Labertouche Sands Pty Ltd v Mowwinnybah Pastoral Co Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA

)

VICTORIA DISTRICT REGISTR?

)	VG No. 31 of 1385

GENERAL DIVISION

)

Between: LABERTOUCHE SANDS

PTY.

LTD.

(Applicant)

m: MOOWINNYBAH PASTORAL CO.

PTY. LTD.

(First-named Respondent)

m: EDWARD COOPER

(Second-named Respondent)

A d : KEG LATIMER

iThrd-named Respondent

m: MOOWINNYBAH PASTORAL CO.

PTP. LTD. and EDWARD

COOPER

(Cross Claimants)

m: REG LATIMER

(Cross Respondent)

Judse Makins Order: Ryan J.

Date of order:

25 February 1987

Where

Made:

Melbourne

2 .

MINUTE

I ~ R D E R

THE COURT ORDERS THAT:

The

appllcant provlde securlty for the costs of the

flrst and second respondents In the sum of $14,000	to
the satisfactlon of the reglstrar.

2 . Proceedings on the application herein be stayed until

security

for

the

costs

of the flrst and

second

respondents is provlded by the applicant

as aforesaid.

3 . The costs of the appllcatlon for security be the flrst

and

second

respondents'

costa

in the

substantive

appllcatlon.

NOTE: Settlement and Entry of Orders is dealt wlth In

Order

36 of the Federal Court Rules.

h * -

IN THE FEDERAL L'0UF.T OF MJSTFALIA

-.-

VICTORIA DISTRICT FiECISTR'i

dcr No. 31 of 1985

Betk-een: LABERTOUCHE SANDS PTY.

LTD.

(Applicant)

W :

MOOWINNYBAH PASTORAL CO.

PTP.

L r n .

(First-named Respondent)

.m: EIjbIdRD

COOPER

(Second-named Respondent)

m: REG LATIMER

iThlrd-named Respondent)

&&: MOOWINNYBAH PASTORIU; CO.

FT:.

LTD. and EIjWziFtD

COOFEIi

(Cross

Claimants)

-	And: REG LATIMER

\Cross Respondent)

Coram:	Ryan S .
Date:	25 February 1987

REASONS FOR JUDGMFNT

The first and second respondents

to this appllcatlon

have sought an order that the applicant glve securlty in the

sum of $60,000 for thelr costs of the appllcatlon.

They have

also sought an order

that

further

proceedings

the

applicant’s clalm be stayed untll securlty 1 s provlded.

The

factual background and relevant statutory provisions are set. out In my reasons glven on 16 December 1986 for refuslng, at the request of the appllcant, to adjourn the applicatlon For securlty.

When the appllcatlon for security for costs came

on for

further argument on 19 December 1’386, Mr. Trlbe, for the flrst and second respondents m support of the applicatlon,

urged

that

because

the

applicant

xas in voluntary

liquldatlon, It had the evldentiary burden

of showing speclal

circumstances which would justify the refusal

of an order for

security.

Reference

was

made

Celebritv

Circuit

Attractions Ptv. Ltd. (in liquidation, v. Wren C13661 2

NSNR

282 where the Prothonotary

of the Supreme Court

of New South

Wales referred to Fure Spirit Co. v. Fowler

(1890) 25

QBD

2 3 5 , and said at

283:

“Accordingly, I think that where the plaintlff 1s

llquldatlon a strong

case

exlsts

for

the

orderlng of securlty unless special circumstances

exlst whlch would lustlfy the refusal of such

order.

The only evldence

before

is an

affidavit by

the

defendant S solicltor

the

substance of which

1 s that the plaintlff is

liquldatlon and he believes It 3111 not be able to pay the defendant’s costs of these proceedings if It 1 s unsuccessful.

The fact of llquldatlon is In itself prlma facie

evldence

that

the

plaintlff,

unsuccessful,

will not be able

to pay the

defendant‘s costs and

3 .

that fact casts

upon the

plalntlff company the

burden af showing that It5 assets are sufflclent to pay the cost5 of the defendant. Na such

evldence 1s before

and the defendant has

therefore made out	a	case f o r	securlty xhlch
remains unanswered."

