Suatu Holdings Pty Ltd v Australian Postal Commission

[1990] FCA 409

LLM I T ~ I ) p! ~ T / ? ' ~ U T I D N

JUDGMENT No. .... to.?/ .,.. 2 . 5

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY )	No. NG 1286 of 1988

)

GENERAL DIVISION )

BETWEEN: SUATU HOLDINGS PTY LIMITED

Applicant

AND: AUSTRALIAN POSTAL COMMISSION

Respondent

CORAM :	WILCOX J
PLACE :	SYDNEY

DATE : 13 JUNE 1990

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.       The application for security for costs be dismissed.

Note :	Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. [See also Order 37
rule 2(3)].

2.        The respondent in the principal proceeding pay to the applicant in the principal proceeding its costs of the motlon for security for costs.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY )	No. NG 1286 of 1988

)

GENERAL DIVISION )

BETWEEN: SUATU HOLDINGS PTY LIMITED

Applicant

AND: AUSTRALIAN POSTAL COMMISSION

Respondent

CORAM:  WILCOX J

PLACE: SYDNEY

DATE :  13 JUNE 1990

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J:  This is an application for an order that the

applicant in the principal proceeding provide security for the

respondent's costs.

An affidavit has been sworn by the solcltor actlng on

behalf of the respondent in which the respondent's likely
taxed costs of the matter are assessed at $74,614. This
calculation assumes a hearing spread over 15 days, which is
the estimate of both counsel. No criticism has been made of

the estimate of costs.

The evidence before the Court as to the financial

position of the applicant is sparse. But, such as it is, it
indicates that the applicant has little or no assets. The
applicant carries on an activity as a trustee only. More
significantly, the various annual returns which have been
filed by the applicant, and which go down to 30 June 1988,
show no significant assets. Indeed, in the annual return for
the year to 30 June 1988, there was an excess of liabilities
over assets of $40. Evidence contained in an affidavit of
~ichard John Tanner, one of the directors of the applicant
company, which was eventually tendered for the purpose of this
application by the respondent to the principal proceeding,
indicates that, since 1988, there has been no substantial
alteration in the financial position of the applicant.

I think that the only inference I can draw is that the applicant company would be unable to pay out of its own resources the amount of any order for costs which might be

made against it.

Notwithstanding this situation, the application is opposed. It is not suggested that the Court lacks power to make the order sought. Indeed, such a proposition would be untenable; see s.56 of the Federal Court of Australia Act

1976. However, it is said that no order ought to be made
because of either or both of two factors. The first factor is
that a sum of $30,000 is currently held on deposit by Westpac
Bank. This sum was apparently deposited wlth the bank at the
time of the initial contractual arrangements between the
parties some two years or more ago. The deposit is held
subject to an arrangement, the details of which do not appear
in the evidence but which gives to the respondent a measure of
control over the money.

I gather that there is a certificate of deposit,

which is held by or on behalf of the respondent. However, it
has been pointed out that this mlght not necessarily entitle
the respondent to reslst an attempt by the applicant to
withdraw the $30,000 pending the disposal of the case. In
order to overcome this objection, counsel for the applicant
has obtained instructions from his client to offer an
undertaking to the Court that the applicant will not attempt
to withdraw any part of the said sum of $30,000 pending the
disposition of the principal proceeding. It is said that thls

fund provides some security for the respondent in relation to

costs. However, counsel for the respondent points out that
there may be other claims against this $30,000.	Indeed, there

is a substantial cross-claim pressed by the respondent. If
this cross-claim is successful, then the respondent would be
looking to the $30,000 sum to meet part or all of the cross

claim. The amount actually sought by way of cross-claim is

$188,000.

Accordingly, although the existence of the fund of

$30,000 is a relevant matter and I do propose to record the

undertaking to the Court given by counsel and to hold the
applicant to that posltlon, I do not think that the mere
existence of the $30,000 deposit is a sufflclent reason to
exercise the Court's discretion against the making of an order
for security for costs, in a case where I am satisfied that
the applicant would not be able to pay an order to pay costs

if so ordered.

The more substantial ground relied upon by the
applicant is the delay of the respondent in maklng this
application. It is conceded that the respondent has known,
ever since the first arrangements whlch it made with the
applicant, that the applicant is a company with a small
capital. It was for this reason that the deposit was sought

and obtained.

