Maggbury Pty Ltd & Anor v Hafele Australia Pty Ltd

[2001] HCATrans 184

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B36 of 2001

B e t w e e n -

MAGGBURY PTY LTD and GISMA PTY LTD

Appellants

and

HAFELE AUSTRALIA PTY LTD and HAFELE GMBH & CO

Respondents

Application for security for costs

CALLINAN J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 6 JUNE 2001, AT 11.02 AM

Copyright in the High Court of Australia

MR J.S. DOUGLAS, QC:   May it please your Honour, I appear for the applicant, who is in the respondent in the appeal, with my learned junior, MR G.C. McGOWAN.  (instructed by Logie‑Smith Lanyon)

MR S.J. LEE:   If the Court pleases, I appear for the appellant and the respondents to this application.  (instructed by O’Shea Corser & Wadley)

HIS HONOUR:   Gentlemen, having regard to the fact that 20 minutes is the usual time for a special leave application, you should proceed upon the basis that each of you will have 20 minutes.  I may be prepared to extend the time, but if you could attempt to limit your oral submissions to 20 minutes, I would be grateful.  Thank you.

MR DOUGLAS:   Your Honour, I read the summons filed 24 May 2001.

HIS HONOUR:   Yes.

MR DOUGLAS:   The supporting affidavits of Ralph Bedford McKay filed 24 May 2001 and of Joel Pascual Dy filed that date, an affidavit of Roderick Ernest O’Sullivan filed 1 June 2001 and an affidavit of Mark Jonathon Ord filed 4 June 2001.  I will also seek leave to read and file a further affidavit of Mr Dy sworn today which arises in circumstances where I shall explain why I want to do that.

HIS HONOUR:   Is there any objection though, Mr Lee?

MR LEE:   To the last affidavit there will be strenuous objection, your Honour.  To the other ones that my friend seeks leave to file, I also seek leave to read and file an affidavit and my consent is subject to that being filed as well, given the late notice of this application.

HIS HONOUR:   It looks as if the only contentious affidavit is this one you are about to tell me about, Mr Douglas.

MR DOUGLAS:   My learned friend wishes to file an affidavit of Mr Breen, which has been filed earlier in these proceedings and never admitted.  It goes to an issue about the, I suppose, nature of the proceeding which was filed for the special leave application.  If it is to be admitted, which we would object to – we say it is not really relevant to these proceedings – we would be seeking to read an affidavit of a Mr Chambers.  They really go to the nature of the agreements in issue in the appeal, whether they are common or standard and whether, therefore, it gives rise to an important issue or not.  I do not think it is terribly relevant for these proceedings.

HIS HONOUR:   No.  Well, the fact that the matter has had a grant of special leave suggests that the Court has regarded it as a matter of some importance, of some general importance, and if that is all the affidavit goes to, then it advances the matter no further, I would not have thought.

MR DOUGLAS:   That is my submission, your Honour. 

MR LEE:   Your Honour, if my learned friends are desisting in their submission that there is no public interest in this proceeding, then I am prepared to rest.

MR DOUGLAS:   No, I am not saying that.  We are saying that this arises out of a private agreement and we are saying for that reason it is not in the category of cases where there is an important matter of public interest raised.  Now, it might be an interesting or difficult legal issue ‑ ‑ ‑

HIS HONOUR:   You are talking about the issues in the appeal itself?

MR DOUGLAS:   Yes.

HIS HONOUR:   Well, of course, public interest is not an exclusive ground upon which special leave is granted.  The general interests of justice and justice to the parties itself may afford a ground, but generally speaking the Court does not entertain matters of interest to nobody else apart from the parties, generally speaking.

MR DOUGLAS:   Yes, I appreciate that, your Honour.

HIS HONOUR:   Look, I would prefer to defer my decision about these matters.  This last affidavit you were going to tell me about, Mr Douglas, what does it go to?

MR DOUGLAS:   To make sense of our submissions your Honour needs to look at Mr Diercke’s affidavit, which I think my learned friend will be reading.

HIS HONOUR:   Well, treat it as if it is there and ‑ ‑ ‑

MR DOUGLAS:   If you look at Mr Diercke’s affidavit, in paragraph 17 he refers to an affidavit of a Mr Jefferis, which he exhibits, which was filed in earlier proceedings in the Supreme Court where security for costs was sought in respect of a contempt proceeding before Justice White and her Honour ordered it.

HIS HONOUR:   Mr Douglas, perhaps before we get to this – and I do not want to interrupt you – can you tell me this – and I know it is in the material, but the trial lasted how long approximately?

MR DOUGLAS:   From recollection it was eight days.

HIS HONOUR:   About eight days.  Was there any order for security for costs made in respect of the trial?

MR DOUGLAS:   No.

HIS HONOUR:   No.  All right.  The appellant succeeded at the trial and no doubt got an order for costs at the trial.  Were there any orders for costs in interlocutory matters made in favour of the appellant before the trial?

MR DOUGLAS:   I was not involved before the trial.  From recollection they were reserved; costs in the cause.  There was an interlocutory application for an injunction.

HIS HONOUR:   Right.  So, in effect, the appellant got most or all of the costs up until the end of the trial, is that right?

MR DOUGLAS:   Most.  There was a debate because it lost on certain issues and there was a deduction for that.

HIS HONOUR:   Right.  Then you succeeded on the appeal.

MR DOUGLAS:   Yes.  We got the costs of the appeal but the court ordered that the costs of the trial below, in effect, be no order as to costs of the trial below.

HIS HONOUR:   The appellant got an award of $5,000, I think, as a result of the decision of the Court of Appeal, is that right?

MR DOUGLAS:   Quite right.

HIS HONOUR:   Now, Mr Douglas, was any order for security for costs made in respect of the appeal itself?

MR DOUGLAS:   No.

HIS HONOUR:   No, but a bill has been prepared but not taxed, is that right?

MR DOUGLAS:   Yes, there was a debate and a dispute which went to court before Justice Wilson about the recoverability of costs incurred by the Victorian solicitors and her Honour found that they were recoverable.  That has only recently been decided.

HIS HONOUR:   That was on your side, was it?

MR DOUGLAS:   Yes.  I should remind your Honour too that there was a stay sought in the Court of Appeal of the injunction granted by Mr Justice Byrne.  The injunction was not stayed but the amount of damages assessed by his Honour of 25,000 was ordered to be paid into court, not to the appellants.

HIS HONOUR:   Well, Mr Douglas, so there was a dispute which was resolved by her Honour Justice Wilson, is that right?

MR DOUGLAS:   About the recoverability of the Victorian solicitors’ costs, yes.

HIS HONOUR:   Right.  Now, a bill has been prepared in what amount?  I see a figure of 150,000 was mentioned.

MR DOUGLAS:   Around 140 to 150 from recollection.

HIS HONOUR:   How long did the appeal last?

MR DOUGLAS:   About half a day.

HIS HONOUR:   And $140,000 was the bill for the appeal?  Is that right?  I mean, have not been so long out of practice as not to have some recollection of costs and fees and $140,000 for a half day appeal in respect of an eight day trial in the Court of Appeal strikes me as very, very high.  Is that bill here?  Where is that bill?

MR DOUGLAS:   That can be resolved on taxation no doubt, your Honour.

HIS HONOUR:   Well, I see that the appellant describes it as an ambit claim.  Where do I find that bill in the papers?

MR DOUGLAS:   It is exhibited to Mr Dy’s affidavit, JPD13.

HIS HONOUR:   You do not need to be a costs assessor to raise your eyebrows at that amount.

