Andel Pty Ltd v Century Car Care Pty Ltd

[1989] FCA 566

IN THE FEDERAL COURT OF AUSTRALIA	)
QUEENSLAND DISTRICT REGISTRY	1 QLD G365 of 1988

GENERAL DIVISION 1

BETWEEN:  ANDEL PTY LTD

Applicant

AND :  CENTURY CAR CARE PTY LTD

First Respondent

AND :  CENTURY MARKETING PTY LTD

Second Respondent

AND :  TRIPLINK PTY LTD

Third Respondent

AND :  BRANSTAR PTY LTD

Fourth Respondent

AND :  JOHN McGAW

Fifth Respondent

AND :  CHRISTINA HELEN TYSON

Sixth Respondent

AND :  KEMSLEY GRAY SCHMIDT

Seventh Respondent

1. Owen Rodney Bailey and Phyllis Barbara Bailey

JUDGE MAKING ORDER:

DATE	OF ORDER:
-	8 SEPTEMBER 1989
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

provide a joint and several guarantee to the fifth respondent, under seal, promising to pay the costs, if any, awarded in favour of the fifth respondent against the applicant, limited to the amount of $20,000;

2.   Owen Rodney Bailey and Phyllis Barbara Bailey provide a joint and several guarantee to the seventh respondent, under seal, promising to pay the costs, if any, awarded in favour of the seventh respondent against the applicant, limited to the amount of $20,000;

3.    each guarantee must be prepared by the applicant's solicitor and must be in a form satisfactory to the Registrar;

4.    the costs of and incidental to the notice of motion of the fifth respondent and of the seventh respondent be that respondent's costs in the proceedings against the applicant;

5.   the applicant give the seventh respondent's solicitors further and better particulars of the way in which the applicant claims a right to succeed aqainst the seventh resuondent under s.75B of the ~rade Practices Act; those particulars to be supplied on or before 22 September 1989;

6.   the matter be set down for further mention on Wednesday, 27 September 1989 at 2.15 p.m.

NOTE :  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

,

IN THE FEDERAL COURT OF AUSTRALIA	)
QUEENSLAND DISTRICT REGISTRY	1 QLD G365 of 1988
GENERAL DIVISION	1

BETWEEN:  ANDEL PTY LTD

Applicant

AND :  CENTURY CAR CARE PTY LTD

First Respondent

AND :  CENTURY MARKETING PTY LTD

Second Respondent

AND :  TRIPLINK PTY LTD

Third Respondent

AND:  BRANSTAR PTY LTD

Fourth Respondent

AND :  JOHN MCGAW

Fifth Respondent

AND :  CHRISTINA HELEN TYSON

Sixth Respondent

AND :  KEMSLEY GRAY SCHMIDT

Seventh Respondent

PINCUS J . 8 SEPTEMBER 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application for security for costs made by each of two respondents (the fifth and seventh respondents) in a rather complicated case concerning the sale of property. The fifth respondent is a practising solicitor and the seventh respondent a practising accountant. Each of them is sued in relation to conduct in connection with the negotiations relating to and settlement of the transaction I had mentioned.

The allegation against the fifth respondent, Mr MCGaW, is that he undertook to act as solicitor in the matter for the applicant and failed in his duty as solicitor. The fifth respondent says, principally, that he did not undertake to act as solicitor at all. Mr Sheehan, who appeared for Mr McGaw, has suggested that the particulars of the alleged retainer are deficient and that for other reasons the case against the fifth respondent is unlikely to succeed.

The information available with respect to the case against MK Schmidt, the seventh respondent, is rather more detailed. It seems to be common ground that Mr Schmidt prepared a set of accounts, and he says that he did it merely on information supplied by the client who was, or was represented by, one Tyson,

