ow IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION BETWEEN: AND: JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: ) ) No. G22 of 1983 ) ) ) ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY ABEL EQUIPMENT PTY. LIMITED (In Liquidation) Appellant THE NATIONAL CAPITAL DEVELOPMENT COMMISSION First Respondent ABEL DRAINERS PTY. LIMITED (In Liquidation) Second Respondent ORDER Neaves J. 2 September 1983 Canberra THE COURT ORDERS THAT: 1. The appellant give security to the satisfaction of the District Registrar within 28 days in the sum of $2,000.00 failing which the appeal herein 1s to stand dismissed. 2. The costs of this application are to be the second respondent's costs in the appeal. 3. I reserve liberty to the appeilant and the second respondent to apply on seven days' notice. IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY ) ) ) ) No. G22 of 1983 DISTRICT REGISTRY ) ) ) GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY BETWEEN: ABEL EQUIPMENT PTY. LIMITED (In Liquidation) Appellant AND: THE NATIONAL CAPITAL DEVELOPMENT COMMISSION First Respondent AND: ABEL DRAINERS PTY. LIMITED (In Liquidation) Second Respondent CORAM: Neaves J. DATE: 2 September 1983 REASONS FOR JUDGMENT This is an application by Abel Drainers Pty. Limited (In Liquidation), the second respondent to an appeal pending in this Court from a decision of the Supreme Court of the Australian Capital Territory (Blackburn C.J.), for an order that the appellant, Abel Equipment Pty. Limited (In Liquidation), give security for the second respondent's costs of the appeal. I shall refer to the applicant as "Drainers"' and to the appellant as "Equipment". On 25 August 1982 the Supreme Court had before it an interpleader summons taken out on behalf of the National Capital Development Commission (hereinafter called "the Commission") which had, pursuant to an order of that Court, paid into Court the sum of $19,582.18 on the basis that adverse claims were made to that sum ty Drainers and Equipment. The Supreme Court ordered that Drainers file and deliver a statement of its claim to the moneys, that Equipment file and deliver a defence and statement of its own claim and that thereafter an issue be tried between Drainers and Equipment as to which party was entitled. Drainers claimed that the moneys represented the net sums admitted to be due by the Commission to Drainers in respect of work done pursuant to certain contracts entered into between the Commission and Drainers. Three such contracts were identified. Equipment filed and delivered a document headed "Plaintiff's Defence and Statement of Claim". The basis of the claim as disclosed by that document may be summarised as Follows: - (a) At all material times Equipment and Drainers operated separate cheque accounts at the Manuka Branch of the Australia and New Zealand Banking Group Limited (hereinafter called "the Bank"). (b) (c) (d) (e) (£) (g) ¢h) Equipment and Drainers had executed documents authorising the Bank to set off the indebtedness from time to time of either one to the Bank against the Bank's indebtedness to the other and guaranteeing to the Bank the indebtedness from time to time of the other. In October 1977 the Bank purported to reduce the credit balance in the account of Equipment by the amount of $17,012.33 and set off that amount against the indebtedness of Drainers to the Bank. In November 1977 Drainers was wound up by order of the Supreme Court of the Australian Capital Territory. In February 1978 Equipment was wound up pursuant to section 260 of the Companies Ordinance 1962 of the Australian Capital Territory. Sometime prior to October 1978 the Bank at the request of Drainers executed in favour of the Commission certain bonds guaranteeing the perform- ance by Drainers of certain contracts between the Commission and Drainers. In October 1978 the Commission called up the bonds to the extent of $11,811.31 and that sum was paid by the Bank to the Commission, the Bank debiting the account of Drainers in the same amount. As the accovnt was un overdraft interest has accrued on Drainers' indebtedness to the Bank. In March 1980, upon the Bank becoming indebted to Equipment in an amount exceeding $15,396.00, the Bank paid to Equipment moneys sufficient to discharge its liability to the company save and except for the sum of $15,396.00. (i) The sum of $19,582.18 paid into Court by the Commission represents moneys due by the Commission to Drainers, arising out of the contracts referred to and is made up of the following amounts - Amount called up by the Commission on the bonds $11,811.31 Net amount due from the Commission to Drainers at the time of the call up of the bonds 7,770.87 $19,582.18 The document then asserted that, as against the Commission, Drainers was entitled to payment of the moneys paid into court and that Equipment was "entitled to be indemnified through and or subrogated to Drainers' rights in or