Sunshine General Industries Pty Ltd v Everdure Pty Ltd

[1988] FCA 789

NOT FOR DISTRIBUTION

C A T C H W O R D S

PRACTICE AND PROCEDURE - security for costs - relevant principles

- applicant economically fragile - cause of action bona fide -

reasonable prospect of success - financial difficulties not

brought about by conduct of respondent - order would not

necessarily prevent applicant from proceeding with claim - reduced

estimate of costs on basis that trial of preliminary issue -

account taken of costs already ordered.

Companies (Western Australia) Code 1981	6.533
Judiciary Act 1903	6 . 7 9
bederal Court of Australia Act 1976	6.56

E. Fencott and Associates Pty Ltd	v Eretta Pty Ltd
1 16 FCR 497

FRENCH J. PERTH 16 DECEMBER 1988
SUNSHINE GENERAL INDUSTRIES PTY LTD	V EVERDURE PTY LTD
NO. WAG 183 Of 1988

i

IN THE FEDERAL COURT ) NOT FOR DISTRIBUTION

OF AUSTRALIA

WESTERN AUSTRALIA

DISTRICT REGISTRY	)
GENERAL DIVISION	No. WAG 183 of 1988
B E T W E E N :	SUNSHINE  GENERAL INDUSTRIES L D PTY

Applicant

and

EVERDURE PTY LTD

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER:	16 DECEMBER 1988
WHERE MADE:	PERTH
THE COURT ORDERS	THAT:

1. That the applicant do provide security for the

respondent’s costs by way of lodgement with the Court of

two bank guarantees	of $2,000	each. The first to	be
lodged on or before	31 January 1989, the	second by	28

February 1989, or such other security in the amount of

$4,000 as the Registrar may approve, on or before	31
January 1989.

2.          The respondent to be at liberty to apply to increase the

amount of security on 48 hours written notice.

3.          There will be liberty to apply generally.

4 . The costs of the motion for security for costs be

reserved.

NOTE: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT	1	NOT FOR DISTRIBUTION
OF AUSTRALIA	)
WESTERN AUSTRALIA	1
DISTRICT REGISTRY	1

GENERAL DIVISION	1	No. WAG	183	of	1988
B E T W E E N :	SUNSHINE	GENERAL	INDUSTRIES	L D	PTY

Applicant

and

EVERDURE PTY LTD

Respondent

CORAM: FRENCH J .

16 December 1988

EX TEMPORE REASONS FOR JUDGMENT

I am satisfied that the respondent has shown, and indeed

it comes in large part out of affidavit material tendered by the

applicant, that there is	credible testimony that there is reason
to believe that the applicant would be unable to pay the costs	of

the	respondent if it is successful in its	defence. And that
condition being satisfied,	the discretion to order security	for

costs under 6.533 of	the Companies (Western Australia) Code 1981
as applied in these proceedings, through	s.79 of the Judiciary Act
1903, is enlivened.

The discretion conferred on the Court by that provision

is additional to the general	discretion arising from s.56 of	the
Federal Court of Australia Act	1976.	It is sufficient for these

purposes, however, to have regard to s.533 and to note, as I found after a review of the authorities in Bryan E. Fencott and

Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497, that the

discretion is not fettered by any predisposition in favour of an order for security where the condition precedent is satisfied.

I have regard to the fact that on the face of it, the

applicant advances a bona fide	claim.	I form no view as to the
merits of the claim	at this stage. There	is no clear evidence
before me	that the claim is unmeritorious and	I am prepared to

amsume, for the purposes of this decision, that it has a

reamonable prospect of success. Statements from the bar table

indicate that it is likely that an important part of these

proceedings can be resolved by a trial of a preliminary issue on

agreed facts, which would be of short duration and involve

principally questions of law. And that fact is relevant in

determining how much, if any, security should be ordered.

There is no suggestion that the applicant's financial

difficulties have been brought about by any conduct on the part of

the respondent. Nor am I satisfied that the respondent is

engaging in conduct at the moment, which poses some imminent

threat to the commercial survival of the applicant. In my

opinion, however, this is a case where the applicant is, to use

its own counsel's expression, "economically fragile". It has the

benefit of acorporate personality and the limitations on

liability that	that	involves.	It was not	really	advanced	on
behalf of the	applicant,	that	an	order	for security	would

necessarily prevent it from proceeding with its claim. There is

some controversy as to whether	that is a factor in any event which
can be taken into account,	but I am satisfied that it is not shown
that that is the case here for any order that might	be made.

In my opinion some order for security for costs should estimated $25,000 as likely party and

be made. It will not protect the respondent entirely in the event

that the application is unsuccessful. The respondent has

party costs in the event

that the matter goes to a full hearing on all	issues. On the
assumption that it goes to a trial of a preliminary issue,	the
respondent estimates its costs at	$6,000 to and including such a

hearing. That is not seriously contested by the applicant, and it seems a not unreasonable estimate in all the circumstances. I

take into account, however, that the purpose of an order for

security does not necessarily extend to providing the respondent

with a full indemnity. And I also take into account that I have

already made a costs order in favour of the respondent in relation

to the motion for interlocutory relief, which would cover a

significant element of preparatory work so far as the accumulation

of evidence and obtaining of instructions is concerned.

In my view, however, the applicant should be required to

make available security amounting to a total of $4,000. And I

propose to direct that that be done by	way of instalments as	has
been foreshadowed by the respondent and accepted as	a	proper

procedure on the part of the applicant.

The orders I propose, therefore, are these:

I

1. That the applicant do provide security for the

respondent's costs by way of lodgement with the

Court of two bank	guarantees of $2,000 each.	The
first to be lodged	on or before	31 January 1989,

the second by 28 February 1989, or such other

security in the amount of $4,000 as the Registrar

may approve, on or before 31 January 1989.

2. The respondent o be at liberty to apply to

increase the amount of security on	48 hours written
notice.

3.    There will be liberty to apply generally.

4. The costs of the motion for security for costs

be reserved.

I certify that this and the preceding

three (3) pages are a true copy of the Ex Tempore Reasons for Judgment of his Honour Justice French.

Associate:

Date : 

for the Applicant: Mr R. McCormack

Solicitors for the Applicant:  Parker & Parker

Counsel for the Respondent: Mr P. Pletcher

Solicitors f o r the Respondent:  Solomon Brothers

Date of Hearing: 16 December 1988 Date of Judgment: 16 December 1988