Waldon v Mowen Margaret River Estate Pty Ltd

[2003] FCA 871

FEDERAL COURT OF AUSTRALIA

Waldon v Mowen Margaret River Estate Pty Ltd [2003] FCA 871

PROCEDURE – security for costs – exercise of discretion – risk that cross-claimants may not satisfy costs order if cross-claim unsuccessful – cross-claimants would be shut out of litigation if order made – impecuniosity of cross-claimants arising out of act in respect of which relief is sought – evidence making it arguable that second cross-respondents joined with applicants in principal action in working against interests of cross-claimants – motion for security for costs refused

Federal Court of Australia Act 1976 (Cth) s 56
Corporations Act 2001 (Cth) s 1335

Federal Court Rules O 28 r 2

Equity Access Ltd v Westpac Banking Ltd [1989] ATPR 40-972 applied
Hambley WD & VD & VJ & Ors v Lewis [1987] FCA 708 cited

GRAHAM WILLIAM WALDON, WILLEM BEREND VAN DER LEEST, TERENCE KEITH PITSIKAS, ALEXANDER GORDON LEGGAT, JOHN YANNIS NTOUMENOPOULOS, WILLIAM IAN MCDONAGH, BREFNI BANKS, JUDITH ANN STEWART, OWEN DAVID FERGUSON, ANTONY LEAVERSUCH, NEVILLE KNUCKEY, LEO NTOUMENOPOULOS and JOHN RADUNOVICH v MOWEN MARGARET RIVER ESTATE PTY LTD, MOWEN GRAPE MANAGEMENT PTY LTD, MOWEN GRAPE MANAGEMENT PTY LTD, TROPICAL PTY LTD and ROSS MACLEOD
W236 of 2002

RD NICHOLSON J
21 AUGUST 2003
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W236 OF 2002

BETWEEN:

GRAHAM WILLIAM WALDON, WILLEM BEREND VAN DER LEEST, TERENCE KEITH PITSIKAS, ALEXANDER GORDON LEGGAT, JOHN YANNIS NTOUMENOPOULOS, WILLIAM IAN MCDONAGH, BREFNI BANKS, JUDITH ANN STEWART, OWEN DAVID FERGUSON, ANTONY LEAVERSUCH, NEVILLE KNUCKEY, LEO NTOUMENOPOULOS and JOHN RADUNOVICH
APPLICANTS

AND:

MOWEN MARGARET RIVER ESTATE PTY LTD
(ACN 087 694 166)
FIRST RESPONDENT

MOWEN GRAPE MANAGEMENT PTY LTD
(ACN 087 671 949)
SECOND RESPONDENT

TROPICAL PTY LTD
(ACN 053 108 946)
THIRD RESPONDENT

ROSS MACLEOD
FOURTH RESPONDENT

MOWEN MARGARET RIVER ESTATE PTY LTD, MOWEN GRAPE MANAGEMENT PTY LTD, TROPICAL PTY LTD, ROSS MACLEOD & SABLERIDGE PTY LTD
(ACN 057 031 660)
CROSS-CLAIMANTS

GRAHAM WILLIAM WALDON, WILLEM BEREND VAN DER LEEST, TERENCE KEITH PITSIKAS, ALEXANDER GORDON LEGGAT, JOHN YANNIS NTOUMENOPOULOS, WILLIAM IAN MCDONAGH, BREFNI BANKS, JUDITH ANN STEWART, OWN DAVID FERGUSON, ANTONY LEAVERSUCH, NEVILLE KNUCKEY, LEO NTOUMENOPOULOS and JOHN RADUNOVICH
FIRST CROSS-RESPONDENTS

STANTON PARTNERS AUSTRALASIA PTY LTD
(ACN 948 259 529), NEIL JOYCE & KEITH LINGARD
SECOND CROSS-RESPONDENTS

ROSABROOK HOLDINGS PTY LTD (ACN 100 553 133) & ROSABROOK PTY LTD (ACN 100 553 240)
THIRD CROSS-RESPONDENTS

JUDGE:

RD NICHOLSON J

DATE OF ORDER:

21 AUGUST 2003

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.The second cross-respondents’ notice of motion dated 19 March 2003 be refused.

2.The second cross-respondents pay the cross-claimants costs on the motion.

