CATCHWORDS
SECURITY FOR COSTS - factors relevant to exercise of court's discretion - whether reason to believe applicant corporation unable to pay respondents' costs - whether Corporations Law s 1335 applies where no evidence of insolvency - manner of exercise of court's discretion.
COSTS - quantum of estimate for purpose of application for security for costs - whether separate provision for security for costs appropriate where one of respondents alleged to be employee of another - consideration of accuracy of estimate of costs.
Corporations Law s 1335
Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1 QB 609
Erolen v Baulkham Hills Shire Council (1993) 10 ACSR 441
Bryan E Fencott and Associates Pty Ltd v Eretta Pty Limited (1987) 16 FCR 497
Ilat Nominees Pty Ltd v Murragong Nominees Pty Ltd (1980)
48 FLR 385
K P Cable Investments Pty Limited v Meltglow Pty Limited & Ors (unreported, Federal Court of Australia, Beazley J, 28 February 1995)
BJC MEDIA PTY LIMITED v
AUSTRALIS MEDIA LIMITED & ORS
No. NG 877 of 1994
Tamberlin J
Sydney
22 March 1995
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 877 of 1994
GENERAL DIVISION )
BETWEEN: BJC MEDIA PTY LIMITED
Applicant
AND: AUSTRALIS MEDIA LIMITED
First Respondent
PETER ROSE
Second Respondent
MARK COLLIER
Third Respondent
CORAM : TAMBERLIN J
PLACE : SYDNEY
DATED : 22 MARCH 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. Within 28 days, the applicant gives security for costs in the amount and in the form set out below.
(a) In the case of the first respondent in the sum of $24,000, such sum either:
(i) to be paid into a joint account to be opened in the names of the solicitor for the applicant and the solicitor for the first respondent, with a bank or other like financial institution, such sum and any interest accruing thereon to abide the further order of the Court; or
(ii)to be secured by an insurance or bank bond in a form to be settled by the Registrar;
(b) In the case of the second respondent, in the sum of $17,000 such sum either:
(i) to be paid into a joint account to be opened in the names of the solicitor for the applicant and the solicitor for the second respondent, with a bank or other like financial institution, such sum and any interest accruing thereon to abide the further order of the Court; or
(ii)to be secured by an insurance or bank bond in a form to be settled by the Registrar.
2. Until such security is provided as aforesaid, the applicant is not to be at liberty to take any further steps in these proceedings as against the first and second respondents.
3. The applicant pay the costs of these motions of the first and second respondents.
4. Liberty be reserved to the first and second respondents and each of them in the event that the applicant fails to provide such security within the time limited to apply for an order that the proceedings be dismissed.
5. Liberty be reserved to the first and second respondents and each of them to apply at any time for an order that the amount of such security be increased.
NOTE : Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 877 of 1994 GENERAL DIVISION )
BETWEEN: BJC MEDIA PTY LIMITED
First Applicant
AND: AUSTRALIS MEDIA LIMITED
First Respondent
PETER ROSE
Second Respondent
MARK COLLIER
Third Respondent
CORAM : TAMBERLIN J
PLACE : SYDNEY
DATED : 22 MARCH 1995
REASONS FOR JUDGMENT
Nature of Application
Before me are two notices of motion which seek security for costs. They are made by Australis Media Pty Limited ("Australis") and Peter Rose ("Rose"), who are respectively the first and second respondents to the main proceeding brought by BJC Media Pty Limited ("BJC"). The matter is grounded on alleged breach of contract, estoppel and misleading and deceptive conduct.
Section 1335 of the Corporations Law ("the Law") provides:
"(1)Where a corporation is plaintiff in any action ... the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in .... its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given."
The claim by BJC is for an amount in the order of $500,000.
The evidence before me consists of an affidavit by the solicitor for Australis, which attaches a search of the Australian Securities Commission ("ASC") records. This discloses that the net assets of BJC are $10,000. The corporation was registered on 4 February 1993 and its principal activity is said to be "television entertainment". The directors and shareholders are William Collins, a well-known television personality ("Bill Collins"), and his wife. The paid up capital of the corporation is $10,000.
