Burg Design Pty Ltd v Wolki, Klaus Dieter Johannes

[1997] FCA 1435

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 501 of 1996

BETWEEN:

BURG DESIGN PTY LTD
First Applicant

GEOFFREY JOHN MALLOWS AND ELAINE JOY MALLOWS
Second Applicants

AND:

KLAUS DIETER JOHANNES WOLKI AND BEVERLEY MARTHA WOLKI
Respondents

JUDGE:	BURCHETT J
DATE:	28 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

In this matter an order was made, which involved a measure of consent, for the sum of $10,000 for security for costs.  It was made clear at the time that that was intended to cover the preparation of the case but not necessarily to represent the full measure of the security to be provided before the hearing.  I now have two motions to deal with.  One is brought by the applicant in the case for rescission of that order, the fact being that the $10,000 has not been paid, although the case has proceeded to the point where it is almost ready for hearing.  The other is brought by the respondents to the case, seeking the provision of further security in  the sum of $85,000.

The evidence leads me to infer that the impecuniosity of the applicant company, and in large measure also that of the individual applicants, does stem from the very same circumstances that have given rise to their claim, which has been brought in respect of alleged misrepresentations upon the sale of a business.  That is, of course, a material matter upon the authorities.

It is also a material matter, and one which I regard as of significance in this case, that the individual applicants have not used the corporate applicant as a stalking horse, as I put it in Cameron’s Unit Services Pty Ltd v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53, but have themselves accepted the burden of the litigation, and the risk of a costs order should they lose. However, they are without significant means, and the fact is that if the respondents are successful in the litigation their prospects of recovering any costs awarded in their favour are quite slim.

The basis on which Mr Aldridge, who appears for the respondents, presses for the maintenance of the security order already made, and for the making of an order for further security, is that the litigation is admittedly being funded by the father of the individual male applicant, Mr Mallows senior, and that there is no evidence to suggest he would be unable to provide reasonable security.  The proposition is that if he is willing to come forward and fund litigation of this nature, although he has no direct personal interest in it, his position may be taken into account, as if he were a person standing to benefit from the litigation, from the point of view of the consideration of an order for security.  I do not think that I could accede to that argument, as a general proposition, in the absence of further circumstances, but there is a further circumstance here which is that Mr Mallows senior is owed approximately $100,000 by Mr Mallows junior, possibly jointly with the other individual applicant.  That being so, Mr Mallows senior does stand to gain indirectly, and he does also have a small direct prospect of gaining, so far as he has the prospect of recovering the party and party proportion of the costs that he has already expended up to this time.

Bearing all that in mind, and bearing in mind that, although he has clearly been involved in instructing the solicitors for the applicants, he has not put on evidence himself to suggest that he could not or would not provide security, I think his involvement in the litigation, in the particular circumstances of this case, is sufficient reason to refuse to modify the order for security that has already been made.  It is also sufficient reason to satisfy me that, in all the circumstances, it is appropriate to make a further small order, but not I think a large one.  It cannot be suggested that the gain he stands to make is to be measured by the $100,000 that is owed to him.  The financial position of Mr and Mrs Mallows junior is far too parlous for that to be a realistic way of looking at the matter.  Even if the litigation is successful, Mr Mallows senior may very likely recover only a small part of the moneys owed to him.

Doing the best I can on the material that has been placed before me, I think it is appropriate to order that, before the matter is actually allocated a date for hearing, security be provided in the further sum of $10,000.  I will not fix a precise date for that other than in the general terms that I have just enunciated, but I will reserve liberty to apply, and if the matter is not attended to within a reasonable time, it will be open to Mr Aldridge to move for the fixing of a definite time failing which the possibility of a stay may arise.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

Associate:

Dated:             10 December 1997

Counsel for the Applicant:	P L Hanlon
Solicitor for the Applicant:	Bundesen & Associates
Counsel for the Respondent:	M R Aldridge
Solicitor for the Respondent:	R H Lewis & Associates
Date of Hearing:	28 November 1997
Date of Judgment:	28 November 1997