Mr. Perkins, for the appllcant, on the other hand, contended that it =as erroneous to speak of a burden of proof on an

application of this kind.

He argued that in National Bank of

New Zealand Ltd.

v. Donald Export Tradins Ltd. C13803

1 NZLR

97 to

whlch I

referred in my reasons for judgment of

December 1986, the New Zealand Court of Appeal was at pains not to encumber the exercise of the discretlon conferred by provislons such as s.533(1) of the Companles (Vlctorla) Code by conslderatlons of burden of proof. Mr. Perklns referred

also to a later ludgment

of the New Zealand Court of Appeal

In Attorne>--General

-J. Transport Control Svstarns (NZ) Ltd.

C13823 NZLR 1'3. at 20, =here It xas observed:

"It 1s not ln dispute that It appears by credlble

testlmony that there is reason to believe that

the company will be unable to pay the

costs

the defendants If successful in their defence.

Jurisdictlon to make

an order under the section

accordingly exists.

There then arises a

dls-

cretlon to be exerclsed in all the clrcumstances

of the case.

There is no burden, nor is any

predisposition approprlate, one

way or the other:

see National Bank of

New Zealand Ltd. v. Donald

Export Tradins Ltd. C13803 1 NZLR 97, 101-102,

per Richmond P. deliverlnq the judgment of

thls

Court.

In my

oplnion, the

fact

that an

applicant company is in

liquidatlon does not create

presumptlon that the other

party 1 s entltled

to an order for securlty for costs.

See

Parkinson & Co. Ltd. v. Triplan Ltd. C19731

QB 609 where Lord

Denning M.R., with whom Cairns and Lawton

L.JJ agreed, after

revlewlng some conflictlng earller authorltles, Including

Fure Spirit Co. TT.

Fowler (supra) and Northampton Coal,

Iron.

and Waqqon

Co. v.

Midland Waqson

Ca. (1878) 7 Ch.D.

500,

said, at 626:

"There seems to have been some mlsapprehenslon on the matter In the past. The sooner It 1s put

rlght the better. If there

1s reason to believe

that

the

company

cannot

pay

the

costs, then

securlty

be ordered, but not must be ordered.

The court

has

discretim which it

will

exercise. The court has a discretion which it

will exercise considering all the circumstances

of the particular case."

To similar effect, Lawton L.J. observed,

at 628:

"I agree with Lord Denning

M.R. that the effect

sectlon 447

is that once It is established

credible evidence that there 1s reason to believe

that the plalntiff company

wlll be unable to pay

the

costs of the defendants If

they

are

successful in their

defence, the court has

dlscretion, and that dlscretlon ought not to be

hampered by any special rules

or regulations, not-

ought it to be put

into a straitlacket

conslderatlons of burden of proof. It 15 a discretion which the court wlll exercise havlng regard to all the circumstances of the case."

Xccordlngly, I

turn to examlne the circumstances

this

case, some of

xhich have been sufficiently descrlbed in

reasons for ludgment of

16 December

1986.

Proceedings are

pending in the Supreme Court of Victoria in which the first respcjndent ("Moowinnybah") is seeking the removal of caveats lodged by the present applicant, Labertouche Sands Pty. Ltd,

5 .

against the reglstratlon of any

deallng In respect

the

property "Binalong".

By another actlon in the same Court,

First

Natlonal

Flnance

Llmlted,

("First Natlonal") as

mortgagee of "Blnalong" IS also seeklng

the removal of the

present

applicant's

caveats.

addition,

First

Natlonal

has, on

July 1385,

obtained ludgment agalnst, amongst

others, the second respondent, on

a guarantee of performance

by Moowinnybah

Its obllgatlons under the mortgage

"Binalong". On the strength of that ludgment, Flrst Natlonal

has petltloned for a sequestratlon ordsr agamst the estates

of Mr. Edward Cooper and the other guarantors. Mr. Perkins

xas somewhat critical

of the

fact that Mr. Cooper has not

made full disclosure In

the present appllcatlun, that those

bankruptcy proceedmgs are pendlng agalnst hlm.

