FEDERAL COURT OF AUSTRALIA

Pearse v Wiseguy Pty Ltd [2005] FCA 222

WARREN VICTOR PEARSE v WISEGUY PTY LTD

No SAD 11 of 2005

FINN J

ADELAIDE

10 MARCH 2005

THE COURT ORDERS THAT:

1.         The respondent’s motion be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     This is a motion in an appeal filed by the respondent, Wiseguy Pty Ltd, against the appellant, Warren Victor Pearse seeking security for costs under s 56 of the Federal Court of Australia Act 1976 (Cth). 

2                     The appeal itself relates to a decision of a Federal Magistrate which summarily dismissed an application by Mr Pearse to have a bankruptcy notice set aside under s 41 of the Bankruptcy Act 1966 (Cth).  Mr Pearse acknowledged in those proceedings that he was in debt to Wiseguy in the amount of $6,609.30.  He nonetheless claimed that Wiseguy owed him a substantially greater sum of money than that debt.  In support of that he referred to legal proceedings that had been initiated in the District Court of South Australia claiming the sum of $299,450.00 from Wiseguy.  The stated plaintiff in that proceeding was a company, Oakstaff Pty Ltd, which was apparently trustee for a unit trust called FM Media Trust, the sole beneficiary of that trust allegedly being Mr Pearse.  Mr Pearse was also the sole director of Oakstaff Pty Ltd.  It is clear on material filed before me that he is not a shareholder in that company. 

3                     The Magistrate dismissed Mr Pearse’s application on the short ground that Mr Pearse as debtor had no set off, counter claim or cross demand against Wiseguy by virtue of those proceedings, those proceedings being conducted by a third party.  The notice of appeal filed against the Magistrate’s judgment challenges findings of fact made by the Magistrate.  It appears from that judgment that the facts as found were based on evidence provided by Mr Pearse and are consistent with the pleadings in the District Court action which are in evidence before me.  It equally seems to be the case that the errors allegedly made by the Federal Magistrate are founded on information which was not before the Magistrate.  It would seem that a new case is sought to be run on the appeal.  It is not necessary for me on the present motion to express a firm view as to the prospects of the appeal although I would have to say that I do not consider them to be at all strong:  cf Chapman v Luminis Pty Ltd [2002] FCA 496 at [17];  given what I have said above.

4                     The sum of money founding the bankruptcy notice resulted from a costs order in proceedings in the Supreme Court of South Australia between Mr Pearse and Wiseguy which was determined adversely to Mr Pearse.  That proceeding arose out of business dealings between Mr Pearse and Wiseguy relating to the purchase and sale of FM radio licences and equipment and which still remain the subject of dispute between them.  In the proceeding Wiseguy sought successfully to have set aside a statutory demand served on it by Mr Pearse in respect of an alleged debt arising from the non-return of a deposit paid under a sale contract that had been terminated.

5                     The District Court proceedings brought by Oakstaff Pty Ltd to which I have referred was summarily dismissed by a judge of that Court on 10 February 2005 on the apparent basis that Oakstaff was not the proper plaintiff.  Mr Pearse had been provided with an opportunity to bring an application to be substituted as plaintiff but had not done so within the time directed by the District Court.  I would note that in dismissing Oakstaff’s action, the judge ordered it – I note not Mr Pearse – to pay Wiseguy’s costs on a indemnity basis.  I would also note that Mr Pearse has foreshadowed bringing fresh proceedings in his own name in respect of the dispute the subject of the dismissed proceedings.

6                     For the sake of completeness I would note that in the matter the subject of the present appeal Roberts FM ordered Mr Pearse to pay costs in the sum of $2,080.00.

7                     The apparent basis of the motion is that Mr Pearse has had costs orders made against him and has not complied with them.  This, when coupled with his alleged failure to make payments either on time or at all under contracts he had with Wiseguy (contracts I would note which are the subject of the parties’ ongoing dispute) and the limited prospects of the appeal itself make it fair and just to require Mr Pearse to secure Wiseguy’s costs of the appeal. 

