FEDERAL COURT OF AUSTRALIA Commissioner of Taxation v Vasiliades [2016] FCAFC 170 Appeal from: Application for leave to appeal: Vasiliades v Commissioner of Taxation [2016] FCA 420 File numbers: VID 426 of 2016 VID 427 of 2016 VID 428 of 2016 Judges: DOWSETT, KENNY AND EDELMAN JJ Date of judgment: 8 December 2016 Catchwords: TAXATION – application for leave to appeal from a decision of a single judge of the Federal Court of Australia setting aside orders of a registrar that the respondent pay security for costs – whether primary Judge erred in considering the defensive nature of the primary proceedings as determinative of the question of security for costs – whether primary Judge erred in the characterisation of proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) Legislation: Federal Court of Australia Act 1976 (Cth) s 56 Federal Court Rules 2011 (Cth) r 19.01 Taxation Administration Act 1953 (Cth) Cases cited: Abraham v Thompson [1997] 4 All ER 362 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 622 Aurora Networks Pty Ltd v Halbedl; In the Matter of Aurora Networks Pty Ltd [2013] FCA 632 Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 Belmonte v Aynard [1879] 4 CPD 221 Bhagat v Murphy [2000] NSWSC 892 BW Offshore Ltd v Anzon Australia Limited [2009] FCA 1133 Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251 Condliffe v Hislop [1996] 1 All ER 431; [1996] 1 WLR 753 CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1995] 1 BCLC 148; [1994] 2 Lloyd's Rep 567 Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 DSQ Property Co Ltd v Lotus Cars Ltd [1987] 1 WLR 127 E I Du Pont de Nemours & Co v Commissioner of Patents (No 7) (1990) 18 IPR 643 Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461 Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 GAIN Capital UK Limited v Citigroup Inc [2015] FCA 1009 Hii v Commissioner of Taxation (No 3) [2016] FCA 58; 238 FCR 304 House v The King [1936] HCA 40; 55 CLR 499 Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 J H Billington Ltd v Billington [1907] 2 KB 106 Lines v Tana Pty Ltd [1987] VR 641 Logue v Hansen Technologies Ltd [2003] FCA 81; 125 FCR 590 Maatschappij Voor Fondsenbezit v Shell Transport and Trading Company [1923] 2 KB 166 Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1 Mazukov v University of Tasmania [2004] FCAFC 159 Merribee Pastoral Industries Pty Limited v Australia and New Zealand Banking Group Limited [1998] HCA 41; 193 CLR 502 Nitopi v Nitopi (No 2) [2016] NSWSC 476 O'Neill v De Leo (1993) 2 Tas R 225 Oswal v Commissioner of Taxation (No 2) [2015] FCA 1143 Oswal v Commissioner of Taxation [2015] FCA 1366 PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; 102 ALR 321 Putney Group Pty Limited v The Royal Rehabilitation Centre Sydney [2009] NSWSC 424 Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 Re CSR Ltd [2010] FCAFC 34; 183 FCR 358 Re Little Olympian Each Ways Ltd [1994] 4 All ER 561; [1995] 1 WLR 560 Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance Ltd (in liq) [2003] FCA 803 Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; 132 CLR 301 Shannon v Australian and New Zealand Banking Group Ltd (No 2) [1994] 2 Qd R 563 Stanley-Hill v Kool [1982] 1 NSWLR 460 Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 Tomlinson v Land and Finance Corporation Limited [1884] 14 KBD 539 Vasiliades v Commissioner of Taxation [2016] FCA 420 Weily's Quarries v Devine Shipping Pty Ltd [1994] TASSC 76; 14 ACSR 186 Welsel v Francis [2011] NSWSC 477 Willey v Synan [1935] HCA 76; 54 CLR 175 Williams v Crosling [1847] 3 CB 957; 136 ER 384 Wyong-Gosford Progressive Community Radio Incorporated v Australian Communications and Media Authority [2006] FCA 625 Date of hearing: 22 August 2016 Registry: Victoria Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 111 Counsel for the Applicant: Mr S Sharpley QC and Mr S Linden Solicitor for the Applicant: ATO Review and Dispute Resolution Counsel for the Respondent: Ms H Symon QC and Mr M Bearman Solicitor for the Respondent: HWL Ebsworth Lawyers ORDERS VID 426 of 2016 VID 427 of 2016 VID 428 of 2016 BETWEEN: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Applicant AND: SOCRATES VASILIADES Respondent JUDGES: DOWSETT, KENNY AND EDELMAN JJ DATE OF ORDER: 8 December 2016 THE COURT ORDERS THAT: 1. Leave be granted to appeal from paragraph 2 of the orders of the Court made on 22 April 2016. 2. The draft notice of appeal the subject of argument before the Full Court on 22 August 2016 stand as the notice of appeal. 3. The appeal be allowed. 4. Paragraph 2 of the orders of the Court made on 22 April 2016 be set aside and in its place order that the interlocutory application filed by the respondent on 20 January 2016 seeking review of the orders made by Registrar Ryan on 21 December 2015 be dismissed. 5. The orders made by Registrar Ryan on 21 December 2015 be varied with effect that the date "25 January 2016" is substituted with "16 March 2016". 6. The respondent pay the appellant's costs of the application for leave to appeal and of the appeal, to be taxed in default of agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DOWSETT J: THE PRIMARY JUDGMENT 1 I have read the reasons prepared by Kenny and Edelman JJ. I need not say any more about the facts of the case. 2 At [15] the primary Judge observed that whether security should be ordered was in the discretion of the Court, and that the only limitation upon that discretion was that it must be exercised judicially. Having made that observation her Honour said: 15 Notwithstanding, the cases provide useful guidance on the considerations attending the exercise of the discretion to make an order for security for costs. Relevant to the present case is: (a) whether the proceeding is essentially defensive in nature; (b) whether the applicant is a natural person; and (c) whether the applicant is a non-resident with no assets in Australia. 16 It can be relevant to the exercise of discretion that the party against whom the security is sought is a natural person. As Lindgren J observed in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [32]–[33], many cases can be cited for the proposition that there is a disinclination to order an applicant who is a natural person to provide security, at least in the absence of some factor in addition to impecuniosity. In the cases in which natural persons have been ordered to provide security, some factor in addition to impecuniosity has generally been present, for example residency outside Australia. The fact that a person is a non-resident and has no assets in Australia may be a factor in favour of the grant of security: PS Chellaram & Co v China Ocean Shipping Co (1991) 102 ALR 321 at 323; [1991] HCA 36 at [7]. 17 In the present case, it is clearly a factor to take into account that the taxpayer resides outside of Australia and there is no evidence to show that the applicant has assets in Australia (or elsewhere). In Logue v Hansen Technologies Ltd (2003) 125 FCR 590; [2003] FCA 81 at [18], Weinberg J explained that the purpose of ordering security for costs against an applicant resident outside Australia is to create a fund within Australia against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant's claimed country of residence. The taxpayer submitted nonetheless that security for costs should not be ordered against him because he is, in substance, in the position of a defendant. 3 At [18]-[24] her Honour considered, in some detail, a line of authority, observing at [18] that "a court should be reluctant to order security where the proceeding is essentially defensive in nature" citing the decision of the Court of Appeal in Maatschappij Voor Fondsenbezit v Shell Transport and Trading Company [1923] 2 KB 166. Below, I refer to a number of cases in which this proposition has been considered. It appears to have developed as part of the now general rule that when a plaintiff is out of the jurisdiction, and has no assets within the jurisdiction the court will generally order that the plaintiff give security for the defendant's costs. Shell Transport and other cases demonstrate that in determining whether a party is a plaintiff or a defendant, the court will not simply look to the way in which he or she is described in the court documents, but rather to the substance of the dispute. The primary Judge clearly attributed appropriate weight to the fact that the taxpayer was out of the jurisdiction, with no assets in the jurisdiction. However her conclusion that the proceedings were essentially defensive in nature led her to conclude that no order for security should be made. the application for leave to appeal 4 The Commissioner submits that apart from the extent to which the proceedings are defensive, "some of the considerations that have been found to be material to the exercise of the discretion include the following": 29.1 whether there is reason to believe the applicant will be unable to pay the respondent's costs if so ordered; 29.2 whether the applicant is ordinarily resident outside Australia; 29.3 whether the applicant is suing for someone else's benefit; 29.4 whether the applicant is impecunious and an order for security for costs would stultify the proceedings; 29.5 whether the applicant is a corporation or a natural person; 29.6 whether the application for security has been brought promptly; and 29.7 the prospects of success of the proceedings. (Footnotes omitted.) 5 At para 30 the Commissioner identifies the first, second and fourth considerations as being particularly relevant in this case, and submits that her Honour ought to have considered them. However the real thrust of the Commissioner's case is that her Honour placed too much weight upon her view that the proceedings were effectively defensive. 6 The proposed grounds of appeal are as follows: 1. The learned primary Judge erred in characterising proceedings in this Court brought pursuant to Part IVC of the Tax Administration Act 1953 (Cth) as "truly defensive in character" (at [26]) and has having an "essentially defensive nature" (at [29]). 2. The primary judge should have followed previous authority in this Court, namely Oswal v Commissioner of Taxation (No 2) [2015] FCA 1143, per Nicholas J, at [54] and Hii v Commissioner of Taxation (No 3) [2016] FCA 58, per Collier J, at [28], which rise no higher than characterising Part IVC proceedings as having a significant defensive element or aspect and reject the need to take a binary view of the question of characterisation. 3. The primary judge erred (at [26]) in treating the characterisation referred to in paragraph 1 above as determinative of the question whether security for costs should be ordered. 4. The primary judge ought to have approached the exercise of her discretion by considering and weighing all of the circumstances relevant to the grant of security in the context of this individual application. 5. The primary judge erred in failing to take into account a material consideration, namely that the respondent's proceedings would not be stultified if an order for security for costs were made. THE CASES 7 It has long been the practice to order that a plaintiff who is out of the jurisdiction, and has no assets within the jurisdiction, give security for the defendant's costs of the proceedings. In PS Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321, McHugh J considered an application for security for costs pursuant to the High Court rules and its inherent jurisdiction. At 323, his Honour said: To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. 8 In BW Offshore Ltd v Anzon Australia Limited [2009] FCA 1133, at [31], Ryan J said, concerning that passage: Accordingly, in the absence of some particularly weighty special circumstance or set of circumstances, or countervailing factor, the incorporation of an applicant company overseas and the absence of any assets owned by it in the jurisdiction will ordinarily dispose a Court to exercise the discretion by requiring the provision of security for costs. Incorporated under the laws of Bermuda and with its headquarters in Norway, B W Offshore prima facie attracts the application of that approach. The question then becomes, is there any special circumstance or countervailing factor of great weight in this case? 9 His Honour was there addressing an application for security for costs pursuant to O 28 r 3 of the previous Federal Court Rules. That rule prescribed that a matter to be taken into account in considering such an application was that the plaintiff/applicant was ordinarily resident outside of Australia. 