Case: Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972
Outcome: applied
Two guidelines to add to this list which were suggested by Hill J in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50,635 are: 1. Whether there are aspects of public interest which weigh in the balance against the making of an order, and 2. Whether there are any particular discretionary matters peculiar to the circumstances of the case. 36 Obviously the factors of the individual case will to a significant degree determine the outcome because it is incumbent on the judge, in exercising discretion, to consider the circumstances of the case at hand. 37 The first and second respondents have sought an order for an award of security for costs in respect of their costs of these proceedings, essentially those not covered by the previous order of the Full Court. The onus is on them to satisfy the Court that it is a proper exercise of the Court's discretion to make such an order. It is clear that the costs represented in their application relate to costs incurred both during the 10 days of trial already held, and future costs. I propose to deal first with security in respect of costs yet to be incurred, and then consider the application of the respondents in respect of costs incurred during the 10 days of trial already held. 38 In my view an award of security in respect of future costs in this matter is appropriate. In forming this view I take into account the following factors: 1. The first and third applicants were ordered earlier this year to pay the first and second respondents security for costs up to the end of the first day of trial in the sum of $150 000: Sunstate Orchards Pty Ltd v Citrus Queensland Pty Ltd [2006] FCAFC 93. To paraphrase Emmett J in Checked-Out Pty Ltd v Eagle Eye Inspections Pty Ltd [2001] FCA 1475 at [26] , for reasons I detail below I do not see any reason at all to depart from the view of the Full Court in making an order that security for costs were payable, and note that the Full Court did not preclude a subsequent application at an appropriate time. 2. The first and third applicants have admitted that they are unable, from their own resources, to meet any costs order made against them in these proceedings. This admission of the applicants means that under both s 56 Federal Court Act and s 1335 Corporations Act the Court has a broad discretion, fettered only by the requirement that the Court act judicially, to order the applicant to give security for the payment of the respondent's costs (Branson J in Hopeshore Pty Limited v Melroad Equipment Pty Limited [2004] FCA 1445 at [3] ). 3. The application was filed and served on 22 November 2006 once it was clear that the trial would not finish on 24 November 2006, and the matter has been adjourned until May 2007. There is no issue of delay in respect of this application in respect of future costs. 4. Although the courts have shown reluctance to order security for future costs in respect of part-heard trial, on the basis that, if the applicant cannot provide security, it runs the risk of having wasted costs of the trial days already heard, the fact that the length of the proceedings was not foreseen is a factor which may influence the court to exercise its discretion in ordering security for those costs (see comments of Street CJ in Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at 308). 5. In my view it is not appropriate to form any views as to the strength of the applicants' case at this stage of the trial (cf comments of Hill J in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at 50,636). It is clear however that there are triable issues, and it has not been suggested to me that the case of the applicants is frivolous. 6. Insofar as this application is concerned, it is clear that the first and third applicants are unable to satisfy a costs order. I do not need to go to the evidence which has been heard to be so satisfied. Further, in my view the impropriety of reaching conclusions in this respect works both ways clearly the respondents strongly deny that their conduct has caused the impecuniosity of the first and third applicants (indeed it is a basis of the litigation), and in my view it is not proper at this stage when some, but not all, of the evidence has been heard, to make any findings as to this issue. I believe it is acceptable, however, to note evidence given in Court by Mr Hambleton, the administrator under the third applicant's deed of company arrangement, that in his opinion there was a strong prospect that the third applicant was insolvent from incorporation (TS 23 November p 572 ll 24-25). 7. Although the applicants contend that the reliance by the respondents on previous material filed in respect of security for costs is a tacit admission that nothing has occurred to justify this application for security for costs, I cannot accept that contention. Plainly, circumstances have altered. A trial which was listed for 10 days being the best estimate of Counsel as communicated to the Court is now manifestly running over that time. I shall consider this issue later in this judgment in relation to quantum. However I fail to see how the respondents, in relying on evidence of Mr McLellan that the costs for each day beyond 10 days would be $8166, is a tacit admission of the kind submitted by the applicants, notwithstanding that the affidavit of Mr McLellan was filed 27 March 2006. In my view the only 'admission' of the respondents in this respect is that their trial costs beyond 10 days would not exceed $8166 per day, and would not increase in the 2007 calendar year. 8. There is no evidence before me that the effect of an order awarding security for costs would be to stultify the litigation. Indeed as was clear during the hearing it would be the second applicant, Mr Tracy, who would be providing any security for costs ordered (TS 23 November 2006 p 585 ll 25-27). As pointed out by Jessup J in Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279 at [49] , there is an intrinsic connection between the 'stultify factor' and the 'persons standing behind' factor as described by Beazley J in KB Cable . That the second applicant and his wife, Mrs Adrienne Tracy, are principal beneficiaries (and in the case of the second applicant, the principal architect), of the litigation before me is also clear from the evidence (for example TS 17 November 2006 p 194 ll 31; TS 17 November 2006 p 219 ll 41-43; TS 20 November 2006 p 233 ll 16-19, and exhibit R15). Further, that Mr and Mrs Tracy are of considerable means was made clear from evidence