Case: Bell Wholesale Co Ltd v Gates Export Corp (1984) 2 FCR 1
Outcome: considered
Once the threshold prescribed by s 1335 is satisfied, the discretion as to whether to order security for costs is an unqualified one: Bell Wholesale Co Ltd v Gates Export Corp (1984) 2 FCR 1 at 3; Sir Lindsay Parkinson &amp; Co Ltd v Triplan Ltd [1973] QB 609; Spiel v Commodity Brokers Australia Pty Ltd (In liq) (1983) 35 SASR 294; Ratepayers &amp; Residents Action Association Inc v Auckland City Council [1986] 1 NZLR 746. 25 Those cases reflect the policy underlying s 1335 that security may be ordered where a company appears to be in no position to provide security from its own resources where, in all the circumstances, it is reasonable that the resources of some other person or entity standing behind the company or of some person or entity for whose practical benefit the proceeding is being conducted should provide the security. The privilege of limited liability should not necessarily exclude those standing to benefit from proceedings by that company from having to provide support to it: Buckley v Bennell Design &amp; Constructions Pty Ltd (1974) 1 ACLR 301 at 303-304. The approach was conveniently expressed in Bell Wholesale 2 FCR 1 at 4 where the Full Court (Sheppard, Morling and Neaves JJ) said: "In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the applicant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means." 28 Cosdean accepts that, where the opposition to an application for security for costs is based upon the assertion that the effect of an order for security for costs will stultify a bona fide claim, the onus is upon the party asserting that effect to prove it: see Idoport Pty Ltd v National Australia Bank [2001] NSWSC 744 at [51] - [52] and [66] per Einstein J; Bell Wholesale 2 FCR 1 at 4; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at 583. The last-mentioned case concerned a litigation funder, whose resources were considered to be relevant. Cosdean also accepts that there is no evidence that it has made any approach to Deumer to fund or support the proceedings, or to support any order for security for costs. There is no evidence to demonstrate that Deumer is either unable or unwilling to support Cosdean's action or of any other financial hardship or commercial impracticability in it doing so. 29 Consequently, as I consider for the reasons given that the circumstances of Deumer are properly to be taken into account in considering the applications, it follows that Cosdean has not demonstrated that further orders for security for costs would stultify the proceedings. It may be that Deumer is unable to support the proceedings but that is purely speculation. If it were not prepared to, but had the capacity to do so, in circumstances where it had in effect the first call upon the proceeds of the action to the extent of some $1.8 million, that in itself would be a relevant consideration as to whether to make further orders for security for costs. 30 As noted above, the respondents accept that Cosdean's claim is brought in good faith.