Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Ltd
[1992] FCA 950
•8 Jul 1992
JUDGMENT No. .2>2 ...... / ....5 .k
IN THE FEDERAL COURT OF AUSTRALIA)
WESTERN AUSTRALIAN DISTRICT ) NO WG 148 of 1990 REGISTRY. GENERAt DIVISION ) BETWEEN RICOCHET PTY LIMITED h
- ORS First Applicant U N BARRON Second Applicant HDRWEST INVESTMENTS PTP LIMITED AS TRUSTEE FOR HDRWEST TRADING TRUST Third Applicant
AND EOUITY TRUSTEES EXECUMRS
AND AGENCY COMPANY ~ - LIMITED First Respondent/First
Cross-ClaimantAUSTORE LIMITED Second Respondent/Second
Cross-ClaimantAZELIA PTY LIMITED
Cross-Respondent
EX TEMPORE JUDGMENT
birth pains. It was commenced on 18 December 1990. There has been a number of changes to the statement of claim and a significant amount of time has been spent in interlocutory proceedings and directions hearings. In this Court directions are conducted by judges for the purpose of assisting the parties in getting cases ready for hearing in the shortest possible time and also for proper management of the cases and the Court's work. It is necessary that the parties co-operate in this procedure and not engage in directions hearings and other pre-trial procedures lightly. They should not be represented at such times by people who know nothing about the case itself or are unable to make commitments on behalf of their clients or statements upon which the Court may place reliahce, On 4
EINFELD J PERTH 8 JULY 1992 This is an application for leave to appeal from a decision of Justice French given on 24 June 1992 refusing an order for security of costs. The case itself has had a long gestation period and seems to have gone through more than the usual
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March 1992, when this case was fixed for seven hearEpg dayIs to
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commence on 3 August, the applicants filed' th'e parfi&ui-arsi of
: " I t?? , damage upon which they said they wished to rely and tlie . : . , C J ~
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parties said that the matter was ready 'for hearikng. , No . , . . S & , , I, -. 7
application for security had then been filed o$ was men$i'oned. .. ! T.I , I - Hence the Court was entitled to be satisfied that all
was in fact ready to be given a date, in priority to other interlocutory matters had been dealt with and that the case matters awaiting hearing. Yet further particulars in support of a further attempt to amend the statement of claim were filed on 4 June 1992 and some further particulars of damage were given or prophesied. Subsequently the respondents filed this application for security. The case is apparently to be heard with another case with which it is related. There are said to be some 14 witnesses for the applicant including some who need to come from the eastern states.
If leave to appeal were granted from this application for security, the appeal may well be able to be heard during the sittings of the Full Court in Perth in the two weeks commencing on 20 July but that means that a result would not be available much before the hearing which has been fixed. The possibility that further preparation of the case will be delayed in these last few weeks before the hearing in order to deal with the appeal on security ought to be taken into consideration in considering the present motion. So should the further possibility that an appeal could have the result of interfering with the likelihood that the hearing could take place at that time.
The motion for security was filed on 8 June 1992. Some orders by way of timetable were made on 10 June by Justice Sweeney
hearing on 24 June. The amount of costs said by the first and
concerning the filing of evidence and the motion came on for
second respondents to be involved is some $266,000. After considering the matter, Justice French refused the application for security and dismissed the motion so far as it related to that application. The arguments in support of the application for leave are twofold. One is that the learned judge made an error of principle. The second is that the decision works a substantial injustice. It is said that these two matters are sufficient for granting leave.
The grounds outlined in support of the alleged errors of principle are that:
1.
his Honour mis-stated the effect of delay in relation to the filing of a motion for security; and
2.
the case brought by the applicants is weak and ought not to be allowed to be heard unless the shareholders of the first and third applicants are exposed to the possibility of loss by way of costs. On the assumptions always made in security applications, these costs would be ordered to be paid by them.
The case made for the respondents is that the first applicant is impecunious. In this regard reliance is placed upon the company's return filed with the Australian Securities Commission for the year to 30 June 1990 which showed an excess of liabilities over assets, and upon the fact that the company has not filed its return for the year to 30 June 1991. So far
case, reliance is placed upon some alleged defect in the as concerns the question of the strength and weakness of the pleadings and particulars which it is argued would deprive the
applicants of any real chance of success.In my opinion there is a fundamental misconception on the part of the respondents about this matter. The particulars said to manifest the weakness of the applicants' case were made available to the respondents almost exactly a year to the day before the application for security was filed. No reason is given for this delay except in the course of argument when, admittedly hypothetically but apparently with meaning, counsel for the respondents indicated that a party who admits to forgetting to make an application for security has given a sufficient reason for a delay in doing so.