10 Since at least the early part of the nineteenth century, the courts have, in considering applications for security, identified a party as a plaintiff or defendant by reference to the true nature of the proceedings rather than by reference to the way in which he or she is described in the court documents. The decision in Shell Transport reflected a number of earlier decisions. The first is the decision of the Court of Common Pleas in Williams v Crosling [1847] 3 CB 957; 136 ER 384. It seems that the sheriff was in possession of goods, seized on the application of a judgment creditor. The sheriff was to withdraw from such possession, their value having been paid into the court. The remaining parties were the judgment creditor and the judgment debtor's assignee in bankruptcy. Their opposing claims to the goods were to be determined in proceedings in which the assignee was nominated as the plaintiff and the judgment creditor, as the defendant. The latter was out of the jurisdiction. The former applied for security for costs. Maule J declined to order security. The plaintiff then moved before Wilde CJ and Maule J for review of that order. Wilde CJ said at 961-962; 386: If there had been no interpleader rule, but the sheriff had withdrawn from possession, leaving the execution creditor to his ordinary remedy, he could only have brought an action against the sheriff for a false return; and, in that case, he would have been compelled to give security for costs: he could in no other way have made his execution available. His situation, therefore, will not be altered by calling upon him to give such security, he being defendant in an issue. If, then, the now defendant is not called upon to do anything that he might not have been compelled to do if the court had not interfered, do the plaintiffs get anything which they would not have had if all had remained as it was? In that case, if they had been put to an action against the sheriff, they would have had a defendant resident here, and amenable for costs. They now say to the execution creditor – "If you interfere with our remedy against the sheriff, by substituting as a defendant one who is out of the jurisdiction of the court, at least you should give us security for costs". Seeing, therefore, that we shall neither place the execution creditor in a worse position, nor the assignees in a better, by ordering the former to give security, and seeing that the statute refers it to the court to make such rules and orders as the justice of the case may seem to require, I think the plaintiffs in the issue should have all such remedies for costs as ordinarily belong to litigants. The situation of the execution creditor is not in any degree prejudiced by his being made defendant in the issue; for his execution will not be defeated unless the assignees make out a prior title to the goods. As the execution creditor is calling on the court to give effect to his execution, justice requires that he should give security for costs. 11 Maule J said at 962-963; 386: This is an application under the 6th section of the 1 & 2 W.4, c58, which confers upon the court, in the case of the sheriff, larger powers than it possesses in ordinary cases; and probably the reason of this is, that the courts were already in the habit of exercising, in cases in which the sheriff was concerned, an equitable jurisdiction with which the legislature did not mean to interfere. Upon the best consideration I was able to give to the matter when before me at chambers, I thought the right of the assignee to call on the execution creditor to give security for costs was very doubtful and obscure. One who asserts a right, is bound to convince the court or judge that his claim is well founded. The applicants in this case failed to convince me: and, bearing in mind the maxim of the civilians, "Semper in obscuris quod minimum est sequere", I made the order in the terms in which it appears. I now, however, perceive that what I then thought obscure is perfectly clear. I think justice requires that the execution-creditor should be compelled to give security for costs; and I think it will operate no hardship on him so to do; whereas, a contrary course would be manifestly unjust towards the assignees. I see no reason for altering the position of the parties. The assignees are properly made plaintiffs; for, if they fail to prove their case, the execution-creditor will, of course, sustain his execution. 12 The decision seems not to have depended upon any pre-existing practice. Rather, it provided the intellectual underpinning for the practice which has subsequently emerged. There was no discussion about who was the real plaintiff, or who, the real defendant. Nonetheless the case was resolved by treating the actual defendant as if he were the plaintiff, on the ground that, had the sheriff remained in possession, the former would have had to sue the latter. 13 Belmonte v Aynard [1879] 4 CPD 221 was also an interpleader case. PG (in Yokohama) had consigned bales of silk to A&R (London merchants). A&R had made cash advances to PG. However they sought security for repayment of the advances from FG (in Hamburg) who represented PG in Europe. FG provided such security in the form of bills. A&R subsequently sold the silk. The amount recovered on sale left them with funds held to the credit of FG. FG was indebted to D&B (London merchants) in a sum exceeding the balance held by A&R. D&B had obtained a garnishee order, attaching the moneys held by A&R. D&B went into liquidation, EF being the trustee. EF continued the proceedings commenced by D&B. FG also went into "liquidation" and his trustee (Belmonte) sought to recover the moneys held by A&R. PG also claimed those moneys as consignor of the goods. Belmonte was resident in Hamburg, as was FG. PG was resident in Yokohama. All other parties were within the jurisdiction. A&R took out an interpleader summons. It was ordered that the issue be tried between Belmonte as plaintiff and PG and EF as defendants. EF sought an order for security for costs against Belmonte. The Master made no order and the matter was referred to the Court. Denman J said at 223-224: The only question is whether Belmonte, the trustee in liquidation abroad of the firm at Hamburgh, is bound to give security for costs in favour of [EF], who claims security. I think the principle on which security for costs is ordered is clearly this, viz., that one who is substantially in the position of plaintiff initiating an action, and is a foreigner residing abroad, shall be bound to give security for costs; and if Belmonte occupied that position as between himself and [EF], we should as a matter of course order him to give security. It is, however, admitted on both sides that he is put in the position of plaintiff as against [EF] simply for convenience of the proceedings, but in no sense, I think, can it fairly be said that he occupies the position of a plaintiff suing here, being a foreigner residing abroad. Mr. Lamaison has called our attention to several authorities, and invited us to say that they are in his favour. But I think the ratio decidendi is that the Court, in considering a question of the present kind, will see whether the party against whom security is claimed really is in the position of plaintiff or not. In some cases he is so, although he may be called defendant, and may come into the case in an unusual and anomalous way. ... So here, I think it clear that [EF] is the person attacking Belmonte, and in the position of plaintiff against him, and not Belmonte who is the plaintiff against [EF]. There is another case in which it has been held that the defendant is bound to give security if he be a foreigner residing abroad, viz., in replevin, and that is on the principle that the defendant in replevin is practically the plaintiff. He is the party for whom the proceedings are taken. He is the party initiating the proceedings and carrying on the litigation. So, regarding that as the principle, I think [EF], if he was living abroad, might – whatever his nominal position – be called on to give security. But Belmonte occupies an exactly contrary position, and we should be practically ordering the defendant to give security, instead of the plaintiff, if we made the order. 14 Lindley J said at 224-225: I think we should, in the first place, look at the merits of the case to see which of the parties is the real plaintiff and real defendant, and that the mere accident that one happens to be named plaintiff in the interpleader proceedings is not conclusive. There were several illustrations of this in the old Chancery practice, for the rule was precisely the same as the rule of law; but, at the same time, if the defendant in a suit filed a cross-bill and became plaintiff, he did not give security, because his claim was looked on as a matter of defence. So, if the plaintiff filed a bill to restrain an action at law, it was looked upon as a matter of practical defence, and he did not give security simply because he was plaintiff. Here the Hamburgh firm are, in substance, sued by [EF] for a debt. Now that makes [EF], in effect, plaintiff as between these two, and although it is very true that [EF] and [PG] have been substituted as defendants, it does not alter the substance of the case ... . Although in form [EF] is defendant, in substance he is plaintiff, and in the same position as if he were plaintiff. 15 Tomlinson v Land and Finance Corporation Limited [1884] 14 QBD 539 was a case involving an insolvent corporation rather than a plaintiff out of the jurisdiction. At 541 Brett MR said: In this case the sheriff has interpleaded. As a rule, where a sheriff interpleads, the execution creditors have taken the first step in the proceedings by issuing a writ of fieri facias upon the judgment, which they have obtained against the execution debtors: this writ is lodged with the sheriff, who acts upon it by seizing chattels supposed to belong to the execution debtors. If the chattels are claimed under an alleged title which is inconsistent with the supposed property of the execution debtors, upon the sheriff interpleading the execution creditors will have to prove that they are entitled to the chattels seized: it is true that the execution creditors are usually made defendants in the interpleader issue, but they have to assert their right, and substantially are plaintiffs; and in this view, as it seems to me, Williams v Crosling 3 C.B. 957 was rightly decided. At common law, the position of both the execution creditors and the claimants of the chattels depended upon the steps which the sheriff might take: according to what the sheriff did, each might be a plaintiff. 16 His Lordship then referred to the interpleader legislation, observing that under the relevant statutes both the execution creditor and the claimant were plaintiffs, and that neither was a defendant, "although on the record, as a matter of convenience, one party was made plaintiff, and the other defendant". His Lordship then continued: And, therefore, the rule, that a defendant shall not be compelled to give security for costs, does not apply to a defendant in a sheriff's interpleader. ... 17 His Honour then observed at 542: The view which we have here adopted is not necessarily to be followed as a stringent rule in every case: our ruling is not inconsistent with Belmonte v Aynard ... , which was not a case of a sheriff's interpleader. 18 In Shell Transport to which I have previously referred, the headnote states the facts as follows: Under various agreements in writing made abroad but to be deemed to be English contracts and to be construed and to operate according to English law, certain royalties on shipments and sales of petroleum became due to one D., a Dutch subject residing in England, from a Dutch company. The payment of the royalties was guaranteed by an English company and other English guarantors. D. purported to assign his interest to another Dutch company. After the alleged assignment a third Dutch company recovered judgment against D. and obtained an order of a competent Court in Holland attaching debts due to D. from the first mentioned Dutch company. The second Dutch company and D., their assignor, brought an action in England against the first Dutch company and their guarantors to recover royalties admittedly payable under the agreements. The third Dutch company obtained leave to intervene as and be made defendants in the action. The plaintiffs applied that these defendants should be ordered to give security for costs:- 19 At 172-173 Bankes LJ said: It was strenuously contended that the Court had no jurisdiction to make a foreigner joined as defendant in an action give security for costs. This is not doubt true as a general rule, and the reason for the rule is clearly stated by Jessel M.R. ... where he says: "The principal is well established that a person instituting legal proceedings in this country, and being abroad, so that no adverse order could effectually be made against him if unsuccessful, is by the Court compelled to give security for costs. That is a perfectly well established and a perfectly reasonable principle; but it does not apply to a defendant or a respondent who is brought here to defend himself." It is equally true, however, that in interpleader proceedings the Court will look at the substance rather than at the form of the dispute and will order a party, even though he be a defendant in the proceedings, to give security if satisfied that he is really what is indifferently described as a claimant, a plaintiff, or an actor in the proceedings. 