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W236 OF 2002

BETWEEN:

GRAHAM WILLIAM WALDON, WILLEM BEREND VAN DER LEEST, TERENCE KEITH PITSIKAS, ALEXANDER GORDON LEGGAT, JOHN YANNIS NTOUMENOPOULOS, WILLIAM IAN MCDONOUGH, BREFNI BANKS, JUDITH ANN STEWART, OWEN DAVID FERGUSON, ANTONY LEAVERSUCH, NEVILLE KNUCKEY, LEO NTOUMENOPOULOS and JOHN RADUNOVICH
APPLICANTS

AND:

MOWEN MARGARET RIVER ESTATE PTY LTD
(ACN 087 694 166)
FIRST RESPONDENT

MOWEN GRAPE MANAGEMENT PTY LTD
(ACN 087 671 949)
SECOND RESPONDENT

TROPICAL PTY LTD
(ACN 053 108 946)
THIRD RESPONDENT

ROSS MACLEOD
FOURTH RESPONDENT

MOWEN MARGARET RIVER ESTATE PTY LTD, MOWEN GRAPE MANAGEMENT PTY LTD, TROPICAL PTY LTD, ROSS MACLEOD & SABLERIDGE PTY LTD
(ACN 057 031 660)
CROSS-CLAIMANTS

GRAHAM WILLIAM WALDON, WILLEM BEREND VAN DER LEEST, TERENCE KEITH PITSIKAS, ALEXANDER GORDON LEGGAT, JOHN YANNIS NTOUMENOPOULOS, WILLIAM IAN MCDONAGH, BREFNI BANKS, JUDITH ANN STEWART, OWN DAVID FERGUSON, ANTONY LEAVERSUCH, NEVILLE KNUCKEY, LEO NTOUMENOPOULOS and JOHN RADUNOVICH
FIRST CROSS-RESPONDENTS

STANTON PARTNERS AUSTRALASIA PTY LTD
(ACN 948 259 529), NEIL JOYCE & KEITH LINGARD
SECOND CROSS-RESPONDENTS

ROSABROOK HOLDINGS PTY LTD (ACN 100 553 133) & ROSABROOK PTY LTD (ACN 100 553 240)
THIRD CROSS-RESPONDENTS

JUDGE:	RD NICHOLSON J
DATE:	21 AUGUST 2003
PLACE:	PERTH

REASONS FOR JUDGMENT

1. The second cross-respondents bring a notice of motion seeking orders that the cross-claimants give security for the payment of costs that may be awarded against them in favour of the second cross-respondents.  The motion is supported by an affidavit of the second cross-respondent Mr Joyce and a further affidavit of Mr MacLennan of the solicitors for the second cross-respondents.  The submission in opposition on behalf of the cross-claimants is supported by an affidavit of the cross-claimant Mr MacLeod. 

2. The motion is brought in reliance on s 56 of the Federal Court of Australia Act 1976 (Cth) and O 28 r 2 of the Federal Court Rules. In addition, so far as concerns the corporate cross-claimants, s 1335 of the Corporations Act 2001 (Cth) is relied upon. This latter section provides that it must be established by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant.

   BACKGROUND CIRCUMSTANCES

3. In June 1999 Mowen Margaret River Estate Pty Ltd (‘MMRE’) and Mowen Grape Management Pty Ltd (‘MGM’) entered into 15 Lease and Management agreements with various parties (‘the Growers’).  The purpose of the agreements was to develop and operate a vineyard at Margaret River.  The land had been purchased by Tropical Pty Ltd (‘Tropical’) and was to be transferred to MMRE.  MGM was to manage the vineyard and the marketing.  Each of the Growers leased an area of the vineyard which was to be managed effectively as one unit.  The marketing was to be on the basis that the produce would be pooled.  The Growers had the option to purchase half of the shares of MMRE. 

4. Prior to commencement, the project was developed by Mr MacLeod with the advice of Stanton Partners Australasia Pty Ltd (‘Stanton Partners’), Mr Joyce and Mr Lingard, Stanton Partners having been his accountant since around 1991.  He dealt mainly with Mr Joyce.  Stanton Partners was involved in planning and implementing the project and had a number of clients who wished to participate along with Mr Joyce and Mr Lingard.

5. In early 2002, Mr MacLeod and two other people who were involved in the ongoing operation of the vineyard, namely, Mr Larking (a solicitor) and Mr Matthews (a financier) proceeded with a purchase of another vineyard with a recognised label (‘Rosabrook’).  They arranged for MMRE or nominee to execute a contract for that purchase which they regarded as advantageous.  Having entered into the agreement they then placed the proposal before the Growers who agreed to a proposal that the purchaser would be two new companies in which they, along with Mr MacLeod, Mr Larking and Mr Matthews, had an interest.  The agreement was to the effect that the Mowen and Rosabrook wines would be sold through Rosabrook and MGM would manage both projects.

