Aviacion Colombiana Limitada Aviaco Ltda v Commonwealth of Australia

[1990] FCA 389

JUDGMENT NO. ..3Zj4/.%..-.,*

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA

\ )

AUSTRALIAN CAPITAL TERRITORY	i
1 No. ACT G 20 of 1990
DISTRICT REGISTRY	1 1
GENERAL DIVISION	j

ON APPEAL FROM THE SUPREME COURT

OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: AVIACION COLOMBIANA LIMITADA

AVIACO LTDA

Appellant

AND: COMMONWEALTH OF AUSTRALIA

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER :  Neaves J. RECEIVED

1     AUG 1990

DATE OF ORDER . 30 July 1990

FEDERAL COURT OF

AUSTRALIA

WFIERe MADE . Canberra PRINCIPAL REQISTRY

THE COURT ORDERS THAT:

1.   The appellant, within 35 days after the date of this order, give security in the sum of $10,000 for the payment to the respondent of any costs that may be awarded against the appellant in the appeal.

36 of the Federal Court Rules.

2 .    The said security be given by the payment into Court of the sum of $10,000.

3.   If the appellant fails to comply with the aforementioned orders, further proceeding upon the appeal be stayed.

4.  The appellant pay the respondent's costs of the motion notice of which is dated 22 May 1990 to and including the entry of this order.

m: Settlement and entry of orders is dealt with in Order

IN THE FEDERAL COURT OF AUSTRALIA )
AUSTRALIAN CAPITAL TERRITORY

1     NO. ACT G 20 of 1990

DISTRICT REGISTRY	1
GENERAL DIVISION	1

ON APPEAL FROM THE SUPREME COURT

OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: AVIACION COLOMBIANA LIMITADA

AVIACO LTDA

Appellant

AND: COMMONWEALTH OF AUSTRALIA

Respondent

CORAM: Neaves J.

D: 30 July 1990

REASONS FOR JUDGMENT

This is an application by motion on notice by the

Commonwealth of Australia ("the Commonwealth") that Aviacion

Colombians Limitada Aviaco Ltda ("the appellant") be ordered

to give security for the costs which may be awarded against it	in an appeal instituted by it in this Court on 11 April 1990
and numbered ACT G 20 of 1990.
The appeal is from a judgment of the Supreme Court of the Australian Capital Territory given on 22 March 1990 dismissing, with costs, an action brought by the appellant against the Commonwealth. In essence, the appellant's case was that under an uncompleted agreement it paid to an agent of

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the Commonwealth the sum of $US985,000.00, that the consideration for that payment wholly failed and that it was, therefore, entitled to recover that sum as money received by the Commonwealth to the use of the appellant. The uncompleted agreement referred to was an agreement for the sale by the Commonwealth to the appellant of two Hercules AC 130 aircraft.

The application for security for costs is made pursuant to s.56 of the Federal Court of Australia Act 1976 (Cth) and Order 52, rule 20 and Order 28, rule 3 of the Federal Court Rules. The later rule, so far as material for present purposes, provides:

"3. (1) Where, in any proceeding, it appears to the

Court on the application of a respondent -

(a)	that an applicant is ordinarily resident outside Australia;
(b)	that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent
if ordered to do so;

(c) .	. .;	or
(d)	. .	.

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

That rule applies to a proceeding in the appellate jurisdiction of the Court: R.D. Werner & Co. Inc. v. Bailev Aluminium Products Ptv Ltd (1988) 18 F.C.R. 389 at p.399.

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It is common ground that the appellant is a corporation incorporated pursuant to the laws of the Republic of Colombia and that it neither carries on business nor has any assets in Australia.

The present application is supported by the affidavit of John Cater Campbell sworn 5 June 1990. Paragraph 6 of that affidavit reads as follows:

"6. At the hearing of the appellant's claim in the

Court below Mr Pascual Bravo Munoz gave evidence that he founded the appellant in 1982, that until October 1988 he was a shareholder in a family company which was the principal shareholder in the appellant, that in October 1988 his family company sold its shareholding in the appellant and that apart from reserving to his family company the benefit [of] any rights the appellant has against the respondent, he no longer had any interest in the appellant. This evidence appears at pages 312, 334 and 335 of the transcript of the hearing in the Court below. I understand from Mr Bravo's evidence that the appellant has no beneficial interest in this proceeding and that this proceeding is being maintained by Mr Bravo for the benefit of himself and his family. If the appellant is unsuccessful in this proceeding there is no means by which any order for costs could be sought or enforced against Mr Bravo. "

The appellant, in opposing the application for security for costs, relies upon the affidavit of John Astley Buxton sworn 11 July 1990. Mr Buxton, the solicitor for the appellant, states that instructions were first received on
behalf of the appellant in 1985 from Mr	Manuel Sanniento and

M r Guerra, members of the law firm known as Ferriera Sarmiento

Trujillo Associados of Bogota in the Republic of Colombia and that since that time instructions have been received from Mr