However, I

am not persuaded

of the relevance of the pendency of those

bankruptcy

proceedings, (which it was not

attempted to

conceal), to the exercise

the court's discretion on an

appllcation

for

security

for

costs.

one

view,

the

imminent threat

of a sequestratlon order against him, may

even give added point and urgency to

Mr. Cooper's applicatlon

for security for costs against the appllcant.

Another factor which

Mr.

Perkms suggested militated

against any order for security for costs, was the need

of the

liquidator of the

applicant, in the course of bringlng the

liquidatlon to an end, to obtaln adlud~catlon

on questlons of

fact and law as to whether there had been any breach

by the

respondent of ss.52 or 53A of the

Trade Fractlces Act 1374,

aa a result of xhlch

the applicant had suffered damage. It

was put that the llquldatot-

1 s

an oiflcer

the Supreme

Court of Victorla

xho must be taken to be dolng hls publl~

duty in

put-sulng the appllcatlon m

thls (:'out-t under the

Trade Practices Act.

Reference xas made to

Pavellc

Investments

Pty.

Ltd.

3 ACLR 417 xhere

Blackburn C.J.

referred at 417 to:

"what appears

a rule of practlce so

inveterate as to be almost a rule of law, namely that the liquidator of a company, appomted by the court, is not requlred to give security for

costs save in very exceptional circumstances.	I
need not set out all the authorities to support

thls: the leading case is

&Strand Wood Co. Ltd.

C13041 2 Ch 1.

The rationale

the rule is

partly that the liquidator

is performlng a public

function

behalf

all

the

credltors

and

contributories of the company, and

partly that it

is wlthin the competence of the court, m an

approprlate

case, to

award

costs

aqalnst

the

llquidator personally.

The question before me,

therefore, 1s whether

thla LS an exceptlonal case

In whlch the power to order security

f o r

costs

should properly be

exercised.

It may be that the rule to

whlch the learned Chief Justice

was there referring is conflned

to actlons against directors

for mlsfeasance.

The

proceedings in Re Pavellc Investments

Ptv. Ltd. (supra) and Re Strand Wood Co. Ltd. which was cited by his Honour were both of that kind, and references to the latter authorlty by various text wrlters confine it to

appllcations

for

security

for

costs

misfeasance

proceedings.

(See e.g. Palmer's

Company Law, 21st

Edn.

p.776; Wallace and Young, Australian Company

Law and Practice

pp.681 and 932, and

The Supreme Court Practice 1985 p.388).

At all events, I am not prepared to

hold, in the face of

multitude of Instances

of an order for security belng made

against a liquldator In a voluntary wlnding

up, that such a

liquidator, by reason of the duty owed to the court by which

he 1s registered and to the public, is not generally amenable

to an order for securlty. Examples

of orders €or security

being made agamst companies

m llyuldation are provided by

Northampton Coal Iron and Waqqon Co. v. Plidland Wasqon Co. (supra], Pure Spirit Co. v. Fowler (supra), National Bank of Wales v. L'olllns (1894) 38 SJ 186; C l t v of Moscow Gas Co. v .

International Flnanclal Socletv C13711

Ch.

225, and

Victorlan

Mortqaqe

and

Deposit

Bank

Ltd.

Australian

Financial Aqencv	& Guarantee Co. Ltd. and Lucas (1892) 18 VLR
754.

cross-claim by the

first

respondent against the

applicant alleges repudiation

of the licence agreement and

claims $10,000 due thereunder together

with damages. Mr.

Perkins also pointed to the fact that a cross-claim has been filed by the first and second respondents agalnst the third respondent, Latimer. The cross-claimants there assert that

the

representations

and

warranties

pleaded

the

applicant were false or untrue,

as alleged, then that Falsity

or untruth resulted from Mr.

Lather's failure to exercise

reasonable

care

and

skill

as a consulting

engineer

compiling a report

for

the

cross-claimants

on the

sand

content of part of "Binalong".

Accordingly, lt =as argued, the respondents who

are

seeking securlty for costs are

"lust as much applicants as

respondents".

existence of the cross-claim agalnst the applicant itself is

not sufficient to warrant the court exercising its discretion

by refusing an order that the applicant provide security for

However, In my opmion the mere

they

are

the costs of the application.

In Washoe Minins Company v.

