Kavcor Pty Ltd (in liq) v Kavanagh

The case of Kavcor Pty Ltd (in liq) v Kavanagh involved a company in liquidation that sought to pursue a claim against an individual. The liquidator of Kavcor Pty Ltd, the plaintiff, brought the action against the defendant, Kavanagh, seeking damages for breaches of fiduciary duty and negligence. The dispute came before the Federal Court of Australia, which was tasked with determining whether the liquidator was required to provide security for the costs of the litigation. The central issue before the court was whether the liquidator, representing a company in liquidation without immediately available funds, could be excused from providing security for the costs of pursuing the claim against Kavanagh. The court had to consider whether the liquidator had demonstrated insurmountable impecuniosity, which would exempt the company from the requirement to provide security for costs.

The court examined the evidence presented by the liquidator regarding the financial state of the company. It assessed whether the company's inability to pay costs was such that it would be unjust to require security for costs. The court held that while the liquidator had shown some financial difficulties, they had not sufficiently demonstrated insurmountable impecuniosity. The evidence did not establish that the company would be unable to pay costs if an order for security was made. Consequently, the court ruled that the liquidator must provide security for the costs of the litigation. The decision underscored the importance of demonstrating a clear and compelling inability to pay costs in order to avoid the requirement for security. The court's ruling emphasised the balance between the right to pursue legal action and the need to protect defendants from undue financial burden.