Devenish & Ors v Jewel Food Stores Pty Limited

[1990] HCATrans 175

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--

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S51 of 1990

B e t w e e n -

MICHAEL GERARD DEVENISH & ORS

and AMALGAMATED MILK VENDORS

ASSOCIATION INC.

Respondents/Applicants

and

JEWEL FOOD STORES PTY LIMITED

Applicant/Respondent

Application for security for

costs

MASON CJ

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON WEDNESDAY, 15 AUGUST 1990, AT 10.25 AM

Copyright in the High Court of Australia

Devenish(3) 1 15/8/90

MR M. ELLICOTT: In this matter I appear for the respondent,

the moving party on the summons, Your Honour.

(instructed by Hunt & Hunt)

MR P. GRAY:  May it please the Court, I appear for the

appellants, the respondents to the motion.

(instructed by Sly & Weigall)

MR ELLICOTT:  Your Honour, this is a summons dated 6 August.

The respondent under that that summons seeks an

order that the second appellant provide security

for costs.

By way of a technical matter, I might just

hand up minutes of order which we propose which, to

some extent, limit the scope of the security we are

seeking. Order 1 that we seek in the summons

suggests that it applies to costs incurred by the respondent in these proceedings. We have limited

that by way of what I have just handed to

Your Honour to costs to be incurred from today's

date.

MASON CJ: Costs being incurred - - -?

MR ELLICOTT: After today or the date of this order.

MASON CJ: But, Mr Ellicott, would there be any costs

incurred after the date of this order?

MR ELLICOTT: Well, Your Honour, the costs substantially of

an appeal, we submit, will occur after today's

date. There will be the preparation.

MASON CJ:  I would have thought that briefs to counsel on

the hearing of the appeal would already have been

delivered.

MR ELLICOTT: Yes, Your Honour, but the substantial work and

the costs of getting the appeal up will occur just

prior to the hearing which will be the 30th of this

month, we submit, and there is evidence from

Mr Maffey that we estimate what those costs are

going to be, at least on our side, in the future to

the extent of $20,000 to $25,000.

Initially, Your Honour, I will be seeking leave to issue some subpoenas to various parties.

MASON CJ: But, why, Mr Ellicott?

MR ELLICOTT: If I can just go into the background of it,

Your Honour. The application is made because

documents have come to light which suggest to the

respondents that the second appellant has been

funded in these proceedings to date from an outside

entity; that those funds came from a contingency

Devenish(3) 15/8/90

fund set up by the New South Wales Dairy

Corporation; that that fund was set up supposedly

to pay funds for the purpose of abnormal freight

costs.

Subsequently, it would seem from the material

which we have in our possession, the Minister

looked at this and said, "Well, it appears that

funds have gone out to the tune of $120,000 to pay

the costs of the Milk Vendors Association" and they

could not be categorized as abnormal freight costs

and the General Manager of the New South Wales

Dairy Corporation has indicated in a letter that

the funding will no longer continue as of last

March.

Therefore, we say there is an inference, a

real and substantial inference, that having been

funded to the extent of some $120,000, that the

second appellant could not of itself afford its own

costs and we build on that inference to say we

cannot afford our's. Now, we say in relation to

that we have inferences deriving from documents.

What the subpoenas are seeking to get are the

actual arrangements which occurred. All we have is

material which came from the Dairy Corporation

under an application under the Freedom of

Information Act.

So, we really want to follow the snail's

trail, as it were, and seek such documents as exist

which will flesh it out. We do not anticipate that

that would involve a truck load of documents, we

anticipate there would be a couple of letters

passing between, for example, the second appellant

and the New South Wales Dairy Corporation or the

New South Wales Dairy Industry Conference. So, the

reason for issuing those is really to flesh out the

inferences which we say arise from the documents we

have in our possession.

MASON CJ: But, Mr Ellicott, it seems to me the big problem

with the application is that it has been brought so

late in the day. After all, it is now a fortnight

only before the appeal is due to be heard. Appeal

books have been filed. All the steps preparatory

to the hearing of the appeal must have been taken.

Now, let us assume for the moment that it is

proper to draw the inference that a source of funds
previously available to the second appellant for
financing the cost of these proceedings is no

longer available, the critical question still

arises whether in the light of that delay and in

the light of the fact that the Court has granted special leave to appeal should you get any order for security.

Devenish(3) 3 15/8/90

Now, that is the question as I see it, the

critical question, and I cannot help feeling that

if we are going to pursue the matters of subpoenas

we are really pursuing something that is at the

very fringes of the critical issue for decision.

MR ELLICOTT:  Yes, Your Honour.

MASON CJ: But let me see if I can shorten this. Mr Gray,

what is your attitude in relation to the case on

the facts that is brought by the applicant? Now,

the suggestion is that a source of funds available

to your client for the prosecution of the

proceedings is no longer available. What do you

say about that?

MR GRAY:  Your Honour, we say that the documents exhibited

to my friend's affidavit certainly suggest that

that is the case but we say that that is, with

respect, quite irrelevant. The question is whether

the second appellant is able to meet the costs of
these proceedings or whether there is credible

testimony that it cannot and, in our submission,

there is no testimony at all as to the financial

position of the second appellant that is before the

Court.

