FEDERAL COURT OF AUSTRALIA

GG Australia Pty Ltd v Sphere Projects Pty Ltd (No 2) [2017] FCA 664

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ interlocutory application filed on 27 October 2016 be dismissed.

2.    The respondents pay the applicants’ costs of the interlocutory application filed on 27 October 2016.

3.    List the proceeding for a case management hearing at 9.30 am on 21 June 2017.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 18 September 2015 GG Australia Pty Ltd (GG Australia), GG Townsville Pty Ltd (GG Townsville), GG Tuggeranong Pty Ltd (GG Tuggeranong) and Leigh Taylforth (collectively, Applicants) as prospective applicants filed an urgent application before start of a proceeding in this Court seeking urgent orders against Sphere Projects Pty Ltd (Sphere Projects) and Zoran Sever (collectively, Respondents). On that date, upon the Applicants jointly and severally giving to the Court the usual undertaking as to damages and, under r 7.01(3) of the Federal Court Rules 2011 (Cth) (Rules), an undertaking to start a proceeding in relation to the subject matter of the application within 14 days, the Court made orders restraining the Respondents from communicating with persons in certain broad categories relating to Gold’s Gym in relation to the financial position of any of the Applicants or any other of the Gold’s Gym entities, including in relation to their solvency or their ability to pay their employees or contractors.

2    In accordance with those orders the Applicants commenced a proceeding in this Court by the filing of an originating application and statement of claim against the Respondents. An amended originating application was subsequently filed.

3    Since the commencement of the proceeding, orders have been made on a number of occasions for the filing of a defence by the Respondents, which has been done, and for the filing of a reply and further evidence by the Applicants. On 27 October 2016 the Respondents filed an application for security for costs. It is that application which is now before me for determination.

nature of the proceeding

4    The Applicants were involved in a business conducting health clubs under the “Gold’s Gym” brand. Gold’s Gym USA appointed GGA Franchising Pty Limited (GGA Franchising), which is not a party to the proceeding, as sub-franchisor, with a right to offer and grant sub-franchises in Australia. Mr Taylforth is the sole director of GG Australia, GG Townsville, GG Tuggeranong and GGA Franchising. The Applicants’ claims are based on the following alleged conduct on the part of the Respondents:

(1)    email communications from Mr Sever, sent on his own behalf and on behalf of Sphere Projects, to individuals at Gold’s Gym USA in August 2015 which, it is alleged, conveyed to Gold’s Gym USA that GG Townsville and GG Australia were operating while insolvent and that the Australian management of those companies was “working hard to destroy and tarnish the name and reputation of the Gold’s Gym brand”;

(2)    oral statements made by Mr Sever for and on behalf of Sphere Projects to tradespeople and other individuals present or working at the construction site of a proposed Gold’s Gym in Tuggeranong on 7, 9 and 10 September 2015 which, it is alleged, conveyed, among other things, that GG Australia, GG Townsville and GG Tuggeranong were trading while insolvent, that the Applicants would not pay the tradespeople and that Mr Taylforth would soon be bankrupt;

(3)    email communications from Mr Sever, sent on his own behalf and on behalf of Sphere Projects, to GG Tuggeranong’s landlord on 10 September 2015 which, it is alleged, conveyed to the landlord that GG Australia, GG Townsville and GG Tuggeranong were operating while insolvent and were operating contrary to law;

(4)    communications made by Mr Sever for and on behalf of Sphere Projects to individuals working at Gold’s Gym in Fyshwick on or about 8 September 2015 which alleged that GG Australia, GG Townsville and GG Tuggeranong were insolvent and would be closed down soon and that the staff would stop getting paid; and

(5)    an email communication from Mr Sever, sent on his own behalf and on behalf of Sphere Projects, to the manager of Gold’s Gym in Townsville on or about 14 September 2015 which alleged that GG Townsville and GG Australia were operating while insolvent.

5    The Applicants allege that:

(1)    in making the various communications the Respondents engaged in misleading or deceptive conduct in contravention of s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL);

(2)    the communications were defamatory;

(3)    the Respondents published each of the communications; the statements and meanings conveyed by the communications were false; and the communications were published maliciously as part of a campaign by the Respondents aimed at exerting undue pressure on the Applicants so that each of GG Australia, GG Townsville and Mr Taylforth would yield to a claim by Sphere Projects that had been filed in the Supreme Court of Queensland; and

(4)    by making the communications the Respondents interfered with the Applicants’ contractual relations with Gold’s Gym USA, GG Tuggeranong’s landlord and the Applicants’ staff and various tradesmen. In doing so the Respondents induced or sought to induce each of those persons to breach their contractual relations with the Applicants or to prevent them from performing their obligations to the Applicants’ detriment.

6    As a result of the alleged conduct the Applicants seek declarations and claim damages, including damages pursuant to s 236 of the ACL; compensation pursuant to s 237 of the ACL; and interest and costs.

7    In their defence the Respondents:

(1)    deny that the natural and ordinary meaning of the first email sent in August 2015 to Gold’s Gym USA conveyed that GG Townsville and GG Australia were operating while insolvent;

(2)    admit that in August 2015 they sent an email to Gold’s Gym USA which in its natural and ordinary meaning conveyed that the Australian management of GG Australia and GG Townsville were working hard to destroy and tarnish the name and reputation of the Gold’s Gym brand;

(3)    deny that they made the alleged oral statements to tradespeople and other individuals present or working at the construction site of the proposed Gold’s Gym in Tuggeranong on 7, 9 and 10 September 2015;

(4)    admit that they sent an email to GG Tuggeranong’s landlord on 10 September 2015 which conveyed to the landlord that GG Australia, GG Townsville and GG Tuggeranong were operating while insolvent and were operating contrary to law;

(5)    deny that they made the alleged statements to individuals working at Gold’s Gym in Fyshwick on or about 8 September 2015; and

(6)    admit that they sent an email to the manager of Gold’s Gym in Townsville on or about 14 September 2015 which alleged that GG Townsville and GG Australia were operating while insolvent.

statutory framework and legal principles

8    The Respondents make their application pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) and r 19.01 of the Rules and, in relation to the corporate Applicants, pursuant to s 1335 of the Corporations Act 2001 (Cth) (Corporations Act).