MR DOUGLAS:   That is actually Mr Monteath’s bill, is it?

MR LEE:   If I might be so rude as to interrupt your Honour?  That bill only relates as well to the Victorian solicitors, not to the Brisbane solicitor.

HIS HONOUR:   What?  So 140,000 is not the complete bill?

MR LEE:   No, apparently not.

HIS HONOUR:   Where do I find the complete bill?

MR LEE:   Mr Dy’s affidavit deposes to that at paragraph 26.

HIS HONOUR:   Well, what is the total damage, as it were?

MR LEE:   I am sorry, paragraph 24.  They do not depose to what the total costs will be.

HIS HONOUR:   Think of a number.  So this bill that I am looking at is just the Victorian solicitors bill, is it?

MR DOUGLAS:   Yes.

HIS HONOUR:   That is JPD13.  There were Queensland solicitors as well and I see the instructions item which the Victorian solicitors seek to charge is $20,000.

MR DOUGLAS:   This includes counsels fees as well, your Honour.

HIS HONOUR:   Of course, Mr Douglas, and I rather suspect they will turn out to be relatively modest.  Where do I find them, by the way?

MR DOUGLAS:   They appear in various parts along the way.  There was a lot of documentary evidence filed too, your Honour.  For example, the appeal book itself cost $10,000 to copy, even though it was an eight day trial.

HIS HONOUR:   But we are not concerned with the trial, Mr Douglas.

MR DOUGLAS:   I know that but one had to copy the record, for example, and apart from the oral evidence given before his Honour there was very bulky affidavit evidence as well.

HIS HONOUR:   You and I both know, however, that often not nearly as much discrimination is employed by solicitors when they are preparing records as ought to be employed.  This may be a ‑ ‑ ‑

MR DOUGLAS:   With respect, your Honour, this appeal did require the evidence to be put in in detail because it was that sort of an appeal.

HIS HONOUR:   What I do not understand is these are Victorian solicitors costs and ‑ ‑ ‑

MR DOUGLAS:   Including all disbursements as well, your Honour.

HIS HONOUR:   Yes, but take item 452, only a small amount, $22, but “letter to Court of Appeal seeking court record books”.  What are the Victorian solicitors doing writing for them?  Why could not the Queensland solicitors have picked them up in the normal course?

MR DOUGLAS:   I do not know, your Honour.  These are the sorts of things that can be dealt with on taxation, your Honour.

HIS HONOUR:   I know that, but they are not irrelevant to my consideration, Mr Douglas.

MR DOUGLAS:   Well, with respect, much of what is set out there is something that can be dealt with elsewhere, but if your Honour is concerned about questions of security for costs, one needs to look at the estimates put in here and to see what they come to.

HIS HONOUR:   Yes, true.

MR DOUGLAS:   Can I revert to what I was saying about Mr Dy’s most recent affidavit and why we wish to file it?

HIS HONOUR:   But wait a moment.  What was Mr McGowan’s role in the case?

MR DOUGLAS:   He is my junior.

HIS HONOUR:   And he was paid $15,120.  He was paid $7,840 for reading, preparation and drawing submissions, which were no doubt settled by senior counsel.  All right.  Sorry, you go ahead, Mr Douglas.

MR DOUGLAS:   Thank you, your Honour.  Do you have Mr Diercke’s affidavit there, your Honour?

HIS HONOUR:   Yes, I do, Mr Douglas.

MR DOUGLAS:   I was taking your Honour to paragraph 17.  I want to take your Honour to paragraph 24 as well.  What Mr Diercke says in paragraph 17 is, in effect, to refer back to an affidavit of Mr Jefferis which was used in the proceedings before Justice White where her Honour ordered to security, which has not been paid.

HIS HONOUR:   That was security in respect of the ‑ ‑ ‑

MR DOUGLAS:   Contempt proceedings.

HIS HONOUR:   Just tell me about them, I am sorry, Mr Douglas.

MR DOUGLAS:   After his Honour Mr Justice Byrne granted an injunction, separate proceedings were instituted by the appellants asserting that the respondents had committed contempt of the injunction granted by his Honour.  There were proceedings in those proceedings dealing with discovery of documents, whether the partnership, or limited partnership, or corporate partners of a German body, were entitled to claim privilege against self‑incrimination in respect of certain documents.  That was decided against the respondents by Justice Fryberg and taken on appeal.

The proceedings then went back for further interlocutory steps in the contempt proceedings.  An application for security for costs in those was made before Justice White.  Her Honour made that order and her Honour’s reasons are exhibited to these affidavits of Mr Dy.  I think it is exhibit JPD2, including your Honour’s order.  In that proceeding this affidavit of Mr Jefferis was read.  Now, one of the things that Mr Jefferis said – and, in effect, it was taken up by Mr Diercke – is that, “If an order for payment in for security for costs is made the plaintiffs will not be able to provide the required security other than the personal guarantees already offered”.  One infers from Mr Diercke, relying upon that here, that the same situation exists now, which is buttressed by his statement in paragraph 24:

I am further informed by Mr Garry Allen and Mrs Ines Allen –

who are the people behind the corporate plaintiffs or appellants –

and I believe that there is a very real likelihood that an order for security in this proceeding could stifle the High Court appeal in the following way.

In effect, if security is ordered, there will be delay in the ability to get their security and their consent about the appeal coming on.

HIS HONOUR:   Mr Douglas, I have always been intrigued at the tension – and it seems to me to be a completely unresolved tension in these applications.  On the one hand, the authorities say that a party ought not to be shut out from pursuing a legitimate claim and some degree of impecuniosity should not be an obstacle to pursuing it.  But, on the other hand, the foundation for an application for security for costs is usually some perceived impecuniosity of the party seeking to pursue the claim.

MR DOUGLAS:   Yes, but in circumstances here where, in our submission, it is clear that there are people behind the parties pursuing it who are good for some money.

HIS HONOUR:   I know, but before you get to that point, the authorities never, to my mind, seem to resolve that tension.  I do not know whether you know of any case ‑ ‑ ‑

MR DOUGLAS:   I think they resolve it, your Honour, by trying to go behind, say, for example, corporate plaintiffs ‑ ‑ ‑

HIS HONOUR:   Not always, Mr Douglas.

MR DOUGLAS:   But that is one way of doing it though.

HIS HONOUR:   Well, it is.  Now, in this case are personal guarantees offered?

MR DOUGLAS:   Yes, and we would submit that on the evidence that is not good for much at all.  The critical thing, whether it is relevant to the attempt to put this material in, is based upon the application of the Commonwealth Evidence Act.  Now, of course, without prejudice negotiations are normally not admissible.  Under the Commonwealth Evidence Act, in section 131, which is, in effect, a code, provision is made that:

Evidence is not to be adduced of:

(a)  a communication that is made between persons in dispute . . . in connection with an attempt to negotiate a settlement ‑ ‑ ‑

HIS HONOUR:   Mr Douglas, the trial would not have been conducted in federal jurisdiction.

MR DOUGLAS:   No, but this is a proceeding in the High Court, this application for security.

HIS HONOUR:   I suppose that is right, yes.

MR DOUGLAS:   And the High Court applies this Evidence Act.

HIS HONOUR:   Yes.

MR DOUGLAS:   We think anyway that just reflects the common law what I am about to tell you.

HIS HONOUR:   Yes.

MR DOUGLAS:   Section 131(2)(g) provides that a prohibition against putting in without prejudice communication does not apply if:

evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence.