MASON CJ: All right. Now, are you prepared to make the

admission, for the purpose of this application,

that a source of funds previously available to your

client for the prosecution of the proceedings is no

longer available in relation to the costs of the

appeal?

MR GRAY:	Yes, Your Honour.
MASON CJ:	You are?

MR GRAY: Yes, Your Honour.

MASON CJ: There you are, Mr Ellicott.

MR ELLICOTT:  Yes, Your Honour. Well, in relation to the

subpoenas, that would only leave material which we

have sought under notice to produce as to the

financial standing of the second appellant.

MASON CJ: Well, in effect, notice to produce is a matter

different. You can call on Mr Gray to answer, if

you want to, the notice to produce.

MR ELLICOTT: Yes.

MASON CJ: But that is going to leave you in the situation

where, if he does not produce anything, you then

have to adduce evidence yourself.

Devenish(3) 4 15/8/90

MR ELLICOTT:	Yes, Your Honour. Our submissions will be founded on the admission that has just been made.
MASON CJ:	I see.

MR ELLICOTT: Whether that be persuasive or not.

MASON CJ: Yes.

MR ELLICOTT: So, Your Honour, I would seek to call on a

notice to produce dated 10 August 1990 addressed to

the second appellant.

MR GRAY:  Your Honour, we say two things in answer to that

call. First, we say that as a technical matter

arising from the rules, there appears to be no

provisions allowing my friend to serve such a

notice, hence, as I - - -

MASON CJ:  You mean the Rules make no provision for the

service of a notice to produce?

MR GRAY:  Yes. That, as I understood it, was the reason why

my friend's solicitors sought the leave of the

Court, as I understand it, last week to issue

subpoenas and I gather that the subpoenas were not

issued.

MASON CJ:  No, the subpoenas were not issued because I

directed the Registry to inform the applicant that

I did not propose to issue subpoenas. I think the

formal provision in the Rules is that a subpoena

will be issued on a note from a Justice, but that

the applicant would be required to show cause today

why a subpoena should be issued and that, in

effect, is what has happened.

MR GRAY:	Yes.
MASON CJ:	Mr Ellicott sought to justify the issue of the

subpoenas but I have endeavoured to circumvent that

by securing the admission from you.

MR GRAY:  Yes. Thank you, Your Honour. The second point we

make is that the notice to produce has nine

numbered paragraphs. The last five of those, 5 to

9, call for documents relating to the matter now

the subject of an admission.

MR ELLICOTT: Might I circumvent that by saying we call on 1

to 4 and we do not press 5 to 9.

MASON CJ: All right. Now, Mr Ellicott, could you give me a

copy of the notice to produce because this argument

is taking place in the dark, as it were, as far as

I am concerned. Thank you. Now, you do not press

5 to 9 because of the admission that has been made?

Devenish(3) 15/8/90

MR ELLICOTT: That is correct, Your Honour.

MASON CJ: So, we are concerned only with l to 4?

MR GRAY:  If it please the Court, I produce documents in

answer to paragraphs 1, 2 and 4.	I produce no
documents in answer to paragraph 3.

MASON CJ: But you do not produce them to me, you produce

them to Mr Ellicott.

MR GRAY:  May it please the Court.

MASON CJ: The notice to produce is quite different from a

subpoena. There is, as it were, no legal

obligation on a party to comply with a notice to

produce. The effect of service of a notice to

produce is that if the party does not produce, the

party serving the notice is then entitled to give

secondary evidence of the documents.

MR GRAY:  Thank you, Your Honour. Yes, I produce the

documents to Mr Ellicott.

MR ELLICOTT: Might I have leave to inspect those documents,

Your Honour?

MASON CJ: Well, you have got them, have you not?

MR ELLICOTT: Yes.

MASON CJ: They are not in the possession of the Court, they

are in your possession.	I mean, you are in a
position to look at them.

MR ELLICOTT: Yes. I would like, initially, Your Honour,

just to have five minutes to look at those

documents and then make submissions on the

application.

MASON CJ: Certainly, I will adjourn.for five minutes to

enable you to look at the documents, Mr Ellicott.

MR ELLICOTT: If Your Honour pleases.

AT 10.38 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.58 AM:

MASON CJ:  I should mention that the Rules do make provision

for notices to produce. It is Order 33 rule 6

Devenish(3) 6 15/8/90

which deals with evidence of service of a notice. But, of course, the Rules do not, as the supreme court procedures do, impose any obligation to

comply with a notice to produce. The High Court

Rules have not been brought up to date in that

fashion and they proceed according to the old

common law procedure whereby the function of a

notice to produce was to enable you to prove

something and if the document was not produced you

give secondary evidence of it.

MR ELLICOTT:	Yes.
MASON CJ:	In other words, it did not impose an obligation

on the assumption, incorrect as it happens, that

as a subpoena does to produce documents to the

notices to produce have the same effects in this

Court that they have in the supreme court. But

anyhow that is by the way. It indicates why we

were at cross-purposes before.

MR ELLICOTT:  Your Honour, I would seek to tender as a

bundle on this application material produced in response to the notice to produce being a draft unaudited balance sheet as at 30 June 1990; the balance sheet as at 30 June 1989; and the balance

sheet as at 30 June 1988. I would seek to tender

those, Your Honour.

