Horizon World Plus TV Pty Ltd v GlobeCast Australia Pty Ltd

[2006] FCA 1472

FEDERAL COURT OF AUSTRALIA

Horizon World Plus TV Pty Ltd v GlobeCast Australia Pty Ltd

[2006] FCA 1472

PROCEDURE – security for costs – discretion to order security for costs – transfer of applicant’s assets – impecuniosity – security for costs ordered

Corporations Act 2001 (Cth) s 1335(1)
Federal Court of Australia Act 1976 (Cth) s 56
Federal Court Rules O 28 rr3, 5

Carey-Hazell v Getz Bros and Co (Aust) Pty Ltd [2004] FCA 1334 referred to
Cowell v Taylor (1885) 31 Ch D 34 referred to
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 referred to
Pearson v Naydler [1977] 1 WLR 899 referred to
Rosenfield Nominees v Bain & Co (1988) 14 ACLR 467 referred to

HORIZON WORLD PLUS TV PTY LTD v GLOBECAST AUSTRALIA PTY LTD AND PANAMSAT ASIA PTY LTD
NSD1068 OF 2006

STONE J
9 NOVEMBER 2006
BRISBANE (HEARD IN SYDNEY)

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD1068 OF 2006

BETWEEN:

HORIZON WORLD PLUS TV PTY LTD
Applicant

AND:

GLOBECAST AUSTRALIA PTY LTD
First Respondent

PANAMSAT ASIA PTY LTD
Second Respondent

JUDGE:	STONE J
DATE OF ORDER:	9 NOVEMBER 2006
WHERE MADE:	BRISBANE (HEARD IN SYDNEY)

THE COURT ORDERS THAT:

1.The respondents submit short minutes of order providing for security in a form consistent with these reasons or in a form otherwise agreed between the parties, on or before 17 November 2006.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD1068 OF 2006

BETWEEN:

HORIZON WORLD PLUS TV PTY LTD
Applicant

AND:

GLOBECAST AUSTRALIA PTY LTD
First Respondent

PANAMSAT ASIA PTY LTD
Second Respondent

JUDGE:	STONE J
DATE:	9 NOVEMBER 2006
PLACE:	BRISBANE(HEARD IN SYDNEY)

REASONS FOR JUDGMENT

1. The respondents in this proceeding have filed a notice of motion seeking security for costs.  The proceedings concern an agreement between the applicant (Horizon) and the first respondent (GlobeCast) for the transmission, via satellite, of television content provided by the applicant.  The dispute between the parties involves the interpretation and scope of the transmission agreement, the quality of the transmission service and the payment of invoices issued by GlobeCast to Horizon.

2. On 20 May 2006, GlobeCast purported to terminate the agreement, allegedly because Horizon failed to pay certain disputed invoices.  On 23 May 2006 Horizon, treating the alleged termination by GlobeCast as a repudiation, purported to terminate the agreement.  GlobeCast continued to broadcast the television content for a short time after this however, on 2 June 2006 Horizon obtained an ex parte injunction restraining GlobeCast from any further transmission of the material.  Horizon alleged that GlobeCast had breached its copyright and had made misrepresentations to its customers.  The injunction has since been discharged by consent, on terms that GlobeCast agrees not to transmit the relevant channels. 

3. This Court has jurisdiction to make an order for security for costs both under the Corporations Act 2001 (Cth) s 1335(1) and the Federal Court of Australia Act 1976 (Cth) s 56; see also the Federal Court Rules O 28 r 3 and r 5. The Court may stay or dismiss the proceedings if the security is not provided.

4. The decision to order security for costs is discretionary and it is well accepted that the Court’s discretion in this matter is unfettered.  There are however, general principles that guide the Court in the exercise of its discretion.  These were set out by Beazley J in  KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 and repeated by French J in Carey-Hazell v Getz Bros and Co (Aust) Pty Ltd [2004] FCA 1334 at [28] as follows:

   “1.Whether the application for security has been brought promptly.

   2.The strength and bona fides of the applicant’s case.

   3.Whether the applicant’s impecuniosity was caused by the respondent’s conduct the subject of the claim.

   4.Whether the respondent’s application for security is oppressive in the sense that it is being used merely to deny an impecunious applicant a right to litigate.

   5.Whether there are any persons standing behind the applicant who are likely to benefit from the litigation and who are willing to provide the necessary security.

   6.Whether the persons standing behind the applicant have offered any personal undertaking to be liable for the costs and, if so, the form of any such undertaking.

   7.Whether the applicant is in substance a plaintiff or the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt the respondent’s self-help procedures.”

   The present circumstances

5. It is common ground between the parties that Horizon’s liabilities considerably exceed its assets and that it would be unable to meet a costs order in favour of the respondents.  The respondents accept that impecuniosity, of itself, is not a sufficient reason to order security (Cowell v Taylor (1885) 31 Ch D 34 at 38) however the inability of an applicant to meet the costs of a successful respondent not only “opens the jurisdiction for the giving of security” but is also a significant consideration in the exercise of the Court’s discretion: Pearson v Naydler [1977] 1 WLR 899 at 906; Rosenfield Nominees v Bain & Co (1988) 14 ACLR 467 at 470.

