Case: Bryan E Fencott &amp; Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Outcome: cited
Section 56 of the Federal Court of Australia Act 1976 confers a broad discretion on the Court to make an order for security for costs ( Bell Wholesale Co. Pty Ltd v Gates Export Corporation (1984) 2 FCR 1 per Sheppard, Morling and Neaves JJ; Cameron's Unit Services Pty Ltd v Kevin R Whelpton &amp; Associates (Australia) Pty Ltd (1986) 13 FCR 46 per Burchett J; Bryan E Fencott &amp; Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 per French J at 515) including an order for security in an appeal. The appellants concede that an order for security ought properly be made requiring the appellants to provide security. The appellants further concede that there is a jurisdiction to order security for costs prospectively and also power to order security for costs already incurred such as costs associated with the making of the application for security for costs. Having said that, the appellants contend that any order for security ought, in this case, to operate only prospectively. The first and third appellants are not in a position to be able to pay the first and second respondents' costs of the appeal if they are unsuccessful on appeal. On 9 August 2005, Sunstate Citrus (the third appellant) entered into a Deed of Company Arrangement. Recital A of the Deed records that on 23 June 2005, Mr Tracy [the director] resolved to the effect that in his opinion the company was insolvent or likely to become insolvent at some time in the future and that Mr Hambleton be appointed as administrator under Part 5.3A of the Corporations Act 2001 (Cth). Moreover, on 8 November 2006, Mr Tracy swore an affidavit in the respondents' application for security for costs in relation to the principal proceeding in which he said that neither the first nor third applicants [appellants] "has sufficient funds to provide that security either by 4pm tomorrow or at all". In the course of evidence during the trial, Mr Tracy conceded that the first applicant [appellant] did not have sufficient assets to meet any judgment ordered against it. Mr Tracy also conceded that as to the third applicant "it too has no assets". At trial, Mr Hambleton gave evidence that in his view there was "a strong prospect" that the third appellant had been "insolvent from incorporation". Plainly enough, there is no prospect of the third appellant paying any orders for costs against it and there seems little likelihood of any satisfaction from the first appellant. The respondents inevitably look to the individual, Mr Tracy, the second appellant for their costs should they be successful in the appeal. The second appellant is already subject to a substantial order for costs and neither the first nor the second appellant will be able to discharge those orders. Mr Tracy has not filed an affidavit in the proceeding by which he seeks to establish his capacity to satisfy existing costs orders or costs to be incurred except to say this. The appellants contend that $50,000.00 should be provided by way of security. Presumably, the appellants are in a position to provide that amount and will do so quickly in order to enable the appeal to proceed. The real question is what is the appropriate amount to properly secure the interests of the respondents?