before the Court, including a balance sheet describing assets and liabilities of the second applicant, Mrs Tracy and their companies as at 12 November 2004 (exhibit R14). The first and third applicants appear to be impecunious, however there is no evidence before me that the second applicant or Mrs Tracy are at a similar financial disadvantage notwithstanding the events which have resulted in the litigation before me. No undertakings have been provided by the second applicant or any other person as to the costs to which the first and third applicants may become liable. Accordingly in such circumstances security for costs may be ordered to ensure that those who stand to benefit from the litigation undertake some of the risks. ( Rosenfield Nominees Pty Ltd v Bain &amp; Co (1988) 14 ACLR 467 at 472-473; Acohs Pty Ltd v Merck Ltd [1997] FCA 573 ; Costa Vraca v Bell Regal Pty Ltd [2003] FCA 65 at [77] ; Harpur v Ariadne at 532; Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4; Bryan E Fencott Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 511; Interline Hydrocarbon at [35]; Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279 at [49] - [51] .) 44 This application is of particular interest because it has been brought 10 days into a trial which has been adjourned and is expected to run another seven days. Two cases where similar applications were brought are Southern Cross Exploration and Equity Access . 47 In Equity Access the matter was heard for three days, and then adjourned for two months when it was expected to continue for a further two and a half days. Hill J, in declining to make an order for security for costs in respect of the two and a half days of trial already heard, said: 'Weighing all the factors as best I can, the appropriate conclusion seems to me that the Court should order that, assuming the applicant's financial position to remain as it is, without the injection of further capital, the applicant provide security for costs, not in respect of the proceedings now past, but in respect of the remaining two-and-a-half days of hearing yet to come. I so conclude because it seems relatively clear at the moment that the applicant could not meet an order for costs if such were made even in respect of the costs not yet incurred. There is some evidence of intention that the capital of the company will be increased and that as a result the company might then be able to meet the costs of the proceedings...' ((1989) ATPR 40-972 at 50,638) 48 In my view there are, as Hill J said in Equity Access , a number of discretionary issues peculiar to the facts of the present case which are persuade me that it is not appropriate to order that costs of 10 days of the trial already heard be encompassed in an award for security for costs. They are as follows: 1. In cases where security for costs have been awarded in respect of costs already incurred, there is often a catalyst which distinguishes the case from the usual circumstance where security is awarded in respect of prospective costs, and therefore justifies the application. So, for example: &#8226; in Pooley , Procon and Bryan E Fencott the retrospectivity of the award for security was not in contention &#8226; in Turner and Pooley the respondents had only immediately prior to bringing the application discovered that the applicants were insolvent. In the case before me, no such catalyst is evident. 2. In my view it would be oppressive to require the first and third applicants to now pay security for costs for those 10 days of trial already held, when they could reasonably rely on the decision in Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 3) [2006] FCA 1498 as meaning that they were not subject to a security for costs order in respect of that part of the trial. Although Mr Bell on behalf of the respondents made no secret of the fact that, if the trial did not commence within the scheduled time, his clients would be making an application for security for costs in the sum of $200 000, in my view to allow the respondents to have security for costs which have already been denied would be unjust in the circumstances. 3. Following on from this point, I note that I had dismissed the application by the first and second respondents for security for costs for that part of the trial just heard, on the basis of delay in bringing that application . Notwithstanding that the matter has now been adjourned, that the respondents indicated that they would seek security for costs if the trial did not get underway, and that the respondents were prompt in renewing their call for security for costs in respect of the trial dates once it was clear that the trial would not conclude within the scheduled 10 days, nothing has occurred which impacts on the reasons I gave dismissing the application of the respondents in respect of security for costs for the 10 days of trial. 4. The fact that the trial was not completed within the 10 days could substantially be attributed to such actions which could properly be laid at the feet of the applicants including the failure of the applicants to comply with earlier directions in relation to exchanging objections to evidence (thus requiring valuable scheduled trial time to be spent dealing with such issues), an adjournment requested by the applicants for the entirety of Wednesday 15 November 2006, and the failure of a key witness of the applicants to appear at Court which required me to stand down the Court while I considered an appropriate ruling in the circumstances. Having said that, it appeared that, despite my formal direction that the parties seek to resolve objections to evidence in advance of the trial and further attempts by Counsel on this score, the respondents' objections to evidence required two days of trial time which was considerably more than had been anticipated. Further, while no blame at all attaches to Counsel the fact remains that the examination, cross-examination and re-examination of the second applicant extended over four days, which also appeared to be considerably more than had been anticipated. Accordingly, in light of these developments it would be unfair to lay fault for the failure of the trial to finish during the allotted time completely at the feet of the applicants. 49 Like Waddell J in Southern Cross and Hill J in Equity Access , weighing all the factors as best I can, in my view the appropriate conclusion in this case is that the respondents are entitled to an award for security for costs in respect of future costs, but not in respect of costs for that part of the trial recently heard.