6. The respondents submit, however, that there is an additional reason why Horizon’s impecuniosity should weigh heavily in the Court’s consideration of their application.  They allege that it is the result of calculated and deliberate conduct directed towards frustrating the processes of the Court.  The respondents submit that statements made by officers of Horizon, indicating an intention to strip the company of its assets so that there would be no assets available to meet claims made by the respondents, invite this conclusion. 

7. In support of their application the respondents relied on affidavits made by employees of GlobeCast, namely:  Nitish Gawde, Direct to Home Broadcast Manager and Mike Lattin Chief Executive Officer.  Both gentlemen gave evidence of comments made by Mr Seymon Pinchuk, a director of Horizon at meetings on 27 April and 19 May 2006, in the course of discussions about the disputed invoices.  In response to demands made by GlobeCast for Horizon to pay the amounts in the disputed invoices, Mr Pinchuk is alleged to have threatened to “wind up” or “bankrupt” or “close down” the company so that no one would be paid.  They also claimed that Mr Pinchuk referred to Horizon as “just a $2 company” or said that he would “make it” a $2 company. 

8. In his evidence Mr Pinchuk denied that such comments were ever made.  He said that at the meeting on 19 May he told GlobeCast that he was getting old and “having a lot of stress” and that if GlobeCast closed down the television channels it would “ruin the business” but that he did not threaten to close down the business.  Mr Pinchuk also denied ever using or even understanding the phrase, “$2 company”.  Despite these denials I was not impressed by Mr Pinchuk’s evidence.  I accept that there were some language difficulties; Mr Pinchuk is a Russian speaker and his English is not perfect.  Nevertheless, I had the distinct impression that his English fluency was greater than some of his responses would indicate.  It was noticeable that he had less difficulty with the questions on re-examination than he did with those on cross-examination.  Moreover many of his answers on cross-examination were evasive and unconvincing including his failure to remember significant aspects of an important meeting and his professed ignorance about legal and financial aspects of the business.

9. Neither Mr Gawde nor Mr Lattin were shaken on cross-examination. They consistently maintained that Mr Pinchuk had made the statements referred to in [7] above. While I accept that Mr Pinchuk made these statements it is not entirely clear however whether, in making these statements, Mr Pinchuk was threatening to strip the company of its assets or merely referring to the fact that the company had no assets and thus would be unable to meet any costs order. 

10. Of more concern was the evidence concerning the transfer of Horizon’s assets to another company, or perhaps a trust, in which Mr Pinchuk’s son apparently has some interest.  On this issue Mr Pinchuk was less than forthcoming both as to the nature of the arrangement and the payment to Horizon.  He pleaded ignorance as to the details, claiming that this was all left to the lawyers.  On the basis of the evidence, I am satisfied that there is a reasonable chance that any assets that might have been available to meet a costs order are likely to be out of the reach of the respondents, should an order be made in their favour.  For this reason, in the circumstances I am satisfied that the respondents should have some security for their costs in this proceeding.

11. For completeness, I note that while there are many other factors that may be relevant to the exercise of the Court’s discretion, in my view none of these factors is relevant to this application.  Those factors include the strength or weakness of the applicant’s case which in certain circumstances, may be important.  In this case however, it is a neutral factor; the respondents have conceded, for the purpose of this application only, that the applicant has made a bona fide claim with a reasonable prospect of success.  Other factors that may be relevant include whether the respondent’s conduct may have been the cause of the applicant’s distressed financial position, whether the application is oppressive or whether the applicant is, in substance if not form, in the position of a defendant.  Horizon sought to rely principally on the latter factor.  I do not accept that Horizon, who initiated the proceeding and seeks, amongst other things, damages, is in this proceeding in substance in the position of a defendant. 

12. In their notice of motion the respondents seek security for their costs in the amount of $83,720.  In support of their claim for this amount they rely on the affidavit of Mr Dean Rutherford, a solicitor employed by the solicitors for the respondents.  According to Mr Rutherford the respondents’ costs in this matter to date are $63,390.14.  He estimated the future costs of defending Horizon’s claims to be between $100,600 and $138,600.  This range was the aggregate of estimates of the costs of elements in the future conduct of the matter including discovery, drafting pleadings, preparing affidavit evidence of 5-10 witnesses, preparing the matter for hearing as well as the cost of the hearing itself.  The amount of $83,720 was arrived at by taking $119,600 as the median point in the range of costs estimated and assuming that, if successful, the respondents could expect to recover 70% of that amount – that is $83,720. 

13. Mr Rutherford did not give any details of his experience in dealing with litigation of this kind or of his claims to expertise in estimating costs of litigation.  Nevertheless, on their face, the estimates he has made seem reasonable and his evidence was uncontested and therefore I am minded to order security to be provided in the amount requested by payment into Court in a form satisfactory to the Registrar.  At the hearing of the present application however, both counsel indicated that should the Court be prepared to order security they would appreciate some time to reach agreement on the form of the security.  I shall therefore allow a short time for the parties to attempt to reach agreement.  I propose to order that the respondents by 17 November 2006 submit short minutes of order providing for security in a form consistent with the above or in a form otherwise agreed between the parties.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate:

Dated:        9 November 2006

Counsel for the Applicant:	Mr R Horsley
Solicitor for the Applicant:	Horowitz & Bilinsky
Counsel for the 1st and 2nd Respondents:	Mr H Stowe
Solicitor for the 1st and 2nd Respondents:	Shanahan Tudhope
Date of Hearing:	27 September 2006
Date of Judgment:	9 November 2006