Tomlinson, P.J. v Cut Price Deli Pty Limited

[1993] FCA 413

\443

JUDGMENT NO. ..,&!t.?3,./ .....m.a.

I	IN THE FEDERAL COURT OF AUSTRALIA )	NO. QG 72 of 1991
QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION 1

BETWEEN: PETER JOHN TOMLINSON and

JEAN TOMLINSON

Applicants

AND :  CUT PRICE DEL1 PTY. LIMITED

I First Respondent

AND :  ENZO SGAMBELLONE

Second Respondent

AND :  HARRY MALOVANY

Third Respondent

AND :  PETER HOEFLER

Fourth Respondent

AND:  RON HARMER

Fifth Respondent

AND :  CUT PRICE DEL1 PTY. LIMITED

Cross Claimant

AND :  PETER JOHN TOMLINSON and
JEAN TOMLINSON

Cross Respondents

i

MINUTES OF ORDERS

Drummond J	2 3 JUN 1993
20 April, 1993	FEDEAAL CUURl
Brisbane	AUSTRALIA PRINCIPAL REGISTRY 1

THE COURT ORDERS THAT:

! 1. The respondents' motion for security for costs filed on 23 March, 1993 is dismissed.

The respondents pay the applicants' costs of the respondents' application for security to be taxed.

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

IN THE FEDERAL COURT OF AUSTRALIA )	No. QG 72 of 1991
QlIEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	1

BETWEEN: PETER JOHN TOMLINSON and

JEAN TOMLINSON

Applicants

AND :  CUT PRICE DEL1 PTY. LIMITED

First Respondent

AND:  ENZO SGAMBELLONE

Second Respondent

AND:  HARRY MALOVANY

Third Respondent

AND:  PETER HOEFLER

Fourth Respondent

AND :  RON HARMER

Fifth Respondent

AND :  CUT PRICE DELI PTY. LIMITED

Cross Claimant

AND :  PETER JOHN TOMLINSON and
JEAN TOMLINSON

Cross Respondents

Coram:	Drummond J
Date:	20 April, 1993

Place: Brisbane

EX TEMPORE REASONS FOR JUDGMENT

This is an application by the respondents in action

QG 72 of 1991 that the applicants in that action give security

for the costs of the respondents. The Tomlinsons claim

damages in respect of representations that are alleged to have induced them to take up the franchise of a delicatessen business and which are said to constitute conduct that infringes S. 52 of the Trade Practices Act 1974.

Both Mr. & Mrs. Tomlinson are Australian residents. They concede that they will be unable to meet any order for costs that the respondents may obtain against them if the respondentsf defence to their claim is successful. This will be the position even in respect of the respondentsr costs of the action from this point on, which is all the costs for which the respondents are seeking security.

The evidence before me confirms that this concession was rightly made. On 7 December 1992 the business was abandoned by the Tomlinsons when they were confronted with the obligation to pay rent on the premises and in respect of the equipment as from a date fixed by my order of 18 November 1992 if they chose to remain in possession. Moreover, there is

were in difficulties in paying the debt owed to a supplier of	evidence in the respondents own material that the Tomlinsons
food to the business prior to their abandonment of it. Tomlinson deposes to compromises with suppliers and that if they lost the business the Tomlinsons would "be unable to finance the legal costs involved in prosecuting this action".
The respondents referred to the fact that, until the Tomlinsons abandoned the business in December 1992, they had, what is called by the respondents, a substantial asset - the business. The evidence before me strongly suggests that the business could never have been regarded as an asset of any real value to the Tomlinsons such that it might have assisted them in meeting a costs order in favour of the respondents if the respondents were successful at the end of the day, and that the respondents have for long known that the Tomlinsons were in financial difficulties. It is worthy of note in the present context that the respondents' supervisor reported to the respondents in March 1991, some two weeks before the action was commenced in 1991, that the Tomlinsons were complaining of being in financial difficulties due to the operating losses being incurred by the business; losses in respect of which damages are claimed in the action. Moreover, Mr. Tomlinson has gone on oath in the course of various proceedings in the action to refer to his financial difficulties.
The court has jurisdiction under S. 56 of the Federal Court of Australia Act 1976 to order that the Tomlinsons provide security for the respondents' costs of defending the action. The discretion conferred on the court by S. 56 is limited only by the requirement that it must be exercised judicially, that is, on the basis of how justice will be best served in the circumstances of the particular case. Order 28, r. 3 of the Federal Court Rules does not
provide an exhaustive statement of the circumstances in which the court can order an applicant who is a natural person resident in the jurisdiction to provide security for the respondents costs of an action: Bell Wholesale Co. Ltd. v Gates Export Corporation (1984) 2 F.C.R. 1 at 2-3 and James v
AN2 Bankinq Group Ltd. (1985) 9 F.C.R. 442 at 444. In Fame1
Ptv. Ltd. v Burswood Management Ptv. Ltd. (1989) 11 A.T.P.R. 40-962, French J proceeded on the basis that S. 56 confers power on the court to order a natural person resident in the jurisdiction to give security for the respondents costs of an action, but he declined to make the order sought as a matter of discretion.
The broad inherent jurisdiction of the Supreme Court to do that which is necessary for the proper administration of justice, which includes jurisdiction to order security for costs, has been held to be unfettered by rules of court similar to 0. 28, r. 3 and wide enough to entitle the court, in an appropriate case, to order a plaintiff who is a natural
benefit, to provide security for the defendants' costs of the person resident in the jurisdiction and suing for his own action. Raiski v Computer Manufacture & Desian Ptv. Ltd. [l9821 2 N.S.W.L.R. 443 at 447-8 and 452-5. This court has no less power under S. 56.