8                     Turning now to the principles which inform the exercise of judicial discretion under s 56 of the Act, I would note the following.  It is well accepted that the discretion conferred by section 56 is unfettered and that each case must depend on its own circumstances:  Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4;  and must be determined without any particular predisposition:  Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 511. 

9                     The courts have over time identified considerations of which account will typically be taken in determining an application for security for costs.  I need only refer to the formulation of Hill J in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at [50,635] and of Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197.  Of those principles the following are of some importance to the present matter:

(i)         What are the chances of success of the appellant?

(ii)        Is there a risk that the appellant cannot satisfy a costs order?

(iii)       Will the making of an order stifle the appeal?

(iv)       Are there any particular discretionary matters distinctive to the circumstances of the case?

10                  This motion must, in my view, be seen in some degree against the background of the dispute between Mr Pearse and Wiseguy resulting from their business dealings.  This dispute has not been the subject of judicial resolution on the merits.  I am not in a position to express any informed view of where the merits actually lie.  Neither am I in a position to express a view on the propriety or otherwise of either party’s conduct as it related to the two contracts that were entered into between them.  Each party alleges non-compliance by the other. 

11                  The issue in the present appeal stands apart from that dispute though it arose out of it, and seemingly explains in part at least Mr Pearse’s reluctance to satisfy the costs order made against him by the Supreme Court of South Australia.

12                  I have already indicated my general view that I do not consider the prospects of the appeal to be strong.  Be this as it may, this provides no basis for awarding security of itself. 

13                  One of the real issues is said to be whether Mr Pearse is impecunious such that there is a risk that he could not satisfy a costs order if the appeal was unsuccessful.  The opportunity given him to dispel any doubt on this score has been most inadequately taken.  He has filed an affidavit listing in short form what he says are his assets and liabilities and which, on his estimation, would leave him richly solvent. 

14                  Apart from the fact that a significant proportion of his “assets” are represented by sums he is claiming actually or prospectively in litigations (including that foreshadowed against Wiseguy), he has left me with no reliable basis for concluding what are his actual financial circumstances, the more so because they are tied in significant measure to his interest in a company about the financial circumstances of which no true picture has been given.  I am not prepared to speculate about that matter but neither am I prepared to infer from the material before me that he is impecunious to the extent that there is a risk he could not satisfy a costs order on the appeal which Wiseguy estimates would be of the order of $5,000.  In saying this I, nonetheless, acknowledge that there is evidence before me that personal cheques drawn by Mr Pearse in Wiseguy’s favour in the aggregate sum of $5,500 in March 2004 were dishonoured although cash payments in that sum were then made.

15                  The most important consideration in this matter in my view is that, contrary to Wiseguy’s contention, Mr Pearse has not shown himself to be a serial defaulter in satisfying costs orders.  The original judgment debt (which was for costs) remains unsatisfied.  But it having been used to found the bankruptcy notice, Wiseguy cannot complain that it got caught up in proceedings under s 41 of the Bankruptcy Act 1966 (Cth).

16                  The only other unsatisfied costs order was that of Roberts FM.  It is hardly surprising that it has not been paid when the judgment sustaining it is challenged in this appeal.

17                  The order for costs made in the District Court proceedings, I again emphasise, was not made against Mr Pearse but against Oakstaff Pty Ltd. 

18                  It doubtless may be a cause of frustration to Wiseguy that it has been successful in three proceedings against Mr Pearse but has not enjoyed the fruits of that success.  Nonetheless, it was Wiseguy’s choice to proceed down the bankruptcy notice path to secure payment of its first costs order.  In so doing it exposed itself to the proceedings which have given rise to this appeal and to the second unsatisfied costs order.

19                  If I had otherwise concluded that this might have been a case in which it was appropriate to consider the ordering of security, I would have given Mr Pearse the further opportunity to put satisfactory evidence before the Court of his personal circumstances.  He is a litigant in person who has shown himself to be less than adept at protecting his own interest.

20                  However, I do not consider that taking such a course is necessary in the circumstances.  Mr Pearse may have engaged in misguided litigation against Wiseguy, but I cannot say on the material before me that it has been vexatious or that circumstances have been exposed that would justify ordering security.

21                  I will order that the Wiseguy’s motion be dismissed.

Associate:

Dated:              10 March 2005