20 His Lordship then referred to the observation by Bowen LJ at 542 in Tomlinson to the effect that: When an interpleader issue has been directed and the sheriff has slipped out of the dispute, the parties who remain, that is, the execution creditor and the claimant, are both plaintiffs, they are not in the position of the parties to an ordinary action. The hand of the Court is set free, and it may use its discretion whether security for costs should be ordered. 21 Bankes LJ continued: For the reason thus stated the defendant in the interpleader proceedings in that instance was ordered to give security. 22 His Lordship then referred to the decision in Belmonte and continued at 174: The real question, as it seems to me, in this appeal is whether, having regard to the peculiar circumstances of the case, the Court is not entitled to look at the substance of the dispute and to say that though the action remains an action in form it is in substance indistinguishable for the present purpose from an interpleader proceeding. When once the defendants admitted liability the whole character of the proceedings in my opinion changed. 23 Scrutton LJ said at 176-177: The general rule as stated by Brett M.R. in [Tomlinson] is that a defendant shall not be compelled to give security for costs, the reason being that he is required to attend at the suit of the plaintiff, and if the plaintiff chooses to sue the defendant where he has no property, that is the plaintiff's concern. This is carried so far that a foreign defendant counterclaiming is not required to give security for the costs of his counterclaim so long as it arises out of the same transaction as the claim: ... . It is otherwise if the counterclaim arises out of a different and fresh transaction: ... . But it is said here that the Perlak Company has not been compelled to come as a defendant, but has intervened of its own free will. There are however a set of cases in which foreign claimants have come to England to protect property attacked in English proceedings, but have not been ordered to give security, because they are only there in defence of property threatened by English proceedings. Such cases are foreign shareholders opposing an English petition to wind up: ... a foreign patentee coming to resist an English application to revoke his patent or trade mark: ... . In these cases there is an invitation to come by advertisement, but the position, I think, extends to every case where the person against whom security is sought is really defending himself against attack, even if he be nominally a plaintiff, but really defending himself against defendants' previous action against him. ... The Court always, as I understand, endeavours to be guided by the substance and not by the form of the matter, and orders security for costs against the foreign attacker, not against the foreigner defending himself or his property from attack. 24 A number of these cases were cited by members of the High Court in their reasons in Willey v Synan [1935] 54 CLR 175. The facts of that case were, in my view, effectively identical with those in the present case. They appear sufficiently from the first paragraph of the headnote as follows: The plaintiff, who was a member of the crew of a ship travelling from New Zealand to Australia, alleged that he found on board the ship English silver coins totalling in value £351. On arrival of the vessel, officials of the Customs Department took possession of the coins. The plaintiff made a claim for the coins under sec. 207 of the Customs Act 1901-1934. The Collector of Customs thereupon gave notice to the plaintiff requiring him to commence an action for the recovery of the coins, and stating that in default of bringing such action the coins would be condemned without further proceedings. The plaintiff, who was not ordinarily resident within the Commonwealth, thereupon commenced an action against the Collector of Customs for the recovery of the coins. The Collector of Customs applied for security for costs pursuant to [the rules of the High Court]. 25 In Willey the Collector of Customs had the power effectively to terminate any claim which the plaintiff may have had to the coins, by giving the relevant notice, requiring him to commence an action. To my mind such a process is similar to that in which the Commissioner issues a notice of assessment to which a taxpayer can respond only by taking one or other of the courses identified in the Taxation Administration Act 1953 (Cth) (the "Taxation Administration Act"). By the issue of the notice of assessment the Commissioner both quantifies the amount of the assessment and effectively renders it a debt owing to the Commonwealth. The only way in which the taxpayer can defend him/herself against enforcement proceedings is to seek to set aside the assessment, either in the Administrative Appeals Tribunal or in this Court. I see little or no relevant difference between that process and the process in Willey. 26 After stating, with apparent approval, the propositions established by the decisions in Shell Transport and Tomlinson, Latham CJ observed at 180: In this case the Collector really initiated legal process by giving a notice under sec. 207 which would result in the exclusion of any right of the plaintiff unless the plaintiff himself took legal proceedings. If the Collector had not acted under sec. 207, it would not have been necessary for the plaintiff, in order to prevent the extinction of his right, to take any proceedings. If, no notice having been given, he took proceedings in conversion or detinue, he would be in the same position as any plaintiff who comes into the jurisdiction to complain of an act which he alleges to be wrongful. But, as the Collector has given him a notice under sec. 207, he is, in effect, forced into legal proceedings, not merely to enforce his claim, but to prevent his claim from being extinguished. He is therefore really in the position of a defendant. 27 Dixon J said at 184-185: The principle is that a party to judicial proceedings, who resides beyond the jurisdiction, should not be required to give security for costs unless, however the parties are arranged upon the record, he is the person invoking or resorting to the jurisdiction for the purpose of establishing rights or obtaining relief. If he does avail himself of the remedies the jurisdiction provides in order to obtain affirmative relief or redress, he may be ordered to give security, although he becomes a defendant in the action. Thus, on the one hand, a defendant in an action at law who filed a bill in equity to restrain the proceedings at law, was not required by the Court of Chancery to give security for the costs of the suit although he resided out of the jurisdiction ... . And, on the other hand, a distraining landlord who became a defendant in an action of replevin in respect of the goods distrained was ordered to give security on the ground that he resided out of the jurisdiction ... . The principle was considered in Maatschappij Voor Fondsenbezit v. Shell Transport and Trading Co. ... where a number of illustrative cases are collected in the judgment of Scrutton L.J. He said: "The position, I think, extends to every case where the person against whom security is sought is really defending himself against attack, even if he be nominally a plaintiff, but really defending himself against defendants' previous action against him" ... . 28 His Honour continued: The application of the principle to the present case is difficult because the one party, the plaintiff, has propounded a claim to money which, he says, he found before it came to the handed to the defendant, and the other party, the defendant as Collector, has propounded a claim to the same money on the ground that after the time when the plaintiff says he found it, it became forfeit to the Crown. The solution of the difficulty, in my opinion, lies in a consideration of the effect produced by the provisions of the Customs Act. The right of forfeiture relied upon by the Crown is altogether independent of the validity of the plaintiff's claim. Even if he did find the silver, so as to obtain a right to its possession, the forfeiture over-reaches his claim. But to over-reach it steps must be taken on behalf of the Crown to secure a condemnation of the goods, or the statutory equivalent of a condemnation. It was open to the Customs to retain the money without seeking to forfeit it and, if the plaintiff carried out his threat to sue for it, to rely upon any weakness in the title he set up to the possession of the money. But, in that case, the Crown would be exposed to the risk of the plaintiff's recovering the money if he established a prior possessory title. The Customs did not take this risk but proceeded under sec. 207 to obtain the equivalent of a condemnation. This step involved the assumption that the plaintiff was "owner" of the coins. It may be granted that the assumption was made only for the purpose of obtaining a forfeiture and that, if the forfeiture proves not to have been effected, the Customs are not precluded from denying his ownership. Nevertheless for that purpose his prima facie title is assumed. The purpose of assuming it is to defeat it. But that purpose can only be accomplished by calling upon him to enter the present action. If he does not, the goods assumed to be his are condemned. 29 In Chellaram and BW Offshore, McHugh J and Ryan J insisted upon the proposition that the fact that a plaintiff was out of the jurisdiction, and without assets within the jurisdiction would lead to the making of an order for security, unless other circumstances displaced the weight attributable to that fact. In this respect their Honours reflected the views expressed in the nineteenth century cases to which I have referred. These decisions do not sit well with the proposition (advanced in more recent cases and urged by the Commissioner in this case) that being out of the jurisdiction, with no assets within the jurisdiction, is simply a matter to be taken into account with other matters, as is any question as to whether the proceedings are truly defensive. The importance attached by McHugh J and Ryan J to the "general rule", must also attach to the qualification concerning defensive proceedings. The latter consideration is simply a limitation upon the wider proposition. THE POWER TO ORDER SECURITY FOR COSTS 30 The application for security was apparently made pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (the "Federal Court Act") and r 19.01 of the Federal Court Rules 2011 (the "Rules"). Section 56 provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security. 31 Rule 19.01 provides: (1) A respondent may apply to the Court for an order: (a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and (b) that the applicant's proceeding be stayed until security is given; and (c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed. (2) An application under subrule (1) must be accompanied by an affidavit stating the facts on which the order for security for costs is sought. (3) The respondent's affidavit should state the following: (a) whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered; (b) whether the applicant is ordinarily resident outside Australia; (c) whether the applicant is suing for someone else's benefit; (d) whether the applicant is impecunious; (e) any other relevant matter. ... (4) In this rule: applicant includes a cross-claimant. respondent includes a cross-respondent. 32 The term "applicant" in s 56 seems to describe the person commencing proceedings in the Court, rather than any applicant for an order for security. If that view is correct, then the section does not authorize the making of an order for costs against a defendant (or respondent), even if he is really a plaintiff (or applicant) in the sense in which those terms are used in the cases to which I have referred. This apparent anomaly arises only if s 56 is the sole source of the Court's authority to make orders by way of security for costs. This approach was taken by Olney J in Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 308. His Honour suggested that: ... the very specific provisions of s 56 were intended to provide a comprehensive statement of the court's power to order security for costs. Had the intention been to merely preserve those powers which such a court in our legal system has traditionally enjoyed, there would have been no purpose enacting s 56, at least so far as proceedings at first instance are concerned. 