Avtex Airservices Pty Ltd v Bartsch, R.I.C.

[1991] FCA 587

JUDGMENT NO. 537 .I "r.....

U THE FEDERAL OF AUSTRALIA 1

l 1

OUTH WALES DISTRICT REGIST	W	1	No G73 of 1991
1

- 1

g

PBS

Applicants

27 SEP 1991

FEDERAL W R l ,F	RONALD IAN CHARLES BARTSCH & 0s
R ~ ~ ~ T R Y	Respondents
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,X

: HILL J : SYDNEY

DATED: 27 AUGUST 1991

EX TEMP- FOR JUDGMENT

The respondent in the proceedings, the applicant to the motion before me, seeks against the applicants in the proceedings, security for costs. The proceedings commenced by application on 27 February 1991 and have proceeded to the point where they have now been set down for hearing before Burchett J on 11 September 1991. As I understand the matter, following a conciliation conference in May, the proceedings were set down on 4 June 1991. The motion itself, however, seeking security for costs was not filed until 21 August 1991.

has been, on the part of the respondents, a breach of	applicant and one or more of the respondents and that there
copyright. In addition to the copyright claim and an associated trade practices claim, which need not be separately dealt with, there is an allegation of fraud arising out of an alleged opening of a bank account improperly by the first and second respondents and the deposit of money in that account belonging to one or other of the applicants and the use of moneys in that account improperly with the consequence that it is said the sum of $146,500 in that account was wrongfully converted.
Those allegations are of course denied in the defence of the respondent. The respondents filed with their defence a cross-claim by the fifth respondent. That cross- claim which had in fact been foreshadowed prior to the commencement of the present litigation alleges that the fifth respondent was the owner of the copyright in the relevant works and that the applicants were in breach of the fifth respondents copyright in them. This was, as I have indicated, consistent with a letter of demand that had been sent before the proceedings were commenced by the applicants threatening
proceedings for breach of copyright against the applicants.
The evidence indicates that the financial situation of the corporate applicants is such that they might not be able to satisfy an award of costs in the event that costs were in fact ordered against them. No evidence to the contrary has been filed on behalf of the applicants. So far as the substantive proceedings are concerned, the individual applicants are no doubt proper parties and that is a factor which I will take into account in determining whether to order security in so far as it would seem that the corporate applicants are at least to a large extent the alter egos of the individuals in question. This cannot be said, of course, about the claim for conversion which is a claim solely on the part of the corporate applicant and one in respect of which the individual applicants would seem to have no title to prosecute.
There is no dispute that the court has power to order security for the payment of costs and to order that proceedings be stayed in the event that such security be not provided. Such jurisdiction arises under the provisions of
8.56 of the Court of Australia Acf 1976 cf Jodast Pty

The substantive proceedings as pleaded by the applicant involve an allegation that the applicant has copyright in certain works, that that copyright arose as regards agreements entered into between the corporate

. .

U v A & J Blattner Ptv Llmrted (17 June 1991, unreported).

The power is, of course, not confined to the class of matters dealt with in Order 28 of the Federal Court Rules. The power conferred upon the court is discretionary and the parties accept that the matters relevant to the exercise of that discretion are the same matters as were relevant to the exercise of discretion under the Com~anies Code prior to the

repeal of that code by the Cor~orations W cf BIL f U

S\ Ltd & A n o ~ v -use Ltd & Or% (1991) 4 ACSR 258.

I have set out in considerable detail in the judgment in

. .

tv Access L - v HestDac B a u Cor~oration h Ors

(1989) ATPR 40-972 the matters generally regarded as relevant
to the exercise of discretion involved.

Those matters are not, of course, exhaustive and no doubt circumstances may well arise where other matters may be of relevance. Clearly however, the following matters are appropriate to take into account:

*	The chances of success of the applicant and in particular whether it is suggested that the applicants claim is not bona fide or a sham.
*	The quantum of risk that the applicant could not satisfy a cost order.
*	Whether the making of an order for security might or would shut out a small company from making a genuine
claim against a large company.
*	Whether the impecuniosity of the applicant arises out of the act complained of by it in respect of which relief is sought.
*	Whether there are any particular discretionary matters that might be peculiar to the circumstances of the case.

