Ealesdeen Pty Ltd v Ash Bros Pty Ltd

[1992] QCA 451

[1992] QCA 451

ASH BROS PTY LTD	(Defendant) Respondent
BRISBANE ..DATE 13/11/92
JUDGMENT his reasons first.

COURT OF APPEAL

MACROSSAN CJ
DAVIES JA

DERRINGTON J

CA No 232 of 1992

EALESDEEN PTY LTD	(First Plaintiff) Applicant
and
OLMONTE PTY LTD (Receivers and
Managers appointed)	(Second Plaintiff) Applicant
and

DAVIES JA: The applicants, who are the plaintiffs in an action in the District Court, seek leave to appeal against an order made by Judge Daly in that action on l6 October 1992 that each of them

deposit by way of security for costs a sum of $12,500 and that the
action be stayed until such deposits were made.

The order being an interlocutory one, an appeal is available to this Court only by leave, which shall not be granted unless some important question of law or justice is involved: District Courts Act s 92(2).

The order was made pursuant to s 1335 of the Corporations Law, subsection 1 of which provides:

"Where a corporation is plaintiff in any action or other
legal proceeding, the Court having jurisdiction in the
matter may, if it appears by credible testimony that
there is reason to believe that the corporation will be
unable to pay the costs of the defendant if successful
in his, her or its defence, require sufficient security
to be given for those costs and stay all proceedings
until the security is given."

It was common ground before His Honour that each of the plaintiffs was impecunious and consequently unable to meet any order as to costs. The second plaintiff had a receiver and manager appointed on behalf of the Commonwealth Bank, a secured creditor, and the receiver and manager has declined to be involved in the action.

The action is one in which the first plaintiff claims damages for breach of contract or negligence in the design and supervision of the installation of a hydraulic winch system in a fishing vessel. The second plaintiff's claim is one for damages for loss of use

of the vessel during its incapacity due to failure of that
system. Both claims are for substantial sums and the trial will
involve technical
questions of some complexity.

The plaintiffs have been guilty of considerable delay in making their claims, the delay extending over a period which included the trial in which the defendant obtained judgment against the first plaintiff for approximately $24,000 for work done and materials supplied, at least partly in respect of the allegedly defective hydraulic winch system.

However, it was apparently not contended before His Honour that the plaintiffs were, for that reason, precluded from bringing this action (see Port of Melbourne Authority v. Anshun Pty Ltd (No 2)(1981) 147 CLR 589). His Honour, nevertheless, expressed some scepticism about the plaintiffs’ claims because of the delay in making them and the absence of any complaint about the defendant's work before they were made.

The directors of each of the plaintiff companies were Bartolo Antonio La Macchia and Julie Jacqueline Buckley. Ms Buckley swore, however, that she was not a shareholder in either company. She said that Mr La Macchia was the principal shareholder of both plaintiffs. There is no other evidence of who the other shareholders are in either company. The last annual return of the first plaintiff, that is the year ended 30 June 1988, shows that there were then two shareholders, Mr La Macchia who held three shares, and Dale La Macchia who held one. There was no evidence of who the shareholders of the second plaintiff were at any time. It was also common ground, or at least unchallenged, that Mr La Macchia was also without means and would be unable to satisfy any costs order in favour of the defendant.

The plaintiffs submit that the important question of law, or at least the main important question of law involved here, is whether, where those who stand behind an impecunious company plaintiff and consequently who stand to benefit from the successful prosecution of its claim are also without means, an order for security should always be refused. They submit, in effect, that the effect of such an order would necessarily be to frustrate the litigation and that must result in refusal of an order.

No such question of law arises if the plaintiffs have failed to show that there was no-one standing behind the company and consequently likely to benefit from the litigation, if it were successful, who had the means to and who consequently could provide security for defendant's costs. Mr Logan, who appeared for the applicant, concedes that the onus on this issue is upon the plaintiffs.

Ms Buckley swore that she was not aware of any other person having an interest in either of the first or second plaintiffs who would be able to provide security for the defendant's costs. It might be thought that the Commonwealth Bank had such an interest in the second plaintiff and would be so able, but in any event, there was no evidence of who the other shareholders were in either plaintiff. In the absence of proof of their inability to meet any such order for costs, the correctness of the above principle does not arise for consideration.

The other two matters which were said to raise important questions of law really, in effect, go to the quantum of the amount of security ordered by His Honour. The first objection which was raised by Mr Logan with respect to that question was, in effect, that His Honour was wrong in principle in ordering the sum which he did, namely $25,000, as security, because that would provide the defendants with a complete indemnity as to costs and that was contrary, he said, to what was stated by Lord Lindley, Master of the Rolls, in The Dominion Brewery Company Limited v. Foster (1898) 77 LT 507.

No challenge appears to have been made in this respect below and, in that event, I would conclude that it is not a matter which could be raised as an important general question at this stage. However important it may have been for the plaintiffs to have that resolved at the hearing, they elected not to argue that point before His Honour, or at least there was nothing before us which indicated that they did.

The other question was conceded before us by Mr Logan to be a matter of a technicality. That is, that as he put it, if either plaintiff were able to deposit the sum of $12,500, it might nevertheless be precluded from proceeding because the total sum on the order which was made was required to be deposited before the action either in whole or in part could proceed.

Again, this question was not raised before His Honour and for
that reason I would not accept that it was an important question
of law which could be raised now. For those reasons, I would
refuse the application.
THE CHIEF JUSTICE: I agree.
DERRINGTON J: I agree.

THE CHIEF JUSTICE: The order of the Court will then be that the application is dismissed. Mr Lanza?

MR LANZA: Yes, we would be seeking costs, Your Honour.
THE CHIEF JUSTICE: Anything you feel able to say about that, Mr

Logan?

MR LOGAN: No, that must follow the event, I should think.

THE CHIEF JUSTICE: Yes, all right. The respondent to have the costs of and incidental to the application to be taxed.

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