33 His Honour considered that s 56(5) reinforced this view: ... in that it preserves other statutes and the Rules of Court in relation to the operation of furnishing of security for costs. As the rule-making power is limited to making rules not inconsistent with the Act, it would not be possible to expand the court's power in this area by making a rule inconsistent with s 56, and indeed the Rules do not seek to do so. 34 Much time could be consumed in speculating about the meaning of s 56(5), whether s 56 is the sole source of any power to order security and whether s 43 (dealing with costs), s 38 (dealing with practice and procedure) and s 59 (dealing with rules), provide an alternative basis for the power to order security. One might also speculate about any possible inherent jurisdiction concerning the control of proceedings. However the problem does not arise in this case. The question is the application of the cases to which I have referred to the exercise of the Court's power to order security against an applicant or plaintiff. A "BINARY" OR "DICHOTOMOUS" APPROACH 35 Finally, I should say something about the proposition advanced by the Commissioner that the Court should not take a "binary" or "dichotomous" approach to the question of whether the case is essentially defensive. This proposition seems to involve the assumption that there may be aspects of a case which are "aggressive" and other aspects which are "defensive", and that these aspects should simply be taken into account as relevant circumstances. In my view such an approach completely undermines the principles upon which these "rules" are based. The proposition necessarily assumes that a party be characterized as either the moving party or the defending party, and that the established practice is that only a moving (or aggressive) party out of the jurisdiction, without assets in the jurisdiction, will generally be ordered to provide security. THE PROPOSED GROUNDS OF APPEAL 36 As to proposed ground 1, for the reasons which I have given, the taxpayer's claim should be characterized as defensive. In Madgwick v Kelly (2013) 212 FCR 1 at [16] Allsop CJ and Middleton J held that the cases do not require a minute analysis of the relevant legal relationship in order to determine the true role of the party against whom security is sought. I respectfully adopt that observation. Proposed ground 1 must fail. 37 As to proposed ground 2, her Honour seems to have attributed greater weight to the defensive aspect of the case than did the relevant Judges in Oswal v Commissioner of Taxation (No 2) [2015] FCA 1143 and Hii v Commissioner of Taxation (No 3) [2016] FCA 58. According to the Commissioner, her Honour ought to have followed those decisions by considering, "whether and to what extent the present proceedings have a defensive element or character, and then (weighing) that defensive element against the other factors to be taken into account in exercising the discretion". Further, the Commissioner submits that her Honour ought not to have taken, "a binary view of the question of characterisation". Those submissions suggest that the characterization of a party's position as having a significant defensive element will lead only to that matter being treated as one factor to be considered along with others. It may be that in Madgwick v Kelly at [18], Allsop CJ and Middleton J gave some faint support to such an approach. However that was not a case in which the plaintiff was out of the jurisdiction. For the reasons given above, I consider that whatever the view taken in Oswal or Hii, the approach taken by the primary Judge was correct. . 38 As I understand the Commissioner's case, proposed ground 3 really asserts that the primary Judge gave too much weight to the defensive nature of the taxpayer's case. In light of the authorities, I see no merit in that criticism. In my view, the dominant considerations were that the taxpayer was out of the jurisdiction and without assets in the jurisdiction, and that the taxpayer's case was, in truth, defensive. Her Honour gave appropriate weight to those matters. I do not accept that her Honour otherwise failed to consider any relevant aspect. Proposed ground 3 must fail. Proposed ground 4 is to similar effect and should also fail. 39 Proposed ground 5 is misconceived. The risk of stultification may militate against an order that an applicant give security. That a party is able to give security says nothing about whether an order should be made. Such an approach would mean that in any case, all other things being equal, any applicant (and perhaps any respondent), could be ordered to give security simply because he or she was able to do so. Proposed ground 5 must fail. 40 The proposed appeal must fail. Leave to appeal should be refused with costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate: Dated: 5 December 2016 REASONS FOR JUDGMENT KENNY AND EDELMAN JJ: introduction 41 The Court has heard argument on an application for leave to appeal from part of the orders made by a judge of the Court on 22 April 2016 in three proceedings (VID 66-68 of 2015), as well as argument on the appeal supposing leave were granted. For the reasons stated below, we would grant leave to appeal, allow the appeal, and in the re-exercise of the discretion, substantially restore the provision for security for costs ordered on 21 December 2015. 42 The three proceedings were instituted by Mr Socrates Vasiliades in February 2015 to contest taxation liabilities under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA). In instituting these proceedings, Mr Vasiliades was exercising his right under s 14ZZ of the TAA to appeal to the Federal Court against the decision of the Commissioner of Taxation (Commissioner) to disallow Mr Vasiliades' objection against amended assessments for the years of income ending 30 June 2007, 2008 and 2009 (assessments). 43 In May 2015, judgment was awarded in related proceedings in this Court against Mr Vasiliades in favour of the Deputy Commissioner of Taxation in the sum of $30,315,876.54 (judgment debt) for the amounts assessed plus the general interest charge that had accrued by that time. A judge of this Court also declared that an amount of $2,701,196.68 in a Macquarie Bank account was held for Mr Vasiliades; and the bank subsequently transferred that amount to the Commissioner. The Commissioner had treated the amount as part payment of the judgment debt, the balance of the judgment debt remaining unpaid. 44 In November 2015, the Commissioner applied for security for costs in the three Part IVC proceedings pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) and r 19.01 of the Federal Court Rules 2011 (Cth) (Rules), primarily on the basis that Mr Vasiliades resided outside Australia and there was no evidence to show that he had assets within Australia. There has been no change in Mr Vasiliades' position in this regard. 45 In December 2015, a registrar of the Court heard the Commissioner's application. This was supported by, amongst other things, an affidavit sworn on 4 November 2015 by Elizabeth Mary Harris, a costs consultant, annexing her report assessing the Commissioner's party-party costs, if the proceedings progressed to trial and the Commissioner's costs were ordered to be paid by Mr Vasiliades, in the amount of $436,193. The registrar made orders on 21 December 2015 in each proceeding that Mr Vasiliades provide security by the provision of one or more bank guarantees or in a form otherwise acceptable to the Deputy Registrar for the costs of the Commissioner of those proceedings in the sum of $228,000 by 4 pm on 25 January 2016. Although Mr Vasiliades did not provide any guarantee by 25 January 2016, on 16 March 2016, he provided a bank guarantee from Nordea Bank SA in Luxembourg for the amount of $228,000. He also provided an undertaking to renew the guarantee if the proceedings remained on foot on or before the date of expiration of the current bank guarantee. 46 In the meantime, in January 2016, Mr Vasiliades applied to the Court under s 35A(5) of the Federal Court Act and r 3.11 of the Rules to review the registrar's orders. Such an application proceeds as a hearing do novo: Mazukov v University of Tasmania [2004] FCAFC 159 at [21]–[24]. In February 2016, the Commissioner applied for summary dismissal of the three proceedings under rr 5.22(b) and 5.23(1)(b)(i) of the Rules on the basis that, as outlined above, Mr Vasiliades was in default of the order for the provision of security. 47 After a hearing on 24 March 2016, the primary judge dismissed the Commissioner's application on 22 April 2016. Her Honour also ordered that the registrar's December 2015 orders be set aside and that the Commissioner's application for security for costs be dismissed. Before us, the Commissioner sought leave to appeal against paragraph 2 of her Honour's orders of 22 April 2016, which set aside the registrar's orders for the provision of security. The Commissioner has not sought leave to appeal from the dismissal of his summary judgment application. 48 Pursuant to s 24(1A) of the Federal Court Act, an appeal can only be brought from interlocutory orders, such as those made by the primary judge, with leave. The principles to be applied in determining whether or not leave should be granted are well settled: see [60]-[61] below. The grounds set out in the Commissioner's draft notice of appeal were as follows: 1. The learned primary Judge erred in characterising proceedings in this Court brought pursuant to Part IVC of the Tax Administration Act 1953 (Cth) [sic] as "truly defensive in character" (at [26]) and has [sic] having an "essentially defensive nature" (at [29]). 2. The primary judge should have followed previous authority in this Court, namely Oswal v Commission of Taxation (No 2) [2015] FCA 1143, per Nicholas J, at [54] and Hii v Commissioner of Taxation (No 3) [2016] FCA 58, per Collier J, at [28], which rise no higher than characterising Part IVC proceedings as having a significant defensive element or aspect and reject the need to take a binary view of the question of characterisation. 3. The primary judge erred (at [26]) in treating the characterisation referred to in paragraph 1 above as determinative of the question whether security for costs should be ordered. 4. The primary judge ought to have approached the exercise of her discretion by considering and weighing all of the circumstances relevant to the grant of security in the context of this individual application. 5. The primary judge erred in failing to take into account a material consideration, namely that the respondent's proceedings would not be stultified if an order for security for costs were made. 49 In his draft notice of appeal, the Commissioner sought the following orders: 1. Appeal allowed. 2. Set aside paragraph 2 of the Orders made by the primary Judge on 22 April 2016. 3. In its place, order that the interlocutory application filed by the Respondent on 25 January 2016 seeking review of the orders made by Registrar David Ryan on 21 December 2015 be dismissed. 4. The Respondent pay the Appellant's costs of and incidental to this appeal and of the application for review of the orders made by Registrar David Ryan on 21 December 2015. 5. Such further or other orders as the Court thinks fit. Decision of the primary judge 50 The primary judge began her discussion of the matter of security for costs by identifying three factors as "relevant to the present case": (a) whether the proceeding is essentially defensive in nature; (b) whether the applicant is a natural person; and (c) whether the applicant is a non-resident with no assets in Australia: see Vasiliades v Commissioner of Taxation [2016] FCA 420 (PJ) at [15]. In particular, citing PS Chellaram & Co v China Ocean Shipping Co [1991] HCA 36; 102 ALR 321 at [7] and Logue v Hansen Technologies Ltd [2003] FCA 81; 125 FCR 590 at [18], her Honour accepted (PJ [16]-[17]) that the fact Mr Vasiliades was resident outside Australia and there was no evidence that he had assets in Australia was a factor to be taken into account in favour of the grant of security. 51 The primary judge was, however, persuaded by counsel for Mr Vasiliades that no security should be ordered because Mr Vasiliades was, in substance, in the position of a defendant. Her Honour's decision rested heavily on a statement made by Dixon J (with whom Rich J agreed) in Willey v Synan [1935] HCA 76; 54 CLR 175 at 184, accepting statements made by Scrutton LJ in Maatschappij Voor Fondsenbezit v Shell Transport and Trading Company [1923] 2 KB 166 at 177. In Willey v Synan, so her Honour said (PJ [18]), "the High Court held that security for costs should not be ordered against the plaintiff by reason that his proceedings were essentially defensive in nature". 