9    Section 56 of the Federal Court Act and r 19.01 of the Rules relevantly provide as follows:

56     Security

(1)    The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.

(2)    The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.

…

(4)    If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.

…

And:

19.01     Application for an order for security for costs

(1)     A respondent may apply to the Court for an order:

(a)    that an applicant give security for costs and for the manner, time and terms for the giving of the security; and

(b)    that the applicant’s proceeding be stayed until security is given; and

(c)    that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed.

…

10    Section 1335 of the Corporations Act relevantly provides:

1335     Costs

(1)     Where a corporation is plaintiff in any action or other legal proceeding, 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 his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

…

11    The primary purpose of an order for security for costs is to ensure that a respondent, if successful in defending a proceeding, is able to obtain its costs ordered by the Court: Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 3) (2009) 181 FCR 152 at [100] (per Buchanan J).

12    In Hii v Federal Commissioner of Taxation (No 3) (2016) 238 FCR 304 Collier J considered an application for security for costs made pursuant to s 56 of the Federal Court Act and r 19.01 of the Rules. In doing so her Honour observed at [9] that it was well settled that there are no fixed rules that apply to the Court’s consideration of such an application and that the Court is only required to exercise the discretion judicially and according to the circumstances of each case. Notwithstanding that, her Honour went on to extract guidance from a review of the authorities that had considered such applications at [10] as follows:

… Relevant principles include the following:

•    Whether the application for security for costs has been brought promptly: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197.

•    Whether the applicant is a natural person or a corporation. Traditionally the courts are disinclined to order security against natural persons. However as Lindgren J observed in Knight v Beyond Properties Pty Ltd [2005] FCA 764 at [33] the state of being a natural person is no bar to an order for security for costs particularly when coupled with other factors (for example, an applicant’s impecuniosity and residence outside Australia).

•    Whether the applicant is impecunious such that the applicant would not be able to satisfy a costs order against it. The general rule is that where the applicant is a natural person he or she will not be required to provide security for costs merely because he or she is impecunious, however courts have nonetheless ordered security in such circumstances: Randall v Deputy Commissioner of Taxation (2008) 174 FCR 441; Goodman v Thomson Maloney & Partners Pty Ltd [2010] FCA 1264 at [21].

•    Whether such impecuniosity has been caused by the conduct of the respondent. Ordinarily before a court could accept that the plaintiff’s impecuniosity was caused by the defendant’s conduct, it would be necessary to form a provisional view as to the strength of the plaintiff’s case: Gleeson J in Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 at [40].

•    Whether an order for security for costs would stifle the litigation (Bell Wholesale Company Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4; Australian Equity Investors v Colliers International (NSW) Pty Ltd [2012] FCAFC 57 at [25]-[30]).

•    Whether the applicant is a foreign resident. The following observation of McHugh J in PS Chellaram & Company Ltd v China Ocean Shipping Company (1991) 65 ALJR 642 at 643; 102 ALR 321 at 323 is commonly cited in this respect:

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.

As explained by Weinberg J in Logue v Hansen Technologies Ltd (2003) 125 FCR 590 at [18], the clear rationale of this principle is:

to create a fund within this country against which a successful respondent may enforce a judgment for costs thereby enabling the avoiding of the risks, uncertainties and delays of attempting to enforce such a judgment in the applicant’s claimed country of residence.

•    Whether the party against whom security is sought is in substance a defendant. An order ought not to be made against parties who are defending themselves and thus forced to litigate: KP Cable Investments at 198.

•    The prospects of success of the applicant’s claim (although this has been treated as a minor issue in such cases as Ninan v St George Bank Ltd (2012) 294 ALR 190 at [39] and Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 at [3]).

13    A number of those factors are relevant to this case. First, security is sought not only against the corporate Applicants but against Mr Taylforth. In Knight v Beyond Properties Pty Ltd [2005] FCA 764 Lindgren J considered an application that an individual, Mr Knight, provide security for the respondents’ costs. At [32] his Honour noted that there is a disinclination to order an applicant who is a natural person to provide security, at least in the absence of some factor additional to impecuniosity. His Honour noted at [33] that a factor in addition to impecuniosity has been present in the cases in which natural persons have been ordered to provide security. Lindgren J declined to order security, noting at [34] that Mr Knight was a natural person residing in Australia; that, while there may be a suspicion, there was no satisfactory evidence that he was impecunious; that his pleading did not establish that he had poor prospects of success; that his changes of name and address were not a dominant consideration; that his failure to state his address in the originating process told against him only marginally in light of his correcting the omission at the hearing; and that the presence of the cross-claim told against the ordering of security.

14    In Di Francesco v Pioneer Energy Pty Limited (No 2) [2014] NSWSC 1923 (Di Francesco) Brereton J considered an application that the third and fourth plaintiffs, both of whom were corporations, give security for their costs. There his Honour was not satisfied, based on the evidence, that there was reason to believe that the relevant plaintiffs would be unable to pay the applicants’ costs. On that basis his Honour found that the ground for an order for security for costs was not made out. However, Brereton J went on to briefly consider the various discretionary arguments that had been advanced. One of the plaintiffs was a natural person. Relevantly at [24] his Honour said:

More decisively, the albeit belated acknowledgement on the part of the second plaintiff that he would be liable for any costs order that might be made against the third or the fourth plaintiff would have resulted in the refusal of the application on discretionary grounds. The existence of a natural plaintiff in the jurisdiction, regardless of his or her financial capacity or even solvency, has always been a very important consideration against making an order for security against a joint foreign plaintiff or a joint corporate plaintiff. I accept that it is not decisive, and that where there is not an overlap of the cases brought by the natural plaintiff with the case brought by the plaintiff who would otherwise be amenable to a security order, the court may well still make an order. I considered these matters in Street v Luna Park Sydney Pty Limited [2006] NSWSC 1317, in particular as follows:

