Case: P S Chellaram &amp; Co Ltd v China Ocean Shipping Co [1991] HCA 36 ; (1991) 102 ALR 321
Outcome: followed
relies on P S Chellaram &amp; Co Ltd v China Ocean Shipping Co [1991] HCA 36 ; (1991) 102 ALR 321 ( Chellaram ). In that case, the respondents to an appeal pending in the High Court sought an order that the appellant provide security for the costs of the appeal. The application was made pursuant to the provisions of O 70 r 7 of the High Court Rules , s 1335 of the Corporations Law and the inherent jurisdiction of the High Court. McHugh J summarised the ground of the application as being that the appellant was a company incorporated in Hong Kong, had no assets in Australia, and had a deficiency of shareholders' funds of more than $HK22 million. His Honour stated (at 323): To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction. In the following paragraph, his Honour remarked that not only was the appellant resident out of, and without assets within, Australia, but also it was "hopelessly insolvent". An individual who was a major shareholder in the appellant's business proffered an undertaking to meet any costs ordered to be paid by the appellant up to the amount of the security being sought by the respondent, but there was no evidence concerning his financial position, the financial position of the other major shareholder of the appellant, or evidence of how the appellant's own costs were being funded. The present applicants correctly point out that the circumstances of the present case differ from those in Chellaram in relation to the insolvency of the party against whom the order for security was sought. This point of difference does not, however, automatically deny the proposition that great weight should be given to the fact that a party against whom the order for security is sought is a foreign resident without assets within the jurisdiction. Indeed, the present applicants accept that an order for security will be made in those circumstances unless other factors overcome the weight to be accorded to them. The application raises the question what is meant by "assets within the jurisdiction" for present purposes. (i) Overall solvency of the applicants I am not persuaded by the considerations referred to by the applicants to think that the "great weight" to which McHugh J referred in Chellaram should not be attached to the circumstance that both applicants are foreign corporations who have no readily realisable assets in Australia against which an order for costs could be enforced without difficulty or delay. Ultimately, the applicants' submission is that in view of the size and wealth of Rare Breed and the Campari Group, the considerable revenue that Rare Breed derives from the Australian market, and its apparent commitment to expand its operations in that market, it is simply unthinkable that it would not satisfy an adverse costs order. According to this approach, the presence or absence of assets in Australia is irrelevant. In my respectful opinion, this is the wrong approach. Lodestar is entitled to have its present application for security determined on the basis that it will have to enforce the costs order hypothetically made in its favour. It is not appropriate to determine the application on the assumption that the applicants will respond to an order that they pay costs with immediate compliance. At that time they may hold a certain view of the course that the proceeding has taken and determine not to satisfy the costs order unless forced to do so.