That is simply an untenable proposition. The Law has always provided, and provided in explicit, careful and oft repeated terms, that applications for security must be brought promptly
| • | and pressed to determination. The reason is that an applicant company from whom security is sought must be allowed to know its position in relation to the issue of costs and any difficulties it might have in meeting any orders in that regard, before it commences to any real extent in the preparation of its litigation and certainly before it expends substantial sums in the preparation of its case. | |
| There is another reason why applications must be made | ||
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| If at some late stage, after a considerable amount of court time has been expended, respondents spring on applications for security, the applications will partly be in respect of costs already incurred. If security is granted and any action is stayed, all that time and at least some of those costs will be lost forever never to be recovered, such as costs expended by the Court and therefore by the public, and the costs inflicted |
on other litigants whose cases have been delayed as a
consequence of the time spent on the case in question.In addition in such a case, the considerable funds expended by applicants on the preparation of their cases would all be 10s t . Even the security-seeking respondents will have incurred costs which in the given circumstances would not be recoverable at that time. The idea that the Court and court process can be used for such futilities and then diverted very late in the piece by applications for security is inconsistent with the efficient and orderly conduct of the Court's •
business, the proper expenditure of public funds in its maintenance, and the achievement of expeditious and affordable justice.
Another problem goes to the issue of discretion. There is
nothing secret or new about applications for security. If a
respondent brings an application for security very late in the
piece, it is entitled to be judged as an application in which
the respondent has relatively little faith itself, even if the
excuse given for the lateness is forgetfulness. In my a experience corporate litigants and their lawyers rarely forget matters which protect and secure their own financial entitlements and wellbeing. The facts in this particular case concerning Ricochet would have been available very early in the litigation. They have nothing to do with the proposed very late amendment to the statement of claim and particulars of damage. No facts are put before the Court in relation to the third applicant, Morwest Investments, about which little is known. The circumstances of the supposed forgetfulness, such as the attraction by the person concerned of a psychological disability or the intervention of an accident producing amnesia, are not presented.
Furthermore, it turns out from the documents obtained from the Securities Commission that Ricochet has three shareholders all of which are companies. There is no evidence at all as to whether these companies are or are not in a position to meet any requirement for costs. The idea that with three weeks to go before the case, the whole proceedings should be diverted to an examination of what those companies can or cannot supply in funds to cover the respondents' costs when the respondents have not taken any action in all this period of time to secure their own costs is unacceptable. In my opinion the learned judge made no error of principle in his handling of the matter of delay.
So far as concerns the question of the weakness or otherwise
| m | of the applicantsp case, I remain quite unpersuaded that the respondents' point in this regard is a substantive one. A case is made - with some degree of persuasiveness - that the pleadings are not as yet in proper order. But it seems perfectly clear to me that the respondents are well aware of the allegation being made and of the case which the applicants wish to make. It has never previously been suggested that the case simply cannot succeed and that it should be summarily dismissed for that reason. | |
| This is a shopping centre case, of which there have been many in the Court in recent years. This case does not seem to have any unusual features in its fundamentals even though some of the appearances of it, including the number of attempts at producing satisfactory pleadings, seem to have been somewhat exceptional. So far as I can see, the applicants' case will depend upon the matters that these cases usually depend on: the evidence brought and the credibility of the relevant witnesses; the contents of the appropriate documents; and the other usual criteria of successful and unsuccessful cases. | ||
| As has been many times pointed out, it is not appropriate for a judge hearing an application for security to examine to any extent the issue as to whether the case as a whole is likely to fail or succeed. There are obvious good policy reasons for that course. Amongst others, security applications should not be used as vehicles to try the cases themselves, nor as "dry runs" at applicants, nor as covers for motions for summary judgment. Perhaps where a particular case could be shown to | ||
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| security for costs, but this would be rare and this is not a case of that variety in any event. The normal assumption is that the case is at least arguable and there is no reason to depart from that assumption here. | ||
| In the circumstances, it seems to me that an appeal against Justice French's decision would be bound to fail and I |
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representations are mentioned in statements of claim, respondents are on notice of the problem, and these respondents certainly cannot claim that they are caught by surprise because allegations of future conduct have been in earlier versions of the statements of claim, including some of some antiquity. All the major amendment seeks to do is to make clear what must otherwise have seemed very likely.
The other amendments appear to me to be of a minor kind and ought to be allowed. I will grant the motion to amend the statement of claim which, for want of a better term, I think should not be headed "minute of fresh amended statement of claimu but hopefully "final amended statement of claim".
RECORDED . NOT TRANSCRIBED
HIS HONOUR: Yes. The respondents will have the costs of this motion.
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