MASON CJ: Any objection, Mr Gray?

MR GRAY:  No, Your Honour.

MASON CJ: They will be exhibit A.

EXHIBIT:	Exhibit A •.... Three balance sheets
MR ELLICOTT:	The only other evidenc~ to which I would take

Your Honour is that contained in the affidavit of

Mr Stephen John Maffey, sworn 3 August 1990. Would

Your Honour have me read that affidavit?

MASON CJ: What part of the affidavit do you want to rely

on?

MR ELLICOTT: Paragraphs 3 to 5 inclusive, Your Honour, we say, establish that we have given up a right that

we might otherwise have had and have agreed to seek

costs in these proceedings only from the second

appellant. We have come to an arrangement whereby

we are not going to seek costs from the individual

milk vendors who we sued as being engaged in

contravention of section 450. So, we rely on 3, 4

Devenish(3) 15/8/90

and 5 for that purpose. So, it leaves us with only

one target, we say, vis-a-vis costs.

I spoke to my friend earlier about paragraphs

which relate to the documents we obtained. The

only matter now, having regard to the admission

that we press in relation to those - and I

understand my friend is prepared to admit it - is

the extent of the funding provided by the outside

body was some $123,576. If my friend is prepared

to admit that then I do not press paragraphs 6 to 8

inclusive of the affidavit.

MASON CJ: What do you say about that, Mr Gray?

MR GRAY:  Your Honour, I am prepared to admit, on

instructions, that the amount in paragraph 11,

$123.576, has been received.

MR ELLICOTT:  So that leaves paragraphs 9 and 10 which

relate to correspondence between the solicitors

which occurred in March, Your Honour. I rely on

that correspondence because we say it goes to delay

and it bears some importance in view of the

admissions just made.	The correspondence is
contained in annexure F to the affidavit.	Does
Your Honour have those annexures?

MASON CJ: Yes.

MR ELLICOTT: Sorry, annexures E and F: Eis the letter we

sent indicating what the documents to us

represented and saying that we had concerns and we

asked for security. The response is to the effect

that the source of the funding is not a matter of

which we have knowledge and yet today they are so

readily prepared to admit the source of that

funding which was put to them in clear terms in a

letter, annexure E, and they say it is irrelevant

to any consideration. So, they are putting it a

little bit on an abstract plane, Your Honour,

vis-a-vis this application, we submit, in that

letter.

So, we rely on those letters to make those

points.	We do not rely on paragraph 11 in view of
the admission.	We rely on paragraph 12 which

relates to annexure G, and annexure Gare questions

on notice in the Legislative Council in the

Parliament of New South Wales; two of which relate

to the extent to which this fund that they outlined

to Your Honour before has been used to finance

court actions. We say that no answers have been

received to those questions but they were matters

to which we were trying to obtain information in

respect of by means of this procedure in the period

from March up to the current date. So, we say that

Devenish(3) 15/8/90

they bear some reasonable amount of importance on

the question of delay as well.

We rely on paragraph 13 to establish the

extent of our costs to date and one marries that up
with the level of the admission of $123,000

received in respect of costs by the second

appellant. We rely on paragraph 14 because that

establishes that the costs are to be incurred after

the date of this affidavit, that is $20,000 to

$25,000. And I take Your Honour back to the extent

of the security we are seeking which is $25,000.

Paragraph 15 we rely on though I can see

reasons why it might be objected to and rejected.

MASON CJ: Yes. Well, there is a difficulty about it, is

there not, Mr Ellicott?

MR ELLICOTT: Yes. Paragraph 16 - - -

MASON CJ:  I mean, I am not sure whether it is objected to

but quite clearly I cannot place reliance on it.

MR ELLICOTT: No, Your Honour. Paragraphs 16 and 17 are

merely formal so that is the extent to which we

rely on the affidavit and the supporting material.

MASON CJ: Yes.

MR GRAY:  Your Honour, if my friend presses paragraphs 9 and

10 only on the question of delay then we do not
object to those and similarly 12, if that is put

only on the question of delay, we do not object to

that but, Your Honour, we do object to

paragraph 15.

MASON CJ: Yes, I reject paragraph 15. Yes, Mr Ellicott?

MR ELLICOTT:  I understand there is no evidence forthcoming

from the other side.

MASON CJ:  I gather not, no affidavit has been filed.

MR GRAY:  No, Your Honour. Your Honour, if the Court would

give me leave, I would ask Mr Maffey a few short

questions.

MASON CJ: What about?

MR GRAY:  On about, firstly, the delay by the applicant on

the motion in bringing the motion and, secondly,

about his knowledge of the actual financial

position of the second appellant.

MASON CJ: Very well.

Devenish(3)	15/8/90
STEPHEN JOHN MAFFEY, sworn:
MR ELLICOTT:	Mr Maffey, have you sworn an affidavit on this

application dated 3 August 1990?---I have.

Do you-say the contents of that affidavit are true?---I do.

Thank you.

CROSS-EXAMINED BY MR GRAY:

MR GRAY:  Mr Maffey, you received instructions from

Mr Flemming of Jewel in February that he had

received the documents which were annexed to your

affidavit, is that right?---Certain documents,

that's correct.

