Two Italian Boys Holdings Pty Ltd v The Winery Pty Ltd

Two Italian Boys Holdings Pty Ltd brought an action against The Winery Pty Ltd, seeking damages for breach of contract and other related claims. The dispute centred on an alleged failure by The Winery to honour a contract for the purchase of certain shares. The matter was heard in the Federal Court of Australia, where the primary judge was Justice Edelman. The main legal issue before the court was whether the plaintiff should be ordered to provide security for the defendant's costs, including the costs incurred in the making of a motion to strike out the plaintiff's statement of claim. The court had to determine if the plaintiff should be required to provide such security given that the defendant was ultimately successful in having the motion allowed.

The court examined the relevant provisions of the Federal Court Rules of 2011, which allow for the order of security for costs in certain circumstances. Justice Edelman considered the case law on the matter, including the decision in the case of Esanda Finance Corporation v Peat Marwick Hungerfords, where it was held that security for costs should be ordered when the plaintiff's claim has no real prospect of success, or where the plaintiff has no reasonable prospects of being able to pay the defendant's costs if ordered. The judge also took into account the principle that costs should generally follow the event, which meant that the outcome of the motion was a relevant factor.

The court concluded that the plaintiff should not be required to provide security for the defendant's costs, including the costs of the motion, due to the lack of any indication that the plaintiff's claim had no real prospect of success. The judge found that the plaintiff had raised a plausible argument that the defendant had breached the contract, and that the plaintiff had a reasonable prospect of being able to pay the defendant's costs if ordered. As such, the court held that the costs should follow the event, and the plaintiff was not required to provide security for the defendant's costs. The final orders of the court were that the plaintiff was not to be ordered to provide security for the defendant's costs, including the costs of the motion to strike out the statement of claim.