Now, what Mr Diercke says here, in effect, is that there is no ability in the plaintiffs to provide security and a very real likelihood that an order for security in this proceeding could stifle the High Court appeal.  The material that is exhibited to Mr Dy’s affidavit contradicts that.

MR LEE:   Your Honour, excuse me, I object to my friend even making any reference to the contents of this affidavit.  I understand that if he presses the point - he will have to, but I want my objection to be noted.

HIS HONOUR:   Your objection is noted, but Mr Douglas cannot deal with the point unless he does that and you will just have to rely upon my putting it out of mind ‑ ‑ ‑

MR LEE:   Yes, I do, your Honour.

HIS HONOUR:   ‑ ‑ ‑ if in the end I rule it as inadmissible, but Mr Douglas has to refer to it.  Yes, Mr Douglas.

MR DOUGLAS:   In my submission, if your Honour reads the correspondence, it will lead your Honour to the conclusion that this is covered by section 131(2)(g).

HIS HONOUR:   Because there is some material ‑ ‑ ‑

MR DOUGLAS:   That shows a capacity to pay a significant amount.  I would seek leave to read and file the affidavit.

HIS HONOUR:   All right.  I will look at the affidavit, Mr Lee, before I rule on it.  I have to look at it.  Mr Douglas, one problem about admitting it would be that I would then have to admit evidence which I presume is available – I am assuming is available – on the other side to explain the basis upon which this without prejudice offer can be made.  I do not know whether that is so, but the reception of this might create, in effect, a further

issue, which may or may not turn out to be a false issue, but assume it is not a ‑ ‑ ‑

MR DOUGLAS:   It may, but as the material stands before your Honour, it is misleading because the inference one draws from it is that the parties are not able to put up a significant amount by way of security when clearly they are.

HIS HONOUR:   Well, say, for example, the offer could only have been made upon the basis that it was accepted and, for example, the costs of today were going to be avoided because of its acceptance.  I am not suggesting that is so.  That may be one possible explanation.  I do not know.

MR DOUGLAS:   I think we will just have to cope with that, your Honour.  In my submission, it is admissible under the section of the Act.

HIS HONOUR:   Only if I form the ultimate conclusion that the matter to which you refer in Mr Diercke’s affidavit is, in the light of this, misleading.

MR DOUGLAS:   Yes.

HIS HONOUR:   You would bear the onus in relation to that.

MR DOUGLAS:   Yes.

HIS HONOUR:   I am not expressing a view either way, but I do not know whether this offer which is contained in the without prejudice letter would necessarily be sufficient to discharge that onus.  I am not saying it is or it is not.  I do not know.  Mr Lee, I am minded to reserve my decision in relation to this affidavit.  If I reserve my decision in relation to it, you want to tender another affidavit yourself, do you not?  Is that right?

MR LEE:   I do not have instructions on that, your Honour, but ‑ ‑ ‑

HIS HONOUR:   I thought there was some material that you wanted to put in conditional, as it were, upon the reception of material from Mr Douglas’ side.  Am I wrong about that?

MR LEE:   I would have to get instructions on that, your Honour.

HIS HONOUR:   You are not ready to put in such an affidavit at the moment?

MR LEE:   No, but the matter could sensibly proceed without that.

HIS HONOUR:   I will reserve my decision on the reception of this affidavit, Mr Douglas.

MR DOUGLAS:   Thank you, your Honour.

HIS HONOUR:   Perhaps it can be marked for identification for present purposes.  It will be MFI R1.

MFIMFI R1…..Affidavit

MR DOUGLAS:   Thank you, your Honour.  Can I be cheeky and ask whether my 20 minutes can start now?

HIS HONOUR:   No.  Mr Douglas, you go ahead, but I do not want to take up a lot of time on a security for costs application, as you would appreciate.  If you do not mind, I will ask you some questions which will enable me to know the factual background.

MR DOUGLAS:   Can I just give your Honour the headlines of what we say are the relevant issues?

HIS HONOUR:   Yes, you do that.

MR DOUGLAS:   Whether the material filed on behalf of the respondent discloses any ability to pay in them; whether security should be ordered because of the situation created by the assistance of Mr Gull, who is referred to in our material, who clearly seems to be behind the appellants, or at least helping to fund it; whether an order for security would stifle that appeal, to which that affidavit goes; and the amount of security that should be ordered.  That is what we see as the principal issues.

HIS HONOUR:   Yes.  Mr Douglas, I am sorry to come back to the nuts and bolts of all of this, but is there any material before me to indicate what the Queensland solicitors fees are, costs are?

MR DOUGLAS:   The expected fees for the High Court appeal?

HIS HONOUR:   No, this 148,000 is what I am interested in.  What is to be added to that?

MR DOUGLAS:   I do not think there is any material.  I gather it is still being costed.  Can we take the view it is not relevant to this application?

HIS HONOUR:   I know you do.  I know you do, but I am not satisfied at the moment that it is irrelevant.  I understand what you say about it.  Tell me this:  is there a party and party scale of counsels fees in the Supreme Court of Queensland now?

MR DOUGLAS:   No.

HIS HONOUR:   None at all?

MR DOUGLAS:   No.  I am pretty sure of that, your Honour.

HIS HONOUR:   Is there any kind of a norm as to what counsel, on a party and party basis, get?

MR DOUGLAS:   I expect there would be through the taxing officers, yes.

HIS HONOUR:   There is no evidence of that before me?

MR DOUGLAS:   No.  Not in the Supreme Court, no.  There is evidence from both sides in respect of likely counsels fees in the High Court.

HIS HONOUR:   Well, that is the next question I was going to ask you.  By the time a matter gets to the High Court the reality is that the role of the solicitors is not a great deal more than mechanical – that may be unpopular but it is true – collecting record books ‑ ‑ ‑

MR DOUGLAS:   A bit more than that here, your Honour, because there are German clients involved with whom the solicitors have to communicate.

HIS HONOUR:   Well, they just have to be told, but you have to tell your clients whether they are in German or Dalby.

MR DOUGLAS:   Yes, but you have to translate information for them and get information back and that is translated.

HIS HONOUR:   That is as may be, but I do not think if they litigate…..clients we are going to pay for their translations, are we?

MR DOUGLAS:   No.  I am just talking about the role of the solicitor.

HIS HONOUR:   No.  Well, what is the evidence before me then of the likely costs of the appeal?

MR DOUGLAS:   On our side something in the range of about $85,000.

HIS HONOUR:   And how much of that is counsels fees?  Can you answer that question on your side, Mr Lee, what you say about that?

MR LEE:   I will consider that, your Honour.

HIS HONOUR:   I only want you to refer to material which - - -

MR DOUGLAS:   Is this for both special leave and for the appeal?

HIS HONOUR:   No, just for the appeal.

MR DOUGLAS:   Just for the appeal.

MR LEE:   We say 13,000, your Honour, including the special leave application.

HIS HONOUR:   Well, 13,000 for running the appeal?

MR LEE:   It is 8,000 for counsel for running the appeal and 5,000 for the special leave application.

HIS HONOUR:   And what about solicitors costs?

MR LEE:   Our total bill is 18,440, so it would be about the balance, which would be about 5,000.

HIS HONOUR:   Obviously that is on your side.

MR LEE:   Yes.

HIS HONOUR:   And silk is not briefed on your side.

MR LEE:   No.  But this is our evidence in rebuttal to their evidence about what their party/party costs would be.

HIS HONOUR:   Yes, but they have ‑ ‑ ‑

MR DOUGLAS:   Ours comes to 35,800.