[27]    It is undoubtedly relevant to the exercise of the discretion to order security that there is one or more individual co-plaintiffs against whom an order for security could not or would not be made [Pearson v Naydler [1977] 1 WLR 899; Interwest Ltd v Tricontinental Corporation Ltd & Anor (1991) 5 ACSR 621 at 635 (Ormiston J); Fiduciary Ltd & Ors v Morningstar Research Pty Ltd & Ors (2004) 208 ALR 564]. This appears to have originated with cases in which there was a plaintiff outside the jurisdiction (against whom security might be ordered) but also a plaintiff, albeit an impecunious one, within the jurisdiction. The view was taken that the defendant's position should not be improved by the mere circumstance that there was an additional plaintiff. In other words, as the defendant would not have been able to get an order for security against the impecunious plaintiff in the jurisdiction, it should be no better off by reason of the circumstance that a plaintiff outside the jurisdiction was also joined [Sykes v Sykes (1869) LR 4 CP 645; D'Hormusgee & Co v Grey (1882) 10 QBD 13]. …

[28]     However, this is not an absolute rule, as appears from the judgment of Plowman J in John Bishop (Caterers) Ltd v The National Union Bank Ltd [1973] 1 All ER 707; see also Fiduciary Ltd v Morning Star Research. Where there is a complete identity between the corporate plaintiff and the individual plaintiff, so that all plaintiffs are suing in relation to one and the same defendant, and all plaintiffs must succeed or fail together, security will not ordinarily be ordered against only one of them [Bishop, 709–710]. But where the various plaintiffs’ claims have different elements and aspects, so that they will not all necessarily succeed or fail together, although the existence of individual plaintiffs is a factor that diminishes the defendant's claim to be entitled to security against the corporate plaintiff, it does not extinguish it [Interwest Ltd v Tricontinental]. And where the degree of overlap between the claim of the individual and corporate plaintiffs is comparatively small, such that separate orders for costs might be made in respect of each of the plaintiffs, it is usually appropriate that an order for security be made [Bishop, 716; Fiduciary v Morning Star, 33–36].

15    The strength of the Applicants’ case is also an issue that has been raised. In Staff Development & Training Centre Pty Ltd v Commonwealth of Australia [2005] FCA 1643 Spender J noted at [11] that the extent to which the strength of an applicant’s case may be taken into account has “been the subject of not wholly consistent observations in the cases”. His Honour then referred to the observations of Pincus J in Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 that:

[A]t the stage of hearing an application for security for costs there will usually be no information on which the Court can possibly assess the merits of the applicant’s claim. Accordingly, at the hearing of such an application, detailed investigation by the parties into the likelihood or otherwise of the success of the action will not be the right course to adopt”.

16    Spender J also referred to Jodast Pty Ltd & Ors v A & J Blattner Pty Ltd & Ors (1991) 104 ALR 248, where Hill J suggested that “the situation might be otherwise where the case for the applicant appeared on the face of the pleadings to be merely frivolous or vexatious”. Finally, Spender J referred to the observations of French J in Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514 that:

It is consistent with authority and the existence of a broadly based discretion that the bona fides and merits of the claim be taken into account where there is material from which some assessment can be made.

17    Section 1335 of the Corporations Act requires that an applicant for security establish by “credible testimony” that there is reason to believe that the corporation will be unable to pay the defendant’s costs if successful in his, her or its defence. If that ground is established, the Court then considers whether, as a matter of discretion, an order should be made and, if so, the quantum of any order to be made: KDL Building v Mount [2006] NSWSC 474 at [6] per Brereton J.

18    The first step in determining whether an order for security should be made under s 1335 is a jurisdictional question. In Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205 von Doussa J formulated what became a “generally accepted test” for the determination of when the power of the court arises under s 1335.

19    Subsequently, in Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 (Livingspring) the Victorian Court of Appeal (Maxwell P and Buchanan JA) declined to apply the test formulated by von Doussa J, holding at [13]-[14]:

13    This formulation has been applied many times. In our respectful view, however, it is wrong to substitute a judicial exposition for the words of the statute itself. As the High Court has stated repeatedly in recent years, it is the words of the statute which govern. Kirby J made the point very clearly in Central Bayside General Practice Association Ltd v Commissioner of State Revenue:

Where the law in issue is expressed in the form of an Act of an Australian legislature, it is in the words of that statute that the content of the legal obligation is to be found, not in judicial synonyms, restatements or approximations.

14    The language of the statutory test is clear. The court must address the question which the section poses:

Is there reason to believe that the corporation will be unable to pay the defendant’s costs?

There is no warrant for – and no apparent advantage in – adopting the much lengthier Beach Petroleum formulation, which requires the court to decide whether there is:

reason to believe there is a real chance that in events which can fairly be described as reasonably possible the corporation will be unable to pay, … even if in other events which can also be fairly described as reasonably possible the plaintiff corporation would be able to pay …

(footnotes omitted)

20    The court in Livingspring went on to note at [15] that the phrase “reason to believe” is the “touchstone of jurisdiction”. It requires “a rational basis for the belief” and the making of a judgment as to whether there is a risk that the corporation will be unable to pay.

21    Subsequent decisions in this Court have followed the approach in Livingspring: see for example Topcide Pty Limited v Charter Financial Planning Limited [2010] FCA 1151 at [10] (per Katzmann J); Health Information Pharmacy Franchising Pty Ltd v Khoo [2010] FCA 438 (Khoo) at [11] (per Yates J); Professional Vending Services Pty Ltd v Christou [2010] FCA 580 at [10]-[11] (Bromberg J); Headway Group Pty Ltd v Spyre Projects Pty Ltd [2016] FCA 874 at [11] (per Moshinsky J). I also respectfully adopt the approach in Livingspring.

22    The evidentiary onus to satisfy the Court that an applicant will be unable to meet a respondent’s costs if it successfully defends the litigation lies with the respondent. Once that is established, the Court’s power to order security for costs is triggered. At that point the evidentiary burden shifts to the applicant to satisfy the Court that, taking into account all relevant factors, its discretion should be exercised to refuse security: Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd [2010] FCA 1222 at [9] (per Katzmann J).