One of the documents exhibited to your affidavit was a

letter from Mr Flemming to the Minister for

Agriculture dated 16 February·where Mr Flemming

said that he had recently received copies of

documentation which indicated that the milk vendors

had been funded in this litigation out of the

contingency fund.	Do you remember that?---That's
correct.

So that that was information which Jewel had by no later

than 16 February, is that correct?---That's

correct.·

And the application for special leave in this Court was

granted on 6 April 1990?---Initially, that's

correct.

And after an administrative hiccup it was confirmed on

11 May?---That's correct.

MASON CJ: That is because the notice of appeal was not

filed within time.

MR GRAY:  So that since at least 11 May Jewel and your firm

have been aware of the fact that the second

appellant has been funded, in part at least, from

the contingency fund?---That's correct.

MASON CJ:	From 2 May?
MR GRAY:	The date I mentioned was 11 May, Your Honour, the

date that leave was affirmed.

Devenish(3) 10 S.J. MAFFEY, XXN 15/8/90

Apart from issuing the notice to produce and seeking to

issue a subpoena which has been discussed this

morning, did you take any steps to seek to

ascertain the financial position of the second

appellant?---No, no further detailed steps other

than this morning, no.

Did you make any search at the Corporate Affairs

Commission?---Not a recent one, no.

Well, any search?---No, certainly not.

You made no search at the Corporate Affairs Commission as to

the second appellant's annual reports or other

financial information disclosed to the

commission?---No, the documents that we sought were

the documents that were sought in the notice - the

original in the subpoena and subsequently the

notice to produce.

Yes, and both the draft subpoena and the notice to produce

came into being last week, is that right?---In the

form, yes, in which we sought to have them filed.

Thank you, Your Honour.

MASON CJ:  Do you have any questions, Mr Ellicott?

MR ELLICOTT: Just one, I think, Your Honour.

RE-EXAMINED BY MR ELLICOTT:

MR ELLICOTT:  Mr Maffey, did you make any inquiry of the

solicitors for the second applicant as to the

financial position of the second applicant at any

time since February of this year, either oral or in

writing?---! certainly cannot recall in writing. I

had a discussion with Mr Williams recently.	I
can't recall if that was on the record or off the

record.

Thank you, no further questions.

THE WITNESS WITHDREW

MASON CJ: Yes, Mr Ellicott?

MR ELLICOTT:  Your Honour, we submit that the principles,

such as they be, established in this Court in

Devenish(3) 11 15/8/90

relation to Order 70 rule 7 which is the relevant

rule providing for the granting of security for

costs, suggest that the discretion is absolute,

that it is one to be exercised having regard to all

the circumstances of the case and that it is one

designed to do justice in the case, being such a

general discretion.

Those principles, we say, flow from a decision of Mr Justice Rich in King v Commercial Bank,

(1920) 28 CLR 289, at page 292. I would like to

hand up to Your Honour a little folder which we

have prepared which contains the cases I would be

relying on.	I do not want to spend hours thrashing
through those decisions, Your Honour.	We just

submit that they establish a very wide discretion.

The statement of Mr Justice Rich was to the

following effect, and it was in relation to the old

rule, Your Honour, but the next case I will take

you to has Mr Justice Brennan approving the

statement in relation to Order 70 rule 7.

Mr Justice Rich said:

The Legislature, however, has left absolute

discretion to the Court, and has done so

without prescribing any rules for its

exercise. In these circumstances no rules can

be formulated in advance by any Judge as to

how the discretion shall be exercised. It

depends entirely on the circumstances of each

particular case. The discretion must, of

course, be exercised judicially, which means

that in each case the Judge has to inquire

how, on the whole, justice will be best

served, whether by altering the amount -

which is the old procedure where there was an

amount there -

and, if so, to what extent, or by letting it

stand unaltered.

Now, we say that that is the position in relation

to Order 70 rule 7, support for that corning from a

decision of Mr Justice Brennan in Lucas v Yorke,

which is behind the second tab in Your Honour's

bundle. That was a decision in (1984) 58 ALJR 21,

and if I take Your Honour to page 21, column 1,

about point 5:

The inability of an appellant to meet the costs of an unsuccessful appeal is a relevant

factor in exercising the discretion ..... but it

is no more than a factor to be weighed in all

the circumstances.

Devenish(3) 12 15/8/90

And he relies on a brief judgment of Chief Justice Gibbs, as he then was.

This discretion is not fettered by a rule,

such as the rule adopted by the Court of

Appeal in that security for costs is

ordinarily ordered when a respondent shows

that the appellant, if unsuccessful, will be

unable through poverty to pay the costs of the

appeal. The discretion ..... under the High

Court Procedure Act considered by Rich J. in

King v Commercial Bank of Australia. I would

respectfully adopt what Rich J. said, mutatis

mutandis, to the discretion now to be

exercised.

Then His Honour goes on to talk about various

discretionary elements. The first is an appellant

failing at first instance and on appeal. Not so in

page 21:

this case though they have lost on appeal to the top of

the appellants' impecuniosity has
arisen ..... from the losses sustained as the

result of buying and carrying on the business.

Not so here, we say, Your Honour, because this was

a boycott effectively from the first and second
appellants of our business and that no evidence has

been led in that regard in any event.