HIS HONOUR:   Solicitors fees?

MR DOUGLAS:   No, counsels fees for preparation and hearing.

HIS HONOUR:   Yes, and two counsel, of course.

MR DOUGLAS:   Yes.

HIS HONOUR:   But, what, solicitors fees $50,000?  What are the solicitors doing that could possibly be worth $50,000 on an appeal to the High Court?

MR DOUGLAS:   Ours covers both special leave and the appeal, your Honour.

HIS HONOUR:   All right.  Well, just for the appeal.

MR DOUGLAS:   And the security for costs application.

HIS HONOUR:   Well, just for the appeal.  You may not have the figure.  If you do, I just ‑ ‑ ‑

MR DOUGLAS:   No, it is all broken up into professional costs and disbursements.  Yes, 9,450 we think, your Honour.

HIS HONOUR:   Against Mr Diercke’s 5,000 on his side and they have the responsibility for ordering and arranging about the appeal books.

MR DOUGLAS:   They would be disbursements I think.

HIS HONOUR:   Yes, but there is more involved in doing it because they have the carriage of the appeal.

MR DOUGLAS:   Yes.

HIS HONOUR:   All right, thank you for that, Mr Douglas.  You go ahead then.

MR DOUGLAS:   Their estimate is of our costs as well.

HIS HONOUR:   Yes, I understand that.  I am sorry, yes, I do.  What I said before was not quite accurate then when I talked about the carriage.  Yes.

MR DOUGLAS:   Yes.

HIS HONOUR:   Yes, you go ahead, Mr Douglas.

MR DOUGLAS:   Can I address the first issue we see as significant, your Honour, namely, what is the ability of the appellants to put up security?  Mr Diercke’s affidavit asserts that Mystico Pty Limited, which seems to be a family company associated with the natural persons backing the appellants, will offer to guarantee payment of the respondents costs of the appeal as may be ordered by the Court.  That is paragraph 12(i) or 18(ii) of his affidavit.  His assertion is that the company has equity in its property in the sum of $140,000.  We say rhetorically, if that is so, then there should be no impediment to it securing a bank guarantee in the sum claimed by the respondents to be appropriate to provide security or such as the Court orders.

It is also significant that there is no valuation of the property exhibited to Mr Diercke’s affidavit, nor was any information provided about other debts that that company might owe, nor was any information provided about any debts that Mr and Mrs Allen might owe, apart from what is deposed to in the material on our side, which refers to proceedings against them in the District Court for $19,000.

Mr Diercke’s affidavit in paragraph 13 also refers to the prospect of income derived by the sale of ironing boards and his affidavit exhibits as LD8 a valuation so‑called, which, in our submission, does not bear any analysis, let alone close analysis, in supporting a valuation of Gisma’s assets at 2,245,283.  If you look at the valuation, what the valuer, Mr Allan, says is that:

Our investigations found that the United States and Canadian markets are approximately 30% of world markets.  The valuation of Gisma’s asset (AU$2,245,283.00) for the remaining 70% of marketing rights, is achieved by calculating investors monies paid against percentage received of the world market.

It does not seem to ‑ ‑ ‑

HIS HONOUR:   You say that is like a One.Tel prospectus?

MR DOUGLAS:   Yes, your Honour, or it is the sort of valuation which, if you put up in this form:  if the customers come, it will be worth that much.  It means nothing.  It is purely prospective.  Actually the valuer goes on to say:

Our understanding is that the accessories and products are confidential and therefore difficult to value at this stage.

Other matters

To enable further verification –

he needs to:

confirm the following:

1.  Finalisation of agreements with the licensee for US and Canada markets.

2.  Finalisation of agreement with investors, for 70% of world marketing rights –

and this is on 28 May 2001, so it is pretty recent and he is not shown anything then to justify any solid agreement backing it.  Of course, if it were worth that amount, one would have thought there should be no trouble in getting a bank guarantee to support security.  As we have said in our written outline, this is not an asset which can be executed against, this valuation, and any examination of it makes it clear that is not objective based on optimistic estimates by the appellants.

There is also no information provided to support the expectation that Gisma will receive an income of approximately 300,000 by 30 June 2002.  That is just an assertion in Mr Diercke’s affidavit.  Nor is there any clear evidence that Mr Allen has actually reached agreement with third party investors.  What is said by Mr Diercke for Mr Allen in paragraph 13 is, again, confusing and, dare I say it, misleading.  If you look at paragraph 13, he says, starting in the second line:

Mr Allen further informs me and I verily believe that Gisma Pty Ltd has now reached agreement with third party investors who in December, 2000 acquired the manufacturing and marketing rights of the said ironing board from Gisma Pty Ltd for in the United States of America and Canada, the details of which Mr Allen cannot reveal due to their confidential nature.

We contest that.  It is common in proceedings of this nature for such agreements to be revealed on condition, for example, that the lawyers for the opponents only have access to them and not pass on the information to their clients.  The fact that such an agreement exists also seems to be in doubt because it was not provided to the valuer as recently as 28 May this year.  Then when you go further down the affidavit to the third and fourth last line, Mr Diercke says:

I am further informed by Mr Allen and verily believe that he has all but concluded negotiations for the manufacture and marketing rights of the said ironing board and that Gisma expects to receive an income of approximately $300,000 by 30 June 2002 from this endeavour.

So we have in the one paragraph an assertion of it “has reached agreement” and then a further assertion that it “has all but concluded negotiations”.  So it is a very unreliable basis on which to assert that there is some capacity to pay.  Of course, if there was, why not come up with a bank guarantee?

Our learned friend actually in his outline of submissions asserts that there is evidence about the state of negotiations with European and Japanese investors.  We have searched through the affidavits and cannot find anything about that there.  In truth, it seems that any negotiations are still at the same inconclusive state that led Justice Byrne to value any loss suffered by the plaintiff in the sum of $25,000, which the Court of Appeal reduced to $5,000.  It was clear at the trial that there was no sound evidence of the worth of any rights to exploit Maggbury’s ironing board and we submit your Honour should remain unconvinced that that situation has changed.

Accordingly, in our submission, it is clear that the appellants are still financially fragile, which is obviously the reason why the Court of Appeal, when refusing a stay of the injunction granted by Justice Byrne, only required the assessment of damages by his Honour to be paid into court rather than to be paid to the appellants.  One can assume that the only basis for doing that was its clear expectation that the appellants would be unable to repay that amount if the appeal to the Court of Appeal should succeed, as it did.

Can I then address the position of Mr Gull.  Mr Ord’s affidavit exhibits the correspondence that went between the solicitors about his position.  The appellants material does not address his situation at all.  It is clear from the correspondence exhibited to Mr Ord’s affidavit that Mr Gull has been helping to fund these proceedings, allegedly because he has an unspecified interest in Gisma that does not appear on company records.  Nevertheless, the appellants have in the past offered to provide $48,000 by way of security for costs ordered by White J in the Supreme Court.  That is in a letter exhibited to Mr O’Sullivan’s affidavit.  The letter is, I think, 22 November last year.

One can legitimately assume that the source of that proposed fund was Mr Gull because of the contemporaneous assertions that the interests associated with Mr Allen were unable to put up a bank guarantee.  If it is the case that Mr Gull seeks to profit from this litigation as a holder of an interest in Gisma, then, in our submission, it is clearly appropriate that he be involved in the provision of security for costs also.  The closest that the appellants have come to addressing this issue is to say in paragraph 24 of Mr Diercke’s affidavit that they:

cannot compel any other person or party to post security for the respondents costs including in the High Court appeal, were such security to be ordered.