23    The application against the corporate Applicants is based on their impecuniosity. That being so, there is no practical difference in the approach to deciding whether to make an order under s 56 of the Federal Court Act or s 1335 of the Corporations Act. In Khoo at [5] Yates J said:

Unlike s 1335(1) of the Corporations Act, s 56 of the Federal Court Act does not require “credible testimony that there is reason to believe that the corporation will be unable to pay the costs of [the respondents]”. The differences between the two provisions have been considered by decisions of this Court: see, for example, Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd (2009) 181 FCR 360 at [6]-[8]; MHG Plastic Industries Pty Ltd v Quality Assurance Services Pty Limited [2002] FCA 821 at [8]-[9]. However, given that the applicant’s impecuniosity was the cornerstone of their motion, the respondents submitted that the Court’s jurisdiction under both provisions was, in this case, relevantly identical. They proceeded on the basis that they were required to satisfy the threshold requirement of s 1335(1) in order to succeed on the motion. This approach is understandable. Where the only asserted basis for an order for security relates to the alleged inability of the applicant to meet a future costs order, it is difficult to see in practice a difference between the operation of the two provisions: see the observations of Perram J in Soul Pattinson Telecommunications Pty Ltd v Subex Americas Inc [2009] FCA 651 at [6].

the Respondents’ evidence

24    The Respondents relied on two affidavits sworn by their solicitor, Rhondda Nicholas, on 26 October 2016 (Ms Nicholas’ First Affidavit) and 15 March 2017 (Ms Nicholas’ Second Affidavit) respectively other than a letter annexed to Ms Nicholas’ First Affidavit from KB Legals, the former solicitors for the Applicants, dated 22 August 2016. The evidence relied on by the Respondents is summarised below.

25    Ms Nicholas says that in the period 13 May 2016 to 6 July 2016 she wrote to the Applicants’ solicitors on four occasions. In the first of those letters, dated 13 May 2016, Ms Nicholas noted that no particulars of loss and damage in relation to either the misleading or deceptive conduct claim or the defamation claim had been provided. In the third of those letters, dated 17 June 2016, Ms Nicholas requested evidence of the Applicants’ ability to meet an adverse costs order. The other two letters were follow-up letters.

26    The next letter Ms Nicholas wrote to the Applicants’ solicitors was dated 15 July 2016. In that letter, among other things, Ms Nicholas requested that, within seven days of the date of the letter, each of GG Townsville, GG Australia and Mr Taylforth “provide documents supporting the ability of each of them to pay an adverse costs order in the range of $100,000 to $150,000”, including but not limited to statements of assets and liabilities and tax returns for the last two years and the last six months of business activity statements.

27    On 2 August 2016 Ms Nicholas then received an email from Kristyl Burnett of KB Legals which included the following:

Our clients dispute a number of matters that are raised in your correspondence concerning security for costs. We will respond to those matters in detail in due course. However, in summary, we note that your client, Mr Sever, has, since the injunction granted by the Court, continued with his campaign to undermine our clients' financial position. Any application for security for costs will fail, because your clients have contributed to, and have indeed caused, any impecuniosity. In any event, there cannot be any basis for seeking security against Mr Taylforth. The matters that you have raised concerning him are without any basis.

28    Insofar as evidence led by the Respondents of the financial position of the Applicants is concerned, first, in relation to GG Australia the evidence is that:

(1)    it was registered on 21 June 2011;

(2)    Mr Taylforth is its sole director, secretary and shareholder; and

(3)    according to searches annexed to Ms Nicholas’ First Affidavit, it has no real property registered in its name in New South Wales or Queensland. Ms Nicholas gives evidence that, in addition, it has no real property registered in its name in Victoria or Western Australia, although real property searches for those states have not been provided.

29    Secondly, in relation to GG Townsville the evidence is that:

(1)    it was registered on 10 November 2014;

(2)    Mr Taylforth is its sole director and secretary;

(3)    Rambo Enterprises Pty Ltd (Rambo Enterprises) is its sole shareholder. It holds 50 class A shares and 50 class B shares. Rambo Enterprises was registered on 1 December 2010. Its sole director, secretary and shareholder is Erin May Taylforth; and

(4)    according to searches annexed to Ms Nicholas’ First Affidavit, it has no real property registered in its name in New South Wales or Queensland. Ms Nicholas gives evidence that, in addition, it has no real property registered in its name in Victoria or Western Australia, although real property searches for those states have not been provided.

30    Thirdly, in relation to GG Tuggeranong the evidence is that:

(1)    it was registered on 28 October 2014;

(2)    Mr Taylforth is its sole director and secretary;

(3)    Mrs Taylforth is its sole shareholder; and

(4)    according to a search annexed to Ms Nicholas’ First Affidavit, it has no real property registered in its name in New South Wales. Ms Nicholas gives evidence that, in addition, it has no real property registered in its name in Queensland, Victoria or Western Australia, although real property searches for those states have not been provided.

31    Fourthly, in relation to Mr Taylforth the evidence is that:

(1)    historical personal name extract searches extracted from the Australian Securities and Investments Commission (ASIC) database on 15 July 2016 for the name of “Taylforth, Leigh” and “Taylforth, Leigh Mathew” show that:

(a)    Leigh Taylforth is a director and secretary of two registered companies and a third company which is under external administration or has a controller appointed. The address shown for each company was in the Australian Capital Territory; and

(b)    Leigh Mathew Taylforth is a director and secretary of 18 registered companies including GG Australia, GG Townsville, and GG Tuggeranong. The addresses shown were variously 55 Walker Street, Redfern NSW and addresses in the Australian Capital Territory; and

(2)    according to searches annexed to Ms Nicholas’ First Affidavit, Mr Taylforth has no real property registered in his name in New South Wales or Queensland. Ms Nicholas gives evidence that, in addition, Mr Taylforth has no real property registered in his name in Victoria or Western Australia, although real property searches for those states have not been provided.

32    In Ms Nicholas’ Second Affidavit she says that she conducted some research into the address 55 Walker Street, Redfern NSW, which she says is listed as Mr Taylforth’s address on the ASIC search for “Golds Gym Australia Pty Ltd”. I take that to be a reference to the ASIC search for GG Australia carried out on 15 July 2016. I note that a subsequent search carried out by Ms Nicholas on 13 March 2017 records Mr Taylforth’s address as 22 Mavis Latham St, Franklin ACT.

33    Ms Nicholas annexes two newspaper articles to her second affidavit. I infer that they constitute her research. Those articles, both dated 25 September 2014, are from The Daily Telegraph and are titled: “Drug dealers and meth dens: How junkies are still buying and using drugs in Sydney unit block just a month after Harriet Wran and co-accused allegedly committed murder” and “Haunting symphony of life at infamous unit block where drug dealer Daniel McNulty was brutally stabbed to death”. The first article refers to and is about the “McKell tower”. It does not provide the address of that property other than saying that it is in Redfern. The second article refers to the “cavernous, dank and depressing McKell public housing block at 55 Walker Street, Redfern”.