The most recent annual return shows that there was no operating profit or loss after income tax for the financial year ended 30 June 1994.
The above affidavit also asserts that the estimated party-party costs of Australis are in the order of $35,500 for preparation and costs of the hearing. Mr Watson, solicitor for Rose, asserts in his affidavit that the party-party costs in respect of his client are estimated to be $26,000.
There was no cross-examination on the above affidavits by the solicitor for BJC, nor was there any evidence tendered or adduced on behalf of BJC as to its present financial position.
The statement of claim alleges that Rose was employed during the relevant period by Australis as its Programming Consultant. In his Defence, Rose admits that he was the Managing Director of Rose Communications Pty Limited which was engaged as a consultant by Australis during that time but otherwise denies the allegations.
The third respondent, Mark Collier, ("Collier"), is an employee of Australis and does not seek security "at this stage".
BJC was referred to as a "loan out company", which allegedly made arrangements to provide the services of Mr Collins to Australis. These services included the use of the name, image and likeness of "Bill Collins" for the promotion of Australis Pay Television, and services as a consultant regarding which films should be screened and as to the way in which such films should be screened.
On behalf of BJC, a number of matters were asserted from the bar table as to the resources of BJC but no evidence at all was provided, either orally or in written form.
It was further suggested that there was no evidence BJC was insolvent and that therefore s 1335 of the Law did not apply. However, the section requires not insolvency but simply that based on credible evidence there is reason to believe that the applicant corporation will be unable to pay the costs of the respondent. Once this is shown the Court has a discretion to require sufficient security for the costs to be given and to stay proceedings until security is provided.
The discretion must be exercised judicially and BJC referred to the judgment of Lord Denning MR in Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1 QB 609 at 626 where it was pointed out that even where it is shown that the company appears to be unable to pay the costs of the other parties, it is not mandatory that the Court should order security, but that it still retained a discretion. There is no burden one way or another as to the way in which such discretion should be exercised. The discretion is to be exercised in all the circumstances of the case without any predetermined inclination for or against awarding security. This is a view which I favour. But there is a contrary view that the relevant discretion is not an unfettered one, but must be exercised in accordance with established principles. See for example Erolen v Baulkham Hills Shire Council (1993) 10 ACSR 441. But cf: Bryan E Fencott and Associates Pty Ltd v Eretta Pty Limited (1987) 16 FCR 497.
Attention was drawn, in the course of argument on behalf of the applicant, to a list of matters which could be relevant on the question of providing security, depending on the circumstances of each case. On behalf of BJC it was submitted that regard must be had to whether the proceeding had a reasonable prospect of success; whether it was a bona fide claim; whether the claim for security was oppressive and/or being used to stifle a genuine claim and whether the company's want of means was brought about by the respondent's conduct, such as delay in payment. Another factor to take into account was whether the claim or any part of it had been admitted. These matters were applied by Smithers J in this Court in Ilat Nominees Pty Ltd v Murragong Nominees Pty Ltd (1980) 48 FLR 385. The relevant authorities are comprehensively reviewed in Bryan E Fencott and Associates Pty Limited at pp 505-512 by French J; and by Beazley J in K P Cable Investments Pty Limited v Meltglow Pty Limited & Ors (unreported, Federal Court of Australia, Beazley J, 28 February 1995) at pp 15-19.
The circumstances of the present case are quite different from those before Smithers J in Ilat, because in that case, his Honour was prepared to infer from the material before him that the applicant's lack of funds was caused by the misrepresentations alleged under the Trade Practices Act 1974 (Cth).
There is no evidence to that effect in the present case. Nor in the present application is there any evidence that the claim for security is being used to stifle a genuine claim. There is no suggestion that the action will not proceed if an order for security for costs is made.
Accordingly, I am left with the uncontradicted evidence that the estimated party-party costs are very substantially in excess of the net assets of BJC, in a proceeding where the applicant's claim is in the order of $500,000.