The present is not a case where it is suggested that the applicants' claim is a sham or that there are not issues which might properly be litigated. It is, however, a case where on the evidence I am satisfied that the applicant could not satisfy a large cost order if one were made against it. I would not make any finding to the effect that the respondent in bringing this motion in any way seeks to do so in a way oppressively against the applicants, although the timing of the application leaves much to be desired.

Evidence has been adduced in the form of bank statements and affidavit evidence of persons who took a course which is the ultimate subject matter of litigation, which would support, if it remained unchallenged, a view that moneys prima facie belonging to the applicant were deposited with a bank account of the respondents and that these moneys were from persons desiring to undertake a course. The evidence does not, of course, in the state in which it is, establish

conversion.

The respondent suggests that if the applicant wishes

to take into account the argument that its impecuniosity

arises - in whole or in part - out of the fraud of the

respondent, the onus lies upon the applicant at this stage to prove that case. I do not think that this can be correct. Proceedings of the present kind by their very nature cannot establish one way or the other whether the applicant in the proceedings must succeed. Indeed, it would be improper in most cases for a court to come to a conclusion about that matter. However, the evidence does go so far as to suggest that there is a substantial issue that the impecuniosity might in part be caused by the fraud that is alleged if ultimately that fraud is proved. This is a matter which I have taken into account, although only as one of the matters ultimately considered.

The present case, however, involves two particular matters relevant to the exercise of my discretion. Firstly, it is obvious an application for security for costs should be brought promptly; Sgllpil v Burton [l9751 VR 776. This is not to say, however, that an order might not be made at a late time before trial commenced or indeed might not be made even

after the trial has commenced in a particular case, cf &&&y

Acceee

Limitedsupra).

The second peculiar circumstance of the present case seems to be that the litigation was precipitated by a claim on the part of the respondent itself that it was the owner of copyright and that the applicant had breached that copyright. It is true as a matter of form, that the proceedings precipitated by that letter, were commenced then by the applicant. The respondent in due course, as no doubt could be expected, cross-claimed as well as defending the proceedings brought by the applicants. The result of this is, that were I to order for example, a stay of the applicants' proceedings, the respondent would still incur precisely the same costs by litigating its own proceeding. Putting it another way, there really are not two separate proceedings involved in the claim and cross-claim, they are the one and the same proceeding and indeed as counsel for the respondent conceded, it would be impossible to disentangle them, apart from the claim in fraud.

When that is added together to the lateness of time of which the application for security is made, it becomes apparent in my view that the present is not an appropriate case for security to be given in respect of the basic copyright issue.

The fraud issue may be in a slightly different position in the sense that it certainly can be disentangled from the cross-claim, although clearly there are some matters of fact that would be common to both. I think, however, that

having regard to the fact that the case is ready for hearing

and is to be heard very shortly, and having regard to the fact

that the applicants' position may, if the applicants' case succeeds, have been worsened by an act of fraud on the part of the respondent, and having regard also to the fact that the substantial cross-claim on the copyright proceedings in any event will proceed, I have formed the view that the present would not be an appropriate case to order security to be given.

Accordingly I would dismiss the motion and order the reapondents to the proceedings to pay the applicants' costs of it.

I certify that this and the

preceding seven (7) pages
are a true copy of the Reasons

Aseociate:

Counsel and Solicitors	E Strasser instructed by
for Applicant in the	by Messrs Schweizer & CO

proceedings (Respondent
to the motion):

Counsel and Solicitors	J B Maston instructed by
for Reapondent in the	Webster O'Halloran 6 Associates

proceedings (Applicant
to the motion):

Date of Hearing:  27 August 1991