Fersuson E18661 2 Eq. 371

it was held that the principle of

not making the plaintiff in

a cross suit give security is

that the cross bill is a mere defence to the original

blll.

For an

example of the application

that princlple, see

Accidental and Marine Insurance Co. v. Mercati C18661 3

Eq.

200. In that

case a

company had, before

went

into

liquidation, filed a bill seeking

a declaration that a marine

policy on which it was being sued by the defendant, had been

fraudulently obtained and was void.

The

Court refused to

order it to provlde security for the	defendant's	costs,
observing at 203:-

"Where a company is defending itself, it must be regarded as, in substance, a Defendant, and, therefore, is not to be called upon to give

security.

In this instance the company must be

considered as a Defendant,

and

not

as a

'plaintiff or pursuer' within the meaning of the

Act, this being virtually

a cross-sult."

By contrast, in the present case the cross-claim

by the first

respondent

against

the

applicant, of its

nature,

raises

3 .

something more than a mere defence to the application.

I have taken account of the fact that the

applicant's

licence to extract sand from

"Binalong" has been regarded,

at-

least by some potential purchasers, as

an asset of conslder-

able value. Undoubtedly the applicant has been lnhiblted	In
seeking to reallze the value of the licence by the uncer-

tainty surrounding the caveats lodged by

It to protest its

interest m "Emalong". The delays In completlng

the

litigation necessary to resolve that uncertainty have not,

the evidence, been of the

applicant's

maklng. However, it

remains the fact that, by the time when the substantive

application for security came to be

argued before me on

December 1986, no

firm agreement had been concluded by the

applicant to dlspose of its sand mining operation to First National as mortgagee of "Binalong" or anybody else. I am also mindful that if the "in princlple" agreement wlth First National were to come to fruition, it would be at least May

1987 before the applicant could recelve the proposed amount

of $200,000 from the proceeds of

sale of "Binalong", and that

even receipt of that amount would not be sufficient to enable

the liquidator to pay in

full the admitted debts

of the

applicant (excluding the

sum

of $60,000 for which the first

respondent has lodged a proof of debt).

also respondents had delayed unduly in making their application

suggested

that

the

first

and

second

It was

10.

for securltjr for costs, and thls was a matter whlch should weigh with the court in exercising its dlssretion to refuse the application.

In makmg

thls suggestlon,

Mr.

Perkins referred to

Cohen v. Fower C19713 2 Ontarlo Rep. 742 where a Master of the Supreme Court of Ontario held that an unexplained delay in moving for security for costs was fatal to the success of

the application. However,

an examination

the Canadian

authoritles on which the Master relied reveals that they do

not purport to take

a different approach from that suggested

In Re Smlth, Baln v. Bain

(19961 75 LT 46. That

was an

action for

account and adminlstratlon of

deceased

estate, and the appolntment of

a recelver. The actlon was

commenced in March 1892 and In June 1 8 9 2 appllcation was made

by the defendant for securlty for costs, alleging that there

was no reslduary

estate.

Because

difficulties

were

encountered in proving the

will, a statement of claim was not

delivered until 31 December 1895.

A defence was delivered on

11 March 1896, and

on 12 March 1896 the defendant took out

summons renewing the application for security for costs.

Allowing an appeal from Kekewich

J., the Court of Appeal held

that the defendant was entitled to	an	order for security.
Llndley L.J. observed at 48:

"When I look, however, at Order L:<V r.6 and the two cases which Mr. Butcher referred to of Martano v. t4ann 14 Ch.D. 419 and The Lvndnev and Wiqpool Iron Ore Company Ltd. v. Bird 2 3 Ch.D.

. J .

11.

358 it seems to me that the court is not bound by

any hard and fast line as

to when an order for

security for costs can be made.

of the

opinion,

therefore,

that

the

appellant

1 s

entitled to the ordlnary order

for- securlty for

costs.

. . . "

In the light of that passage

and the authorities to whlch his

Lordship there referred, I

conslder that an application for

securlty such as

the present should be examlned

the

exercise of the court's

unfettered

dlscretion

without

regarding delay, even if unexplained, as necessarily fatal.

