Montchel Pty Ltd v Civil Aviation Authority

[1991] FCA 883

JN THE F E D E ~ COURT OF AUSTRALIA ) NO. QG 121 of 1991

QUEENSLAND DISTRICT REGISTRY	1
GENERAL DIVISION	)

BETWEEN: MONTCHEL PTY. LTD.

Applicant

AND: CIVIL AVIATION AUTHORITY

Respondent

NINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	2 DECEMBER 199 1
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT$

1 .    The proceedings be stayed until the applicant gives security for the respondent's costs in a form satisfactory to the Registrar in a sum of $40,000 provided that the Registrar may accept as sufficient security an undertaking in form satisfactory to him by the deponent M.R.M. Broadbent to be responsible for the respondent's costs in the sum of $40,000 .

2 .    The applicant pay the respondent's costs of the application for security.

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

NOTE :

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IN THE FEDERAL COURT OF AUSTRALIA	)	No. QG 121 of 1991	l
QUEENSLAND DISTRICT REGISTRY	1
GENERAL DIVISION

BETWEEN: MONTCHEL PTY. LTD.

Applicant

AND: CIVIL AVIATION AUTHORITY

Respondent

CORAM? PINCUS J.

PLACE: BRISBANE

m! 2 DECEMBER 1991

EX TEMPORE REASONS FOR JUDGMENT

This is an application for security for costs. In

the principal proceedings the system of charging under the
regulations made under the Air Navigation Charaes Act 1952 and
that of charging under the Civil Aviation Act 1988 in respect
of certain services rendered to aircraft are challenged. The
events which prompted the challenge were attempts by the
respondent authority to set in motion the deregistration of

aircraft of the applicant which, it was said by the applicant,

were subject to no obligation for charges.

The respondent's case is that the system of charging

is and was valid and that moneys were owed in respect to the airckaft. The respondent's threat to deregister was met by an application made by the applicant for an interlocutory

injunction and that was unsuccessful. I gave reasons which
dealt with the arguments then advanced and expressed the view
that the case was, although arguable, not a strong one.

I added the caveat, in effect, that in some respects

dt least the case might strengthen if more information were

available. Now the respondent says that the matter should not go further without security being given and in saying that, no doubt, it is encouraged by the outcome of the interlocutory

application. There has been some correspondence in which
demands for security have been made and the amounts mentioned
by the respondent started at some $44,000, then increased to

$69,000 and most recently became just over $118,000.

Mr Radcliff who has, on behalf of the applicant, resisted the application for security for costs, suggested that the changes in the amounts desired points to an attitude

on the part of the respondent which one would not wish to
encourage, and there seems to be something in that. The
evidence with respect to the financial position of the
applicant is somewhat scanty, but so far as I can make out
from it, there is reason to doubt the financial ability of the

applicant to meet an order for costs.

The case looks likely to be quite an expensive one,

and the test which the statute prescribes in s.1335 of the

Cor~orations Law is that it must appear by credible testimony

that there is reason to believe that the body corporate will
be Qnable to pay the costs. It is not necessary to show
positively that there is an inability to pay costs, but it
seems to me there is sufficient reason to believe that there
will be an inability to pay the costs.

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The best evidence of that, although I concede it is rather slight, consists in statements made by the applicant's lawyers. During the course of the interlocutory proceeding it

was suggested by senior counsel for the applicant that the
Court should take into account that, on the evidence, the
applicant might be unable to pay the charges sought to be
levied, and that argument was put forward to support a
suggestion that if the applicant did not obtain interlocutory
relief then the result might be that the planes could not be

flown at all. In the event, the charges were paid in respect

of all but two of the aeroplanes, and I am told by Mr
Radcliff, for the applicant, that of the other two, one is
sold and the other is inoperative. More recently, during the
course of communications between the solicitors, a suggestion
has been made by the solicitor for the applicant that there
might be some doubt about the inability of the applicant to

pay charges. If one adds to that the fact that the financial

position of the applicant is a matter which it could
presumably prove easily and it has led no evidence about it,

there appears to me to be sufficient to satisfy the statutory

test.

Now the next point taken by Mr Radcliff is, in

substance, that he says that the case is one where, although the body corporate is nominally in the position of plaintiff or applicant for the purposes of 9.1335, the substantial

position is that it is, so Mr Radcliff says, resisting another claim. how there is some substance in this, in the sense that the way in which the litigation started, as I mentioned, was

by a threat to deregister aeroplanes.

On the other hand, it is possible to take the

doctrine of substantial plaintiff and substantial defendant
rather too far. It is not absolutely clear why, as a matter
of policy, the rule in s.1335 is confined to plaintiffs.
Persons in the position of defendant may, of course, be acting
quite unreasonably, and those in the position of plaintiffs
may be simply trying to put a stop to some wrong done to them.

If A owes B money and is forced to pay, for example

by a threat of the exercise of a security, then A is of
necessity the plaintiff and would fall within the doctrine to
which Mr Radcliff refers. But if B is committing a continuing
wrong against A then again A is, of necessity, plaintiff, but
would not fall within the doctrine, ordinarily.

