Jet Corporation of Australia Pty Ltd v Petres Pty Ltd

[1985] FCA 207

Re: JET CORPORATION OF AUSTRALIA PTY. LIMITED (in its capacity as Trustee of
the JET CORPORATION AUSTRALIA TRUST)
And: PETRES PTY. LIMITED (in its own right and in its capacity as Trustee of
the Schutt Unit Trust) and OTHERS
V. No. G 109 of 1983
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop J.

CATCHWORDS

Practice and Procedure - security for costs - stay of proceedings pending payment of costs already ordered and unpaid.

Federal Court Rules 0.28 r.3.

HEARING

MELBOURNE
#DATE 23:5:1985

ORDER

1. The proceedings against Petres Pty. Limited, Dipson Pty. Limited, Westwind Jet Corporation Pty. Limited, Trevor Burton Huttley and Jon Dean Wilson be stayed until the applicant has paid to them their costs, allowed at $27,498.49.

2. The proceedings against Edward Christiaan Sent and Brian Forshaw be stayed until the applicant has paid to them their costs, allowed at $29,680.10.

3. The applicant pay the costs of the motion.
   
   (Settlement and entry of Orders is dealt with by 0.36 of the Federal Court Rules.)

JUDGE1

The respondents Petres Pty. Limited, Dipson Pty. Limited, Westwind Jet Corporation Pty. Limited, Trevor Burton Huttley and Jon Dean Wilson (hereinafter called "the first group of respondents") and the respondents Edward Christiaan Sent and Brian Forshaw (hereinafter called "the second group of respondents") have moved the Court for orders that the proceedings, insofar as they relate to each of them, be stayed until such time as the applicant pays the costs which a Full Court has ordered the applicant to pay to them.

1. On 4 October 1983 the Court, as presently constituted, refused motions by the respondents to the application that the proceedings be stayed or dismissed generally or in part and refused motions that the applicant provide security for costs; see Jet Corporation of Australia Pty. Limited v. Petres Pty. Limited and others (1983) 50 ALR 722. The respondents, including the first group of respondents and the second group of respondents, appealed from those orders. On 6 July 1984 a Full Court made orders allowing the appeals in part; see Sent v. Jet Corporation of Australia Pty. Limited (1984) 54 ALR 237. For present purposes it is sufficient to say that the Full Court ordered the applicant to pay the costs of the motions and of the appeals of the first group of respondents and of the second group of respondents and that the applicant provide security for costs for each of the respondents, including the first group of respondents and the second group of respondents. Pursuant to those orders the costs of the first group of respondents have been taxed in the amount of $27,498.49 and the costs of the second group of respondents have been taxed in the amount of $29,680.10. The applicant has not paid those costs or any part of them.

2. The Full Court further ordered that the applicant provide security for costs of each of the respondents, the determination of the amount and nature of the security to be determined by the Court as presently constituted. Minutes of an order for security for costs have been submitted to the Court with respect to the respondents, other than the second group of respondents, but no formal order has yet been taken out. The minutes make provision for the amount and nature of the security, which are based on future costs with a provision that further security may be given with respect to further costs as future steps in the proceedings are completed. On 14 March 1985 the Court, as presently constituted, made certain orders relating to security for future costs to be provided by the applicant with respect to the second group of respondents.

3. The present motions are directed to a different issue. The nature of the issues raised by the motions are illustrated by the notice given on behalf of the second group of respondents which stated the orders sought as follows:
   
   

"1. An order that this proceeding be stayed as against the eighth and ninth Respondents until the costs of such Respondents ordered to be paid by the Applicant by a Full Court of the Court on 6th July, 1984 ("the relevant costs") are paid.

2. Alternatively to 1, an order pursuant to Order 35 Rule 6 that further proceedings herein be stayed as against the eighth and ninth Respondents until payment of the relevant costs.

3. Alternatively to 1 and 2, an order pursuant to Order 28 Rule 5 that further proceedings herein be stayed as against the eighth and ninth Respondents until payment of the relevant costs.

4. An order that there be paid from the security provided or to be provided by the Applicant for the costs of the eighth Respondent and ninth Respondent pursuant to the order of a Full Court of this Court on 6th July, 1984 the amount of the relevant costs."