52 The primary judge also held (PJ [20]) that the proceedings instituted by Mr Vasiliades under Part IVC of the TAA were "in substance in the nature of defensive proceedings". Her Honour supported this characterisation by the following analysis of the significance of Part IVC (at [20]): By virtue of s 350-10(1) of Sch 1 to the TAA, production of a copy of a Notice of Assessment is conclusive evidence that the assessment was properly made and, except in proceedings under Pt IVC of the TAA on an appeal or review relating to the assessment, that the amount and all the particulars of the assessment are correct. The tax assessed is a debt due to the Commonwealth and is payable to the Commissioner: s 255-5(1) of Sch 1 to the TAA. The avenue for a taxpayer to challenge the substantive liability imposed by the assessment is under the Pt IVC procedure by lodging an objection with the Commissioner against the assessment and, if the objection is wholly or partly disallowed, either seeking review of the Commissioner's objection decision in the Administrative Appeals Tribunal ("AAT") or appealing the objection decision in the Federal Court. In such proceedings the taxpayer bears the burden of proving that the assessment is "excessive": in the AAT by force of s 14ZZK of the TAA and in the Federal Court by force of s 14ZZO of the TAA. The term "excessive" relates to the "amount" of the assessment and in Pt IVC proceedings the taxpayer must prove that the amount of taxable income assessed exceeds the taxpayer's actual taxable income: Commissioner of Taxation v Dalco (1990) 168 CLR 614; [1990] HCA 3 at [12]. Unless the amount is found to be "excessive" in the sense of being greater than the taxable income on which tax ought to have been levied, the taxpayer fails on the review or appeal. Notwithstanding the pendency of a review or appeal, the Deputy Commissioner may sue for and recover any unpaid tax (and any additional tax or other amount) as if no review or appeal were pending: ss 14ZZM and 14ZZR of the TAA. Given the statutory force of the production of a Notice of Assessment and the liability created by force of the operation of the TAA, Pt IVC proceedings are in substance in the nature of defensive proceedings. 53 After referring in some detail to the reasons for judgment of Nicholas J in Oswal v Commissioner of Taxation (No 2) [2015] FCA 1143 and of Collier J in Hii v Commissioner of Taxation (No 3) [2016] FCA 58; 238 FCR 304, both of whom had granted security for costs notwithstanding they were sought in Part IVC proceedings, the primary judge stated (PJ [26]) that in her view the defensive nature of the Part IVC proceedings was: ... a significant factor that should, and does, weigh against an order for security in the present case. These proceedings are truly defensive in character and the principle espoused in Willey v Synan applies to the circumstances of this case. The Commissioner's exercise of his assessment power has by force of law crystallised a liability for the taxpayer. The effect of s 350-10(1) of Sch 1 to the TAA is to preclude a challenge to the amount of tax assessed except in Pt IVC proceedings and it is upon the taxpayer to bring such proceedings under Pt IVC. These proceedings are the avenue by which the taxpayer can challenge the Commissioner's assessments and his liability to the tax as assessed and it has not been suggested by the Commissioner that there is not a real issue to be decided between the parties. In the circumstances, I do not consider that the taxpayer should be required to give security for costs. 54 Accordingly, her Honour set aside the orders of the registrar, with the consequence that the Commissioner lost the benefit of security for costs. parties' submissions 55 In support of his application for leave to appeal, the Commissioner submitted that if leave were refused in this case, the Commissioner would suffer substantial injustice because the Commissioner "would be deprived of security for any costs that may be awarded in his favour in circumstances where the respondent ... is a foreign resident, has no assets in Australia and no disclosed foreign assets" whilst the respondent was not at risk of failing to recover any costs awarded in his favour. 56 Both in support of the grant of leave to appeal and the appeal, the Commissioner submitted that there was in this case an error of the kind referred to in House v The King [1936] HCA 40; 55 CLR 499 because the primary judge mistakenly characterised the Part IVC proceedings as "in substance in the nature of defensive proceedings", "truly defensive in character" and of an "essentially defensive nature". The Commissioner submitted that some proceedings might be brought under Part IVC that had no, or an insignificant, defensive element and that, even if the Part IVC proceedings in this case had a defensive element, this did not require the dismissal of the Commissioner's application for security for costs. The Commissioner submitted that the primary judge erred by acting on this erroneous basis and that Willey v Synan should be distinguished. The Commissioner submitted that the relevant provisions of the TAA did not support the conclusion that the Commissioner's statutorily-authorised acts were a "statutory substitute for judicial proceedings by the Crown" (referring to Willey v Synan 54 CLR 175 at 185-186). The Commissioner added that "in appealing against objection decisions the Taxpayer was not defending anything in the nature of property or an existing entitlement" (referring to Wyong-Gosford Progressive Community Radio Incorporated v Australian Communications and Media Authority [2006] FCA 625 at [31]). Rather, so the Commissioner submitted, the taxpayer was "engaging in a statutory process to establish what his correct taxable income should be". 57 The Commissioner further argued that, having identified a wrong principle, the primary judge failed to apply the correct principle and take into account all material considerations in reaching her decision. Referring to Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1, Oswal [2015] FCA 1143 and Hii 238 FCR 304, the Commissioner contended that her Honour should have considered, and did not consider, "how any defensive element weighed against the other factors to be considered in the judicial exercise of this discretion" because whether or not the proceedings had a defensive element was not determinative of a security for costs application as, "in effect", her Honour decided. The Commissioner complained of her Honour's failure to "give any weight to the Taxpayer's inability to pay the Commissioner's costs if so ordered, the Taxpayer's foreign residence or the fact that an order for security would not stultify the Proceedings". At the hearing of the appeal, counsel for the Commissioner expressly stated that, absent any error of principle, he did not contend that the Court should infer there had been a failure properly to exercise the discretion on the basis that the decision of the primary judge was unreasonable or unjust. 58 In response, Mr Vasiliades submitted that the primary judge made no error of principle and had properly considered whether other material factors outweighed the defensive nature of the Part IVC proceedings. It was further submitted that nothing in Oswal and Hii obliged the primary judge to order security for costs to be provided by him in the proceedings. Mr Vasiliades submitted that the defensive nature of Part IVC proceedings flowed from the fact that the taxpayer bore the onus of proof under ss 14ZZK and 14ZZO of the TAA in establishing that the Commissioner's assessment was excessive, and from the provisions of ss 255-1(1) and 350-10(1) of Sch 1 of the TAA. In particular, Mr Vasiliades argued that those two provisions of Sch 1 were "the basis of a considerable evidentiary advantage which the tax legislation affords the Commissioner" and that the taxpayer was forced to institute Part IVC proceedings to contest an assessment. Mr Vasiliades submitted that no error was disclosed in the primary judge's consideration of Willey v Synan and that: It may be accepted that the defensive element of a proceeding instituted under Part IVC is not necessarily determinative of whether the Court should order security for costs. But that does not mean that such a defensive element may never be so determinative in the particular circumstances and merits of a particular case, as the Commissioner contends. ... This Court is not bound by Willey v Synan as a matter of stare decisis in the present case because of the statutory foundation of its discretion to award security for costs. As a general proposition, the principle is nevertheless a consideration to be given significant weight in cases involving natural persons who are defendants in substance. It is certainly the case that Willey v Synan establishes that a natural person litigant who is a defendant in substance may of itself be a sufficient consideration for a court properly to decide not to award security for costs against the litigant. ... Contrary to the Commissioner's contention, that an order for security may not stultify the proceedings is not a determining factor. ... Moreover, contrary to the Commissioner's submissions: (a) Willey v Synan is not authority that proceedings brought against the Crown may be defensive in nature only in the circumstances there described; and (b) the present case is on all fours with Willey v Synan as to the defensive nature of the proceedings. (Citations omitted) 59 Mr Vasiliades submitted, however, that the defensive nature of the proceeding was not the only consideration that led the primary judge to deny the Commissioner security for costs. He submitted that her Honour "weighed that consideration not only in all of the circumstances of the case", but also "expressly took into consideration that (a) the proceeding was essentially defensive in nature, (b) the taxpayer is a natural person, (c) the taxpayer is a non-resident with no assets in Australia, (d) that it had not been suggested by the Commissioner that there is not a real issue to be decided between the parties and (e) the choice the taxpayer had to bring proceedings in the Administrative Appeals Tribunal. Further, the primary Judge expressly declined to consider as a relevant factor whether the Commissioner had had the benefit of $2.7 million recovered pursuant to his debt proceedings". consideration 60 The questions arising on the application for leave to appeal are whether paragraph 2 of her Honour's orders of 22 April 2016, with respect to security for costs, was attended by sufficient doubt to warrant reconsideration by an appellate court and, if so, whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-400; and Re CSR Ltd [2010] FCAFC 34; 183 FCR 358 at [5]. Bearing in mind the purpose of an order for security, the likely costs to the Commissioner of a 5-day hearing, Mr Vasiliades' residence out of the jurisdiction, and his lack of assets within Australia, the second question should be answered in the affirmative. Indeed, Mr Vasiliades made no submission to the contrary. 61 As emphasised below, the judgment of the primary judge was a discretionary one. As the parties acknowledged, conformably with House v The King 55 CLR 499 at 505, before an appeal will be allowed from such a judgment, "[i]t must appear that some error has been made in exercising the discretion". It is also well recognised that an appellate court will "exercise particular caution in reviewing decisions pertaining to practice and procedure" although "the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration": Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; 148 CLR 170 at 177. These principles are relevant to the present appeal. 62 The order respecting security for costs made by the primary judge was made under s 56(1) of the Federal Court Act, which provides: The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. 63 Rule 19.01 of the Rules, which also applies to an application for security for costs, further addresses the practice and procedure of the Court in considering such an application. Rule 19.01(1)(a) provides that "[a] respondent may apply to the Court for an order ... that an applicant give security for costs". Rule 19.01(2) stipulates that such an application must be accompanied by an affidavit "stating the facts on which the order for security for costs is sought", and to this end desirably addressing (r 19.01(3)): (a) whether there is reason to believe that the applicant will be unable to pay the respondent's costs if so ordered; (b) whether the applicant is ordinarily resident outside Australia; (c) whether the applicant is suing for someone else's benefit; (d) whether the applicant is impecunious; (e) any other relevant matter. In r 19.01, "applicant" is defined to include "a cross-claimant", and "respondent" to include "a cross-respondent" (r 19.01(4)). 64 Rule 19.01 is broadly equivalent to O 28 of the former Federal Court Rules 1979 (Cth), which was applicable to proceedings at first instance. (Order 52 r 20 of the former Rules made separate provision for security for costs in appellate proceedings.) The provisions of the Rules, former and current, were made in exercise of the rule-making power conferred on the Judges of the Court (or a majority of them) by s 59 of the Federal Court Act, in particular s 59(2)(n). Section 59(1) confers a power to make Rules of Court "not inconsistent with" the Federal Court Act. Rule 19.01 cannot therefore enlarge the power with respect to security for costs beyond the power conferred by s 56 of the Federal Court Act. 65 But for s 56 or its equivalent, a power to order security for costs may well have been said to arise in exercise of an inherent or implied power to ensure that proceedings before the Court were conducted justly and efficiently. 