34    Fifthly, according to searches annexed to Ms Nicholas’ Second Affidavit, Mrs Taylforth has no real property registered in her name in New South Wales, Queensland or the Australian Capital Territory. Ms Nicholas gives evidence that, in addition, Mrs Taylforth has no real property registered in her name in Victoria or Western Australia, although real property searches for those states have not been provided.

35    Annexed to Ms Nicholas’ First Affidavit is a press release, extracts from Facebook and three articles, one of which appeared in the Townsville Bulletin and the remainder of which appeared in the Canberra Times. Relevantly:

(1)    the press release headed “Gold’s Gym expands aggressive growth plans in Australia with new deals”, dated 13 July 2016, reports that Gold’s Gym had “parted ways with its master franchisee, Leigh Taylforth” and that from 14 July 2016 “the following gym locations will no longer be affiliated with the Gold’s Gym brand: Fyshwick, Gunghalin, Tuggeranong, Bondi Beach, and Townsville”. I pause to note that the fact that GG Australia no longer operates the Gold’s Gym franchise in Australia is not in dispute, but the cause of the termination of the franchise arrangement remains an issue at the heart of this proceeding;

(2)    the article from the Townsville Bulletin, dated 14 July 2016, reports, among other things, that Gold’s Gym Townsville had had a dispute with its landlord and that it was shut;

(3)    the first article from the Canberra Times, dated 19 July 2016, principally reports on a dispute between Christos Kyrgios and Mr Taylforth over franchise agreements; and

(4)    the second article from the Canberra Times, dated 23 September 2016, principally reports on the closure of Gold’s Gym Tuggeranong.

36    The final matter dealt with by Ms Nicholas is an estimate of her clients’ costs of the proceeding. Ms Nicholas was admitted as a solicitor on 20 October 1995 and has had experience in running over 400 trials. Her charge-out rate is $400 per hour and the charge-out rate of a more junior solicitor, to whom she says she would delegate the day-to-day running of this matter, is $245 per hour. Ms Nicholas notes that the Respondents have incurred solicitor costs and disbursements as at the date of her affidavit but does not quantify those costs and disbursements. She then provides the following estimates:

(1)    a trial in this proceeding would run for four to five days;

(2)    the total costs for her clients to take the matter to judgment is likely to be within the range of $120,000 to $150,000; and

(3)    the following costs will be incurred by the Respondents to take the matter to judgment:

(a)    preparation of affidavits of multiple witnesses, including taking evidence from Mr Sever – $12,000;

(b)    issuing subpoenas to, among others, Gold’s Gym USA and tradespeople and making appearances at any applications in respect of those subpoenas – $10,000;

(c)    briefing an expert on insolvency and costs of an expert report on insolvency – $15,000;

(d)    briefing an expert on damages and costs of an expert report on damages – $10,000;

(e)    counsel fees to settle affidavits and prepare for and run the trial, including any interlocutory hearings – $50,000 for counsel (at $3,500 per day) and $10,000 for reader-level counsel (at $1,440 per day);

(f)    correspondence and other incidentals – $15,000; and

(g)    conducting discovery – $5,000.

consideration

The corporate Applicants

37    In order to engage the Court’s jurisdiction the Respondents must establish, by credible testimony, that there is reason to believe that the corporate Applicants will be unable to pay their costs if the Respondents are successful in their defence of the proceeding. In my opinion, the evidence relied on by the Respondents does not reach the requisite threshold. Beyond the admitted fact that the corporate Applicants are not trading because of the termination of the franchise agreement by Gold’s Gym USA, and the fact that they hold no real property, there is no evidence to satisfy me that they will be unable to pay the Respondents’ costs if the Respondents are successful in the proceeding.

38    The Respondents have put before the Court a series of company and property searches and some newspaper articles. That material discloses little beyond the identity of the office holders and shareholders of the corporate Applicants; that the corporate Applicants hold no real property; that the gyms are not operating; and that Mr Taylforth may be involved in disputes with other individuals. It does not rise to the level of establishing on the balance of probabilities that the corporate Applicants will be unable to pay the Respondents’ costs. As Brereton J found at [8] in Di Francesco when faced with corporate searches and real property searches to establish that the companies had no real property and had a limited or nominal paid-up share capital, such evidence does not begin to raise a case of reason to believe that a company will be unable to pay costs.

39    The Respondents submitted that this case could be distinguished from the circumstances faced by the court in Di Francesco. They submitted that that decision needs to be understood in the context of the well accepted jurisprudence identified in Strategic Financial and Project Services Pty Ltd v Bank of China Limited [2009] FCA 604, where at [15] Moore J noted that, where the Court is considering an application for security for costs under s 1335, it is required to form an opinion about “what the financial position of the applicant will be at the time of judgment”. That is, there is a requirement to make a judgment about future events.

40    The Respondents submitted that on the question of security for costs there needs to be a consideration of what the financial position of an applicant will be at the time of judgment, which mandates consideration of the success or otherwise of the applicant’s business and investments in the meantime. They contended that Brereton J’s comments were, in effect, concerned with a company that was a going concern. They gave the example of a family company which ran a business, held no real property, rented its premises and had next to no paid-up share capital, but had a business that was a going concern such that it would never be an appropriate applicant against which to order security for costs. That, they submitted, was not this case.

41    In Di Francesco Brereton J came to his conclusion on the basis of the evidence relied upon by the applicant for security. There is nothing to suggest that the observations of Brereton J were limited to the category of company contended for by the Respondents. Whether the corporate Applicants will have the ability to pay the Respondents’ costs at a point in the future is a matter on which the Respondents bear the onus. The fact that the corporate Applicants are not presently trading is not sufficient evidence upon which that burden of proof can be met.

42    At [9] Brereton J further observed that the inadequacy of the evidence relied upon by the applicants for security was “accentuated” where some evidence is tendered showing the company’s actual financial position. In that case, balance sheets of both the companies in question were produced. The same may be said here. That is, the corporate Applicants tendered a letter from their former solicitors dated 22 August 2016 to the solicitor for the Respondents which enclosed balance sheets as at 31 January 2016 and profit and loss statements for the period 1 July 2015 to 15 April 2016 for each of GG Australia and GG Tuggeranong.

