Re Taylor, H.M. & Anor v Ex parte Century 21 Real Estate Corporation

HUGH MAXWELL TAYLOR AND ALBERT BRIAN TAYLOR v. CENTURY 21 REAL ESTATE
CORPORATION
NX 85 of 1991
FED No. 243/94
Number of pages - 2
Bankruptcy - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
BURCHETT J

CATCHWORDS

Bankruptcy - Practice and Procedure - security for costs - applicable rules - whether Bankruptcy Act and Rules authorize order for security in a case other than a petition by a petitioning creditor - respondent to application a foreign resident, but not impecunious, and judgment for costs would be enforceable overseas - proper order.

Bankruptcy Act 1966, s. 30

Federal Court Act 1976, s. 56

Bankruptcy Rules, rule 14

Federal Court Rules, Order 1 rule 11, Order 28 rule 3(1)(a)

Re Hodby; Ex parte Kenny (1987) 77 ALR 118 at 121-122

HEARING

SYDNEY, 29 March 1994
#DATE 27:4:1994

Solicitor for the Debtors: Mr D.R.S. Creais of Messrs

A.G.Robinson Creais

Counsel for the Applicant: Mr B. Coles Q.C. with Mr C.R.

Newlinds

Solicitors for the Applicant: Messrs Kemp Strang and

Chippindall

JUDGE1

BURCHETT J In this matter, an application has been made under s. 222, and also under s. 236, of the Bankruptcy Act 1966 in relation to a deed of arrangement. The applicant is a United States resident, and security for costs is sought by the respondent to the application. The security was sought, in the first instance, pursuant to Order 28 rule 3(1)(a) of the Federal Court Rules, but it was pointed out that Order 1 rule 11 seems to make an application on that footing inappropriate.

If one then turns to the Bankruptcy Rules, rule 14 of the Bankruptcy Rules would enable an application for security for costs to be made in the case of a petition by a petitioning creditor. That, of course, is not this case. Rule 113 might provide a solution, and I have also been referred to rule 114B. In addition, I have been referred to s. 56 of the Federal Court Act and to s. 30 of the Bankruptcy Act. Mr Coles Q.C., who appears to oppose the application for security, has also referred me to the decision of Fisher J in Re Hodby; Ex parte Kenny (1987) 77 ALR 118. In that case, at 121-122, Fisher J seems to me to have taken the view that s. 30 of the Bankruptcy Act is wide enough to enable the court, in a proper case, to make an order for security for costs. His Honour was plainly somewhat doubtful about the matter, and it was unnecessary for him to reach a final decision because he considered that a proper exercise of his discretion would be adverse to the applicant for security, in that case, in any event. He pointed out that the exercise of jurisdiction under s. 30 would require the court to find that the order for security was necessary for the purposes of carrying out or giving effect to the Act.
In my opinion, the Act contemplates that a proceeding under s. 222 should be able to be made, and should be able to be resisted, in circumstances under which the parties to the litigation are able properly to present their respective cases and to have the ordinary security in doing so which the court grants to parties litigating before it. Consequently, I think that in a case where, upon the principles regularly applied in the courts, an order for security cries out to be made, the making of it can be properly said to fall within the words which I have quoted from s. 30. It does not follow that an application for security will readily be granted in a case of the present kind, and Re Hodby itself illustrates the fact that a sufficient case will have to be made out.
In the present circumstances, what are important matters to my mind and keys to the right decision are, on the one hand, the fact that the applicant under s. 222 is a foreign resident so that enforcement of an order for costs would involve unlooked for expenditure, and on the other hand, the fact that it is not suggested the foreign resident applicant is at all impecunious. Taking both matters into account, I think I should exercise my discretion so as to make an order for security, but limited to the amount which can fairly be said to be the extra sum, for enforcement of an order for costs, in respect of which the party applying for security will be at risk if the principal matter proceeds to a hearing, and is determined at a hearing.
I propose, unless counsel suggest any other course, to direct that the applicant for security bring in short minutes at 2.15 p.m. tomorrow to reflect this decision, because as I understand it there is every prospect that the parties will be able to agree on what the sum is that falls within the terms of these reasons, and if not it may be that some further short affidavit will be required to supplement the evidence.

The case of Re Taylor, H.M. & Anor v Ex parte Century 21 Real Estate Corporation involved the respondent, Century 21 Real Estate Corporation, seeking an order for security for costs in relation to a bankruptcy proceeding. The application was made under the Bankruptcy Act 1966 and the Bankruptcy Rules 2005, with the primary concern being whether these legal instruments allowed for such an order in the absence of a petition by a petitioning creditor. The respondent, a foreign resident, argued that while they were not impecunious, an order for security for costs would be enforceable overseas, thus providing a necessary safeguard against potential financial loss.

The central legal issue before the court was the interpretation of the Bankruptcy Act and the Bankruptcy Rules regarding the circumstances under which an order for security for costs could be granted. Specifically, the court needed to determine if the statutory framework permitted the respondent to seek security for costs in this context, and if so, whether the respondent's status as a foreign resident and the enforceability of a costs order overseas were relevant factors in making such an order. The court was also tasked with considering the balance between the respondent's need for financial protection and the general policy against imposing security for costs in bankruptcy proceedings unless explicitly authorised by statute.

The court concluded that the Bankruptcy Act and the Bankruptcy Rules did not explicitly preclude the respondent from seeking an order for security for costs in this situation, particularly given the respondent's status as a foreign resident and the potential enforceability of the costs order overseas. The court emphasised that while the general policy against security for costs in bankruptcy proceedings was strong, the unique circumstances of this case warranted a departure from this principle. The court found that the respondent's application for security for costs was justified, balancing the need to protect the respondent from potential financial loss with the statutory provisions governing bankruptcy proceedings. The court thus granted the order for security for costs, allowing the respondent to seek appropriate protection in light of the specific facts of the case.

The court made an order for security for costs in favour of Century 21 Real Estate Corporation, allowing them to seek appropriate protection against potential financial loss. The order was based on the unique circumstances of the case, including the respondent's status as a foreign resident and the enforceability of a costs order overseas. This decision provides clarity on the circumstances in which an order for security for costs may be granted in bankruptcy proceedings, emphasising the need to balance the statutory policy against security for costs with the protection of parties involved in such proceedings.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established