66 In England, courts established pursuant to the Royal Prerogative were at one time attributed with inherent power to order security for costs. When, however, statute made provision for appeals, then statutory provision was expressly made for ordering security for costs as ancillary to appeals: see, for example, J H Billington Ltd v Billington [1907] 2 KB 106 at 109-110. The position in England has of course altered since 1907, when J H Billington was decided. 67 In England, prior to the implementation of reforms recommended by Lord Woolf, Ord 23 of the Rules of the Supreme Court 1965 governed applications for security for costs in the English High Court and the civil division of the Court of Appeal (see Ord 1, r 2). In such cases as CT Bowring & Co (Insurance) Ltd v Corsi & Partners Ltd [1995] 1 BCLC 148; [1994] 2 Lloyd's Rep 567 and Condliffe v Hislop [1996] 1 All ER 431; [1996] 1 WLR 753, Ord 23 was held to be exhaustive of the power to order security: see also Re Little Olympian Each Ways Ltd [1994] 4 All ER 561; [1995] 1 WLR 560 at 564-5. It is worth noting, however, that whilst accepting there was no inherent jurisdiction outside Ord 23 to grant security for costs, Kennedy LJ (with whom Peter Gibson LJ and Sir Roger Parker agreed) nonetheless held that the court was entitled to protect its own procedures, and since the principle that costs follow the event was of fundamental importance, then if that principle were threatened, "the court might, at least in some cases, be prepared to order that the action be stayed": Condliffe v Hislop [1996] 1 All ER 431 at 440; cf. Abraham v Thompson [1997] 4 All ER 362 at 369-371. Since the reforms proposed by Lord Woolf, applications for security for costs in England may now be made under r 25.12 of the Civil Procedure Rules 1998. 68 The High Court of Australia has also been said to have an inherent or implied power in the exercise of its original jurisdiction to award security for costs. In Merribee Pastoral Industries Pty Limited v Australia and New Zealand Banking Group Limited [1998] HCA 41; 193 CLR 502, Kirby J reflected on the English legal history of the power and the history of provisions for security for costs in the High Court, including by the High Court Procedure Act 1903 (Cth), since repealed, and in successive Rules of Court, commenting (at [18]): The view was apparently then taken that, appeal, being itself a creature of statute, the regulation of its terms would require statutory provision. This explained the introduction of the specific power for the English High Court and Court of Appeal to order security for the costs of an appeal. It was doubtless upon that footing that the High Court Procedure Act so provided for this Court in 1903. The generality of the provision for security for costs in relation to proceedings other than appeals, lying in the original jurisdiction of a superior court of record, could be left safely to the inherent power of such a court. Although this Court was not created out of the Royal Prerogative but by the Constitution, it enjoys and has exercised the inherent or implied powers traditionally belonging to the Royal Courts of Justice of England and proper to a final court of appeal. It also enjoys and has exercised large powers implied from its functions. (Citations omitted) Hence, so his Honour reasoned, although there was no statutory or other provision conferring power on the High Court to order security for costs in its original jurisdiction, the Court had had an inherent or implied power to do so. 69 Furthermore, the preponderance of authority concerning the State Supreme Courts is that the power to order security for costs derives from the inherent power of a Supreme Court to regulate its own procedure: see Lines v Tana Pty Ltd [1987] VR 641 at 642 (Crockett, O'Bryan and Tadgell JJ); O'Neill v De Leo (1993) 2 Tas R 225 at 229-230 (Green CJ); Shannon v Australian and New Zealand Banking Group Ltd (No 2) [1994] 2 Qd R 563 at 563-564 (Williams J); and Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443 at 447-448 (Holland J). In the last-mentioned case, Holland J stated (at 447) that, in his view, "it is settled by modern authority that power to require security for costs is inherent in the court whether functioning at Common Law or in Equity", adding that "[c]ourts have frequently asserted inherent power to regulate their own practice and procedure to procure proper and effective administration of justice and prevent abuse of process". State Supreme Courts have, on a number of occasions, rejected the proposition that current statutory provisions and the making of court rules on security for costs put aside this inherent power: see, for example, Rajski [1982] 2 NSWLR 443 at 448; and Shannon [1994] 2 Qd R 563 at 564. 70 The Federal Court is "a superior court of record and is a court of law and equity": see Federal Court Act, s 5(2). It has, as Gummow J said in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (1987) 14 FCR 461 at 466, "the general judicature system powers and obligations". Whatever the other sources of power that might exist for security for costs, this application was brought only on the basis of s 56 and r 19.01. Section 56 clearly provides sufficient authority to make a security for costs order of the kind the Commissioner sought: cf. Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,420. Furthermore, a comparison of the decisions in this Court with the other decisions to which we have referred, indicates that, as a practical matter, an exercise of discretion under s 56 will generally be governed by the same consideration as an exercise of what in other courts is described as inherent or implied power to grant security for costs. 71 The discretion conferred by s 56 is a broad one, subject only to the limitation that it must be exercised judicially. The discretion has been sometimes described as unfettered and to depend on the particular circumstances of the case: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 at 4. The latter observation might be thought a truism, save that it strongly indicates that the exercise of the discretion is not determined by rules. 72 The purpose to be served by making an order for security for costs is to ensure that a successful respondent to a claim will have a fund available within the jurisdiction of the Court against which the respondent, if successful in defence, can enforce a judgment for costs in the respondent's favour. This purpose is, of course, relevant to an exercise of discretion. The factors that the courts have over time recognised as relevant to an exercise of discretion are relevant because they bear on the purpose for which an order for security for costs is made. Thus, if an applicant in a proceeding is ordinarily resident outside the jurisdiction, an award of security for costs means that a respondent "does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement": Energy Drilling Inc v Petroz NL (1989) ATPR 40-954 at 50,422 (Gummow J). See also: Logue v Hansen Technologies Ltd 125 FCR 590 at [18] (Weinberg J); GAIN Capital UK Limited v Citigroup Inc [2015] FCA 1009 at [18] (Yates J); and Oswal [2015] FCA 1143 at [57] (Nicholas J). 73 In the present case, the arguments advanced by the parties before the primary judge principally turned on two competing considerations: (1) that the applicant was ordinarily resident outside Australia and had no disclosed assets in Australia to meet an award of costs that might be made in the Commissioner's favour; and (2) the nature of Mr Vasiliades' Part IVC proceedings. This is not to suggest that these were the only relevant considerations: we have already mentioned the primary judge's reference to the fact that the party against whom security was sought was a natural person, and the parties also relied on some other matters, including the Commissioner's application of the amount of $2,701,196.68 against the judgment debt (see [106] below). 74 Regarding the first principal consideration to which we have referred, however, there was no evidence before her Honour concerning either Mr Vasiliades' assets or ordinary residence, although it was common ground that he was an Australian non-resident without apparent assets in Australia. The significance of this consideration was emphasised in PS Chellaram & Co Ltd v China Ocean Shipping Co 102 ALR 321 (in which the respondents applied for an order that the appellant provide security for the costs of its appeal). In reasons for judgment awarding security, McHugh J stated (at 323): To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. 75 The fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction is clearly a significant circumstance militating in favour of an applicant for security for costs. As the above passage highlights, however, there is no rule that security for costs will be awarded as of course where an applicant is resident out of the jurisdiction and has no assets within the jurisdiction. A case may disclose countervailing circumstances that properly justify refusing an application. 76 Regarding the second principal consideration, Mr Vasiliades' case at the hearing before the primary judge was that the three proceedings brought by him under Part IVC of the TAA (at pp 2 and 4-5 of the transcript of those proceedings): ... are, in substance, defensive proceedings. And the law has always been that security for costs will not be awarded against an individual who is a defendant in substance. The authorities for that are the case of Willey v Synan in the High Court, relying on Scrutton LJ in a Court of Appeal decision of Maatschappij. ... Now, in this court ... there has been a departure from the principles expressed in Willey v Synan and by Scrutton CJ [sic]. Beginning with Madgwick v Kelly and continuing through Oswal and Hii, the court, in our submission respectfully, really hasn't placed sufficient weight on this principle that security for costs should not be awarded against an individual who is, in essence, a defendant. Our submission, which your Honour finds set out in paragraphs 12 and 13 of our written submissions, is that circumstances should be truly extraordinary before the court departs from the principle that security for costs will not be awarded against a natural person who is a defendant. 77 For Mr Vasiliades, in reply, it was submitted (at pp 28-29 of the transcript) that "the High Court ... gave an absolute rule in [Willey v Synan]", after which the primary judge remarked (at p 29 of the transcript) that: [T]here appeared to be two competing principles at stake here. First, there's the Willey principle in respect of proceedings that are essentially defensive. Secondly, there's the principle that where you have an overseas litigant who has no assets in Australia, it's a strong factor in favour of the granting of security. Counsel for Mr Vasiliades responded: With respect, your Honour, the rules have always been that an individual overseas or otherwise ought not be ordered to give security and the reason for that, of course, is the defendant is not the person who's calling on the processes of the court ... That's why the debate about who's, in substance, a defendant, has come about ... 78 Having read the transcript of the hearing before the primary judge and the parties' written submissions filed before that hearing, it seems to us that either Mr Vasiliades put his case on the basis that Willey v Synan 54 CLR 175 was authority for a rule that no order for security for costs would be made where the party bringing the proceeding was, in substance, a defendant; alternatively, that it would have been reasonable for her Honour to have understood his case in this way (notwithstanding senior counsel's perception, stated at the hearing before us, that "the highest it was put was this was a very strongly stated position in those authorities"). 79 The reasons for judgment of the primary judge indicate, in our view, that her Honour accepted the case for Mr Vasiliades (as she understood it) that Willey v Synan 54 CLR 175 and Maatschappij [1923] 2 KB 166 stood for the proposition that there was a rule, or a very strong predilection, against ordering security for costs against a party bringing a proceeding that was "essentially defensive in nature" and that this was why her Honour refused to award the Commissioner security for costs against Mr Vasiliades. Thus, for example, her Honour stated (PJ [18]) that "[t]here is a strong line of authority [referring to Willey v Synan and Maatschappij] that a court should be reluctant to order security where the proceeding is essentially defensive in nature"; and, also that Mr Vasiliades submitted that the circumstances should be "truly extraordinary" before the Court departs from the principle in Willey v Synan "which is intended to prevent a defendant being put into a position where that defendant is shut out from justice" (PJ [18]). Significantly, at a critical point in her reasons, her Honour said (PJ [26]) that "[a]lthough in both Oswal and Hii the defensive nature of the Pt IVC proceedings was held not to outweigh other factors bearing upon whether security should be granted, I am of the view it is a significant factor that should, and does, weigh against an order for security in the present case. These proceedings are truly defensive in character and the principle espoused in Willey v Synan applies to the circumstances of this case. ... These proceedings are the avenue by which the taxpayer can challenge the Commissioner's assessments... In the circumstances, I do not consider that the taxpayer should be required to give security for costs" (emphasis added). 