It further appears that during the course of the

action, whlch I interpolate was commenced on 11 October 1988,

affairs of the applicant, including its balance sheets for the

there has been discovery of numerous documents relating to the

years ended 30 June 1986 to 30 June 1989 inclusive. Because
of a change in solicitors, the documents were not actually
inspected until quite recently, namely on 25 May, 30 May and 1
June. However, the documents have been available for nearly
12 months and I think that the matter of delay should take

into account when the information was made available rather
than when it was actually inspected by the solicitors for the
respondent. These documents must have Indicated the true
position, although they probably did no more than reinforce
the general understanding whlch the respondent has had at all
material times.

The catalyst for this application seems to be some

publicity involving Mr Tanner. There was apparently some
litigation between the Westpac Bank and himself personally.
Apparently as a result of this publicity, those advising the
respondent formed doubts about his financial capaclty and
accordingly made this application for security for costs.
However, I see little logic in that approach. Mr Tanner is
not a party to the present application. If the application
fails, no order for costs could be made against him
personally.

It may be true to say - there is no evidence on the

matter - that Mr Tanner is a beneficiary or a potential

beneficiary under a trust instrument of whlch the applicant is

a trustee but his status as a beneficiary or a potential
beneficiary would not expose him to any liability to pay the
costs of this action, if it is unsuccessful. Accordingly, it
seems to me that his financial condition has nothing to do
with the merits of the application.

However, as I have sald, that seems to have been the catalyst for this application. Absent that circumstance, it seems that the respondent would have been content to carry on

as it always had, preparing its defence and cross-claim

without any application for security for costs.

The reasons why delay is material in a case of this

sort is that the maklng of an order for security for costs may
well have an important effect upon the course taken by the
party against whom the order is made. Where the amount is a
substantial sum, and a substantial sum is sought in this case,
an applicant may find Itself unable to provide the securlty
for costs and accordingly may have to abandon the action, or
may find that the action is stayed because of its failure to
provide the security. If an applicant is to be confronted
with such a hurdle, it is important that it know the position
at a relatively early stage; so that it will not go on
incurring costs in an action which it is unable ultimately to

take to court.

In the present case there is no evidence as to the

quantum of costs incurred by the applicant over the last 12
months or so, but it is clear that substantial costs have been
incurred. The matter has been in the list for directions
hearings on numerous occasions. A considerable amount of work
has been done on behalf of the applicants in the preparation
of affidavits. If the applicant had been told 12 months ago
that it had to furnish a substantial sum by way of security
for costs it may have decided to take a different course and
not to expend the moneys whlch it has expended. It seems to
me unfair to a party in the position of this applicant for a
respondent to stand by and allow substantial costs to be
incurred and then to seek an order for security for costs as
the price of the applicant being able to continue the
proceeding. Accordingly, I think that the appropriate course
for me to take in the exercise of my discretion is to note the
undertaking given on behalf of the applicant but to decllne to
make any order by way of security for costs.

I note the undertaking given by counsel for the

applicant in the terms previously recorded. I dismiss the

application for security for costs.

Application is made on behalf of the applicant for

costs of this motion.

The matter is not completely clear cut, in the sense

that I have taken into account the undertaking given today in

respect of the $30,000 deposit. If that matter had not
previously been referred to, I thlnk that I would have taken
the view that there ought not to be an order for costs in
favour of the applicant, at least in unconditional terms.
However, the evidence includes a letter of 20 April 1990,
written by the applicant's solicitors to the respondent's

solicitors in relation to the proposed application for
security for costs, in which speciflc reference is made to

that $30,000 deposit. The solicitors said in that letter:

"Those funds are not to be released until the
satisfactory conclusion of the present
proceedings. The plaintiff has agreed to
allow those funds to remain invested pending

the outcome of the case."

It is true that the respondent's solicitors might

reasonably have wanted something a little more binding than
this; for example, by way of an undertaking to the court. But
the invitation was clearly there and it was not taken up. I
think that, if the respondent's solicitors had responded by
taking up the offer but asking for it to be formalised in an
undertaking to the court, it would not have been necessary for
this motion to have been brought or argued out. In the
circumstances, the appropriate course is that the costs of the
motion follow its event. I order that the respondent in the

principal proceeding pay the applicant's costs of the motion.

I certify this and the seven

preceding pages to be a true copy of
the Reasons for Judgment of

his Honour Justice Wilcox.

~ssociate:	.
Date:
Counsel for the Applicant:	G S Charny
Solicitors for the Applicant:	Heidtman & CO
Counsel for the Respondent:	D Staehli
Solicitors for the Respondent:	Gillis Delaney
Date(s) of hearing:	13 June 1990