Then at page 21 point 6 or 7:

It is an important consideration that the

making of an order for security for costs will

effectively shut out an appeal designed to

recover losses which have caused the

appellants' impecuniosity. That factor has
additional weight if the question on which the

appeal turns is an important question of law appropriate for consiqeration by this Court.

Well, as we say, the first limb of that has not

arisen in this case. So, we say they are the

guiding principles, Your Honour.

Now, if I can take Your Honour to the

financial position disclosed in exhibit A, in

particular, to the unaudited accounts of

30 June 1990 which should be the top document in

that exhibit. What we rely on in those accounts in

the balance sheet is the fact that the current

liabilities far exceed the current assets to the

tune of some $220,000-odd. See the figure of

$344,000 at point 8 in the right-hand column,

versus $112,000 at about point 4. Cash at bank is

Devenish(3) 13 15/8/90

some $5000; stock on hand, some $21,000. Then we

rely on the fact that in the profit and loss

account, if Your Honour goes to expenses - - -

MASON CJ:  What about the shares in AMVA Enterprises said to

be valued at $375,000?

MR ELLICOTT: Your Honour, we are faced with that but all we

can point to is the continuing deteriorating

position and that is just a face value. There is

no other valuations which support it, it would

seem, and we do not know how readily those shares

could be realized. They are in a private company.

MASON CJ: That is true, but it is for you to establish that

they would not be able to pay the costs.	The onus
is not on them.	,

MR ELLICOTT: 

Yes, Your Honour. Well, Your Honour could

take into account that it is a private company and
there may not be an open market for a private

company - shares.

MASON CJ: But, again, it is speculation, is it not,

Mr Ellicott?

MR ELLICOTT: Yes, as much as the value we say is

speculation.

MASON CJ:  I do not know anything about the nature of AMVA

Enterprises' activities. It is quite impossible

for me to form any judgment as to whether or not it

would be a realistic or, as it were, a realizable

asset at anything like the figure that appears in

the balance sheet. It is just something on which I

could not form a judgment of any kind.

MR ELLICOTT: Well, I have said all that I can say on that.

The only other point I would make is in relation to

the legal costs. Your Honour will see that there

is, on page 2 in the profit and loss account, no

were, on the evidence before the Court, funded by	legal costs for last year so we assume that these
the outside entity, and in relation to the current year costs up to 30 June, $990. So, Your Honour,
we say what possible expenses beyond the $990 have
been incurred after June? There is no evidence of any, so that has some significance on the delay
question. There is no provision here in these accounts for the costs of litigation in the future.

Now, Your Honour, just on the matter of delay,

we say that it is a matter of significance and has

been recognized in the cases as a matter of

significance but, again, it is a matter to be

weighed in all the circumstances of the case; that

Devenish(3) 14 15/8/90

Your Honour has a discretion and we say that delay

is relevant to the extent to which prejudice has

been caused to the other side. To the extent to

which they may have been put to expense by reason

of our delay, if there be a delay of substantial

importance, we make a number of points. The first

is that the letters which passed between the

solicitors in March indicated that they thought the

matters raised by us were irrelevant, so it was

really an academic question, and they indicated to

us that they had no obligation to satisfy us as to

their clients' financial standing. It may or may

not be true but they were not being helpful in any

way by saying, "No, look, we have got these shares

in AMVA Enterprises or all these substantial assets

which you can look to."

Secondly, this is an appeal before this Court

which will, we say, involve us in expenditure of

$20,000 to $25,000, on the evidence of Mr Maffey,

which expenditure is yet to occur and we say in the

nature of things the expenditure occurs just prior

to the appeal in the last week or so when counsel

turn their mind to it and prepare - days in

preparation, do all the work.

Thirdly, on delay, the relief we seek does not

in any way impinge on the past expenses, if I can

put it that way. The relief we seek is as to the

future, as to $25,000 that we are going to have to

expend.

The fourth matter on delay is the question on

notice which we had before the Parliament which

would have given us more facts and had they been

prepared in their letter in March to say, "Okay, we

admit we've had these" as they have today, "We
admit we've had this; we admit the level of the

funding, take your own course after that", then we
would not have had to take that step of putting the

material before the Parliament.

Lastly, there is no evidence from them as to

the prejudice that they have suffered as a result

of the delay. There is no evidence of any wasted
expense and we say that if they have known, as they

must have since at least February or March, that

they were not going to be getting funding from this

source then, presumably, they would be trying to

get it from some other source or from their members

and they have not put on any evidence that they

have been in any way prejudiced in that regard.

So, we say that the evidence before

Your Honour establishes a real fear on our part which has a legitimate basis that our costs of this appeal to be incurred in the future, $25,000, will

Devenish(3) 15 15/8/90

be unlikely to be paid in the event that the second

applicant is successful. Having regard to the fact

that it is a general discretion, we say that

Your Honour should take into account our generosity

and our attempt to do justice in reaching an

agreement that we would not pursue the individual

vendors. We say that is a matter of some

importance in that we have said, "Okay, we'll only

look to the Association." So, now we find a

position where their funding has been withdrawn and

we have spent in the vicinity of some $150,000 to date and in future we will spend another $25,000.

