Brigdemere Pty Ltd v Actroa Pty Ltd

[1992] FCA 451

45  1

JUDGMENT No. ....,,.,,.,,. --

IN THE FEDERAL COURT OF AUSTRALIA

!

I	VICTORIA DISTRICT REGISTRY	No. VG 404 of 1991
GENERAL DIVISION

BETWEEN	BRlDGEMERE PTY LIMITED
AND:	ACTROA PTY LIMITED & ORS

EX TEMPORE REASONS FOR JUDGMENT

M: The first and second respondents havc moved for an order pursuant to section 1335 of the Corporations Law that the applicant providc security for those respondents' costs of

this application. It is not disputed that the applicant has a paid up capital of only $2 and that

it has no assets at all from which an order for costs against it could bc sat~sficd. However, i t

is said that the applicant was financed to enter into the franchise business which is the

subject of this action by one of its directors, MS Cetinic, who has deposed that she has lost

moneys in the order of $86,000 through the failure of thc franchise bus~ness.

MS Davies, who appeared for the applicant in opposing the motion for security, referred to a

judgment of Smithers J, in Ilat Nominees Ptv Ltd v M u r r a ~ o n c Nominees Ptv Ltd (1980) 48

FLR 385 in which his Honour refused a motion for security on the ground that it should be

week was approx~matcly 51,030 00 "

inferred that the applicant's impecun~osity had bccn caused by the representations which were

the basis of its action. However, in that case thcrc was apparently evidencc before the court

affirming the allegations as to the making of the representations the falsity of which was said
to have brought about the applicant's impecuniosity. In the present case the ncarest Ms

Cetinic's affidavit comes to providing evidence of that kind is the statement that:

'It became abundantly clear from practically the moment that the Applicant cornmcnced operating the

buslncss that the reprerentatlons made by the Respondents or one or other of them rcgardlng the

prolitabll~ty of the buslncss would not be achlcved. Dunng the tradlng pcnod, the average turnover per

- 2

I regard that evidence as falling well short of a demonstration that the impecuniosity of the

applicant had been brought about by the falsity of any representation made by the first or second respondents. As Mr Greenhcrger of counsel who appears for those respondents in

support of the motlon has pointed out, thc appl~cant company has never had any assets and its

whole operations apparently have been financed by way of loans advanced to i t by MS

Cetinic.

I am also oppressed by the consideration that MS Cetinic is not herself a party to the action

and accordingly is not exposed to any liability at all for costs should the action against the

first and second respondents fail. I therefore considcr that it is appropriate to make an order

for security for costs. However, in accordance with recognised authority in this area I do not

considcr it a proper exercise of the court's discretion to make an order in such an amount that would provide a total indemnity against the likely costs to be incurred by the respondent, and in the circumstances I consider it appropriate to fix the amount of the security a t $15,000.

The order of the court will he that the applicant withln 21 days provide in a form acceptable

to the Registrar of the Court security in the sum of $15,000 for the costs which may be

awarded to the first and second respondent and that pending the giving of such security any

further proceedings in the application including any proceedings on the cross-claim be stayed.

I shall further order that the costs of thc motion for security be costs in the cause.

I certify that this and the preceding 2 pages are a true

copy of the Ex Tempore Reasons for Judgment of his

Honour Mr Justice Ryan

Date:  25 h n e 1992

Counsel for the applicant:	MS J Davies
Solicitor for the applicanP	Mr Jack Di Natale
Counsel for the respondent:	Mr R Greenberger
Solicitor for the respondent:	Kenney and Loel