That is the last few lines of that paragraph.  In our submission, that is a clear invitation to this Court to order security in order to ensure that the shadowy Mr Gull, who wishes to take some benefit from this proceeding, should be required to contribute to the provision of security.

The next issue we wish to address is whether an order would stifle the appeal.  As we have already pointed out, an offer to provide $48,000 by way of security was made by letter dated 22 November 2000.  No explanation is offered in the material filed here as to why such an offer can now not be made, particularly given the appellants renewed confidence in their future prospects, and we submit that of greater concern is the fact that the material filed on behalf of the respondents strongly suggests that any order for security may stifle the appeal.  We have taken your Honour to paragraph 17 and 24 of Mr Diercke’s affidavit already and we submit that the correspondence exhibited to Mr Dy’s affidavit shows that that is not correct, that there is not a real prospect of stifling of the appeal because there is the ability to put up a significant sum by way of security.

Can we then address the amount of security that should be ordered.  Mr Garrett, who is the costs assessor and solicitor who has sworn an affidavit on behalf of the appellants, in our submission, has not been informed properly regarding Hafele’s entitlement to recover costs in respect of its Melbourne lawyers involvement in this proceeding.  He has proceeded on the basis that there should be no provision made for the costs of the Melbourne solicitors and counsel because local counsel and solicitors could have been used.  That argument was run before Justice Wilson and lost, as one can see from her Honour’s orders in respect of the Supreme Court proceedings, which were exhibit as exhibit JPD13, I think.

His paragraphs 13 and 14 assert an absence of entitlement to recover where her Honour has specifically found that Hafele is entitled to recover those costs.  In our submission, also his estimates of costs are not realistic.  They do not take any proper account of the extensive and difficult issues involved in the case.  The authorities I think for the special leave application alone occupied over three lever arch folders.  There is also the need to be on top of all the relevant facts, whether they remain in issue or not, because no doubt the Court will be interested in some aspects of the facts.

The fact that the client is German and that there are communication difficulties associated with that also add to the costs.  Mr Garrett’s reading times allowed are unrealistic.  He allowed $74 for reading the application book, and for perusing the appeal book he has estimated $740, I think an appeal book he estimates to be about two inches thick.  He has allowed photocopying for the special leave at only 30 pages when there were more than three volumes of authorities.  In the appeal he justifies only 80 pages and suggests that an attendance to instruct counsel on the application for special leave is worth only $174.40, when the Court rose at about 3.30 that day.  He also asserts that reading the appeal records justifies only one hour of time, when on his own evidence it is two inches thick.

Mr Diercke’s evidence about the quantum is at paragraph 19(iv) and is, on his own admission, only a preliminary assessment and we submit should be regarded as lacking in basis or consideration.  He does not set out a skeleton bill of costs or attempt to break up the bill in any sensible form that can be analysed, so we submit that his evidence should not be given any weight.  We submit also that the evidence of quantum from the appellants’ interests is at variance with the without prejudice offer exhibited in the letter attached to Mr Dy’s affidavit.

In other words, your Honour, we submit that this is a clear case for security.  The plaintiffs are impecunious.  It seems quite clear that they have people behind them who have the ability to pay and, if they fail on their appeal, there will be nothing which the respondents will have clear or direct access to to protect their own interests, which, of course, have been very seriously prejudiced now in many respects because of orders for costs which are unlikely to be recovered in any event.  Unless there is something else I can assist your Honour with, they are our submissions.

HIS HONOUR:   Mr Douglas, can you tell me this:  that $5,000 is in court, is it?

MR DOUGLAS:   Yes.  I do not think an application has been made formally for it to be paid out.  There is 25,000 in court.  I think from recollection that there is an informal application made before the Court of Appeal for it to be paid out and met with the assertion of, “Well, we are not the appropriate body to deal with that”, and no other application has been made, as far as I understand it.

HIS HONOUR:   Yes.  Is it a possible result on the appeal – probably an unlikely one – if, for example, you were to succeed on the appeal, that the costs order in the Court of Appeal might be reversed on the basis that, although your client was undoubtedly successful there, there was still an award of – what was it?  Was it equitable damages?  What was - in the Court of Appeal?

MR DOUGLAS:   Yes, that is the way they appear to have approached it.

HIS HONOUR:   Is that a possible result?  I suppose it is fairly unlikely.

MR DOUGLAS:   I would have thought it was unlikely, because we really succeeded substantially on the appeal.

HIS HONOUR:   Mr Douglas, it has been held, has it not, that the High Court does not have jurisdiction to award security or to make an order for security in respect of an application for special leave?

MR DOUGLAS:   That is so and we addressed that issue in our written outline.

HIS HONOUR:   Whose decision is that?  Is it a single Justice decision?

MR DOUGLAS:   Yes, we have referred to an article in the ALJ.  It is a practice note we think.  I think Justice Gaudron has proceeded on that basis before too, as our learned friend ‑ ‑ ‑

HIS HONOUR:   I think she may have in that Russian shipping case.

MR DOUGLAS:   Yes, Dillon v Baltic Shipping.

HIS HONOUR:   Yes.  I just query whether that is so in view of the inherent power of the Court.  I question whether necessarily there would need to be a specific rule to deal with it.

MR DOUGLAS:   I suppose you would be a brave party to appear before the High Court asking for security for costs when the Court has a practice note saying no.

HIS HONOUR:   I wonder what the date of that practice note is.  What I am thinking about, Mr Douglas, is it Knight v ‑ ‑ ‑

MR DOUGLAS:   Knight v F P Special Assets?

HIS HONOUR:   Yes, where the order has been made against non‑parties and, I mean, I made an order myself against a non‑party not so long ago who was in substance the real party to the litigation, or a real party, not the only one.  You would think that if the Court has an inherent power to order costs against a non‑party it would have an inherent power to award costs ‑ ‑ ‑

MR DOUGLAS:   To order security for costs?

HIS HONOUR:   ‑ ‑ ‑ order security for costs in any matter before the Court, including an application for special leave.

MR DOUGLAS:   Yes, one would have thought so.

HIS HONOUR:   But it is a practice direction you say?

MR DOUGLAS: In 1987 61 ALJ 817 at 818.

HIS HONOUR:   Somebody gave me Justice Gaudron’s decision.  I looked at it before I came down.

MR DOUGLAS:   My learned friend, Mr Lee, has pointed out in a decision San Sebastian v The Minister (1986) 162 CLR 340 where a similar approach was taken.

HIS HONOUR:   Whose decision was that?

MR DOUGLAS:   Justice Mason apparently.  It is in the annotations to the High Court Rules as well.

HIS HONOUR:   So there are single Justice decisions.  There is no Full Court decision.

MR DOUGLAS:   The security we seek, of course, extends to the costs already incurred of the special leave application.

HIS HONOUR:   Yes, I understand that.

MR DOUGLAS:   And of today as well.

HIS HONOUR:   It is based – it is expressio unius principle really I think because there is a rule that deals with security on an appeal expressly, that that express dealing indicates an exclusive power.

MR DOUGLAS:   Yes, Order 69A deals with applications for special leave and Order 70 deals with appeals and allows security in appeals but there is no reference to it in Order 69A.  Justice Toohey addressed it in Bahr v Nicolay (No 1) as well.

HIS HONOUR:   What did Justice Toohey say?