We say that they cannot avail themselves on

the "we caused the loss" argument because - the

reasons I outlined when taking Your Honour through

Mr Justice Brennan's judgment. I think those are

largely the matters we would seek to rely on,

Your Honour.

MASON CJ: Yes, Mr Ellicott. Yes, Mr Gray?

MR GRAY:  Your Honour, we would respectfully agree with

Mr Ellicott to the extent that he says that
Your Honour has an absolute or an unfettered discretion on this application and we would adopt what Mr Justice Brennan said in Lucas v Yorke in

that regard.

But, Your Honour, the application presumably

is founded on section 533 of the Code. My friend

says that is not so, so I will not pursue it.

HIS HONOUR:  I would have thought it was an application

brought under Order 70 rule 7 of the High Court

Rules.

MR GRAY:	Yes.
HIS HONOUR:	There has been no suggestion it was brought under the Code.

MR GRAY:  No, there has not, I accept that, Your Honour.

Order 70, as my friend has said, simply gives the

Court the wide discretion that he has mentioned.

But on the evidence before the Court there is no

basis, in my submission, on which the Court could

find, or even infer, that there is reason to

suppose that the second appellant would not be able

to pay the costs of the respondent were it to be

unsuccessful. The balance sheet that has been

tendered, which has become exhibit A, shows an

excess of assets over liabilities of some $142,000.

Even on my friend's own case, the liability for his

client's costs is expected to be only up to

$25,000. In our submission, that in itself is a

fairly generous estimate of the costs.

Devenish(3) 16 15/8/90

As Your Honour has said in argument, there is

no reason upon which my friend can rely why the

value of the shares in AMVA Enterprises Pty

Limited, shown in the balance sheet, should be

discounted. There is no basis upon which my friend

has sought, or could seek, to challenge the

accuracy or validity of the balance sheet. So that

9n the sheer facts of the finances of the second

appellant, there is no basis, in our submission,

for the granting of security.

So far as the discretionary matter is

HIS HONOUR:  I suppose what would be in the balance sheet is

that you would not be able to pay the costs

immediately.

MR GRAY:	Not if the fact was - - -
HIS HONOUR:	It is difficult, because it is a matter of

speculation. You do have, as it were, funds from which an amount of, say, $25,000 could be paid if you could realize current assets, and there is no

reason to believe that you would not be able to

realize $25,000 out of current assets totalling

$112,000. But, of course, then the appellant might

be competing with other creditors of the second

appellant in order to gain access to the current

assets.

MR GRAY:  Yes, Your Honour, we accept that, but in our

submission, adopting what Your Honour says, the

onus is on my friend to convince the Court that he

would be disadvantaged in having to compete against

any creditors that there might be and he, of

course, in our submission, has not done that.	So
that on the bare document itself, which is his

evidence, of course, the support that he requires

simply is not to be found, in our submission.

If I might deal with one submission that my

friend made, he said that there was no provision

expressly to be found in the profit and loss

account for future legal costs but, in my

submission, there is no necessary reason why there

would be in a profit and loss account. That is not

necessarily the place where one would expect to

find such a provision.

On the discretionary matters, Your Honour, as

well as discretion being absolute, discretionary

factors to be considered are not necessarily to be

confined to those that Mr Justice Brennan dealt

with in Lucas v Yorke, but certainly the ones that

he covered there are important. One of the

discretionary factors which has been recognized in

the cases is whether the appellant is bringing a

Devenish(3) 17 15/8/90

bona fide appeal or whether it has a reasonably
good chance of success; whether the appeal is not a

sham. In our submission, that is a factor

manifestly to be resolved in favour of the second

appellant, having regard to the fact that it

succeeded at first instance before

Mr Justice Burchett and lost on appeal only by

majority, so that in fact, on a score card at

present, two of the Federal Court judges have found

in favour of the appellants and two have found in

favour of the respondent. So that on the merits of

the appeal, the indications are that the appeal is being prosecuted bona fide and has reasonably good prospects of success.

On the question of delay, the evidence is

clear that the - firstly, that the respondent knew

at least as early as February that the source of

the second appellant's funding had been this

contingency fund, this outside source. Now, Bahr v

Nicolay, 163 CLR 490, makes it clear that an

application for security for costs cannot be

brought until special leave has been granted. So

that the current applicant could not have brought

this application until 11 May. But nevertheless,

since then, since 11 May, he has been in possession

of the facts upon which, apart from documents that

it sought to acquire in the last few days on
subpoena, it wished to base its application. And

secondly, the second fact -

HIS HONOUR:	What was that, Mr Gray? I did not catch that.
MR GRAY:	Since 11 May it has had the information upon which

it based this application, apart from the

information it obtained from the documents it

acquired this morning in answer to the notice to

produce. So it has had those documents giving it

that basis upon which it relied for over three

months, and this in a context where the matter is,

of course, fixed for hearing in the High Court in

15 days time.

Not only had it had those documents which it

says gave rise to a concern that if one source of

funding was withdrawn, there may not be other

sources of funding, but it made not the slightest

attempt to ascertain what the second appellant's

financial position was. The evidence of Mr Maffey

was that he certainly did not write to the

solicitors for the appellant to ask them, and he

could not even say that he had ever asked them

orally, and the only conversation which came to

mind was one in the last few days which may have

been off the record.

