Davey Products P/L v Brookfield, I.W.

[1994] FCA 277

- ,

JUDGMENT No. ..&22 ...... ,I .. ?A...

I N THE FEDERAL COURT O F AUSTRALIA )

No. S G 112 of 1 9 9 3

SOUTH AIJSTRALIA DISTRICT ~ G I S T R Y j

1

GENERAL D I V I S I O N )

ON APPBAL FROM A SINGLE JUDGE

O F THE

FEDERAL COURT OF AUSTRALIA

BETWEEN: DAVEY PRODUCTS PTY

LTD. I T T FLYGT L I M I T E D

A N D W H I T E

INTERNATIONAI. PTY LTD

Appellants

AND :	IAN WALTER BROOKFIELD
AND S E P T I C PRODUCTS AUSTRALIA PTY LTD ( I N LIQUIDATION)
Respondents

CORAM:	WILCOX, DRUMMOND h BEAZLEY JJ
PLACE :	ADELAIDE
DATE :	9 &Y  1994

EXTEMPORE REASONS FOR JUDGMENT

THE COURT: This is an application for leave to appeal against a decision of Heerey J refusing an application for an order requiring security for costs. Hls Honour accepted that the corporate applicant in the principal proceeding, Septic the exercise of his discretion to make an order for security. Products Australia Pty Limited, was insolvent but declined in

Three matters have emerged in the argument before

us.	The first is whether it is correct to say, as his Honour "If the various products supplied by the respondents were defective in the way alleged, then this was the precipitating cause for the collapse of the
did,	that :

company. "

His Honour noted that the evidence on this question was sparse. It was limited to a few paragraphs in the affidavit of Ian Walter Brookfleld, the individual applicant in the principal proceeding, in which he spoke of problems encountered because of losses of contracts caused by pump failures. He said the problems extended over 22 months, apparently ending in August 1992.

It is true that in early 1992, the company was in some financial difficulty. It apparently had to obtain extensions of time for payments from some or all of its creditors. It may be, as Mr Gyles QC submitted, that the	company was under-capitalised. Nonetheless, it was apparently	able to continue to trade untll, according to Mr Brookfield,
and there was no contrary evidence, it was forced into liquidation because of pump problems. It seems to us that the view reached by his Honour was open to him.
The second issue was whether his Honour should have found against Septic Products because of the company's fallure to give evidence about an alleged indemnity. The evidence on

this matter is also sparse. It consists only of evidence from

Mr G.S. Davis, the solicitor for White International Pty Ltd,

concerning two telephone conversations during which a reference was made to the fact that an unnamed person had given an indemnity to the liquidator of Septic Products. The evidence did not disclose the terms of the indemnity nor whether the indemnifier thereby obtained any interest in the fruits of the company's action. This would seem unlikely, given that there was also evidence of conversations referring to an assignment to Mr Brookfield of the company's action. It seems that the indemnifier is someone other than Mr Brookfield.

Although Mr Brookf ield swore an affidavit and could
have been asked questions on the point, he was not cross-
examined. The primary judge dealt with this matter by saying:

"Counsel for the third respondent adverted to the existence of the mysterious indemnity provider and argued that this person also must be getting some

benefit from the proceeding but I do not think at the moment the material on that point extends beyond the realm of speculation."

We agree. The fact that someone has given an indemnity does not mean that he or she has an interest in the proceeds of the action. Such a person is not necessarily a person to whom order 28, rule 3(l)(b) of the Court's rules apply. It certainly cannot be assumed that the action is being brought by the applicants for the benefit of that person - see the comment of Toohey J in Upton v TVW Enterprises Limited (1984)

57 ALR 361 at 363.

The final matter concerned the position of Mr Brookfield. As already mentioned, Mr Brookfield is an applicant. The primary judge thought it unlikely that there would be a different result of the claims brought by one applicant as compared with the other; but against the possibility that Mr Brookfield's claim would succeed and the company's claim fail, M r Brookfield gave an undertaking to pay any costs that might in that situation be ordered against the company.

It seems to us that the only way in which Mr Brookfield's position is relevant to the present application is that it might be said that he stands to benefit from the company's success, and that this ought to be taken into account in determining whether an order for security would stifle the action. Once it is appreciated that Mr Brookfield is putting at risk in the litigation such assets as he has, it

extent of his rights, he cannot be said to be a nominal	seems to us this argument disappears. Whatever the precise
applicant brought spuriously into the case to take advantage of the principle that the court does not ordinarily order security for costs against even an impecunious individual
applicant.
This is not a case of total overlap between the cases of the two applicants in the principal proceedings, but
there is a significant degree of overlap. If the case fails against any particular respondent, we cannot conceive that the trial judge would do otherwise than order both applicants to pay that respondent's costs.

The application for leave to appeal is dismissed

with costs.

I certify that this and the preceding four (4) pages
are a true copy of the Reasons for Judgment

of the Court.

Associate:

Dated:  9 May 1994

APPEARANCES

Counsel for the First and

Second Appellants:	R V Gyles QC and T L Stanley
Solicitors for the First and
Second Appellants:	P i p e r  A l d e r m a n
Counsel for the Third Appellant:	M G Evans

Solicitors for the Third Appellant:	Fisher Jeffries
Counsel for the Respondents:	R A Cameron and R D
Townsend
Solicitors for the Respondents:	Morcombe Townsend
Date of hearing:	9 May 1994