80 We consider that her Honour was led into error, as we explain below. 81 We accept that statements made in the reasons for judgment of Scrutton LJ in Maatschappij [1923] 2 KB 166 can be read as supporting the proposition that a court will not order security for costs to be provided by the party bringing the action where that party is in truth the party under attack. Scrutton LJ stated (at 177-8): But it is said here that the Perlak Company [the intervening defendant] has not been compelled to come as a defendant but has intervened of its own free will. There are however a set of cases in which foreign claimants have come to England to protect property attacked in English proceedings, but have not been ordered to give security, because they are only there in defence of their property threatened by English proceedings. ... [T]he the position, I think, extends to every case where the person against whom security is sought is really defending himself against attack, even if he be nominally a plaintiff, but really defending himself against defendants' previous action against him. ... The Court always, as I understand, endeavours to be guided by the substance and not by the form of the matter, and orders security for costs against the foreign attacker, not against the foreigner defending himself or his property from attack. ... Though the question is a difficult one, I am of opinion that the Perlak Company are really defending themselves and not attacking, and therefore should not be ordered to give security. 82 The circumstances of that case disclose, however, that it was not a case in which security was denied on the basis that the principal proceedings were brought as a defensive measure. In that case, security for costs was sought against a party that had been granted leave to intervene as a defendant, the original defendants having agreed to pay the debt as claimed by the plaintiffs to whomever the court determined it was due. The intervening party was a foreign company which was claiming priority. In these circumstances, the English Court of Appeal refused the plaintiffs' application for security against the intervening defendant. 83 Furthermore, bearing in mind English and Australian legal history over the past 60 plus years, English decisions concerning security for costs are of limited assistance in this Court. It may also be worth noting that, in 1987, Millett J said that a purpose of the introduction of Ord 23 of the Rules of the Supreme Court 1965 was to "[sweep] away the encrustation of accumulated practice" and substitute a general discretion: DSQ Property Co Ltd v Lotus Cars Ltd [1987] 1 WLR 127 at 133. As indicated above, the English courts have continued along this path. 84 What is more, we would not read Willey v Synan 54 CLR 175 as authority for a rule that a court must not order security for costs from a party bringing proceedings where that party is in substance a defendant. In Willey v Synan the Collector of Customs applied for security for costs against the plaintiff seaman under O XXVIII r 9 of the then High Court Rules 1928 (Cth), which provided that a plaintiff ordinarily resident beyond the Commonwealth may be ordered to give security for the costs. The non-resident plaintiff had found English silver coins on board a ship. Officers of the Customs Department took possession of them under the Customs Act 1901 (Cth) and gave notice under that Act that the coins would be condemned unless the plaintiff brought an action for their recovery. In consequence, the plaintiff instituted an action in the High Court under s 207 of the Customs Act 1901 (Cth) to recover them. In argument for the plaintiff it was said that the plaintiff was not the attacker but the person attacked, and that "the ordinary rule [was] that the person attacked, who normally is the defendant, will not be ordered to give security for costs". As Latham CJ observed (at 180) the Collector of Customs "really initiated legal process by giving notice under sec 207 [of the Customs Act] which would result in the exclusion of any right of the plaintiff unless the plaintiff himself took legal proceedings": see also Dixon J at 185-186. The High Court was unanimously of the view that security should not be ordered because the plaintiff was, in substance, in the position of a defendant, since he had to commence proceedings to avoid the statutory forfeiture. 85 Dixon J (with whom Rich J agreed) referred (at 184-5) to Scrutton LJ's judgment in Maatschappij [1923] 2 KB 166 in support of the principle, which he affirmed as correct, that "a party to judicial proceedings, who resides beyond the jurisdiction, should not be required to give security for costs unless, however the parties are arranged upon the record, he is the person invoking or resorting to the jurisdiction for the purpose of establishing rights or obtaining relief". Dixon J added (at 184) that "[i]f he does avail himself of the remedies the jurisdiction provides in order to obtain affirmative relief or redress, he may be ordered to give security, although he becomes a defendant in the action". 86 The High Court did not say, however, that an exercise of discretion to award security for costs was cut down or necessarily limited by the fact a person bringing the proceeding was in substance a defendant. Nor did it say that this factor necessarily prevailed over all other factors in every case. The case was only fought (see 177-178) on the basis that the appellant said that the Collector of Customs was in the position of a plaintiff and the respondent said that it was the plaintiff who was in the position of a plaintiff. It seems to us that Willey v Synan stands for the proposition that the justice of the case must be kept in mind in any exercise of the discretion and that this will depend on the particular circumstances of the case. The purpose of an award of security for costs is relevant at this point. Generally speaking, a party bringing proceedings chooses to institute proceedings after considering the advantages and disadvantages of doing so (including the likelihood of recovering costs from the defendants). In instituting proceedings, a party assumes the risk of being unable to recover costs from those who are sued. The parties against whom proceedings are brought are not respondents by choice but because someone else has chosen to sue them. As noted, the purpose of an order for security is to ensure that there is a fund available for the benefit of a successful respondent, to mitigate the injustice that would arise if a successful respondent, who has not chosen to incur the expense of the litigation, cannot recover costs from the party who chose to bring the proceedings in the first place. The policy of the law in this regard is related to the accepted understanding in Australian courts that normally costs follow the event. It follows from this that an order for security for costs is generally made against a person who brought the proceeding, however named on the record, and is generally not made against a respondent (although, again, this may not be a hard and fast rule: cf. Ritter v North Side Enterprises Pty Ltd [1975] HCA 18; 132 CLR 301 at 305). 87 Willey v Synan 54 CLR 175 is an example of a case in which a court has, as matter of discretion, determined that, having regard to the particular circumstances raised in argument, it was not in the interests of justice to order security for costs against the party named on the record as bringing the proceeding because he was compelled by statute to bring an action for recovery to protect his rights and, as against the applicant for security for costs, should be treated as if he were the defendant. The case is authority for the proposition that the justice of the case controls the exercise of the discretion and that the fact that a party is in substance a defendant is a relevant circumstance in considering an application for security for costs against that party. As McHugh J explained in PS Chellaram 102 ALR 321 (see [74] above) the importance of any one circumstance will depend on all the other relevant circumstances in the case. A factor such as the plaintiff's residence outside the jurisdiction, without assets in the jurisdiction, might often have "great weight" and determinative practical effect. But the exercise remains one of considering all the factors. 88 We can discern no authority binding on this Court for the proposition there is anything in the nature of an absolute rule that a court will not order a person who is in substance a defendant to provide security for costs. In Stanley-Hill v Kool [1982] 1 NSWLR 460 at 464, Reynolds JA (with whom Moffitt P and Glass JA agreed) rejected the notion that rules govern the exercise of the discretion to award security for costs. 89 Conformably with this aspect of Stanley-Hill v Kool [1982] 1 NSWLR 460, decisions in State Supreme Courts emphasise that previous exercises of discretion may guide an exercise of discretion but do not limit it. In Rajski [1982] 2 NSWLR 443, for example, Holland J (at 448) rejected the proposition that the inherent jurisdiction to award security for costs was restricted to the examples in the decided cases in which security had been granted "in the sense of denying the existence of the power for any other cases". Holland J said (at 448-9): It may be postulated that the general practice in the exercise of the power is to be found in the cases but it is another thing to say that an ever present inherent power to regulate the court's procedure so as to attain the ends of justice can wither away or become shrunken by limited past examples of its exercise. In my opinion, the fact that in the past the power has been regularly exercised in a limited number of cases and refused in others proves the existence of but does not restrict the jurisdiction. In that case, Holland J firmly rejected a rule-based approach to exercising the discretion. His Honour's judgment was upheld on appeal ([1983] 2 NSWLR 122) and been has regularly cited and applied: see, for example, Bhagat v Murphy [2000] NSWSC 892; Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251; Welsel v Francis [2011] NSWSC 477; and Nitopi v Nitopi (No 2) [2016] NSWSC 476. 90 Although the source of the authority to order security for costs in the Federal Court is different from that in the State Supreme Courts, there is as much reason to avoid a rule-based approach in this Court and to avoid a strong predilection for a particular outcome as a consequence of the presence or absence of any specific factor (although some factors – such as absence from the jurisdiction without assets in the jurisdiction – might have significant weight). As we have said, s 56 of the Federal Court Act confers a broad judicial discretion, in the exercise of which the significance of any particular factor will depend not only "upon its own intrinsic persuasiveness" (to adopt the language of McHugh J in PS Chellaram 102 ALR 321 at 323) but on the other circumstances of the case. The wide discretion that it clearly confers does not lend itself to an overly "mechanical" approach (cf. Madgwick v Kelly 212 FCR 1 at [92]) and precludes limitation by the application of judge-made rules in its exercise. As Allsop CJ and Middleton J stated in their joint judgment in Madgwick v Kelly at [92], "[f]airness ... lies at the heart of the exercise of discretion under s 56 – fairness as to whether security should be ordered and, also, importantly, in what amount". 91 Indeed, the Full Court in Madgwick v Kelly 212 FCR 1 effectively approved a multifactorial approach to an exercise of the discretion conferred by s 56 of the Federal Court Act. In their joint reasons (at [7]), Allsop CJ and Middleton J set out the factors listed by the primary judge as relevant to the exercise of discretion in that case. These included "[w]hether the proceeding is essentially defensive in nature?". Much like McHugh J in PS Chellaram 102 ALR 321 at 323, their Honours observed in Madgwick v Kelly at [8] that: The primary judge thereafter framed his consideration of the application by reference to these factors. All these factors were legitimate to consider in an application such as this. ... Nevertheless, it should not be taken that every case requires an examination of all these factors. Much will depend on the facts of the individual case, and, importantly, how the application is argued by the parties. 