Devenish(3) 18 15/8/90

So those facts, in our submission,

Your Honour, point to a delay on the part of the applicants on this motion which is not reasonable

and which should not find reward in the form of an

order of security provided within such a short

space of time before the hearing. Particularly is

that so, Your Honour, when regard is had to the

l~tters, exhibits E and F to Mr Maffey's affidavit.

My friend sought to place some reliance on those

letters in his case but, in our submission, to the

extent that they provide any assistance on this

application, they point the other way; that is, on

14 March the applicants raised the question of the

withdrawal of the outside source of funding and

five days later - in other words, very quickly -
the solicitors for the second appellant reply that

this is a matter irrelevant to the question of

security.

Now, that is a matter on which minds may

differ, perhaps, but plainly, in our submission,

the obligation cast upon the applicant was to take
the matter further, not simply to say, as my friend
put it, that the second appellant's solicitors were
not being very helpful. That is hardly to the

point, in our submission. No assertion was being made to the second appellant's solicitors at that

point that there client was impecunious and so
there was no obligation on them to respond by

putting forward the state of the second appellant's

finances.

My friend then said that the real expense in

this case would be likely to be in the last few

days or a week before the hearing when counsel

turned their attention to the brief and prepared.

In our respectful submission, firstly there is no

evidence of that; secondly, under the system
whereby appeals to the High Court are brought only
after an application for special leave has been

allowed, the reality is that these appeals are worked up very thoroughly at the special leave

application stage and the majority of the expense,

in our respectful submission, should already have

been incurred.

Then finally, Your Honour, my friend asked

that the Court take into account what he referred
to as the respondent's generosity regarding the
individual appellants. But in our respectful

submission, there is a non sequitur involved in

that. The generosity, if that is how it is to be

regarded, was afforded not on the basis that the

association, the second appellant, was getting its

funding from some outside source; it was afforded,

if at all, simply on the expectation, it must be

presumed, that the second appellant was funding its

Oevenish(3) 19 15/8/90

own costs. And the mere fact that subsequently it

has come to light that it did have another source

and it now does not have that other source, in our submission, does not alter that one iota. Whether

the respondent's action is to be characterized as

generous or not, it is perhaps not to the point,

but whatever it was, no basis has changed on which

it could now be relied as providing some support

for this application.

Those are our submissions, if the Court

pleases.

HIS HONOUR:  Yes, thank you. Mr Ellicott.

MR ELLICOTT: Just a few short matters, Your Honour. It was

said that there may be some doubt as to the $25,000

figure we have estimated for future costs. We say

that Mr Maffey was cross-examined on his affidavit.

No question was asked of him. Secondly, it was

asserted that this is a bona fide appeal, not a

sham. We say there is just one matter to be

weighed in all of the discretionary matters to
which I have taken Your Honour. Thirdly, on the

question of delay, we again rely on what we have

put in-chief before Your Honour.

Lastly, in relation to expenses already

incurred and my friend's submission that it is likely they would have incurred at the special
leave stage, there is no evidence whatsoever from

the other side as to that to show that they were,

in fact, incurred then and the extent of them.

Secondly, I rely on what I took Your Honour to in

the accounts which show that as at 30 June some

$990 in legal expenses had been paid, which would

be dwarfed in comparison - if that is what they had

to spend to work up the special leave application,

it would be dwarfed in comparison to the expenses

of working up the actual appeal within the next two

weeks, so there is nothing.in those accounts.

That is the extent of the submissions in reply, Your Honour.

HIS HONOUR:  Thank you, Mr Ellicott. I will give my

decision in this matter in 10 minutes time.	In the
meantime I shall adjourn.

AT 11.41 AM SHORT ADJOURNMENT

Devenish(3) 20 15/8/90

UPON RESUMING AT 12.03:

HIS HONOUR: This is an application under Order 70 rule 7 of

the High Court Rules by the respondent to the
appeal for an order for security for costs in the

form of an irrevocable bank guarantee in the sum of

$25,000 to be provided by the second appellant, the

respondent having agreed with the first appellant

not to seek to enforce any order for costs against
that appellant. The sum of $25,000 is estimated to

be the costs still to be incurred by the respondent

in connection with the preparation of the appeal on

its side of the record.

The applicant's case for security for costs

rests on two grounds: one, that the significance

of the proceedings to both parties now relates

solely to costs and, two, that the second appellant

will be unable to meet an order to pay the

respondent's costs of the appeal in the event that

the appeal is dismissed and that the appeal is

being funded by a third party.

The first ground may be disposed of shortly.

There is no material which supports an inference that the costs of the proceedings is the only

subject of contention in the appeal. The Court's

decision to grant special leave establishes that

the appeal involves a matter of public importance.

Moreover, it seems that counsel for the respondent

briefly-argued that the application for special

leave should be refused because the costs of the

proceedings had become the real bone of contention
between the parties. In deciding to grant special

leave, the Court must be taken to have rejected

this argument.