MR DOUGLAS:  

There can be no doubt that O 70, r 7 is only available once leave to appeal has been given.  This follows from the language of the rule and from the clear distinction drawn in the Rules themselves between an appeal and an application for special leave to appeal.

That is in the notations I am reading from.

HIS HONOUR:   Mr Douglas, there would be nothing to stop, however, a party respondent to an application for special leave writing or indicating to an applicant that if the application were to succeed, there would be an application for security for costs.

MR DOUGLAS:   I am instructed that we did that.  I do not know that it is in the material before your Honour though.

HIS HONOUR:   There is no evidence before me to that effect.

MR DOUGLAS:   No, but if necessary we could provide the evidence for your Honour.

HIS HONOUR:   It may be relevant.

MR DOUGLAS:   Yes.  We have not got a copy at the moment but we could undertake to file an affidavit providing proof of that issue.

HIS HONOUR:   Well, it ought to be something that, if it happened, there can be agreement about.

MR DOUGLAS:   Yes.

MR LEE:   I do not have any objection with this being tendered later, but I understand it was limited to threatening to make an application for security for costs for the special leave costs.  As far as my instructing solicitor remembers, he does not recall it going further than that.  But if there is such correspondence, I have no objection to it being tendered.

HIS HONOUR:   Could you just remind me of the dates, Mr Douglas.  The judgment of the Court of Appeal was given, when?

MR DOUGLAS:   12 May 2000.

HIS HONOUR:   12 May.  When was the application for special leave filed?  It would have been in June.

MR DOUGLAS:   My learned friend tells me it was June 2000.

HIS HONOUR:   It would have to be because it is 28 days, is it not?

MR DOUGLAS:   Yes.

HIS HONOUR:   Somebody might look that date up for me.  The application for special leave was heard ‑ ‑ ‑

MR DOUGLAS:   On 4 May and this application was filed, I think, the 17th – 24th.  The letter was sent on 17 May I am told.

HIS HONOUR:    That was the intimation that an application would be made ‑ ‑ ‑

MR DOUGLAS:   Yes.

HIS HONOUR:   ‑ ‑ ‑ on 17 May.  Application was made on 24 May.  What the date is the appeal set down for?  What day are ‑ ‑ ‑

MR DOUGLAS:   25 June.

HIS HONOUR:   25 June.

MR DOUGLAS:   And I gather that today was the earliest day the Registry could arrange for ‑ ‑ ‑

HIS HONOUR:   You are quite right.  I think I have had the papers for a few days, Mr Douglas.  I had to indicate a date.  There is no reason why you could not have got on earlier had I been available.  Yes, before you sit down, Mr and Mrs Allen, are they the effective controllers of the two appellant companies, the natural persons?

MR DOUGLAS:   Maggbury and Gisma, yes.

HIS HONOUR:   And they have offered guarantees?

MR DOUGLAS:   Yes, as has the company Mystico, which is another company associated with them.

HIS HONOUR:   Pty Limited?

MR DOUGLAS:   Yes.  Your Honour has our written submissions too.

HIS HONOUR:   Yes, I have read them, Mr Douglas.  What do you say about – I am looking at the written submissions of the respondent – paragraph 17?

MR DOUGLAS:   We submit that that is incorrect.  There is no evidence that they would have obtained any significant income from marketing of the ironing board.  That was run before Justice Byrne.  He assessed the damages at 25,000.  The Court of Appeal reassessed them at 5,000.  There is evidence that he was bankrupted beforehand and there is controversial evidence about whether he had ever entered a Part 10 beforehand, an assertion from our side that a man of that name entered into a Part 10 and

recently a sworn response to that by Mr Diercke saying that it is not his client.  So they are people who have been in financial trouble all along and on the evidence accepted by his Honour and the Court of Appeal would not have made any significant sum even had my clients not done what they are alleged to have done.

HIS HONOUR:   Yes, all right.  Thank you, Mr Douglas.

MR DOUGLAS:   Thank you, your Honour.

HIS HONOUR:   Mr Lee.

MR LEE:   Your Honour, I read an affidavit of Lawrence Diercke filed and sworn 5 June 2001; an affidavit of Paul David Garrett also filed and sworn 5 June and I seek leave to read and file an affidavit of Philip Lawrence Breen sworn yesterday.  That is the affidavit my friend has objected to.  I seek leave to read and file it and also your Honour’s leave to hand up a photocopy which was faxed to me last night on an undertaking of the appellants that the original will be filed forthwith.

HIS HONOUR:   What is the date, 5 June?

MR LEE:   Yes, that is yesterday.

HIS HONOUR:   Is that the affidavit that was attached to the written submissions?

MR LEE:   I was not aware that was the case but ‑ ‑ ‑

HIS HONOUR:   Well, you had better have a look at it and tell me if that is right.

MR LEE:   It is an affidavit of 12 paragraphs.  That is it, yes.

HIS HONOUR:   And this is the affidavit you would object to, Mr Douglas?

MR DOUGLAS:   On the ground of relevant and, if your Honour were to read it, we would ask your Honour to read the responsive affidavit of a Mr Chambers filed in July 2000 in this Court.

HIS HONOUR:   And this all goes to whether there is any public interest in it?

MR DOUGLAS:   Yes, Mr Breen says it is a common form of agreement; Mr Chambers says it is not, it is very unusual.  That is essentially it.

MR LEE:   But, your Honour, Mr Breen – this is a further affidavit done specially for this application.  He says that it goes further than that, that they held a seminar where they advised their clients – this is an intellectual property law firm – that Justice Byrne’s decision was right and he makes comments going to the general industry ‑ ‑ ‑

HIS HONOUR:   Yes, but his client are not the only people involved in ‑ ‑ ‑

MR LEE:   No, quite, there are other inventors ‑ ‑ ‑

HIS HONOUR:   I mean, if solicitors want to go out and represent to their clients in what is, after all – I will not say client massaging process, but if they want to go out to represent to their clients that they have had a victory in a certain matter and that this is the law in a certain area, it seems to me to be a species of marketing more than anything else.

MR LEE:   Perhaps, your Honour, but he also makes the point that it is in the public interest to enforce such agreements.  This is a similar argument that was ventilated in the special leave summary, that it might cause inventors to hesitate before they disclose, and it makes those kinds of points as well.

HIS HONOUR:   Yes.  Mr Lee, for present purposes I will mark it for identification because I have not decided what I am going to do about this late material.  It will be marked MFI A1.  You proceed.

MFI  MFI A1…..Affidavit

MR LEE:   Thank you, your Honour.

HIS HONOUR:   I have read your written submissions, Mr Lee.

MR LEE:   I will not read those or address those, although I adopt them.  Might I add to your Honour’s chronology 1 June, that being the occasion upon which the summons and affidavit material was served on us.

HIS HONOUR:   1 June, that was the service - - -?

MR LEE:   Yes.

HIS HONOUR:   Right.

MR LEE:   My submission is that it has not been shown that the appellants would be unlikely to meet any adverse costs order.  That being the case, it is really irrelevant to inquire into third parties.

HIS HONOUR:   Well, when did you first volunteer or offer in open correspondence to provide the personal guarantees on behalf of the appellants, Mr and Mrs Allen, and Mystico Pty Limited?

MR LEE:   At the very commencement of the action in September 1998 or October 1998.

HIS HONOUR:   But what about with respect to these proceedings?

MR LEE:   It is in my instructing solicitor’s letter, which is annexed to his affidavit – that is before the application for security was brought – dated 21 May.

HIS HONOUR:   So that on 21 May – this year?

MR LEE:   Yes.

HIS HONOUR:   Personal guarantees were offered, is that right?