43    According to its balance sheet GG Australia had total assets of $931,531, almost entirely comprised of fixed assets, principally gym equipment; total liabilities of $694,598; and total net assets of $236,933. According to its profit and loss statement GG Australia made a net profit of $141,218 in the period 1 July 2015 to 15 April 2016. According to its balance sheet GG Tuggeranong had total assets of $1,907,549, of which $369,745 was cash, and the balance was fixed assets comprised of gym fitout and equipment; total liabilities of $821,144; and total net assets of $1,086,405. According to its profit and loss statement GG Tuggeranong made a loss of $83,606 in the period 1 July 2015 to 15 April 2016.

44    While the information contained in the financial statements is now more than a year old, it shows that each of GG Australia and GG Tuggeranong held assets at that time. The current positon of those companies and of GG Townsville is unknown but, as Brereton J said, the inadequacy of the evidence that has been tendered by the Respondents is accentuated by the evidence that has been provided of a net positive asset position in two of the corporate Applicants. There is simply nothing available to update the Court on the current financial position of the corporate Applicants and insufficient evidence on which the Court would draw an inference that those parties will be unable to pay the Respondents’ costs at a date in the future.

Mr Taylforth

45    That leaves Mr Taylforth. As the authorities recognise, the Court is disinclined to order security against an individual, particularly in the absence of some additional factor beyond impecuniosity. The Respondents submitted that Mr Taylforth is impecunious and that there is such an additional factor present, namely, that Mr Taylforth’s defamation claim constitutes an abuse of process.

46    In support of the latter part of their submission the Respondents rely on the decision of McCallum J in Bleyer v Google Inc (2014) 88 NSWLR 670 (Bleyer), which concerned an action for defamation commenced by Mr Bleyer against Google Inc. Mr Bleyer alleged that Google Inc had published seven items defamatory of him to three people in the form of Google search results. Google Inc filed a notice of motion seeking an order that the proceeding be permanently stayed or alternatively summarily dismissed as an abuse of process. Her Honour found at [95] that Mr Bleyer sought to invoke the processes of the Court to vindicate alleged harm to his reputation when three people undertook a Google search in terms which produced the matters concerning which complaint was made. As to two of those people, her Honour found that Google Inc was not liable as a publisher. Her Honour observed that Google Inc adduced evidence of an estimate of its likely costs of the proceeding in the order of $370,000. Relevantly, her Honour said at [97]:

… It is acknowledged that, if the plaintiff is successful, he will be unable to enforce any award of damages. The interest at stake is his entitlement to vindicate his reputation in the eyes of one person. In all the circumstances, I am persuaded that the resources of the court and the parties that will be expended to determine the claim are out of all proportion to that interest.

47    First, as to Mr Taylforth’s impecuniosity, the Respondents rely on the evidence that he has no real property; that the corporate Applicants are not operating; that the balance of the companies of which he is a director have nominal amounts of paid-up capital and that one of them is in administration; and that Mr Taylforth lives in public housing. Once again, the evidence relied upon by the Respondents does not establish Mr Taylforth’s impecuniosity. The fact that Mr Taylforth holds no real property is not conclusive of his ability to meet a costs order. Beyond the fact that the corporate Applicants do not trade, a matter which is not in dispute, there is no evidence before me about the status of the remainder of the companies of which Mr Taylforth is a director and how they might impact on Mr Taylforth’s financial position.

48    Nor am I able to conclude that Mr Taylforth lives in public housing. At least three different addresses are provided for Mr Taylforth in the various searches relied upon by the Respondents. One of them is 55 Walker Street, Redfern NSW. However, I cannot on that basis alone conclude that Mr Taylforth lives at that address, particularly in circumstances where in his own affidavits relied on in this application he provides an address in Franklin ACT. Nor, to the extent that it is relevant, is there sufficient evidence before me to conclude that the property at 55 Walker Street, Redfern NSW is public housing or, even if it is, how I would infer that Mr Taylforth was impecunious based on that matter. I do not find the articles from The Daily Telegraph relied on by the Respondents sufficiently persuasive in that regard.

49    Secondly, insofar as the Respondents alleged that Mr Taylforth’s claims constitute an abuse of process, they submitted that they only needed to establish an arguable basis for a stay of those claims as an abuse of process. They submitted that one cannot “get around” or distinguish the present case from Bleyer simply because there were, say, 10 defamatory utterances made to 10 different people. This was said to be so because each allegedly defamatory utterance was only made to one person, albeit that such an utterance may have been made 10 times. They contended that each of those utterances is actionable of itself.

50    The effect of the submissions made was that, while there is no bar to enforcement of a judgment in Australia against Mr Sever, who it is alleged published the defamatory statements, it was clear that:

    the alleged defamatory statements were published to a maximum of three people;

    in most instances the alleged defamatory statements were published to people whose identity is not known; and

    significant costs will be incurred in meeting those allegations.

On that basis it was submitted that the defamation proceeding brought by Mr Taylforth was apt to be stayed as an abuse of process.

51    In my opinion, the present case is quite different to Bleyer. In Bleyer there were only three people who received the allegedly defamatory statements when they undertook a search and, after considering the complex issue of publication, McCallum J found that it was only in relation to one of those that Google Inc was liable as a publisher. That is, there was one allegedly defamatory statement published to one person. Here eight allegedly defamatory statements are pleaded which are said to have at least been published to one person in the case of five of those statements, two people in the case of one of those statements and three people in the case of two of those statements. The recipients include in two instances people working at the master franchisor, Gold’s Gyms USA.

52    Further, McCallum J reached her decision in Bleyer after careful consideration of the court’s power to make the orders sought; the issue of proportionality; the question of publication in the context of search engine results; and the enforceability of an Australian judgment in the United States of America. No such detailed argument was put to me and those particular circumstances are not present in this case. In any event the Court would not lightly come to a decision that an action in defamation should be stayed on the basis of proportionality, that is, because the cost of the proceeding will be disproportionate to any interest the applicant has in vindicating his or her reputation.