That is not to say that delay may not be

a factor influencing

a refusal of the application, or that it may not

be relevant

to the perlod	in respect of whlch security for costs might	be
ordered.

The appllcatlon for security was made within four

months of the applicant's grslng

Into voluntary liquidation

29 April 1986. It is

a reasonable Inference that the first

respondents lnformatlon about the applicant's financial positlon untll at

could

not have

obtained

precise

and

second

least two weeks after that date. In all the circumstances,

do not conslder that the delay

in bringing the applicatlon

for security has

been such that it should weigh with me in

deciding to refuse the application. However, the

fact

that

both the

applicant

and

the

respondents

have

incurred

substantial costs in the application to date is a cogent reason for confining any order for security for costs whlch

are to be incurred in the future.

See e.g. Southern Cross

I ._. *.

Exploratlon NL v. Flre & All Risks Insurance Co. Ltd.	C13853
1 NSWLR 114 esp. at 123-126.

Objectlon was taken

behalf of the applicant that

some passages in

an affidavit by the sollcitor

for the first

and second respondents

m support

of the

appllcatlon for

securlty, were not admissible. It will be apparent from the

reasons for the judgment which

gave on 16 December 1986,

that there are only a few matters of fact to which I have

found It necessary

have

regard.

They

are that

the

applicant went Into voluntary liyuidatlon on 29 Aprll

13815,

the

details of Its

financial

posltlon

at that date as

disclosed by a report to the llquldator by its directors, and

certain assertions and estimates by their solicltor

the

costs which the flrst and second respondents

had incurred to

date, and would incur if the appllcatlon were to proceed to trial wlth senior and lunior counsel retalned. A copy of the

report as to the

applicant’s affairs as at 29 April 1986 was

exhibited to an affidavlt sworn by Phllip Maxwell Earle, the solicitor for the first and second respondent, on 27 August

1986. However, that copy

was not

certified by

person

authorized by the Commissioner for Corporate Affairs for

Victoria, as delegate of

the

Natlonal

Companies

and

Securlties Commlssion. Subsequently,

13 December

1986,

Mr. Tribe

of counsel for the first and second respondents

sought, over the

ob~ectlon

Mr.

Perkins, to tender in

evidence a certified copy

of that report.

, ..

As I understand the oblectlon to the admissiblllty of the report, it was that it did not appear that Mr. Earle had

hlmself

carried

out

a search at the offlce of

the.

Commissioner for Corporate Affalrs, and that, therefore, his

assertion that the copy

exhibited to hls affidavit was a true

copy of

the document lodged in that office, was hearsay.

When Mr. Tribe, in the course

of answerlng the

applicant’s

submissions against the making of

order for security,

sought to tender

a copy which had been duly certified

on l8

December 1986, Mr. Perkins contended that, in its discretion, the court should refuse that tender because the evidence had by then closed, and the first and second respondents had left

it too late to remedy

a defect which should have been

apparent to their legal advlsers since

27 August 1956.

In my opinion, the certified copy

of the report of the

directors of the applicant is properly admissible and should

received in evidence. Section

3115)

the Companies

(Victoria) Code provldes that:

“A copy of or extract

from any document lodged

with the Commission or with the Commissioner for

Corporate Affairs or the Registrar of

Companies,

and

certified

the

Cornmission,

is, in any

proceedings, admissible in evidence as of equal

validity with

the origlnal document.”

I am disposed to receive into evidence the certified copy of

the directors‘ report, notwithstandlng the lateness

of the

tender. I am reinforced In that vlew by the fact that the applicant allowed Its appllcation for an adlournment of the

application for security for costs to be argued and resolved

on the basis of the

flnancial information contained in that

report of two of its own

dlrectors, Messrs Whitelaw and

Baxter.

the

second

place,

since

thls

appllcation

for

security f o r custs 1s an lnterlocutory

proceedlng,

documentary

evidence

the

financial

posltion

the

appllcant mlght have been admltted under

0 . 3 3

r.2

of the

Federal Court Rules,

notwlthstandmg

that it was hearsay.

Moreover, the fact that the document tends to prove matters

apparently not bona

fide In dispute, would argue strongly for

receiving it in evidence under	0 . 3 3	r . 3	of the Federal Court
Rules.