6. Shortly after the settlement of the purchase it is said that Mr Joyce told Mr MacLeod that he should now agree to substantial changes in the agreements cutting MGM’s management rights and fees and removing a significant part of its equity.  Mr MacLeod alleges that Mr Joyce and Mr Waldron proceeded together against him.  Dissident growers, including Mr Joyce and Mr Lingard, refused to proceed with the agreement for marketing through Rosabrook and terminated the management agreement of MGM.  It is said on behalf of Mr MacLeod this occurred without proper cause and without observing the procedural requirements of the Lease and Management agreement.

   EVIDENCE FOR SECOND CROSS-RESPONDENTS

7. Mr Joyce’s affidavit stated that he is, in addition to being one of the second cross-respondents, a director of the other cross-respondent Stanton Partners.  His evidence was authorised on behalf of Stanton Partners and the third cross-respondents. 

8. In his evidence Mr Joyce asserts that the cross-claimants are closely associated with one another and are controlled by Mr MacLeod, being part of the ‘MacLeod Group’.  Specifically it is stated:

   1.        MMRE:

   1.1has as its directors Mr Ross MacLeod and Ms Kathleen Gay Arcus;

   1.2has as its secretary Mr Ross MacLeod;

   1.3its shares are all owned by another cross-applicant, Tropical Pty Ltd which in turn is owned and controlled by Ross MacLeod and Kathleen Gay Arcus;

   2.        Tropical:

   2.1has as its directors, Ross MacLeod and Kathleen Gay Arcus;

   2.2has as its secretary, Ross MacLeod;

   2.3its shares are owned by Ross MacLeod and Kathleen Gay Arcus in equal shares;

   3.        Sableridge Pty Ltd (‘Sableridge’):

   3.1has as its owners, Ross MacLeod and Kathleen Gay Arcus;

   3.2has as its secretary, Ross MacLeod;

   3.3its shares are owned by Ross MacLeod and Kathleen Gay Arcus in equal shares;

   4.        MGM:
              4.1      has as its director Ross MacLeod;
              4.2      has as its secretary Ross MacLeod;

   4.3its shares are owned by Sableridge (as to 75%).  Sableridge as stated above is wholly owned by Ross MacLeod and Kathleen Gay Arcus in equal shares, and Ocean City Investments Pty Ltd (as to 25%) which company is in turn substantially owned and controlled by Kevin John Matthews.  Mr Matthews is an associate of Ross MacLeod in the Margaret River Project, the subject of this proceeding. 

9. In his affidavit Mr Joyce states that the cross-claimants are unlikely to be able to meet an order for costs in the event that the cross-claim is unsuccessful.  The basis on which he makes that statement are knowledge which he obtained while acting as accountant for the cross-claimants over a lengthy period and other additional grounds referred to below.

10. His additional grounds in relation to MMRE are that the only asset of this company is land transferred to it by Tropical, so that it has no source of income other than the rent payable under the leases between it and the Growers.  However, such rents are committed to repayment of a mortgage to the Challenge Bank over the property which currently stands in the sum of $410 000.  There is a dispute between the MacLeod Group and the Growers as to whether MMRE is only obliged to meet the interest component of the mortgage or is obliged to pay all of the rents so as to cover the interest and reduce the principal balance of the mortgage.  Even if that is resolved, it is stated it is highly unlikely that the rental payments made by the Growers will generate funds sufficient to cover a likely costs award in the litigation.  Given that, the MacLeod Group has an obligation to discharge the Challenge Bank mortgage by June 2003.  MMRE is prevented from using the leased area (forming the bulk of the land in terms of value and area) as security for advance without the permission of the Growers.  It is said the Growers are unlikely to consent to that because it would reduce the value of the Growers options to purchase MMRE shares, being options granted under cl 35 of the Lease and Management agreement.

11. The further grounds of his belief in relation to MGM are that it has been denied its sole source of revenue from management fees because the Growers have cancelled its appointment and not paid the annual management fee due on 31 July 2003.  This is because the Growers take the view that MGM has repudiated the Lease and Management agreement.  Further, it is said to be not in dispute that MGM is in default of an obligation to Harmans Ridge Wineries to pay it amount of $131 218.04 being the cost of producing the 2002 wine.  Harmans Ridge is purporting to claim a lien over the 2002 wine and has indicated it will sell the wine to cover the debt, dispose of the wine and/or bring proceedings against MGM to recover the debt.  On 11 March 2003 Harmans Ridge served a statutory demand on MMRE in respect of this debt. 