MR LEE:   That is in response to their fax which we received on 17 May indicating that they would be bringing a security for costs application.  So that is the first time that they evinced a definite intention to bring such an application in respect of the appeal.

HIS HONOUR:   Mr Lee or Mr Douglas, have you any more information about that letter that was written ‑ ‑ ‑

MR DOUGLAS:   On 17 May?

HIS HONOUR:   No, with respect to the likelihood of an application for security for costs in the event that special leave were granted?

MR DOUGLAS:   No, we do not have it here in Brisbane.  It is down in Melbourne.

MR LEE:   I am prepared to concede that a letter was sent in the terms that I indicated.

HIS HONOUR:   Yes, but those may not be the terms.  I do not know whether ‑ ‑ ‑

MR LEE:   No.  There may have been further correspondence.

HIS HONOUR:   Are you able to throw any light on what the letter said, Mr Douglas?

MR DOUGLAS:   I understand that it was one before the special leave application anticipating or proposing an application for security for costs, which then when no doubt the parties realised that there was said to be no jurisdiction in this Court to apply for it for the special leave application was not proceeded with.

HIS HONOUR:   So, really, Mr Lee’s version of it is probably correct then, is it?

MR DOUGLAS:   I do not know, yes.

HIS HONOUR:   You do not know?

MR DOUGLAS:   Yes.  I understand it came before the special leave application and was not proceeded with because of the provisions of the Rules dealing ‑ ‑ ‑

HIS HONOUR:   Well, that is consistent with what Mr Lee says really, is it not?

MR DOUGLAS:   It may be, but we are best off to see the document, I think.

HIS HONOUR:   But, Mr Douglas, I am not minded at this stage to grant any adjournment for any further material to be put in with ‑ ‑ ‑

MR DOUGLAS:   Right.  We are having it faxed up now.

HIS HONOUR:   How long is that going to take?

MR DOUGLAS:   We will find out, your Honour.

MR LEE:   Your Honour, if I might make this further submission.  What is crucial, in my respectful submission, is the fact that there was a delay after special leave was granted for almost two weeks and the question becomes, “Are the respondents going to apply for security for costs of the appeal?”, and an intimation they might have made earlier before the special leave argument is a totally different matter.  There was that delay and in that period they either could have been entertaining doubts about whether they will apply for security or they may well have been busily preparing their material, in which case they could have brought the application earlier.

I would also make the submission that in our material served yesterday Mystico offered a guarantee as well.  Mystico holds at least the legal title of the home of the Allens and there is $140,000 equity, the material deposes to, in that.  So there has been some willingness to make the individuals available for what they are worth.

In terms of the evidence, my learned friend has criticised various aspects of it, but might I say this.  At paragraph 13 of Mr Diercke’s affidavit the alleged inconsistency arises out of a fact that the agreements that are deposed to having been made relate to marketing in America and Canada and the agreements that are all but concluded relates to Europe and Japan.  That was the basis for my assertion in my outline.  It is not said in the ‑ ‑ ‑

HIS HONOUR:   Look, I am not going to have a trial – I tell you this frankly and I should have said it to Mr Douglas.  I will give him an opportunity to deal with it.  But I am not going to have a trial at this stage on an issue of your clients’ trading accounts and projections and valuations.  That would take a very long time and it would involve, I would think, cross‑examination and comments can be made on both sides about that, but in the end it is very difficult for me to make any assessment on competing opinion evidence as to the solvency of your clients, or their insolvency.

MR LEE:   In that light, your Honour, could I turn to what might be of more interest to your Honour and that is the allegations that various amounts of costs are owing, not only in the past, but also the 86,000.  I might hand up three schedules, if I may.

HIS HONOUR:   What are they, Mr Lee?

MR LEE:   One, helpfully, I hope, sets out what is the ‑ ‑ ‑

HIS HONOUR:   Are they extracted from the material?

MR LEE:   Yes, they are.

HIS HONOUR:   It is all material before me?

MR LEE:   Yes, your Honour.

HIS HONOUR:   Well, you had better show them to Mr Douglas before you hand them to me.

MR LEE:   Mr Dy’s affidavit is a little difficult to understand.  I am hoping to bring it into some kind of sequence and to do that for your Honour in a very brief period of time.

HIS HONOUR:   That is why you have the schedule, is it?

MR LEE:   Yes.

HIS HONOUR:   I am sure they will be helpful but I do not want to receive them until Mr Douglas is satisfied.  I will tell you what, Mr Douglas, it strikes me as ironic that solicitors who are charging tens and tens of thousands of dollars in the claim that they are on top of this case cannot produce for me a letter which is, on any view, of relevance to the application that your clients are making.

MR DOUGLAS:   It will be produced, your Honour.

HIS HONOUR:   It is rather ironic, is it not, that the solicitors who are charging, what – I do not know – tens and tens of thousands of dollars do not have the critical letter here – a critical letter here and do not even know for sure what it says.

MR DOUGLAS:   That can be cured very quickly though, your Honour.

MR LEE:   I might say this, your Honour, that Mr Dy in his affidavit makes the submission – and my friends do likewise – that whatever happens on the appeal, my clients will still owe at least 110,000 to Hafele.  That is totally incorrect and the schedules will show why.  All they have done is subtracted from the figures they mention the costs that they incurred in the Court of Appeal.  They have not taken into account all the other factors that will have a contrary impact, such as the plaintiffs’ costs in the Court of Appeal, the plaintiffs’ costs at trial, the plaintiffs’ costs in the High Court, should those matters fall in the plaintiffs favour and, indeed, other amounts that have been adjudged owing to the plaintiffs.

HIS HONOUR:   Mr Lee, I do not want to hear you any more, thank you.  Mr Douglas, is there anything you want to say?

MR DOUGLAS:   The relevant letter is being faxed.  I gather it asked for $10,000 for security for costs of the special leave application and that was not proceeded with when the parties realised that there was lack of jurisdiction.

HIS HONOUR:   It was a misconceived – right.  If, in fact, there is not any jurisdiction.

MR DOUGLAS:   Yes.

HIS HONOUR:   Is there anything – you might have gathered, Mr Douglas, I am minded to dismiss the application.  That is why I stopped Mr Lee.

MR DOUGLAS:   I gathered that.

HIS HONOUR:   That is what I am minded to do, but is there anything you feel you would like to say?

MR DOUGLAS:   It will be repetitive but simply to urge on your Honour that in this situation my client, if it succeeds on the appeal, will be left very severely disadvantaged in respect of proceedings where it was originally offered the chance to see a product or information which turned out from its point of view to be worthless, which on no evidence has been shown to be worth anything, and has succeeded on appeal ‑ ‑ ‑

HIS HONOUR:   That is the view of the Court of Appeal.  It is not the view of Justice Byrne and, after all, the appellants have had a grant of special leave.

MR DOUGLAS:   Yes.  Justice Byrne has nevertheless found that it was only worth 25,000, information that was allegedly misused.

HIS HONOUR:   Yes, I understand that.

MR DOUGLAS:   And they have been brought this far by people who have never at any stage had any substance and have not been willing to put up money which it appears, even on the evidence which is accepted, quite apart from Mr Dy’s affidavit, they have had the opportunity to put up $48,000, have been willing to, as security for costs and offer no explanation as to why they cannot now put up such a guarantee.

HIS HONOUR:   Thank you, Mr Douglas.

