Flaxgrove P/L v A.V. Postle and Co. (Brisbane)

[1993] FCA 434

434,1993

JUDGMENT 1\10. ...,. , ,,,,,.. ,.,. .... ........

IN THE FEDERAL COURT OF AUSTRALIA )	No. QG 161 of 1992
QUEENSLAND DISTRICT REGISTRY	1
GENERAL DIVISION	1

BETWEEN: FLAXGROVE PTY. LTD.

Applicant

AND :  A.V. POSTLE & CO. (BRISBANE)

First Respondent

AND :  DONALD POSTLE

Second Respondent

AND :  LESTERY PTY. LTD.

Third Respondent

AND :  GEOFFREY LESSUE

Fourth Respondent

AND :  A.V. POSTLE & CO. (BRISBANE)

First Cross-Respondent

AND :  DONALD POSTLE

Second Cross-Respondent

AND :  LESTERY PTY. LTD.

Third Cross-Respondent

to a maximum of $17,000.00, any costs that the

MINUTES OF ORDERS

JUDGE MAKING ORDER:

DATE OF ORDER:	24 June, 199
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

1.        The principals of the applicant, Mr. P.W. Fox and Mr. J. Gollan, provide personal guarantees in a form satisfactory to the Registrar: firstly, to pay, up

fourth respondent may recover against the applicant in the action that are not paid by the applicant; and, secondly, to pay, up to a maximum of $3,000.00, any costs that the third respondent may recover against the applicant in the action that are not paid by the applicant.

In the event that the guarantees referred to in order 1 are not provided by 26 July, the action is to be stayed.

The costs of today's application for security by the third and fourth respondents are the third and fourth respondents' costs in the proceedings as between them and the applicant.

The applicant has liberty to apply.

NOTE :  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )	NO. QG 161 of 1992
QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION

BETWEEN: FLAXGROVE PTY. LTD.

Applicant

AND:  A.V. POSTLE & CO. (BRISBANE1

First Respondent

AND :  DONALD POSTLE

Second Respondent

AND:  LESTERY PTY. LTD.

Third Respondent

AND :  GEOFFREY LESSUE

Fourth Respondent

AND :  A.V. POSTLE & CO. (BRISBANE)

First Cross-Respondent

AND :  DONALD POSTLE

Second Cross-Respondent

AND :  LESTERY PTY. LTD.

Third Cross-Respondent

Coram:  Drummond J

Place: Brisbane

Date:  24 June, 1993

EX TEMPORE REASONS FOR JUDGWENT

This is an application by the third and fourth respondents in the action for an order that the applicant give security in the sum of $30,000.00 for their costs of defending the action. It is conceded that the applicant will not be able to pay the third and fourth respondents' costs if they are successful in their defence and obtain a costs order against it.

The court has a wide discretion under S. 56 of the Federal Court Act 1976 to order security. The only limitation on the discretion is that it must be exercised judicially: see Bell Wholesale CO Ltd. v Gates Export Corporation (1984) 2 F.C.R. 1 at 3.

I take into account the following factors. Firstly, the third respondent was brought into the proceedings initially by the first and second respondents cross-claiming against it on the basis that, if they were liable to the applicant for the misrepresentations of which the applicant complained, the third respondent was responsible for generating those misrepresentations, which essentially comprise material contained in financial information given by the third respondent to the first and second respondents.

Secondly, the applicant then joined the third respondent against the possibility that it might fail against the first and second respondents, even if it proved that misrepresentations were made to it by the first and second

, respondents, if those respondents could show that they were innocent conduits for the misleading information allegedly generated by the third respondent. However, the applicant also joined the fourth respondent on the basis that he made certain representations additional to those which originated from the third respondent, being additional representations made by the first respondent to the applicant. The applicant alleges that the third respondent is also liable to it, along with the fourth respondent, on those additional representations.

Thirdly, there is an overlap, substantial but not complete, between the issues which the third respondent will incur the costs of litigating as between itself and the first and second respondents, and the issues it will incur the costs of litigating as between itself and the applicant. This is conceded by counsel for the third and fourth respondents. Since the third respondent will rely, in large part, on the work it has to do to meet the first and second respondents' cross-claim in meeting the applicant's claim, that is a relevant factor to take into account in exercising the discretion to award security. I do not think the history of how the third respondent came to be involved in the action,

is irrelevant to the question of what is the proper order for	first as a cross-respondent and then as additional respondent,
security.
Fourthly, the applicant being impecunious, an order that it provide cash or its equivalent by way of security will in all probability kill what may turn out to be a good claim.
Fifthly, there is evidence from the third and fourth respondents' solicitors, which is not contested by the applicant, as to the quantum of the costs both of those respondents will incur in the litigation; i.e., in the third respondent defending both the cross-claim and the applicant's claim and in the fourth respondent defending the applicant's claim. At least, that is how I read paragraph 5 of Mr. Humble's affidavit, which does not assert that the costs estimated relate only to the costs of the third and fourth respondent defending the applicant's claim and do not include the third respondent's costs of defending the cross-claim.
Sixthly, it is not possible on the evidence before me to identify what would be the likely costs the third respondent will incur in defending the issues that arise solely between the third respondent and the applicant, and which do not also arise as between the third respondent and the first and second respondents.
I therefore propose to order that the principals of personal guarantees in a form satisfactory to the Registrar: the applicant, Mr. P.W. Fox and Mr. 3. Gollan, provide
firstly, to pay, up to a maximum of $17,000.00, any costs that the fourth respondent may recover against the applicant in the action that are not paid by the applicant; and, secondly, to pay, up to a maximum of $3,000.00, any costs that the third respondent may recover against the applicant in the action that are not paid by the applicant. I will also order that, in the event that such guarantees are not provided by 26 July, the action is to be stayed.
As to the quantum of the security that I have ordered to be paid, it is obvious, I think, that the order I have made in relation to the fourth respondent's costs is in respect of one-half of the lower estimate of the costs of the third and fourth respondents, referred to by their solicitor. I accept the submission by counsel in that regard that it would be appropriate to look at the matter in that way, if it is proper, as I think it is, to consider the position of the two respondents in question separately.
The quantum of the order I have made in relation to the third respondent is necessarily imprecise, but is based on the fact that there is a substantial overlap between the work that the third respondent will have to do in meeting the cross-claim and the work the third respondent will be able to rely on in answering the applicant's claim.
I certify that this and the preceding
four pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Drummond.
Associate:  L ug
Date  : 24 June, 1993