N J Cincotta Pty Ltd v Australia and New Zealand Banking Group Ltd

[1995] FCA 963

IN THE FEDERAL COURT OF AUSTRALIA                 ) 
  )  
NEW SOUTH WALES DISTRICT REGISTRY                )  No G 708 of 1993
  )     
GENERAL DIVISION  )     

BETWEEN:          N.J. CINCOTTA PTY LIMITED  Applicant

AND:                   AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED

First Respondent

BARCLAYS BANK AUSTRALIA LIMITED

Second Respondent

Coram:        Davies J.
Date:          13 November 1995
Place:         Sydney

MINUTES OF ORDER

THE COURT DIRECTS THAT:

The motions seeking security for costs be adjourned to 9 am on 29 November 1995.

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

IN THE FEDERAL COURT OF AUSTRALIA                 ) 
  )  
NEW SOUTH WALES DISTRICT REGISTRY                )  No G 708 of 1993
  )     
GENERAL DIVISION  )     

BETWEEN:          N.J. CINCOTTA PTY LIMITED

Applicant

AND:                   AUSTRALIA & NEW ZEALAND BANKING GROUP LIMITED

First Respondent

BARCLAYS BANK AUSTRALIA LIMITED

Second Respondent

Coram:        Davies J.
Date:          13 November 1995
Place:         Sydney

REASONS FOR JUDGMENT

These are two motions seeking security for costs in relation to proceedings brought by N. J. Cincotta Pty Limited against the Australia & New Zealand Banking Group Ltd and Barclays Bank Australia Limited. 

Evidence has been given that there is a deficiency of liabilities over the assets of N.J. Cincotta Pty Limited and that the company operated at a loss during the years ended 30 June 1993 and 30 June 1994.  No documents have been produced as to the state of the company's affairs as at 30 June 1995.  The affidavits of a director, Mr Peter Vagg, and a former director, Mr Norman Cincotta, do not clarify the matter other than by reference to the accounts as at 30 June 1994. 

From that it seems to me that the inference should be drawn that there is a substantial risk that the applicant would not be able to pay costs to the respondents if those costs were awarded against it.  Mr Cincotta has undertaken in his affidavit not to enforce his claim for moneys owed to him of over $1 million until any costs that may be awarded against the applicant have been paid.  But there is little evidence to justify a conclusion that, even so, there would not be a significant risk that, such costs, if awarded, would not be paid.  There is no evidence as to the make-up of the assets of the company at the present time, as to whether the assets are worth the amounts set out in the 1994 balance sheet or otherwise. 

These proceedings will be brought not just for the benefit of the company itself.  They will be brought for the benefit of persons who are interested in the company.  Those persons include Mr Cincotta.  Mr Cincotta deposed that he is owed the substantial sum of money of over $1 million.  Accordingly, he will be likely to benefit from the proceedings if they are successful.  In my view it is desirable in the interests of natural justice that persons on both sides of the proceedings be affected by the possibility of an award of costs against them.  The fact of being at risk of costs will encourage the parties to ensure that proceedings which ought not to be continued are resolved and that unnecessary expenses are not incurred.

It is in the interests of justice that there be persons on both sides of the record who are at some risk in relation to costs.  If the applicant is an insolvent company, it very
often happens that the costs are of very little significance to the applicant itself.  I think that that puts the respondent in an unfair position.  I also think it is proper that persons who will benefit should, if they are able to do so, provide security for costs.  That is the ordinary order. 

Security can be provided in a number of ways depending upon the ability of the persons standing behind the company to provide security.  That will depend upon their financial position.  That position is to be taken into account.

It seems to me that I should indicate that, in principle, an order for security for costs would be appropriate.  I have not looked at detailed figures at the present time.  That is a matter which will have to be taken into account in relation to the ability of the persons standing behind the company to provide security.  I shall give Mr Mescher an opportunity to put forward a proposal as to how the security should be provided.  For example, those who are standing behind the company may be in a position to provide security by way of bank guarantee or some form of security over shares or property.  If there is evidence which shows that that cannot be done, there should at least be the provision of a personal indemnity, so that those who are standing behind the company and who will benefit from proceedings if they are successful, will be personally liable for the costs if they are not.

I will adjourn the matter to 9 am on 29 November 1995.

I certify that this and the 3 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.

Associate:

Date:   13 November 1995

Counsel for the applicant:  I. Mescher

Solicitors for the applicant:  Caldecott & Williams

Counsel for the 1st respondent:  G. Blake

Solicitors for the 1st respondent:  Norton Smith

Counsel for the 2nd respondent:  R. Potter

Solicitors for the 2nd respondent:  Phillips Fox

Date of hearing:  13 November 1995

Date of judgment:  13 November 1995