The distinction which is made is not necessarily

founded upon the merits of a case, nor upon a decision as to

whether or not a party has any reasonable choice about whether
to involve itself in litigation. In short, whereas I accept
the doctrine that one may be nominally plaintiff but
substantially resisting, I am disinclined to attach decisive
weight to that in a case of this sort.

Tn the judgment of Ormiston J., to which Mr Radcliff referred me, in Interwest Ltd. v. Tricontinental Corooration

Ltd (1991) 9 A.C.L.C. 1218, his Honour says at p.1229:

"So the issue remains whether the plaintiffs' or
defendants' claims are properly characterised
as defensive. I£ a party is genuinely seeking
to resist another party's claim, whatever form
it takes, then to order security would be

manifestly unfair".

His Honour then says:

"~ooking at the matter overall I am persuaded, on an application that the principles referred to and applied in the Heller Factors and Sydmar

Cases, that it is the plaintiffs' proceedings which are more appropriately characterised as defensive. The defendants have asserted rights

to recover money sums from each of them, they
proceeded to appoint receivers and managers and

otherwise to enforce securities in early 199OU,

and so forth.

I accept what his Honour says, except that I have

some reservation about the suggestion that ordering security

where one party is genuinely seeking to resist another party's

claim is necessarily manifestly unfair. It may bear an

appearance of fairness if the resistance is frivolous and

technical. Now, the present case seems to me to be one where

there is a basis for the contention that the Interwest line of

authority should be applied, but looking to the matter more
broadly, there is a continuing importance in the case, so far
as the applicant is concerned.

If it succeeds in its principal contentions, then it would appear that not only past charges, but charges currently being incurred could not be recovered. Charges to be incurred in the future could not be recovered. In my view, if one

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accepts, as I think one must on the authorities, the principle

that some cases can be taken outside s.1335, although in form

within it, this case seems to me not wholly outside: it is

partly within it and partly outside it, and in that sense, it

resembles the case before Ormiston J.

Mr Radcliff also relied upon the circumstance that

there was a considerable amount of delay on the part of the respondent. It changed course. It did not persist in what seemed to be a very organised way towards recovery of the

charges. Having thought about that, I do not think it has
much to do with the present case. I think Mr Sheahan is right
in saying that that is not the sort of delay which the
authorities are talking about. It is not the sort of delay

which goes against a respondent seeking security.

I have also given consideration to a matter which

was not, I think, much mentioned, and that is whether or not

the application should be encouraged, so to speak, because it

is raising a point which, in the public interest, it is

desirable to have aired. Some administrative law cases are of that character - that is, if there is a practice being engaged in by a governmental or semi-governmental authority which

seems likely to continue unless stopped, and which is of a
dubious character in a substantial sense, then one can
Understand a Court saying, this applicant should be entitled
to take the governmental 0.r quasi-governmental authority to
Court to have the matter determined.

Here, I must say that, so far as I can see, the point is, in essence, one that could be described as of a technical character. This is not to say that it is

necessarily going to fail in the long run. But it is not
suggested, for example, that the charges being made are
unreasonable or outrageous, in the ordinary sense; it is
simply said that they do not comply with requirements of the
statute. In addition, as Mr Sheahan points out, it is said
they do not comply with the requirements of the Constitution -
in particular, s.55. It is not said that there is anything
oppressive about the respondent's conduct, and I do not see
that it falls within the category of cases where the public
interest demands that the applicant be allowed to proceed to

trial unimpeded by any order for security for costs.

The other matter which I have had a chance to think

about during the course of the adjournment is the question of

quantum, and I have made a decision about that. I have

decided to order security. The security which I will order

will not be intended to be a realistic estimate of the likely
costs of the trial.	I think this trial is likely to be quite

expensive, particularly in respect of discovery. But it is an
amount which is designed to take account of the various
circumstances, which I mention, and in particular, the partly
defensive and partly aggressive character of the applicant's
suit. In the case before Ormiston J., I notice his Honour
took a similar course - that is, he made a limited order for
security. The order for security, although limited, and
although I recognise that it is not adequate to provide
anything like complete protection for the respondent, is
intended, so far as one can determine the matter at present,
to be a final order - that is, it is not intended to be merely
an interim order.

The order will be that the proceedings be stayed

until the applicant gives security for the respondent's costs
in a form satisfactory to the Registrar in a sum of $40,000,
provided that the Registrar may accept as sufficient security
an undertaking, in form satisfactory to him, by the deponent
M.R.M. Broadbent to be responsible for the respondent's costs
in the sum of $40,000.

As the respondent has had substantial success - it

has not been entirely successful, but it got no offer of
security - I will order that the applicant pay the
respondent's costs of the application for security.

seven preceding pages are a

I certify that this and the

true copy of the reasons
for judgment herein of his
Honour Mr. Justice Pincus

Associate

Date 2 k e h ~ k J J \Ofi\