The Tomlinsons' action was commenced in May 1991. Interlocutory steps were long ago completed. There has been one major interlocutory dispute which was resolved by my judgment of 18 November, 1992. The trial was fixed to commence on 2 February, 1993 and was set down for six weeks. It went off due to the fact that the Tomlinsons, because of lack of preparation, were not in any position to run the trial. They were ordered to pay one-third of the respondents' costs thrown away by the adjournment. I mention that the respondents did not recover all their lost costs because they failed to inform the court prior to 2 February, when it must have been clear to the respondents, that the Tomlinsons were in no position to run the trial due to start on 2 February.

Notwithstanding this, I am satisfied that the Tomlinsons have incurred very substantial costs in getting the action to the stage it had reached by 2 February, 1993 in the period between then and its commencement in May 1991. Subject to one matter that requires further consideration, it would be far too late in my view for the respondents on an application brought only four weeks ago to be entitled to an order that the Tomlinsons provide security for their costs of the action,

even though only an order in respect of the respondents'	future costs is sought. The respondents have stood by for
nearly two years while the Tomlinsons have incurred substantial costs in getting the action to its present stage in circumstances in which the respondents had good reason to be aware of the Tomlinsons straitened financial circumstances. As to the significance of delay by an applicant for security for costs as disentitling him to such relief, see James v
Bankina Group, supra, at 446, Devenish v Jewel Food Stores Ptv. Ltd. (1990) 64 A.L.J.R. 533 at 534 and Brvan E. Fencott Ptv. Ltd. v Eretta Ptv. Ltd. (1987) 16 F.C.R. 497 at 514-515.
The consideration upon which the respondents rely to overcome the fact that they delayed bringing the application for security until late March 1993 is that the action progressed to the stage when a trial date, 2 February, 1993, was set; the respondents were content to proceed to a final determination of the matter at that time without seeking security from the Tomlinsons, even though they had reason to think that the Tomlinsons were impecunious. But the trial went off because of the Tomlinsons' failure to take any steps to prepare for the hearing. The respondents say this factor, coupled with the Tomlinsons' failure to show any sign of being prepared to get their case ready for trial until about a week ago, entitles them to the order sought, notwithstanding the delay in making the application.
However, I think the respondents' remedy in these the effect of bringing the action to an end in any event, but circumstances is not to seek security which will probably have
to take action such as applying for directions, or for a stay, or for striking out of the action, designed to deal with the prejudicial consequences to the respondents if the conduct of the Tomlinsons prevents or delays the respondents progressing the litigation.
I should say that the respondents rely on a number of other considerations that, they say, entitle them to security notwithstanding the delay. That the action arises out of a commercial dispute and will involve a lengthy trial are matters of which the respondents must have been long aware. Neither consideration assists their claim for security. That the trial went off because of the Tomlinsons' default does not outweigh the fact that, firstly, the Tomlinsons are pursuing the action and have, in the last week, albeit under the impetus of the respondents' application for security, filed and served a substantial amount of evidentiary material that goes towards the completion of their preparation for the hearing; and, secondly, that prior to March 1993, when the respondents brought their application for security, the Tomlinsons had incurred very substantial costs in getting the action to the stage it had then reached. Notwithstanding the damage that Mr. Tomlinson has done to his own credibility in swearing his affidavit of 2 February, 1993 on which he was cross-examined before me, which will be a major consideration
credibility, I cannot on the material before me make an in the action, depending as it does in large part on issues of
assessment that the action lacks substance.
The respondents also rely upon the fact that they have obtained three costs orders against the Tomlinsons, but that does not, I think, assist the respondents in the absence of my being able to conclude that the Tomlinsons had limited prospects of success in the action. Rather it goes to

underline the significance of the conduct of the respondents in allowing so much time to pass, with the Tomlinsons all the while incurring an increasing burden in the way of legal costs, before the respondents chose to make the present application.

I propose to dismiss the application essentially because it is too late, in my view, for the respondents to seek security, even security limited to their future costs of the action, given the expense the Tomlinsons have incurred in getting to this stage of the proceedings, and the evidence including, but by no means limited to, their concession of impecuniosity which indicates that the Tomlinsons are unlikely to be able to continue the action, if they are ordered to provide the security now sought.

I certify that this and the preceding

seven pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Drummond.

Associate: L

Date :  20 April, 1993