12. The further basis of knowledge in relation to Sableridge is that it is a 75% shareholder in MGM.  It also holds an A class share in Rosabrook Holdings Pty Ltd and is only paid up to 1 cent in the dollar and carries with it an obligation to pay calls totalling 99 cents so that the remaining liability on shares totals $297 000.  Sableridge is reliant upon profits from the disputed Rosabrook-Mowen joint venture to bottle wine under the Rosabrook label, to pay the uncalled capital contribution on Sableridge’s Rosabrook shares. 

13. The further basis of knowledge in relation to Tropical is that this company has a significant liability under the Challenge Bank mortgage.  It was Tropical which transferred the Mowen vineyard to MMRE in return for shares in MMRE. 

    EVIDENCE FOR CROSS-CLAIMANTS

14. Mr MacLeod’s evidence corroborates the ownership of the companies in the terms set out in the affidavit evidence Mr Joyce and MMRE’s ownership of the vineyard property. 

15. Mr MacLeod says that property has been valued by Southern Independent Property valuations on or about 27 February 2002 at $1.58m.  His belief is it has increased in value since then but the admissibility of this latter statement is challenged.

16. He further states that Tropical is the owner of a house property of himself and his partner which is worth approximately $680 000.  However, there is presently a mortgage registered against it in favour of Westpac Bank to secure around $500 000. 

17. As a consequence he asserts that the real estate assets of the Mowen Group total around $2.26m.

18. However, against that there is to be offset a mortgage registered against the Mowen vineyard in favour of Westpac Bank in respect of a debt of around $410 000. 

19. Further it is stated that the Growers’ option entitlement was to purchase 50% of the shares in MMRE and that was to be exercised by 30 June 2003.  If it had been exercised the Growers would have been obliged to pay $285 990 as consideration for the allocation of these shares.  It is stated that in that event the money paid would be applied to the reduction of the Westpac mortgage registered against the vineyard property.  As settlement negotiations are in progress, the cross-respondents and cross-claimants have agreed that the date for the exercise of the options to purchase the shares in MMRE will be deferred for three months until 30 September 2003.  The same deferral has been agreed with other Growers including Mr Joyce and Mr Lingard in relation to whom it has not yet actually been agreed.

20. In the meantime the cross-claimants have been continuing to pay the interest to Westpac Bank on the mortgage over the vineyard. 

21. It is further stated that if the Growers are entitled to exercise their option to purchase half of the shares in Tropical and if the litigation proceeds the resulting position would be that the Mowen Group would still own half of the Mowen vineyard (that is, half of the MMRE shares) and would have the obligation to pay approximately $125 000 in satisfaction of the Westpac mortgage.  It is therefore submitted that the net assets position of the Mowen Group is adequate to meet a potential costs order.

22. It is accepted in Mr MacLeod’s affidavit that the liquidity position of the Mowen Group has become significantly affected.  MGM has incurred substantial costs in operating the vineyard and is entitled to be reimbursed.  Non-payment of management fees has further affected this position.  The produce of the 2002 and 2003 vintages has been lodged with Harmans Ridge Winery in relation to which that winery has a claim of $131 000.  The result is that the Mowen Group has suffered significant cash flow distress.

23. It is stated by Mr MacLeod that he believes that part of the intentions of the applicants and Mr Joyce and Mr Lingard is to attempt to force the Mowen Group into such a difficult cash-flow position that it will not proceed with its defence and its cross-claims in the litigation.  He asserts that the cross-claim is strong and valid and has been brought bona fide. 

24. His evidence is that if the security for costs order is made against the cross-claimants in favour of the second cross-respondents it would greatly prejudice the ability of the cross-claimants to defend the claims which have been brought against them and to proceed with their cross-claims because their current cash position is such that they would not be able to continue with the litigation. 

25. In relation to the evidence of Mr MacLeod that the debt secured over the Mowen vineyard is in the vicinity of $410 000, Mr MacLennan’s affidavit states that the maximum secured under the mortgage appears to be $600 000 and that the land is subject to a caveat in favour of Tropical. 

26. In relation to the ownership of the house property by Tropical, Mr MacLennan’s affidavit discloses a mortgage in favour of Perpetual Trustees Australia Ltd and a caveat by solicitors for the cross-claimants to protect a charge for legal fees. 