Mr. Perkins next attacked the estimate expressed by Earle in hls affidavit that the total party costs of this

Mr.

application

will

be contested, as I understood the argument, that Mr. Earle

excess

of $60,000. It

was

not

as a

duly admitted barrlster and sollcltor of the Supreme Court of

Vlctoria was qualified

to express an expert opinion about the

costs likely to be incurred by

a party to an application like

the present.

However,

Mr. Perkins urged that Mr. Earle had

not

established

any

sufficlent

factual

basis

for

the

assumptions on which hls estimate

was

based, such as the

likely length of the	final hearlng and the number of counsel
to be retained. Nor	had he apportioned his estimate between

the

costs

attrlbutable

the

applicatlon

and

the

cross-applicatlon.

my view, those crlticlsms go to the

welght to be attached to

Mr. Earle's estlmate rather than to

Its admissibillty. I consider that

It would be open to

the.

court, even without

his estimate, to take judicial notice

the likelihood that the first and second respondent's party and party costs of this application will be substantial. For reasons which will appear shortly, I do not attach any real

weight to the precise amount of	$60,000 at whlch Mr. Earle
estimated those costs.

One	of the premlses of Mr. Earle's estimate of the

flrst and second respondent's costs

of the appllcation was

that costs Incurred

by them "to date amount to approximately

$18,000'' of which approximately $15,000 "is in respect to the first and second named respondents' former solicitors, Messrs

Noel

Waters

and

Robert

Hession

120 High Street,

Cranbourne."

As well as directing his general objections to

that

passage in common with others

from

Mr.

Earle's

affidavit, Mr. Perkins specifically criticised it

as relying

"entirely on

what has been said to Mr. Earle by somebody

else"

from

the

first

and

second

respondents'

former

solicitors.

Had

been persuaded to make any order for security

bearing a precise relation to the costs incurred by the first

and second respondents to the date of this application,

16.

would, on the present state of the evldence, have taken the course favoured by Beaumont J. in Fat-se1 Ptv. Ltd. L-. Brambles Holdlnqs Ltd. (1395) 3 ACLC 312 by first having the

first and second respondents' costs to date taxed

the

District

Registrar.

However,

I accept,

wlth

respect,

Beaumont J. dld In Fat-se1 Ptv. Ltd. v. Bi-ambles Holdinqs

Ltd. (supra), at

315 the correctness of the approach taken by

Fullagar J. in Brundza v. Robbie L Co. (No. 2 ) (1952) 98

CLR

171 at

175

where his Honour observed that

"in

ordering

security for costs, the Court does not set out

to give

complete and certaln indemnity to

a respondent: see Aberdare

& Plymouth Co. V. Hankey (1888) 32 S.J. 644." For reasons

similar to those which welghed with Waddell J. in Southern

Cross Exploration NL v.

Fire & All Risks Insurance Co. Ltd.

(supra) at 125, that

approach

commends

itself

the

strongly in respect

of costs whlch have already been incurred

by a

respondent before the maklng

an appllcatlon for

security. Accordingly,

I do not conslder that in thls case a

taxation

the respondents' costs to date would afford

enough asslstance, in fixing the amount of any security, to

~ustify

imposing that additlonal expense

on the partles.

Mr. Perkins also argued that it was open to the court stemmed largely from the transactlon m respect of whlch it seeks relief by the present application under the T r a d e

to	infer that the applicant's financial difficulties have

Practlces Act.

That inference,

he contended, permltted the

17.

court to take account of the conslderatlons Identified

Lvnnebrv Ptv. Ltd. v. Farquhar Enterprises Ptv. Ltd.

(1977) 3

ACLR

133.

that case the plaintlff was seeklng relief

agalnst the vendor

a parcel of land alleglng that the,

vendor

had

induced

the

plalntiff

a fraudulent

misrepresentation to purchase the land.

The plalntiff also

sought

recover damages from Its former solicitors for

negligence in falling to ascertain the true zoning

the

land under to-wn plannmg	legislation.	His Honour observed,
at 136:

"The

Master,

however,

exerclsing

his

discretion, also took Into account the fact that,

hls

view,

the

present

parlous

financial

position

the

plaintiff

and

its

two

shareholders

had

been

brought

about

the

alleged fraudulent misrepresentation made by the

vendor company and by the alleged negligence of

the solicitors in the course	of	their alleged
retalner.

