[21]

There was no published precedent concerning an individual other than Barton.^[22] The applicant in Barton, despite the fact that he was a bankrupt, was ordered to provide security. Therefore, the present case is the first published case in which it was held that an ordinary resident outside Australia could completely resist an order for the security for costs by showing their impecuniosity.

Order for security against a natural person

The decision highlights that a relatively common understanding, that is, a natural person will not be ordered to provide security for costs, was a misunderstanding. As demonstrated by Barton, a natural person who was impecunious could be ordered to provide security. The present case was differentiated from Barton on the ground that the applicant in this case was staying in Australia on a bridging visa which restricted working. The decision inferred that once a natural person was recognised as being ordinarily resident outside Australia, the person would be ordered to provide security regardless of his or her impecuniosity if that person was in a position to be able to engage in gainful employment. However, the amount of the security in that case would be the amount assessed by the judge that the person would be able to afford.

Conclusion

In this case, the decision did not establish a new standard for an order. However, it provided clarity on the ambit of security for costs in a number of aspects which previously had not been clear, and it established a precedent for an applicant who is ordinarily resident outside Australia to be able to completely resist an order for the security for costs by relying on their impecuniosity.

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^[*] MEGUMI OGAWA is a Research Fellow at Waseda University, Tokyo, Japan.

© 2006 Megumi Ogawa

email: [e-mail]

^[1] Ogawa v University of Melbourne [2004] FCA 491 (‘Ogawa’). The overseas student who initiated the proceedings is the author of this article. Because of this, the author is familiar with all relevant facts including ones that do not appear in the documents filed with the Court. However, this Brief is based solely on information in the court documents including the transcripts of the proceeding.

^[2] See further, S Colbran, ‘Application for Security for Costs’ (1993) 10 Australian Bar Review 11, 11. See for the opposite objective, J Batrouney, ‘Security for Costs — Shield or Sword?’ (April 1992) Law Institute Journal 284.

^[3] Thus, a common defence for resisting security is to prove the existence of sufficient funds. See for a possible defence, J Delany, Security for Costs (1989) 117.

^[4] Bell Wholesale Co Ltd v Gates Export Corp [1984] FCA 34; (1984) 52 ALR 176, 177.

^[5] See, B Cairns, Australian Civil Procedure, (5th ed, 2002) 535.

^[6] Cowell v Taylor [1885] UKLawRpCh 237; (1885) 31 Ch D 34, 38 (Bowen LJ).

^[7] Scargill v Minister for Immigration and Multicultural Affairs [2003] FCAFC 116.

^[8] Ogawa, above n 1, [27].

^[9] In Scargill v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 116, 75 ALD 53, [26], French, von Doussa and Marshall JJ cited Gummow J in Gauthiez v Minister for Immigration and Ethinic Affairs (1994) 53 FCR 512, 519 that: ‘The meaning ordinarily given to the phrases ‘resides’, ‘usually resides’ and ‘ordinarily resides’ is such as to make the result in a given case depend largely upon matters of fact and degree.’ See also, Logue v Hansen Technologies [2003] FCA 81; (2003) 125 FCR 590, 597.

^[10] Ogawa, above n 1, [25] and [26].

^[11] Ibid [28].

^[12] Ogawa, Transcript of Proceedings, Federal Court of Australia, 19 March 2004, 56.

^[13] Barton v Minister for Foreign Affairs [1984] FCA 126; (1984) 54 ALR 586.

^[14] Ogawa, above n 1, [42].

^[15] Ibid.

^[16] Ibid [43].

^[17] Marshall J considered that a student visa was an indicator of temporary residence in Australia. See, Ogawa, Transcript of Proceedings, 48.

^[18] In this respect, Marshall J stated that: ‘I wouldn’t worry about that [the applicant is not on the Australian electoral roll]. Neither is my brother.’ See, Ogawa, Transcript of Proceedings, 70.

^[19] Ogawa, above n1, [43].

^[20] See, G Flick, Federal Court Practice (1989), [3064/10].

^[21] See, for example, CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270.

^[22] Above n 13.