In these circumstances, I am satisfied on evidence which I find credible that it is appropriate under s 1335 that there should be an order as to security for costs and that the proceeding should be stayed until the security is given.
Quantum
BJC submits that the costs claimed are excessive on their face in two respects. First, in relation to the Australis costs, it is said that costs of $5,000, for example, for the defence, discovery list, and inspection of documents is clearly excessive. It is said, more generally, that for a matter which involves 2 days hearing time that costs of $35,500 for Australis are clearly excessive, and that the costs for Rose of $26,000 are also excessive on a similar basis.
As to the first matter, the deponents to the affidavits were not cross-examined as to quantum or any other matter. It was submitted on behalf of Australis that discovery could involve a great number of documents including, in particular, matters going to mitigation of BJC's alleged loss and that the sum of $5,000 was reasonable. This submission was also relied on, on behalf of Rose.
Second, it was said for BJC that Rose was in effect an employee of Australis and there should not be any allowance for two different sets of representatives with the consequence that two sets of costs might be allowed. For Rose, it was submitted that the defence asserted that Rose was a consultant and was being sued in his own right for $500,000. In these circumstances, it was reasonable that there be two sets of costs.
In the absence of evidence to the contrary, and in the absence of any cross-examination, I accept that Rose should have separate provision for security for costs.
However, I have reservations in relation to the estimates made at this very early stage of the proceedings, and as to whether they can be accurate. I also have some reservations as to whether there may not be duplication of costs between parties. No attempt has been made to itemise or break up the costs into components, in order to provide more information in relation to hours of work for instance, so as to enable a more meaningful appreciation to be obtained of the estimated costs and work involved. The figures given seem to me to be rough general "ball park" figures.
In addition, there is also the consideration that taxation of the party-party costs may well significantly reduce the amount of costs able to be claimed in the final analysis. In the event that the estimate proves to be inadequate, it is open to the parties to make a further application at a later stage. In these circumstances, I consider that an order for security for costs of $24,000 in favour of the first respondent and $17,000 in respect of Rose, will be adequate on the material presently before me.
Accordingly, I make the following orders:
1. That within 28 days, the applicant gives security for costs in the amount and in the form set out below.
(a) In the case of the first respondent in the sum of $24,000, such sum either:
(i) to be paid in to
a joint account to be opened in the names of the solicitor for the applicant
and the solicitor for the first respondent, with a bank or other like financial
institution, such sum and any interest accruing
thereon to abide the further order of the Court; or
(ii)to be secured by an insurance or bank bond in a form to be settled by the Registrar;
(b) In the case of the second respondent, in the sum of $17,000 such sum either:
(i) to be paid into a joint account to be opened in the names of the solicitor for the applicant and the solicitor for the second respondent, with a bank or other like financial institution, such sum and any interest accruing thereon to abide the further order of the Court; or
(ii)to be secured by an insurance or bank bond in a form to be settled by the Registrar.
2. Order that, until such security is provided as aforesaid, the applicant is not to be at liberty to take any further steps in these proceedings as against the first and second respondents.
3. Order that the applicant pay the costs of these motions of the first and second respondents.
4. Reserve liberty to the first and second respondents and each of them in the event that the applicant fails to provide such security within the time limited to apply for an order that the proceedings be dismissed.
5. Reserve liberty to the first and second respondents and each of them to apply at any time for an order that the amount of such security be increased.
I certify that this and
the preceding nine (9)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 22 March 1995
Solicitor for Applicant: Mr M S Cooper, of
Martin Cooper & Co
Counsel for First Respondent: Mr I M Jackman
Solicitor for First Respondent: Tress Cocks & Maddox
Solicitor for Second Respondent: Mr M W Watson, of
Harper Watson
Counsel for Third Respondent: Mr K P Smark
Solicitor for Third Respondent: Macree Scully Karras
Date of Hearing: 17 March 1995
Date Judgment Delivered: 22 March 1995