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Sarmiento, from Mr Pascual Bravo Munoz (Mr Bravo) and from Mr John Corrigan, Attorney-at-Law, of Florida in the United States of America. Mr Buxton further states that he has been informed by Mr Sarmiento and verily believes that the appellant since 1983 and Mr Bravo since 1988 have expended substantial: sums of money "in relation to the proposed purchase of the two Hercules Aircraft, the subject matter of these proceedings"; that Mr Bravo has assumed "exclusively the costs and benefits of the proceedings against the Respondent following the settlement in 1988 where he sold all the interest in the Appellant company to third parties save for any benefits that will arise from these proceedings"; that procedures exist in the Republic of Colombia under the Codigo de Procedimiento Civil (Code of Civil Proceedings) "for the registration of a foreign order and its subsequent enforcement against a resident national or incorporated company in that country"; and that an order of an Australian superior court is capable of registration under those provisions, the procedure being for the order to be formally notarised, translated,

made before the Supreme Court of Civil Cassation. copied and filed and for an application for registration to be Paragraph 11 of the affidavit states:

"11. I am informed by M r Sarmiento and verily believe

that :	-
(i) As a result of the failure to complete the purchase of the two Hercules in 1984 Mr Bravo has allowed his company, the Appellant, prior to selling his interests in 1988, to be rundown by reducing significantly its labour force and scale of operation;

(ii) As a result of the proceedings the costs incurred by the Appellant and by Mr Bravo have been such as to cause substantial financial hardship for Mr Bravo personally."

There is no evidence before the Court as to the financial standing of the appellant or, if it be material, of

Mr Bravo or his family company.

Counsel for the appellant opposed the application. Counsel submitted that the Court, in the exercise of the wide discretion vested in it, should, having regard to the whole of the relevant circumstances, conclude that justice between the parties requires that security for the costs of the appeal should not be ordered. The essence of the argument was that a benefit had accrued to the Commonwealth by reason of the sums expended on the aircraft by or on behalf of the appellant. It

was submitted that "real value" had been added to the aircraft	and that that represented a benefit that the Commonwealth will
continue to enjoy in the event that the appellant is unsuccessful in the appeal. Counsel referred to the decision of the Court of Appeal in De Brv v. Fitzserald (1990) 1 All
E.R. 560.
In my opinion, the case is one in which it is appropriate, in order to protect the legitimate interests of

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the Commonwealth, to require that the appellant give security for the costs which may be awarded against it on the hearing of the appeal. The considerations which lead me to this conclusion are that the appellant is a corporation which is incorporated outside Australia and, so far as appears from the evidence, has no place of business in Australia or any assets in this country which would be available to satisfy any order for costs that may be made against it. This means that, if the Commonwealth is awarded the costs of the appeal, it will be necessary, if payment of the costs is not forthcoming, to seek to avail itself of the procedures in the Republic of Colombia to which M r Buxton has, on information and belief, deposed. It is of significance that the procedures referred to as being available in the case of a "foreign order" require that an application be made to the Supreme Court of Cassation in that country for registration of the "foreign order" but no information has been furnished as to the attitude which the Supreme Court would be likely to take as to the registration of an order for costs made by a foreign court. Further, the

appellant has taken no steps to establish that it has assets

in the Republic of Colombia sufficient to meet any order for

costs. Indeed, par.11 of Mr Buxton's affidavit set out above raises a real doubt as to the appellant's ability to do so. A further consideration is that the appeal is being pursued solely for the benefit of Mr Bravo and his family yet he does not appear to have accepted any obligation to meet any order for costs awarded against the appellant. In any event, his ability to satisfy any such order must be considered far from

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established having regard to the paragraph of Mr Buxton's
affidavit to which I have referred. It follows that the
present case falls within both par.(a) and par.(b) of Order
52, rule 3(1) of the Federal Court Rules.

I am not satisfied that the matters relied upon by the appellant warrant the Court, in the exercise of its discretion, refusing to order security for the costs of the appeal. There is nothing comparable in this case to the features which led the Court of Appeal to set aside the order for security for costs in De Brv v. Fitzaerald (supra).

In his affidavit referred to above, Mr Campbell has estimated the respondent's costs of the appeal to be approximately $12,000. This figure was not disputed. However, the amount to be provided by way of security is habitually fixed at less than the amount which would provide a complete indemnity. I propose, therefore, to order security in the sum of $10,000.

The order of the Court is that the appellant, within 35 days after the date of this order, give security in the sum of $10,000 for the payment to the Commonwealth of any costs that may be awarded against the appellant in the appeal; that that security be given by payment into Court of the sum of $10,000; and that, if the appellant fails to comply with the aforementioned orders, further proceeding upon the appeal be

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stayed. The appellant must pay the Commonwealth's costs of

the motion to and including the entry of this order.

I certify that this and the

preceding 7 pages are a true copy of the Reasons for Judgment herein of the Honourable M r Justice Neaves .

Associa

Dated: 30 July 1990

Counsel for the appellant : M r J.A. Buxton

Solicitors for the appellant : Abbott Tout Russell Kennedy

Counsel for the respondent : Mr C. Erskine

Solicitors for the respondent : Australian Government

Solicitor

Date of hearing	: 13 July 1990
Date of judgment	: 30 July 1990