1. It should be said at once that the order sought in paragraph 4. is refused. The rationale for an order for security for costs is to ensure that in exceptional circumstances a defendant should not be at risk in recovering costs incurred in defending successfully, a claim by a plaintiff. The nature of the exceptional circumstances is illustrated by a reference to sub-section 533(1) of the Companies (Victoria) Code, namely that where a corporation is plaintiff, the Court, if there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his defence, may make an order for security for those costs and stay proceedings until security is given. That exceptional circumstance arises from the nature of corporations and there is no similar exceptional circumstance if a plaintiff is a natural person. Other exceptional circumstances are referred to in 0.28 r.3 of the Rules of Court. The essential feature of an order for security for costs is that the security is to be given with respect to costs which have not been ordered to be paid by the plaintiff. The costs may include costs already incurred by the defendant as well as costs that will be incurred in the future. If an order for costs has been made in favour of a defendant before any order for security for costs has been made, the defendant is able to enforce that order for costs according to normal procedures. It would be ludicrous to suggest that where an order for the payment of costs has been made and is unsatisfied, a defendant should seek an order for security for costs and then seek a further order that the costs which had previously been ordered to be paid, be paid out of that security. In the present case it is to be remembered that the orders for costs were made before the security for costs was ordered. Further, in determining the amount of the security to be given, none of the parties contended that the amount of costs already ordered to be paid should be taken into account. In those circumstances it would be unjust to other respondents that an order be made that costs previously ordered to be paid to some of the respondents be paid out of the security given for the benefit of all respondents and for a different purpose.

2. As a general rule, the fact that a plaintiff has not paid costs ordered to be paid on an interlocutory matter in a proceeding will not justify an order being made that the proceedings be stayed until those costs have been paid, see for example Morton v. Palmer (1882) 9 QBD 89 and compare 0.35 r.6(2) of the Rules of Court with what was said by Cave J. at p 92. Under normal circumstances the defendant is able to recover the amount of those costs under the normal processes of execution. But a Court will order that further proceedings be stayed until the plaintiff has paid the costs ordered to be paid on an interlocutory matter where it would be unjust or unreasonable to allow the plaintiff to continue the proceedings without paying the costs ordered to be paid; see for example Cook v. Hathway (1869) 8 LR(Eq.) 612; in Re Wickham (1887) 35 ChD 272 and Graham v. Sutton, Carden and Co. (1897) 2 Ch 367. The general principle is stated in Exell v. Exell (1984) VR 1 per Crockett, Kaye and Gray JJ. at pp 6-7:
   
   

"Enforcement of an order for payment of costs is not a proper use of the order for directions procedure under 0.30. This is so because, generally speaking, a plaintiff's failure to pay costs of an interlocutory application brought by the opposite party is unlikely to interfere with or delay the progress of the litigation. Other remedies, including execution by a writ of fi.fa., afford appropriate remedies for the recovery of costs. Thus, mere non-payment of the costs of interlocutory proceedings which a plaintiff has been ordered to pay is not a ground for an order staying the action until the costs have been paid. To justify an order staying the action for non-payment of costs of an interlocutory application, it must be shown either that the action is vexatious or that the plaintiff's conduct of the action is oppressive or unreasonable:".

1. In the present case, the factors which influenced the Full Court to order that the applicant give security for costs included the fact that in reality the proceedings were brought in the name of the applicant by Citicorp Australia Ltd., a secured creditor, for its benefit rather than upon some hope that success in the proceedings would provide some benefit to the applicant itself; see 0.28 r.3(b); and the fact that the applicant, being a corporation, would be unable to pay the costs of the respondents if they were successful in their defences; see sub-section 533(1) of the Companies (Victoria) Code. Those very same factors are most relevant in determining the present motions.

2. In my opinion, it would be unjust and unreasonable to allow the applicant to continue its proceedings without paying the costs ordered to be paid by the Full Court. The applicant is in liquidation. There is reason to believe that it would be unable to pay the costs of the respondents if they succeed in their defences. The normal procedures for the enforcement of the orders for costs are not available to the first group of respondents nor to the second group of respondents. The proceedings are being prosecuted by Citicorp in the name of the applicant but for the benefit of Citicorp. The respondents cannot recover any order for costs against Citicorp. In those circumstances, I adapt the words of Sir R. Malins V.C. in Cook v. Hathway, above, at p 619 and say that it would be an act of the grossest injustice to allow the applicant to go on with the proceedings without paying the costs ordered to be paid.

3. In these circumstances, it is not necessary to consider the further matters raised by Counsel in support of the orders numbered 2. and 3. as set out in the notice of motion.

4. It is ordered therefore that the proceedings so far as they relate to the first group of respondents be stayed until the applicant has paid to them the costs, allowed at $27,498.49, ordered to be paid by the applicant and that the proceedings, so far as they relate to the second group of respondents, be stayed until the applicant has paid to them the costs, allowed at $29,680.10, ordered to be paid by the applicant. It is further ordered that the applicant pay the costs of each motion.