I am unable to accept Mr. Einstein's submisslon that the plaintlff would have been In insolvent

clrcumstances

irrespective

land

the

transaction, the subject of the action.

Mr.

J. Fehon stated

before

the

Master

that

the

company was in a healthy situation untll

the tune

when the subject land was bought and he had

been

pouring money into the company from

his

other

sources and those	of	his wife,	ever slnce the
purchase.

On a consideration of this evidence

and of

the

plaintiff's balance sheets,

I am of the opinion

that

the

plaintlff's

present

inanclal

difficultles are largely due to the transactlon.

This 15, I

think, a

most relevant circumstance

(Sir

Llndsay

Parkinson

Co. Ltd. v. Trlplan

W.,

supra at

626-627) and one which warrants

the application belng refused.

18.

It is alleged rn the

statement

claim

that

the

applicant paid

$275,000

to the frrst respondent

for

sand

rnlnlng plant

and

equlpment

on "Binalong"

and

expended

$260,000 on new plant

and equipment and improvements to the

land.

However, it

appears from the report furnished by the

directors of the applicant to the liyuldator that

as at

April 1986 the

plant

and

equipment

had

an estimated

realizable value of $100,000. Moreover, the

"in principle"

agreement to which

Mr. Joseph has deposed suggests, that the

plant and equipment together

with the applicant's interest in

"Binalong" has a current value

of $200,000.

Neither the

evidence so far given, nor the pleadings indicate what income

(if any) the applicant derived from sand mining activities

"Binalong", but the same directors' report to the liquidator

indicates

that

the

applicant

has

a pald

capital

$105,000. It may

be an avallable

inference

that

the

applicant's present Impecuniosity is due, at least in part,

to Its being under-capitalized. At all events,

am not

persuaded that there 1s such

a causal connexion between that

impecuniosity and the alleged breaches

of the Trade Practices

G, (if they can be made

out) that,

on balance, I

should

exercise my discretion by refusing

an order for security.

Nor 1s there evidence one way

or the other about the

means or lack

of them of

the creditors and shareholders of

the applicant who stand to benefit

if the application is

successful.

In that context, I accept with respect what was

13.

sald by a

Full Court

of this Court

(Sheppard, Morling and

Neaves JJ.) in

Bell

Wholesale

Co.

Ltd.

Gates

Export

Corporation (1984) 2 FCR 1, at 4:-

"In our opinion a court

not

lustlfied

declining to order securlty

on the ground that to

wlll frustrate the litigation unless a

company

the position of the appellant here

establishes that those

who stand behind It and

who

will

benefit

from

the litigation if it

successful

(whether

they

shareholders

creditors or, as In this case,

beneilclarles

under a trust) are also wlthout means. It is not

for the party seeking security to raise the

matter: it 1s an essential part of the

case of a

company seeking to reslst an order for security on the ground that the granting of security will

frustrate the litigation to raise the issue

the impecuniosity

of those whom the litigation

wlll benefit and to prove the necessary facts."

Accordingly, in view

of the factual circumstances set

out in my reasons for judgment delivered

on 16 December 1986,

and having regard

to the considerations canvassed above,

conclude that a balance of lustice and reasonableness will

struck by making

an order that the applicant provide securlty

for the costs

of the flrst and second respondents in the

sum

of $14,000. Subject

any submlssions

which counsel may

deslre to make on the form of the order, or the question of

costs, I propose to order that proceedings

on the application

herein be stayed until security for the costs of the first

and second respondents is provlded by the applicant in the

sum of $14,000 to the satisfaction

of the registrar, and that

the costs of the application for security be the flrst and

second respondents' costs in the substantive application.

I certify

that

the

preceding

nlneteen (19) pages are a

true

copy of the Reasons

for

Judgment

herein

the

Honourable Mr. Justlce Ryan.

Dated: 25 February 1987

e?/-

Associate

1 .

[1987] FCA 119

25 Feb 1987