H a Craig Pty Ltd v Speedifix Building Components Pty Ltd

[1985] FCA 337

Re: H.A. CRAIG PTY LIMITED
And: SPEEDIFIX BUILDING COMPONENTS PTY LIMITED
No. NSW G20 of 1985
Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION

CATCHWORDS

Practice - security for costs - delay in applying - shareholders' guarantee - company of no substance.

Costs - security - principal applicant a company - form of order - providing choice for shareholders - opportunity to provide guarantee in lieu.

HEARING

BRISBANE
#DATE 17:7:1985

ORDER

1. The proceedings be stayed unless within seven days -
   
   

(a) security in the sum of $7,500 is given to the satisfaction of the Registrar, or

(b) an affidavit is filed made by the solicitor for the applicant, H.A. Craig Pty Limited, swearing to the execution of a deed by Harold Alexander Craig and Cheryl Anne Craig (mentioned in the papers) in favour of the respondent Speedifix Building Components Pty Limited undertaking to pay any costs ordered to be paid by the applicant H.A. Craig Pty Limited in these proceedings and exhibiting an executed copy of the said deed.

1. The costs of Speedifix Building Components Pty Limited of this application be its costs in the proceedings.

JUDGE1

This is an application for security for costs made by the respondent in the principal proceedings. For the purposes of lucidity, I propose to call the applicant company in the principal proceedings the applicant, and similarly as to the respondent in the principal proceedings. The application in the principal proceedings is to be heard in 12 days and so it comes before me at a time when all the interlocutory steps necessary have been taken and, presumably, much of the preparation for trial is complete.

1. Counsel for the applicant, that is for the applicant in the principal proceedings, urged upon me the view that the delay is such as to justify refusal of the application, and he referred to the remarks of Gillard J. in the Victorian Supreme Court in Smail v. Burton (1975) VR 776 at p 777. His Honour there said in a judgment agreed in by the late Newton J. that:-
   
   

"... it is well established that an application for security of costs should be made promptly. If an appellant has expended sums of money preparing the appeal for hearing and all the matters necessary to be performed have already been performed and the appeal is ready for hearing, it would be patently unjust to permit a respondent who stood by and allowed that work to be done to come to court and to ask for security after such expenses have been incurred. Accordingly, it is well established by authority that applications for security of costs should be made promptly and before considerable expense is incurred by the appellant."

His Honour went on to say:-

"On the other hand, if there are reasonable causes for delay, including the conduct of the appellant, then different considerations might well apply."

It does not seem to me that there is any reasonable cause for the delay here. On the other hand, I do not think the delay obliges me to refuse the application. There is still a discretion.

1. The financial statements in evidence support the inference that in recent years the applicant has had no income and that it has no assets other than a right of indemnity under a trust deed, which deed is not produced.

2. Counsel for the applicant urges upon me the view that the respondent has not established that the applicant company could not meet the costs if unsuccessful. That is, strictly speaking, correct. But I think the respondent has done all that might reasonably be expected of it to raise a prima facie case of impecuniosity.

3. According to the reasons delivered by Connolly J. in the Full Court of the Supreme Court of Queensland in Harpur v. Ariadne Australia Ltd. (1984) 2 Qd R 523 at p 529:-
   
   

"For practical purposes, once the legislature has made it legitimate to regard the lack of means of the plaintiff and its likely inability to meet an order for costs, this must always be a consideration of great weight and will frequently be the determining factor."

I agree, with respect, with that view but have had some difficulty in determining what to do in the face of the equally well-established principle that delay should be taken into account. Counsel for the respondent has argued, correctly in my opinion, that there is no proof that costs have been spent by or on behalf of the applicant in the belief that the applicant would not be required to give security, or rather, that there is no proof that such costs would not otherwise have been expended.

1. On the other hand, delay may produce another outcome, namely an appearance of unfairness in placing a substantial obstacle in the path of the applicant when the litigation is almost about to commence. It appears to me that the latter factor operates in favour of the applicant here.

2. Counsel for the applicant has drawn my attention to the state of the pleadings, and I have formed the view that there is substance in his submission that the admissions made by the respondent suggest that the principal application is far from frivolous and may well have some substance. I have taken that into account, but cannot, of course, form any clear impression as to the likely fate of the principal application.

3. It appears to me that the appropriate order to make is one giving those who own and control the applicant a choice, that is, either to give security or to guarantee payment of the costs. What I have decided then is that limited security should be given unless such a guarantee is provided. The order will be that the proceedings be stayed unless within seven days (1) security in the sum of $7,500 is given to the satisfaction of the Registrar, or (2) an affidavit is filed made by the solicitor for the applicant, H.A. Craig Pty Limited, swearing to the execution of a deed by Harold Alexander Craig and Cheryl Anne Craig (mentioned in the papers) in favour of the respondent Speedifix Building Components Pty Limited undertaking to pay any costs ordered to be paid by the applicant H.A. Craig Pty Limited in these proceedings and exhibiting an executed copy of the said deed.

4. The respondent in the principal proceedings, the applicant before me, applies for the costs of the application for security. I think the proper course is to make the costs of the company Speedifix Building Components Pty Limited of this application its costs in the proceedings, so that it will get those costs if successful in the principal application and will not have to pay them, in any event, and I so order.