Greenwood v World of Maths Pty Ltd
[2005] FMCA 1557
•21 September 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GREENWOOD v WORLD OF MATHS PTY LTD | [2005] FMCA 1557 |
| TRADE PRACTICES – Costs – security for costs – application dismissed. |
| Federal Magistrates Act 1999 (Cth), s.80 Federal Magistrates Court Rules 2001, r.21.01 Trade Practices Act 1975 (Cth), s.52 |
| Equity Access Ltd v Westpac Banking Corporation [1989] APTR 50,631 (40-972) |
| Applicant: | JOHN GREENWOOD |
| Respondent: | WORLD OF MATHS PTY LTD (A.C.N. 073 062 209) |
| File Number: | BRG 154 OF 2005 |
| Judgment of: | Connolly FM |
| Hearing date: | 21 September 2005 |
| Date of Last Submission: | 21 September 2005 |
| Delivered at: | Melbourne |
| Delivered on: | 21 September 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr Hyde |
| Solicitors for the Applicant: | Linacre Lawyers |
| Counsel for the Respondent: | Mr S. Recht |
| Solicitors for the Respondent: | Tisher Liner & Co. |
ORDERS
The application for security for costs by the respondent in the proceedings filed 8 August 2005 be dismissed.
The respondent pay the applicant’s costs fixed in the sum of $1,500.00.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
BRG 154 of 2005
| JOHN GREENWOOD |
Applicant
And
| WORLD OF MATHS PTY LTD (A.C.N. 073 062 209) |
Respondent
REASONS FOR EXTEMPORE JUDGMENT
The proceedings
These are extempore reasons with respect to an application filed
8 August 2005 by the respondent in the proceedings for an order for security for costs against the applicant.
The application is opposed by the respondent and each party has filed an affidavit in support.
The history
The proceedings brought by the applicant are a claim made pursuant to section 52 of the Trade Practices Act 1975 (Cth). They emanate from the applicant’s entry into a franchise agreement with the respondent. Pursuant to the franchise agreement the applicant paid the respondent $86,394. The applicant alleges that it was the respondent’s misleading and deceitful conduct that caused the applicant to enter into the franchise agreement and claims damages and costs as a result.
The respondent denies the misleading and deceptive conduct and claims the applicant is in breach of the provisions of the agreement that he would not carry on any similar business within a certain location.
The Law
Section 80 of the Federal Magistrates Act 1999 (Cth) provides the jurisdiction for this court to make such an order as sought by the respondent, and states as follows:
1)This section does not apply to family law or child support proceedings.
2)The Federal Magistrates Court or a Federal Magistrate may order an applicant in a proceeding in the Federal Magistrates Court to give security for the payment of costs that may be awarded against him or her.
3)The security is to be of such amount, and given at such time and in such manner and form, as the Federal Magistrates Court or Federal Magistrate directs.
4)The Federal Magistrates Court or a Federal Magistrate may:
a)reduce or increase the amount of security ordered to be given; and
b)vary the time at which, or manner or form in which, the security is to be given.
5)If security, or further security, is not given in accordance with an order under this section, the Federal Magistrates Court or a Federal Magistrate may order that the proceeding be:
a)dismissed; or
b)stayed until security or further security is given in accordance with the first-mentioned order.
6)This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the giving of security.
Rule 21.01 of the Federal Magistrates Court Rules 2001 provides as follows:
1.On application by the respondent, the Court may order the applicant to give the security that the Court considers appropriate for the respondent’s costs of the proceeding.
2.For this rule:
respondent includes an applicant if a cross‑claim is made or the response to the application seeks orders in relation to matters not covered by the applicant.
3.An application must be made in accordance with the form of application set out in Part 1 of Schedule 2 and supported by an affidavit setting out the facts relied on.
Conclusions & findings
The decision of Hill J (of the Federal Court) in Equity Access Ltd v Westpac Banking Corporation [1989] APTR 50,631 (40-972) is of particular assistance in the matter. His Honour identified six relevant matters for consideration in deciding whether security for costs ought to be awarded. Those are set out at page 50-635. The decision indicates that among the matters appropriate for consideration are the chances of success of the applicant; whether the applicant’s claim is bona fide or a sham; the quantum of risk that the applicant cannot satisfy a cost order; whether the use of the power would shut out a small company from making a genuine claim against a large company, that is, the power being used to oppressively; whether the impecuniosity arises out of the act in respect of which relief is sought, and whether there are aspects of public interest which weigh in the balance against the making of an order; and, whether there are any particular discretionary matters peculiar to the circumstances of the case.
In applying these considerations I look firstly to the question of the applicant’s prospects of success. It seems to me that the claims made by the applicant are capable of being established and it is well arguable dependent on factual findings. There is nothing in the respondent’s affidavit, that is, the affidavit sworn by Mr Recht, that suggests otherwise.
It also seems to me that the applicant’s argument that the respondent’s cross-claim is based on a restraint of trade provision may well succeed. I am satisfied the applicant’s claim is bona fide.
The respondent’s position as to the quantum of costs required to satisfy security as contained in the affidavit of Mr Recht is clearly grossly exaggerated. The amended figure of some $18,000-odd is not particularised in any way and it may well be that that figure is also somewhat extravagant.
So far as the applicant’s financial situation is concerned it is clearly a very modest one. He cannot have resort to his superannuation entitlements and otherwise has limited assets which would not be readily realisable.
I am satisfied that there is a considerable risk that if the applicant was unsuccessful he may have difficulty in meeting an order for costs.
On the other hand, given the applicant’s current financial situation is significantly the result of the payment of the $86,000 franchise fee, it is clearly arguable that the application’s impecuniosity arises out of the conduct he relies upon to substantiate his claim.
In all the circumstances of this matter perhaps the most pertinent factor is that the making of an order for security would be oppressive in that it would be highly likely to stifle a reasonably arguable claim. Indeed I am satisfied that if I made such an order it is very likely that the applicant’s claim would not proceed.
While I accept that an application for security of costs can be brought at any time under the Rules, it does appear that the respondent could have made the application at a very much earlier time and before the litigation costs had mounted.
Taking all of these matters into account I am not satisfied that it would be appropriate to exercise my discretion and make an order for security for costs. Accordingly I propose to dismiss the application with costs.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Connolly FM
Associate: J. O’Brien
Date: 27 October 2005
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