This is an application by two respondents to an appeal to this Court for security of the costs of the appeal.  The judgment appealed against was given by the Court of Appeal of Queensland on 12 May 2000 and an application for special leave to appeal against that judgment was filed in this Court in June 2000.  The appellants were successful at first instance before Justice Byrne of the Supreme Court of Queensland and his Honour’s judgment awarding the appellants $25,000 and granting them an injunction was reversed in the Court of Appeal except to the extent that the Court of Appeal would have awarded $5,000 in damages and granted no other relief.  The appellants have not received that sum of $5,000, as it forms part of a fund which is held in the Supreme Court.

The application for special leave to appeal was heard on 4 May this year.  The respondents, these applicants today, had earlier written a letter to the appellants seeking the sum of $10,000, or security in that amount, from the appellants as security for the costs of an application for special leave.  There is no written material before the Court setting out the contents of that letter but the parties are agreed that the substance of it is as I have stated it.

No further steps were taken following the sending of that letter on the basis of what seems to be a common understanding that this Court does not have jurisdiction to award security for costs in respect of an application for special leave.  On a reading of the rules it does appear that that is likely to be so unless the Court does have an inherent power in that respect, a matter about which it is unnecessary to say anything further on this application.

It follows that at no stage after the filing of the application for special leave did the respondents to the appeal give any indication of any kind at all to the appellants that if the application for special leave were successful an order for security for costs of the appeal would be sought.

To complete the chronology, I would observe that following the grant of special leave on 4 May this year the respondents gave notice on 17 May that this application would be made.  The application was filed in the Court on 24 May but service of it was not effected upon the appellants until 1 June.  The matter comes before this Court on the first available day upon which it could be heard.  The appeal is to be heard on 25 June this year.  The respondents to the appeal have placed material before the Court which, if accepted, would show that there is a degree of impecuniosity on the other side and that there may be a person of means who does have an interest in the outcome and might be a suitable provider of security.

The appellants, on the other hand, say that they are parties of some means and that there is a prospect, indeed, a very reasonable prospect, that they will have the capacity to satisfy any orders for costs which might be made against them.  For reasons which will appear, it is unnecessary for me to resolve this issue.

There is, in my opinion, an unresolved tension on the authorities between the principle that a party of limited means should not be shut out from prosecuting an arguable case and the possible disadvantage to a successful defendant or respondent arising out of an inability to satisfy an order for costs made against such a party of limited means.  To say that this tension may be resolved by finding a person or corporation of means to stand behind a party and to provide security does not, in my view, completely or satisfactorily resolve that tension.

A court which is invited to make an order for security for costs has to be conscious of the undesirability of shutting out a party and also of the real risk of prejudice to a party on the other side.  I keep these matters in mind but it seems to me that there are considerations here which militate the making of the orders sought

The application is, on any view, made very late.  To some extent this is certainly not the fault of the applicant respondents.  The time between the grant of special leave and the hearing of the appeal is short.  However, it was well within the capacity of the respondents to notify the appellants many, many months ago, indeed, from the filing of the application for special leave, that an application of the kind which has been made might or would be made.

In the meantime, the appellants have gone ahead with their application for special leave, counsel was briefed on that hearing, submissions were prepared and considerable costs were incurred in making the application.  Because such a short time only is to elapse before the matter is to come on for appeal, counsel and solicitors for the appellants would no doubt already have made commitments and undertaken some work to prepare for the hearing of the appeal itself.

If I were to grant the application for security for costs, it seems to me that there might well be a waste of money and resources by reason of the belated nature of this application or, indeed, perhaps more relevantly, of any indication that it would be made.

I am influenced by some other matters.  This Court now hears annually many applications for special leave in civil matters, indeed, up to some hundreds in total.  It is common knowledge that very few of them succeed.  A grant of special leave is not, of course, an indication that an appeal is or, indeed, is even likely to succeed, but at least it is a very clear sign that a party has a reasonably arguable case.  That reasonably arguable case here is based upon, among other things, a lengthy and reasoned judgment at first instance in the appellant’s favour.

I am also influenced by two other matters.  It does seem to me that there may be some, although it is important not to exaggerate the extent of it, public interest in the outcome of this appeal.  As I say, it is important not to take that out of proportion but it is a relevant matter.  I am more impressed by the fact that the appellants have offered personal guarantees in respect of the costs of the appeal, an offer which is unqualified and remains, and an undertaking in respect of which I would require before pronouncing an order that this application should be dismissed.  To those personal guarantees should be added a further guarantee which has been proffered on behalf of another company in which the natural persons who control the appellants have an interest, that is, Mystico Pty Limited.

Are you in a position to give those undertakings, Mr Lee?

MR LEE:   The two individuals do, your Honour.  I am not sure where that leaves the company.  Whilst I imagine they control it, I do not know whether there is a resolution that you could say had been passed to that effect.

HIS HONOUR:   But you have volunteered, have you not?

MR LEE:   Well, I am instructed Mystico will give it.  I am just raising perhaps a semantic point that is ‑ ‑ ‑

HIS HONOUR:   Perhaps I would adjourn the matter to a date to be fixed without pronouncing a final order to make sure that those personal guarantees and Mystico’s guarantee were produced.  I probably cannot make an order against Mystico.  Indeed, I cannot, I do not think, because they are not parties.

MR LEE:   Well, Mystico offers to give the guarantee.  That is in the evidence.

HIS HONOUR:   Yes, all right.  Well, what I propose to do, without pronouncing formal orders, is to adjourn the matter.  What do you think is the best, Mr Douglas, to adjourn the matter to – or can it be done without bringing the matter back before me?

MR DOUGLAS:   It might be able to be done by my learned friend preparing a draft order incorporating the undertakings.

HIS HONOUR:   Yes.  Why do we not do that?  I will not pronounce any formal orders but my order will be, subject to the provision of unqualified undertakings in writing by Mr and Mrs Allen and Mystico Pty Limited with respect to the costs of the appeals, subject to the provision of those and in a form to be attached to my order, I would order that the application be dismissed and that order could be perhaps initialled by the parties and filed with the papers and I will give liberty to apply in case there is any problem in relation to those.  So that is clear enough, Mr Douglas, is it?

MR DOUGLAS:   Yes, I think so.

HIS HONOUR:   Mr Douglas, what I should do about the costs of this application?

MR DOUGLAS:   In my submission, it would be appropriate to make them the appellants’ costs in the cause.  Can I just seek instructions?

HIS HONOUR:   Yes.  That is what I was minded to do, Mr Douglas, but I would be interested in any submissions you would make.

MR DOUGLAS:   Yes.

HIS HONOUR:   What do you say about that, Mr Lee?

MR LEE:   I do not want to be ungrateful, your Honour, but I would ask for costs because these matters were put to the respondents in our letter of 21 May and this was all set out in the letter that we would offer these guarantees and the reasons why we opposed the application were set out.  So I would ask that your Honour apply the costs follow the event.

HIS HONOUR:   What Mr Douglas has said though, on any view, his client cannot get these costs.  All that the effect of the order would be, if Mr Douglas wins, your client does not get them.  Is there anything further you want to say?

MR LEE:   Nothing than what is in my outline.

HIS HONOUR:   All right, thank you.  The order that I would formally pronounce would be that the costs of the application for security of costs should be the appellants’ costs in the appeal.  That is the correct formulation, Mr Douglas?

MR DOUGLAS:   Yes.

HIS HONOUR:   All right.  Is there anything further then?

MR LEE:   No, thank you, your Honour.

HIS HONOUR:   Yes, thank you, gentlemen.

AT 12.33 THE MATTER WAS CONCLUDED