an undischarged bankrupt. It is also common ground that at	subsequent negotiations which preceded the entering by the
applicant in the principal proceedings into the transaction a copy of the document was .produced. Attention has been drawn to the fact that the copy produced was not entirely complete, in that it contained a heading which might have' given a prudent person some warning. The parties diverge from that point on, that is, from the point when the accounts were produced. There is a dispute as to whether or not, in effect, the seventh respondent so acted as to in any way vouch for the veracity or reliability of the accounts.
The case is not one, as it seems to me, in which one could say that the applicant's prospects of success are minimal or that there is any obvious reason why the applicant's case must fail. On the other hand, it may turn out at the trial that what the fifth respondent and seventh ;espondent say about these matters is entirely accurate and such as to exculpate them.
In short, the case is not one in which the merits are so manifestly for or against the fifth and seventh respondents, respectively, that one can gain from consideration of prospects of ultimate success a great deal of assistance in determining the security application.
The fifth and seventh respondents say, and it seems to me to be correct, that the litigation is likely to be expensive and an estimate is given of about five days for the trial. Although Mr Boughen, for the applicant, says that may be
excessive, it does not seem to be so, in my view. I think the
case will be fairly expensive and I can see that the importance of it to the fifth and seventh respondents as professional men and its importance to their reputation may be such as to induce their counsel to fight it very tenaciously and in detail.
I am also satisfied that if the fifth and seventh respondents succeed in the litigation and obtain orders for costs there may be some difficulty in their extracting the costs from the applicant. There is information before me, which during the adjournment I have had the opportunity of studying, as to the financial position of the applicant. It is said against the applicant that to some extent its representations as to its financial position were misleading, but leaving that aside, it could hardly be disputed that if the applicant is ordered to pay costs and also presumably has paid its own costs by the time the trial is over, Messrs McGaw and Schmidt may be short of the amount due to them under the order.
Therefore, on the face of it, it is a case in which I would be inclined to make an order for security because the case is not one in which I could say that the applicant's chances of success are overwhelmingly high. In making that remark, I do not for a moment tend to suggest that I have any view as to whether or not the applicant will succeed, but the case may very well depend upon questions of credit which one could not determine on the papers.
The principal ground, as it seems to me, on which (in this case) one should lean in favour of making an order for security is that, as has been pointed out by Mr Sheehan for the
fifth respondent, the natural persons who are so to speak behind the applicant (Owen .Rodney Bailey and Phyllis Barbara Bailey) would, had they not formed the company, which no doubt was done for tax reasons, incur the ordinary'disadvantage which litigants incur, namely a possible liability for the opponent's costs. I have said in the previous case to which Mr Sheehan referred and adhere to the view that it may in some instances be unfair to let people add to the fiscal advantage, if any, of trading as a company this special procedural advantage.
The only important circumstance which goes against making an order for security, in my opinion, is that there has been some delay. During the adjournment, I have had the opportunity of studying the papers, particularly with reference to this matter and the only reason for the delay, as it seems to me, is that although the general shape of the case was reasonably clear quite some months ago, the fifth and seventh respondents let it run on, not being quite certain what to do about security.
It is true, as Mr Sheehan says, that their difficulty in making an application was enhanced by the problem of trying to ascertain what the applicant's financial position was, but they did not move seriously towards getting security until last month, when they stated a definite intention to do so. The original statement of claim in the suit which was delivered last November was in a significantly different form from the present statement of claim, but I do not see why that excuses the delay. The
claim would be substantially amended, and they could have applied, respondents did not have any reason to know that the statement of
for example, when the defences went in, which was quite a long time ago.
The material filed on behalf of the applicant shows and it is quite credible that in recent months a substantial amount of money has been spent on the applicant's side and this operates, in a sense, unfairly against the applicant if it has to comply with an order for security. If an order for security is made with which it cannot comply, it may simply have wasted that money.
The circumstances to which I have alluded, then, have led me to the conclusion that whereas the fifth and seventh respondents should succeed in today's application, their success should be carefully limited. I propose in each case to require that the persons whom I have mentioned (I have obtained the names from the trust deed which is in evidence: Owen Rodney Bailey and Phyllis Barbara Bailey) provide a joint and several guarantee to the fifth respondent and another joint and several guarantee to the seventh respondent promising to pay the costs, if any, awarded in favour of each respective respondent against the applicant. The order will provide that each guarantee must be prepared by the applicant's solicitor and must be in a form satisfactory to the Registrar and the order will further provide that the amount of each guarantee will be limited to $20,000. That is, the total liability under the two guarantees, maximum, will be $40,000; each will be limited to $20,000.
I am conscious of the fact that the sum in question is not as high as that which is mentioned in the respondentsr material, and I may say that my experience of costs in this Court is such as to make me think that the respondentsp estimates are quite reasonable. I am also conscious of the fact, emphasized in Mr Sheehan's address, that a personal guarantee is by no means as certain a means of securing costs as, for example, a bank guarantee. Nevertheless, it seems to me that the circumstancs are such as to make it unreasonable to make any more onerous order against the applicant. I will add, for the sake of additional clarity, that the form of guarantee is usually under seal, and I will order that this one be under seal to avoid any problem about consideration.

The question of costs then arises. I have looked at the

correspondence which has led up to today's application. It seems to me that to some extent the applicant was unnecessarily unco-operative. On the other hand, one could not say that its resistance was entirely unreasonable or that it was doomed to fail.

It seems to me that the case is one in which the fifth and seventh respondents should get their costs of this application if and only if they succeed in the case and that the applicant should not get its costs in this application even if it does succeed in the case.

To achieve that result then, the order for costs in

favour of the fifth respondent and that in favour of the seventh

respondent will be that that respondent's costs of and incidental	to the notice of motion be that respondent's costs in the
proceedings against the applicant; so that the result will be that if and when each respondent gets an order for costs against the applicant, having won the case, that order will carry these costs with it; otherwise the costs will fall where they lie.
I will order that the applicant give the seventh respondent's solicitors further and better particulars of the way

in which the applicant claims a right to succeed against the seventh respondent under s.75B of the Trade Practices Act and they are to supply those particulars on or before 22 September.

I will set the matter down for further mention on Wednesday, 27 September at 2.15 p.m. If that date does not suit, the parties may delist it by agreement and shift the mention to another date. Also, if matters which are to be raised then do not concern all parties, do not feel obliged to come. That is, as to any parties who are not affected by an order sought (and I have in mind particularly Mr Holmesr side) there is no need to attend if it is simply a matter of an argument between the other parties.

certify that this arid the preceding

>ages are a trua copy o$ the reasons for

judgment hcrein of His Hono

Mr. Justice P~ncus