53    In Toben v Nationwide News Pty Ltd (2016) 338 ALR 329; [2016] NSWCA 296 Ward JA (with whom Meagher and Payne JA agreed) said at [131]-[133]:

131    As already noted, the primary judge indicated that she would not have stayed the proceedings on the alternative basis argued by the News respondents, saying (at [108]) that their submission made an assumption as to the value of the interest at stake, which could not be taken to be established at this stage of the proceedings. In particular, her Honour considered that Dr Toben should be taken to have a prima facie case and that, without determining that case on the merits, it could not be assumed to be of little value.

132    The News respondents point to the overriding purpose of Pt 6 of the Civil Procedure Act identified in s 56, and to s 60 of the Act, which they argue support the proposition stated by the primary judge in an earlier case (Bleyer v Google at [56]-[57]) that:

… Sections 56 and 60 should not be read disjunctively. Further, there is ample authority in this jurisdiction (for which no authority is needed in any event) that the just allocation of the infinite resources of the court is a relevant consideration in the exercise of the court's authority, at least in civil matters.

Once it is recognised that proportionality between the resources required to determine a claim and the interest at stake is relevant to the exercise of the court's procedural powers, it is a small and logical step to conclude that there will be cases in which the disproportion is so vast as to warrant the stay or dismissal of the proceedings.

133    The News respondents accept that a dismissal or stay of proceedings on the basis of a lack of proportionality alone will only rarely be justified (referring to what was said by Macfarlan JA in Ghosh v NineMSN Pty Ltd (2015) 90 NSWLR 595; [2015] NSWCA 334 at [44]) but they maintain that where the requisite disproportionality can be demonstrated it is appropriate to grant such relief (referring not only to Bleyer v Google but also to Grizonic v Suttor [2008] NSWSC 914).

54    In the circumstances I am not persuaded on the basis of the material before me that the claims brought by Mr Taylforth in defamation would be stayed as an abuse of process, even on a prima facie basis. Further, the Respondents’ submissions in this regard ignore the fact that Mr Taylforth has, with the corporate Applicants, other claims arising out of the alleged publications, namely tortious claims in injurious or malicious falsehood and interference with contractual relations.

55    The Applicants raised one other matter which should be addressed at this point. They submitted that, for each claim based on a communication, there is a claim by Mr Taylforth and a claim by the corporate Applicant. That is, the Applicants submitted that on the pleadings the claims are almost identical in terms of the factual matters that need to be proved in the case of the natural Applicant on the one hand and corporate Applicants on the other. The only difference identified by the Applicants was the way in which damages need to be proved but that difference, they submitted, was an insignificant one.

56    The Applicants relied on the decision in Ken Tugrul v Tarrants Financial Consultants Pty Limited ACN 086 674 179 [No 4] [2014] NSWSC 291, where Kunc J considered an application for security for costs made by one of the defendants, Ms Seco, in a proceeding which involved five plaintiffs, four of whom were natural persons. The application, which was made pursuant to both s 1335 of the Corporations Act and the applicable rule of the Uniform Civil Procedure Rules 2005 (NSW), was ultimately only pressed against the corporate plaintiff, K Bricks Pty Ltd (K Bricks). At [17] Kunc J identified that there was a substantial overlap in the case brought against Ms Seco by one of the individual plaintiffs and K Bricks. His Honour was of the view that much of Ms Seco’s defence costs would have to be incurred irrespective of whether K Bricks was a party. Because of that his Honour noted at [18] that Ms Seco’s ability to prove to the court what portion of her costs would be referrable only to K Bricks’ claim against her assumed “central importance in determining the present application”. At [30] his Honour said:

The first step to engage the Court’s jurisdiction to order security for costs against a corporate plaintiff is for the defendant to prove on the balance of probabilities the amount of the defendant’s costs which it says the plaintiff may be ordered to pay. The reason for this is obvious. There may be no reason to believe that a defendant will be unable to pay $50,000 and every reason to believe it will be unable to pay $500,000. As Emmett J (as his Honour then was) observed in Save the Ridge Inc v Commonwealth of Australia [2004] FCA 1289 at [24], “It is necessary for a court to have evidence from an experienced practitioner as to the costs that are likely to be incurred and as to the amount of those costs that are likely to be allowed on taxation”. In this case there is a real question as to what Ms Seco has proven in this regard. The answer requires a close examination of the evidence.

At [51]-[55] his Honour continued:

51    The Court cannot determine the jurisdictional issue in a security for costs application without first making a finding on the balance of probabilities as to the amount of costs the defendant is likely to incur. The onus of proving that figure is on the defendant applicant for security. Without that figure the Court cannot go on to consider whether there is a risk of non-payment of those costs.

…

54    Once Ms Seco abandoned her application against the four natural plaintiffs, she bore the burden of adducing evidence upon which the Court could determine the amount of costs she was likely to incur referable solely to K Bricks' claim against her. This is because both the power to award security in its terms and the principled exercise of the discretion compel the result that in the case of overlapping claims, an order for security should not extend to providing security for costs which will nevertheless be incurred in dealing with claims brought by those from whom the defendant is not entitled to security. In other words, a defendant is not entitled indirectly to the benefit of an order for security for costs which she could not obtain directly.

55    … [T]he question is not what were Ms Seco’s likely costs on the basis that she was the only defendant and K Bricks was the only plaintiff. Rather, the question had to be what were the incremental or additional costs Ms Seco was likely to incur over and above those she would incur in defending the other plaintiffs’ claims, especially [the individual plaintiff’s].

57    I accept the submission that there is a commonality in the claims made by the corporate Applicants and those made by Mr Taylforth. His claims encompass all of the publications and the conduct about which complaint is made. But there are also differences, namely in relation to the damages claimed by the corporate Applicants on the one hand and Mr Taylforth on the other. There seem to me to be two issues that arise from this.

58    The first is that the Respondents have not proved on the balance of probabilities the amount of their costs which they say the corporate Applicants may be ordered to pay. This in turn undermines their ability to discharge their onus on the jurisdictional issue. The second concerns the Applicants’ submission that, whatever the difference in the costs of defending the claims by the corporate Applicants and Mr Taylforth, if I were to conclude that the corporate Applicants were liable to pay security, it would be more than adequately covered by the undertaking proffered by Mr Taylforth in an email dated 29 March 2017 from the Applicants’ solicitor to the solicitor for the Respondents.

