I am hearing together two applications for security for
costs, brought separately
by the t w o respondents to the principal
2 .
proceedings.
The proceedings have been on foot for some time and in
December last were the subject of interlocutory applications.
No
point has been taken concerning the lateness of the applications,
but many documents have been filed over the period, and there
have been several Court hearings. usually of short duration.
Some time after the proceedings had been commenced, the first
respondent.
Uniroyal
Australia
Pty.
Limited,
cross-claimed
against the first and second applicants, the latter apparently
being added as
an applicant as a result of the cross-claim.
The
principal proceedings allege breaches of sections
4 5 ( 2 ) , 4 6 ( 1 )
and 4 7 ( 5 ) of the Trade Practices Act
1974, while the
cross-claim
alleges
breaches
of
confidence
in
relation
to
confidential material. Against the respondent Schenectady there is a further claim for breach of s.52 of the Act. The subject
matters of
claim and cross-claim are associated, but the latter
does not arise by way of defence to the former.
It was contended on behalf of the second respondent that
the second applicant, George Papamanuel, did not allege anything
against it, OK claim relief against it.
On any view
this is not
quite
accurate,
but,
by
joining,
or
being
joined,
as
an
applicant, George Papamanuel becomes party to all allegations
against the respondents. He
is in fact the managing director of
the first applicant as
well as being, with his wife, owner of
half the paid-up capital of the company which is
$4.00 .
3 .
The applicants for security relied upon
s.533
of the
Companies Code, although reference was also made to
5.59 of the
Federal Court of Australia Act
1976.
No security was sought
directly against Mr Papamanuel.
Evidence was produced that the first applicant,
ERA
Polymers Pty. Limited was worth little, in net terms something of
the order of $3000 - $4000.
It nevertheless had had, and largely
retained, a substantial volume of trade in pre-polymer compounds.
Mr Papamanuel was, and seemingly
is, of some means, having, apart
from any other property, fairly valuable accommodation in which
he resided, and another property, apparently
an
investment,
valued at $100,000, which was mortgaged to
a
bank to obtain
funds, as necessary, for the first applicant.
The main purpose of the legislation relied upon is to
ensure that companies of little or no worth are not used by
persons or companies of means to bring litigation, without the
latter incurring any risk as to costs. In such
a case an order
for security has to be met by the principal, that is to say the
guiding hand. On the other
hand, as has so ofter been said,
care
is to be taken not to prevent
a litigant from proceeding with
its, or his, case simply because
it, or he, is poor. The line is
a difficult one to draw. and involves
an examination
of many
circumstances concerning the case. The fact that
claim has the
public interest aspect of reliance
on Part
IV
of the
T r a d e
Practices Act, is doubtless
a factor against risking the stiflinq
of proceedings.
4 .
The present case has the unusual feature that the person
who would have to provide any security ordered against the first
applicant is the co-applicant Mr Papamanuel. In that situation
he can be ordered to pay costs directly. The rationale of the
rule, therefore, is largely displaced.
It has
been
submitted
that
Mr
Papamanuel
could
discontinue at will, and thus escape primary liability.
I do not
think this could be clone so readily, or without
an obligation to
pay costs, and if and when
it did happen, the matter
of security
could be re-examined.
It is my view, therefore, that there should be no order
as to security for costs.
I should say that the amount of security sought by the
first
respondent
is
$209,000 and
by
the
second
respondent
$80,000.
The evidence is that the applicants are likely to incur
costs in these amounts. The costs already incurred are said to
be in total $117,000. It does seem to me to be appalling that to
prosecute a trade
practices
matter
in
reliance
on
the
sub-sections mentioned, in a case not of a wide importance, the
total burden of costs contemplated, according to conservative
calculations, should be nearly half
million dollars.
I dismiss the applications.
-?
\
5.
I certify that this and the
four ( 4 )
preceding pages are
asons
Honour Mr. Associate
Counsel for the Applicant:
J. M. Ireland
with
Ms.A.Bowne
Solicitors for
the Applicant:
Corrs Pavey Whiting
&
Byrne
Counsel for the First Respondent:
J. J. Garnsey
Solicitors for the First Respondent:
R. B. Kandy & Co.
Counsel for the Second Respondent:
M. Walton
Solicitors for the Second Respondent:
Sly & Russell
Date of hearing:
6 March 1987
.
I '
.
,
, .
Details
AGLC
Arnold v Queensland [1987] FCA 148
Case
[1987] FCA 148
Decision Date
CaseChat Overview and Summary
The case of Arnold v Queensland involved two respondents, Uniroyal Australia Pty. Limited and Schenectady Chemicals Australia Pty. Limited, who brought separate applications for security for costs against the applicants, ERA Polymers Pty. Limited and George Papamanuel. The applicants were involved in principal proceedings alleging breaches of sections 45(2), 46(1), and 47(5) of the Trade Practices Act 1974. Uniroyal Australia Pty. Limited also cross-claimed against the applicants for breaches of confidence in relation to confidential material. The applicants sought security for costs under section 533 of the Companies Code and section 59 of the Federal Court of Australia Act 1976. The court was required to decide whether the applicants, who were of limited means, could be ordered to provide security for costs, and if so, the appropriate amount.
The court considered the purpose of the legislation to ensure that companies of little or no worth are not used by persons or companies of means to bring litigation without incurring any risk as to costs. However, the court also needed to balance this with the need to not prevent a litigant from proceeding with their case simply because they are poor. The court examined the circumstances of the case, including the fact that the person who would have to provide any security ordered against the first applicant was the co-applicant, Mr. Papamanuel. The court concluded that the rationale of the rule was largely displaced in this situation, as Mr. Papamanuel could be ordered to pay costs directly if he chose to discontinue the proceedings. The court also noted that the amount of security sought by the respondents was substantial, with the first respondent seeking $209,000 and the second respondent seeking $80,000. The court considered the total burden of costs contemplated in the case to be nearly half a million dollars.
The court dismissed the applications for security for costs, stating that it was appalling that such a large burden of costs would be incurred to prosecute a trade practices matter in a case not of wide importance. The court found that there should be no order as to security for costs, as the applicants were likely to incur costs in the amounts sought by the respondents, and the costs already incurred were said to be in total $117,000. The court emphasized the need to balance the interests of the parties and the public interest in ensuring that litigation could proceed without undue financial burden on the applicants. The court's decision ensured that the applicants could continue to pursue their claims without being financially crippled by the prospect of having to pay substantial security for costs.