92 As the previous paragraph might indicate, an issue arose in Madgwick v Kelly 212 FCR 1 as to whether the proceedings were essentially defensive in nature. The proceedings were related class actions brought by investors in a failed managed investment scheme. In relation to this, Allsop CJ and Middleton J stated (at [18]): The expression of the matter by the primary judge ... was, if we may say so, flawless. To the extent there was an interweaving (though in separate proceedings) of the different cases in the overall controversy or matter, as revealed by the primary judge's careful discussion of the strength and bona fides of the claims ... that was a legitimate factor to weigh, along with others. 93 This, as noted earlier, conforms also to the approach of the Court of Appeal of the Supreme Court of New South Wales in Stanley-Hill v Kool [1982] 1 NSWLR 460 and such other decisions as Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 (Ormiston J, Supreme Court of Victoria), E I Du Pont de Nemours & Co v Commissioner of Patents (No 7) (1990) 18 IPR 643 (Hodgson J, Supreme Court of New South Wales), Weily's Quarries v Devine Shipping Pty Ltd [1994] TASSC 76; 14 ACSR 186 (Zeeman J, Supreme Court of Tasmania), and Putney Group Pty Limited v The Royal Rehabilitation Centre Sydney [2009] NSWSC 424 (Forster J, Supreme Court of New South Wales). It also generally reflects the approach of numerous judges of this Court: see Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance Ltd (in liq) [2003] FCA 803 at [82] (Jacobson J); Oswal v Commissioner of Taxation [2015] FCA 1366 at [44] (Griffiths J); Hii 238 FCR 304 at [29] (Collier J); and Thunderdome 36 FCR 297 at 307-8 (Olney J). It may be that other judges on other occasions have taken a contrary view, that there is no power to order security for costs where a plaintiff is, in substance, in the position of a defendant: see, for example, Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 at 329 (Wilcox J); Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 622 at 626 (Sundberg J); and Aurora Networks Pty Ltd v Halbedl; In the Matter of Aurora Networks Pty Ltd [2013] FCA 632 at [20] (Foster J). If this were so, it is inconsistent with s 56 of the Federal Court Act and Madgwick v Kelly 212 FCR 1, as well as many other authorities. 94 On this appeal (although not before the primary judge) senior counsel for the respondent conceded that it would not be the case today that a person who is in the position of a defendant would be – as a rule – at liberty to defend himself or herself without giving security. Rather, as senior counsel for the respondent accepted on this appeal, this is a factor to be considered in the consideration. For the reasons above, we accept that concession. However, as we have explained, the respondent's submissions before the primary judge, which the primary judge accepted, had been to the effect that such a rule, or strong predilection, existed. 95 Accordingly, we are of the view that the primary judge erred in refusing security for costs on the basis that there was a rule, or a very strong predilection, against ordering security for costs against a party bringing a proceeding that was "essentially defensive in nature". It follows that we would grant leave to appeal, allow the appeal, and re-exercise the discretion. Before we turn to the latter matter, we would address one further argument advanced by the Commissioner. 96 The Commissioner also challenged the primary judge's characterisation of the Part IVC proceedings instituted by Mr Vasiliades as "truly defensive in character" (PJ [26]) and as having an "essentially defensive nature" (PJ [29]). We do not consider that there is any error disclosed in this regard. We accept that not all Part IVC proceedings will be appropriately characterised in the same way. The Commissioner did not, however, point to any error in her Honour's account (as opposed to characterisation) of the statutory scheme, as it applied to Mr Vasiliades, at PJ [20] and [26] of her Honour's reasons. The Commissioner did not suggest that there was not a real issue to be decided between the parties (PJ [26]). As the primary judge indicated at PJ [19], the nature of the statutory scheme is relevant to the question of characterisation. 97 Plainly enough, even apart from the manner the cases were argued, there are differences between the statutory scheme in issue in Willey v Synan (where the High Court held that, by virtue of the requirement to institute proceedings to avoid statutory forfeiture, the plaintiff was in substance in the position of a defendant) and the scheme in issue in this case, which provides the avenue by which a taxpayer can contest a taxation liability. 98 In not dissimilar circumstances in Oswal [2015] FCA 1143 at [54], Nicholas J described the relevant Part IVC proceedings brought by the taxpayer as having "a significant defensive element", a description that Griffiths J, on the application for leave to appeal from Nicholas J's judgment, did not consider to have been misapplied (Oswal [2015] FCA 1366 at [44]); and in Hii 238 FCR 304 at [28] Collier J also accepted that there was merit in Mr Hii's submission that the relevant Part IVC proceedings had "a significant defensive element". We do not think that anything turns on the immaterially different language used by the primary judge in this case. Bearing in mind the nature of the statutory scheme to contest taxation liabilities, we cannot discern any relevant error in her Honour's characterisation of the proceedings brought by Mr Vasiliades in this case. As Allsop CJ and Middleton J remarked in Madgwick v Kelly 212 FCR 1 at [16], "[t]he language of 'defence' and 'attack' or 'offence' has some lineage", citing Maatschappij [1923] 2 KB 166 at 177 (Scrutton LJ) and Willey v Synan 54 CLR 175 at 178-179 (Latham CJ) and 184-185 (Dixon J), adding "[t]hat language is not however (and was not intended by the judges in those cases to be) a reason to analyse minutely the legal relationships involved in the disputes". Bearing in mind the nature of the statutory scheme to contest taxation liabilities, we cannot discern any relevant error in her Honour's characterisation of the proceedings brought by Mr Vasiliades in this case. Re-exercise of discretion 99 It will be recalled that on 21 December 2015 a registrar had ordered that Mr Vasiliades provide security by the provision of one or more bank guarantees or in a form otherwise acceptable to the Deputy Registrar for the costs of the Commissioner in the sum of $228,000 by 4 pm on 25 January 2016. As noted at the outset of these reasons, by paragraph 2 of her orders, the primary judge set aside those orders. In his draft notice of appeal (see [49] above], the Commissioner sought orders allowing the appeal and setting aside that paragraph of her Honour's orders. In place of that paragraph, the Commissioner sought an order that the application for review of the registrar's orders be dismissed. The Commissioner in effect sought to restore the registrar's order for security for costs and no more. 100 In written submissions filed in the proceedings before us, neither party addressed the re-exercise of discretion in the event that leave to appeal were granted and the appeal allowed. 101 When asked about the matter of re-exercise of the discretion at the hearing of the appeal, senior counsel for Mr Vasiliades submitted that there were a number of factors to be "looked at in this case", including that the Commissioner has had the benefit of $2.7 million (transferred by the Macquarie Bank: see [43] and [59] above) but submitted that "the exercise of discretion here ultimately boils down to those two competing factors: the foreign residency and the defensive nature of the proceedings". These are the two considerations to which we referred at [73] above. Senior counsel for Mr Vasiliades submitted that the defensive nature of the proceedings outweighed the matter of foreign residency. 102 At the hearing the Commissioner noted in reply that "[t]he decision of the registrar was that security should only be ordered from the time of application onwards, which was a figure of 226. We haven't put in a notice of contention to say that that should be different". Senior counsel for the Commissioner re-iterated that: It was common ground between the parties that if security was only to be ordered prospectively – that is, from the date of application – then the relevant amount was 226,000 and that's what the deputy registrar ordered. We haven't sought to re-agitate that by notice of contention. 103 We understand that "226,000" to which senior counsel referred was in fact a reference to $228,000, since that is the amount that the registrar ordered to be provided by way of bank guarantees. 104 Further, before us the Commissioner did not contest the form in which the security had been provided. Nor did he any longer contest the provision of the security after the 25 January 2016. It will be recalled that Mr Vasiliades provided a bank guarantee from Nordea Bank SA in Luxembourg for the amount of $228,000 on 16 March 2016 and an undertaking to renew the guarantee if the proceedings remained on foot on or before the date of expiration of the current bank guarantee. Conformably with his draft notice of appeal, the Commissioner did not contend that we should fix an amount different from that previously fixed by the registrar and accepted that an order for security in the form made by the registrar was appropriate on a re-exercise of discretion. 105 Accordingly, we do not consider it necessary or appropriate to deal at any length with the question of the amount and form of security. The main question at this point is whether we should in substance restore the orders made by the registrar on 21 December 2015. 106 In the circumstances of this case, we do not consider that the fact that the Commissioner has applied the amount of $2,701,196.68 against the judgment debt that he obtained against Mr Vasiliades in the other proceedings is a factor that militates against an order for security for costs in the proceedings that Mr Vasiliades has now brought under Part IVC of the TAA. If the Commissioner were the successful party in the Part IVC proceedings, he would in the ordinary course be entitled to costs in addition to payment of the judgment debt. Nor would we attach much significance in this case to the fact that the taxpayer might have chosen to proceed in the Administrative Appeals Tribunal rather than the Federal Court. 107 Assuming that the three Part IVC proceedings have a substantial defensive element, this was, as we have said, merely a factor to take into account with other relevant factors. So too is the fact that Mr Vasiliades is a natural person. These factors militate against an order for security for costs. We also take into account that the Commissioner did not suggest that there is not a real issue to be decided between the parties. 108 The fact that Mr Vasiliades is resident out of the jurisdiction and is apparently without assets within the jurisdiction is a significant factor militating in favour of an award of security. It would have been open to Mr Vasiliades to adduce evidence as to the location of his assets. He has chosen not to do so. Mr Vasiliades has not, moreover, claimed that the provision of security of the kind ordered by the registrar would stultify the proceedings and the fact that he provided such security in March 2016 would undermine any such claim. 109 In the circumstances of the case, taking into account the matters to which the parties referred, it seems to us that an order for some security is appropriate and in this event, for the reasons indicated already, we would in substance restore the orders of the registrar. 110 The orders that we would make in each proceeding are: 1. Leave be granted to appeal from paragraph 2 of the orders of the Court made on 22 April 2016. 2. The draft notice of appeal the subject of argument before the Full Court on 22 August 2016 stand as the notice of appeal. 3. The appeal be allowed. 4. Paragraph 2 of the orders of the Court made on 22 April 2016 be set aside and in its place order that the interlocutory application filed by the respondent on 20 January 2016 seeking review of the orders made by Registrar Ryan on 21 December 2015 be dismissed. 5. The orders made by Registrar Ryan on 21 December 2015 be varied with effect that the date "25 January 2016" is substituted with "16 March 2016". 6. The respondent pay the appellant's costs of the application for leave to appeal and of the appeal, to be taxed in default of agreement. 111 There was no appeal from the order made on 6 May 2016 as to the disposition of costs before the primary judge. I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny and Edelman. Associate: Dated: 6 December 2016