    CONTENTIONS FOR SECOND CROSS-RESPONDENTS

27. It is argued for the second cross-respondents that a cross-claimant may be treated like a plaintiff and ordered to pay security for costs except where the cross-claim is in substance an expression of defence:  Hambley WD & VD & VJ & Ors v Lewis [1987] FCA 708. Here, however, it is said that the exception has no application because the second cross-respondents are not applicants for relief in the proceeding and accordingly respondents in substance as against the cross-claimants.

28. The overall submission for the second cross-respondents is that the Court can fairly take into account that the cross-claimants are all part of the MacLeod Group and, if not one member of that group can demonstrate an ability to meet an award of costs, then given that there will be a lengthy and complex commercial trial, the second cross-respondents are entitled to be protected against costs. 

29. In relation to MMRE, it is submitted it needs to be borne in mind that it has to fund the current litigation; that it may not be able to liquidate or raise money against the land in the short term; and any equity is likely to evaporate in the event that the cross-claimants are unsuccessful both in that capacity and in their capacity as defendants. 

30. In relation to MGM, it is submitted there is clear evidence of its impecuniosity in the form of its inability to meet the Harmans Ridge debt and because its revenues have ceased as the Growers have purported to terminate its appointment as manager.

31. In relation to Sableridge, it is submitted its only known assets are its interest in MGM and its A class shares in Rosabrook in respect of which there is an uncalled liability of $297 000.

32. In relation to Tropical, it is submitted that any equity in this property is ill-liquid and is likely to evaporate in the event that the applicants’ claim for damages, costs and interest succeeds.  In relation to Tropical, as with Sableridge, reliance is placed on the affidavit evidence of Mr Joyce that these companies are unlikely to be able to meet an order for costs.

33. In relation to Mr MacLeod, it is accepted that an order for security for costs will not be made against the non-corporate litigants solely on grounds of impecuniosity. However, s 56 does not contain a limitation in that respect and it is submitted the matter is ultimately one for the discretion of the Court.

34. Additionally, it is said that Mr MacLeod’s claim as currently pleaded is inextricably intermingled with that of the other corporate cross-claimants so that in defending Mr MacLeod’s claim the cross-respondents will also have, in effect, to defend the corporate cross-claimants claims with all of the expense and time that will entail.  This is a situation where the quantum of Mr MacLeod’s claim as against the losses allegedly sustained by the other cross-claimants is said to be ‘de minimus’.  It is submitted the losses claimed by the cross-claimants have been accrued by the corporate cross-claimants.  In this situation if the corporate cross-claimants’ cross-claim was stayed for failure to provide security for costs it is said it would be unjust if Mr MacLeod were permitted to drive the case effectively for the benefit of the other cross-claimants without taking any responsibility for costs in the event the claim is unsuccessful. 

1. In relation to Mr MacLeod’s deposition that the cross-claim is inextricably bound up with the applicants’ claim and that Mr Joyce bears significant responsibility for the cross-claimants’ current cash-flow shortage, it is contended the cross-claim is barely tenable.  In any event, it is said that upon any analysis, Mr Lingard and Stanton Partners are on the cusp and it is patently unjust that they should have to defend the action without some protection for their costs, which will be significant. 

   SUBMISSIONS FOR CROSS-CLAIMANTS

2. For the cross-claimants it is submitted that Mr Joyce, Mr Lingard and Mr Waldon, together with the applicants initiated and have maintained aggressive action against the Mowen Group.  As a result it is said the Mowen Group has been forced to respond by its defence and cross-claim.  It is argued the cross-claims are required to be brought against the second cross-respondents even though they were not originally the applicants.  It is said the developing plan of Mr Waldon and Mr Joyce to get the Rosabrook assets for the Mowen Growers and oust Mr MacLeod can be seen from correspondence between Mr Waldon and Mr Joyce.  Further, it is contended that the participation of Mr Joyce and Mr Lingard in what is described as the aggressive conduct against the Mowen Group can be seen from affidavit material in the proceedings.  These, it is said, show that at least until 29 July 2002 Mr Joyce and Mr Lingard had been acting in concert with Mr Waldon and other Growers in coordinating the events against the Mowen Group.  It is further said that Mr Joyce and Mr Waldon have continued to work together in seeking to operate the Rosabrook companies to the exclusion of Mr MacLeod.  Although Mr Joyce and Mr Lingard obtained separate representation for the purposes of the litigation they continued to work closely with Mr Waldon and the dissident growers in ousting Mr MacLeod’s group and refusing to pay management fees.  Therefore, it is said the action against Mr Joyce, Mr Lingard and Stanton Partners is closely bound up with and interrelated with the claims and cross-claims between the applicants in the Mowen Group, the Mowen Group having had no alternative but to include them in the cross-claims. 