Although that is sufficient to dispose of the first ground, I should make the additional

point that the nature of the argument is such that

the appropriate time to raise it was on the hearing

of the special leave application itself, rather

than on an application for security for costs. I

say that because the argument goes to the question

whether special leave to appeal should be granted

at all, an argument which might, in appropriate

circumstances, sustain an application for

revocation of an order granting special leave to

appeal. But I do not suggest that the

circumstances of the present case are appropriate

to the making of such an application.

The second ground advanced by the respondent

rests on the proposition that the second appellant

will no longer have available to it a source of

Devenish(3) 21 15/8/90

funds from which it has hitherto defrayed the costs

of the litigation. So much is accepted. It is

admitted by the second appellant that the source of

funds previously available to it is no longer

available to it and that a sum of $123,576 has been

provided from that fund by an outside body to the

second appellant in connection with the costs of

the proceedings previously incurred.

However, the evidence falls short of

establishing satisfactorily to my mind that the

second appellant will be unable to meet an adverse

order for costs in the appeal. The second

appellant's balance sheets as at 30 June 1988 and

30 June 1989 have been tendered, as well as a draft

balance sheet as at 30 June 1990. The draft

balance sheet shows a surplus of assets over

liabilities of $142,737. It also shows a

deficiency in current assets as against current

liabilities of $223,000. The capacity of the

second appellant to meet an adverse order for costs

of the appeal may depend upon the second

appellant's capacity to realize its principal asset

which consists of shares in a proprietary company

at valuation. I have no means of knowing whether

this event is likely or not. The evidence is

deafeningly silent upon the point. In this

situation, I am not prepared to infer that the

second appellant will be unable to meet an adverse

order for costs.

In any event, even if that matter had been

established, I would not, in the exercise of my

discretion, make the order sought. There are two

significant factors telling against the exercise of

a discretion in favour of the respondent to the

appeal.

The first is delay arising from the history of the proceedings. The judgment of the Full Court of

the Federal Court from which the appeal is brought

was delivered on 23 November 1989. The

application for special leave was filed on

14 December in that year. The hearing of that

application took place on 6 April when special

leave was granted. Due to the appellant's failure

to file the notice of appeal within time, a further

application for special leave was filed on 30 April

this year, followed by a hearing and the grant of

special leave on 11 May. The actual notice of

appeal was filed on 17 May and the appeal book was

filed on 22 June. The appeal is now fixed for

hearing in the week commencing 28 August and almost

certainly will be heard on 30 August.

In these circumstances, it is obvious that

the major steps preparatory to the hearing of the

Devenish(3) 22 15/8/90

appeal have been taken, so that the appeal is ready

for hearing and the bulk of the costs of the appeal

would already have been incurred by the second

appellant. In the result, the application for

security comes at the heel of the hunt. What is

more, the respondent has had reason to believe, at

least since 8 March 1990, that the source of funds

p~eviously available to the second appellant was no

longer available. In this situation, the

respondent was in a position to seek security as

early as 11 May 1990 when special leave was granted

on the second occasion. As a general rule,

applications for security for costs should be made

promptly and before significant expense is incurred

by the appellant.

The second factor is that the case is one of

public importance involving, as it does, a question
concerning the interpretation and application of

section 45D of the Trade Practices Act. The public

importance of the appeal is evidenced by the

Court's decision to grant special leave to appeal.

Having regard to that circumstance, it would not be

right to prejudice the appellant's prosecution of

the appeal at this late stage by ordering security

for costs.

Accordingly, these two factors would in any

event incline me in the exercise of the discretion

which I have under Order 70 rule 7 to refuse the

application.

For the reasons I have just given, the

application is refused.

MR GRAY:  Does the Court order costs?

HIS HONOUR: Yes. What do you say about that, Mr Ellicott?

MR ELLICOTT:  We would ask as a primary submission that they

be costs on the appeal, giyen that there was some

basis for concern and perhaps there might have been

telling us what their position was in the letters	some jockeying if we had had some co-operation in
of March and making their submissions. Those are
the only submissions I would seek to make,
Your Honour.

HIS HONOUR: Yes, Mr Ellicott. Mr Gray, what would you say

about an order that they be the appellants' costs

in the appeal? In other words, you get the costs

if you win the appeal.

MR GRAY:  Yes. I would only say that in our respectful

submission the application came so late.

Devenish(3) 23 15/8/90

HIS HONOUR: That is true. But on the other hand, you could

have been more forthcoming in your response to the

correspondence that commenced in February of this

year.

MR GRAY:  Yes. Perhaps that is so, Your Honour. On the

other hand - I do not want to labour the point -

the material, part of which became exhibit A, the

annual return, I am instructed - and I appreciate

there is no evidence of this - that it is filed

with the Corporate Affairs Commission and was

readily available; that is to say the 1989 figures,

not the 1990 figures. So that that information was

readily available earlier.

HIS HONOUR:  But I must say there lingers in my mind that

statement in the solicitor's letter that they had

no knowledge of the source of the funds.

MR GRAY:	Yes.
HIS HONOUR:	In the circumstances, I shall order that the

costs of the application by the second appellant's

costs in the appeal.

MR GRAY:  May it please the Court.

MR ELLICOTT: If the Court pleases.

HIS HONOUR:  Court will now adjourn sine die.

AT 12.15 PM THE MATTER WAS ADJOURNED SINE DIE

Devenish(3) 24 15/8/90