59    In both scenarios it is not possible for me to determine, on the state of the evidence as to quantum of costs, the additional or incremental costs that would be incurred by the Respondents over and above those that they would incur in defending the claims made by Mr Taylforth. Ms Nicholas’ evidence provides an estimate of the total costs likely to be incurred in defending the proceeding, but does not differentiate between the costs that would be incurred in defending the corporate Applicants’ claims and Mr Taylforth’s claims and, in particular, does not identify those costs that would be incurred over and above the costs incurred in defending Mr Taylforth’s claims.

60    Given the conclusions I have reached, the Respondents have not demonstrated that, in the case of the corporate Applicants, there is reason to believe that an adverse costs order will not be paid and, in the case of Mr Taylforth, that he is impecunious or, if he were, that there is some additional factor present that would justify an order for security.

Discretionary matters

61    While it is not strictly necessary for me to do so, for completeness I consider below the discretionary arguments which have been advanced, albeit in summary fashion. The factors raised do not assist the Respondents and, having considered the arguments, weigh against the exercise of my discretion to make an order for security.

62    The Applicants submitted that the Court would not exercise its discretion to order security for costs because they have a very strong case and are likely to succeed. The Applicants contended that the effect of the Respondents’ defence is that the Respondents do not claim that the communications they made were true. Rather, the Respondents claim that the imputations complained of were not conveyed; say that there was no likelihood that the recipients would be misled or deceived by the communications; claim that the pleaded imputations were “trivial”; and claim qualified privilege. The Applicants further submitted that the communications clearly convey the imputations of which they complain, despite the Respondents’ assertions to the contrary. They contended that, by not pleading truth, the Respondents admit the falsity of the substance of their communications and effectively admit that they made the communications knowing that the allegations made therein were untrue. They further contended that such an admission is fatal to the defence of qualified privilege and to defending the claim that the Respondents engaged in misleading or deceptive conduct. The Applicants say that, together with the apparent campaign in which Mr Sever was engaged, the knowledge of the falsity of the imputations demonstrates malice, which entitles the Applicants to aggravated damages and is another reason why the defence of qualified privilege would fail.

63    On one view, the matters in issue between the parties seem to be somewhat limited and the fact that the communications were made inescapable. Indeed, the Respondents admit to making a number of the communications, they do not plead that those communications are true and there is evidence beyond the pleaded statements of other communications made by the Respondents concerning the Applicants. On the other hand, there are still a number of factual maters in issue, particularly in relation to the alleged oral statements, the making of which are denied. The pleadings are closed but the Respondents are yet to file their evidence. In my view it is too early to determine with any certainty the strength of the Applicants’ case. As a result I would treat this factor as neutral.

64    The Applicants submitted that the second reason why the Court would not exercise its discretion to order security for costs is the delay in bringing the application. The Applicants submitted that there has been significant and unexplained delay in bringing the application and that, in the meantime, they have expended significant costs in putting on substantial evidence of their claims and have obtained indemnity costs orders against the Respondents. That submission needs to be examined in the context of the procedural steps taken in the proceeding up until the date of the filing of the application for security for costs. Those procedural steps are summarised below.

65    The proceeding was commenced on 2 October 2015. On 16 October 2015 the Respondents filed an interlocutory application seeking an order that the proceeding be transferred to the Supreme Court of Queensland. Orders were made for the filing and service of evidence and submissions in relation to that application and it was set down for hearing on 28 October 2015, later adjourned to 8 March 2016. Ultimately, the application to transfer the proceeding was dismissed without a hearing and with an order that the Respondents pay the Applicants’ costs of that application on an indemnity basis. On 13 May 2016 the Respondents filed their defence and on 3 June 2016 the Applicants filed a reply. On 4 November 2016 the Applicants filed a further affidavit sworn by Mr Taylforth on 6 October 2016. In the meantime, on 27 October 2016 the Respondents filed their application for security for costs.

66    An application for security for costs should be brought promptly. There has undoubtedly been delay on the part of the Respondents in bringing their application more than 12 months after commencement of the proceeding. The Respondents contended that they could not bring an application without any foundation and that the foundation was only laid when their solicitor received the letter dated 22 August 2016 from the Applicants’ solicitors, curiously, a letter upon which they do not rely in this application. That submission needs to be considered in context. That is, in the context of the first request made on behalf of the Respondents of evidence of the Applicants’ ability to meet an adverse costs order having only been made on 17 June 2016, almost nine months after commencement of the proceeding.

67    The Respondents submitted that the question of whether any prejudice was caused by the delay is relevant and that in this case there had been no prejudice suffered by the Applicants. The only relevant evidence prepared by the Applicants since the filing of their statement of claim is the affidavit of Mr Taylforth sworn on 6 October 2016. That affidavit forms the basis of the Applicants’ response to the security for costs application and thus would have been prepared irrespective of when that application was filed. The Respondents rely on the decision of Robertson J in Domino’s Pizza Enterprises Limited v Precision Tracking Pty Ltd (No 2) [2017] FCA 211. At [71]-[72] his Honour said that he was not persuaded by the explanation given for the delay in making an application for security for costs of a cross-claim. But his Honour found that the delay had not prejudiced the cross-claimant in that case, in particular because it had not been shown that the cross-claim would not or might not have been brought or maintained but for the delay in bringing the application for security and because the applicant for security sought security only for future costs.

68    Here there has been no explanation for the delay in bringing the application for security beyond the exchange of correspondence between the solicitors. Further, while the Applicants rely on Mr Taylforth’s affidavit sworn 6 October 2016 in answer to the application for security, it has not been demonstrated that that affidavit was prepared for the purposes of this application only and that it would have been prepared irrespective of when the application was filed. In my view, the delay in bringing the application is a factor which would weigh in favour of the Applicants and against the making of an order for security.

conclusion

69    In light of the conclusions I have reached, the application for security for costs should be dismissed and the Respondents should pay the Applicants’ costs of the application. The proceeding should be listed for a case management hearing on 21 June 2017 at 9.30 am. I will make orders accordingly.

Associate:

Dated:    15 June 2017

SCHEDULE OF PARTIES