3. Reliance is placed on the affidavit evidence of Mr MacLeod that if an order is made requiring the Mowen Group to provide security for costs they will be unable to proceed.  As against this, however, it is asserted that the evidence shows the MacLeod group has adequate assets to enable recovery of a costs order against it if its litigation ultimately fails. 

   REASONING

4. The matters to be taken into account in the exercise of the discretion conferred by s 1335(1) of the Corporations Act include (but are not limited to) the six matters identified by Hill J in Equity Access Ltd v Westpac Banking Ltd [1989] ATPR 40-972 at 50-635 being as follows:

   ‘

   ·     the chances of success of the applicant; whether the applicant´s claim is bona fide or a sham;

   ·     the quantum of risk that the applicant cannot satisfy a cost order;

   ·     whether the use of the power will shut out a small company from making a genuine claim against a large company, ie is the power being used oppressively;

   ·     whether the impecuniosity arises out of the [act] in respect to which relief is sought;

   ·     whether there are aspects of public interest which weigh in the balance of making an order;

   ·     whether there are any particular discretionary matters peculiar to the circumstances of the case.’

5. Turning to each of these considerations it is clear that the cross-claimants’ claims are bona fide and that they have an arguable case against the second cross-respondents.  It is not possible to be more precise concerning the cross-claimants’ chances of success in the cross-claim or in the proceeding on the principal action. 

6. There is a quantum of risk that the cross-claimants would not be able to satisfy a costs order in respect of the second cross-respondents in the event of them being unsuccessful in a claim against those cross-respondents.  However, this must be qualified by stating that while it is apparent that the present cash-flow position of the cross-claimants would make them unable to provide security for costs, it cannot be concluded with certainty that they would not have adequate assets to enable recovery of a costs order.  The evidence is simply not definitive on that aspect and is open to a number of conjectural and speculative elements. 

7. The use of the power to order security for costs has the prospect of shutting out the cross-claimants from making a genuine claim against the second cross-respondents.  It would have the consequence of shutting the cross-claimants out of the litigation or otherwise stultifying them in the conduct of the litigation.  This is in circumstances where the cross-claim is brought as an expression of the defence in the principal action. 

8. This is a case where the impecuniosity of the cross-claimants in terms of present cash flow arises out of the act in respect of which relief is sought.  At the heart of the dispute between the applicants and the respondents in the principal action is the liability of the Growers under the Lease and Management agreement, a liability presently repudiated and resulting in non-payment of management fees to the respondents/cross-claimants. 

9. There are no particular elements of public interest save the public interest in achieving a balance between protection to the second cross-respondents on the one hand and on the other hand avoiding injustice to the cross-claimants by shutting them out of or otherwise stultifying their litigation. 

10. There is a particular matter relevant to the exercise of the discretion and that is the arguable position that the second cross-respondents are closely bound up with and interrelated with the claims and cross-claims between the applicants and the Mowen Group as respondents.  That is an important consideration to the exercise of the discretion.  It is not necessary to make findings of fact on each of the allegations of the participation by Mr Joyce and Mr Lingard in the aggressive conduct against the Mowen Group because some if not all of those issues will fall to be made the subject of findings of fact in relation to the principal action.  It is apparent, however, that for the purposes of this interlocutory application there is evidence making that position arguable. 

    CONCLUSION

11. In these circumstances I do not consider it is appropriate to exercise the discretion in favour of making an order for security for costs.  As the motion therefore necessarily fails against the corporate cross-claimants it follows an order should not be made against the non-corporate cross-claimant.  Accordingly, the notice of motion will be refused. 

I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice
RD Nicholson.

Associate:

Dated:             21 August 2003

Counsel for the Applicants/Second Cross-Respondents:	Mr ML Bennett
Solicitor for the Applicants/Second Cross-Respondents:	Bennett & Co
Counsel for the Respondents/Cross-Claimants:	MR GE Taylor
Solicitor for the Respondents/Cross-Claimants:	Taylor Linfoot & Holmes
Date of Hearing:	21 July 2003
Date of Judgment:	21 August 2003