to the fund to the exclusion of all and every claim by Drainers", Equipment claimed a declaration and orders to that effect. On 6 May 1983 the Supreme Court ordered that the document headed "Plaintiff's Defence and Statement of Claim" filed on behalf of Equipment be struck out on the ground that 1t disclosed no basis supporting the claim by Equip- ment to the moneys in court, that Drainers was entitled to those moneys (including interest) and that Equipment pay Drainers' costs of the proceedings, such costs to be costs in the liquidation of Equipment. It is from this order that Equipment has appealed to this Court. Section 56 of the Federal Court of Australia Act 1976 provides, inter alia, that the Court or a Judge may order an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him, the security to be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. If security is not given in accordance with an order under the section, the Court or a Judge may order that the appeal be dismissed. The section is expressed not to affect the operation of any provision made by or under an Act or by the Rules of Court for or in relation to the furnishing of security. Section 533 of the Companies Act 1981 provides in sub-section (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 defence, require sufficient security to be given for those costs and stay all proceedings until the security is given." The word "plaintiff" has been given a wide meaning and uncludes an appellant. There is no doubt on the material before me that Equipment has not sufficient funds available to it to meet the costs of the appeal if awarded against it. Its only ~~ asset is a credit balance of $15,396.00 in its cheque account at the Manuka Branch of the Bank but those moneys are the subject of a claim by the Bank and the Bank refuses and continues to refuse to permit Equipment to draw on them. The moneys are, therefore, not available-to Equipment. The question then is whether, in the exercise of the wide discretion which is vested in the Court, the Court should order Equipment to give security for the costs of the appeal. Equipment has had its day in Court. It has failed to convince the Supreme Court that its claim has any founda-~ tion. The basis of the Supreme Court's decision is made clear in the following passage taken from the reasons for judgment :- "The argument simply is that a surety (which is in this case Equipment) which has paid a debt (of which Drainers was the debtor) to the bank can claim an amount owed to the debtor by a debtor of the debtor. Put like that the proposition has to be rejected. The surety who has paid the debt does not stand in the shoes of the debtor. He stands in the shoes of the creditor, and put in its simple form the proposition is, in my opinion, untenable." The notice of appeal filed on behalf of Equipment asserts that the Supreme Court should have held that Drainers was, in consequence of the Bank paying the amount of $11,811.31 to the Commission pursuant to the performance bonds, indebted to the Bank in that amount, that that debt to the Bank was discharged by Equipment and that Equipment is entitled to that part of the moneys paid into court as have their origin in the payment made by the Bank to the Commission. The notice of appeal sceks orders that Equip - ment is entitled to the moneys paid into court, or part of them, on the basis that it stands in the shoes of Drainers as against the Commission or, alternatively, that it is entitled to a direction that the moneys be paid to the Bank to reimburse the Bank the amount it paid pursuant to the performance bonds together with interest. The alternative claim as set out in the notice of appeal seems to involve the step that the moneys paid into court, in so far as they derive from the moneys paid to the Commission by the Bank are due by the Commission not to Drainers but to thé Bank. So to contend, however, is inconsistent with what was asserted by Equipment in the document "Plaintiff's Defence and Statement of Claim" which the Supreme Court struck out. So far as appears the alternative claim was not put forward in the Supreme Court. It will, of course, be a matter for the Full Court of this Court hearing the appeal, assuming it proceeds, whether to allow this alternative basis for the claim to be raised at the appellate stage. It is also relevant that the matter was dealt with by the Supreme Court on a motion to strike out the document filed by Equipment as disclosing no basis in law for its claim. No findings of fact have been made so that, in the event of the appeal succeeding, the matter would necessarily have to be remitted to the Supreme Court for thal purpose. I have given the matter careful consideration but it has not been demonstrated to my satisfaction that Equipment's prospects of success on the appeal are such as to warrant the appeal proceeding in the absence of security being given for any costs which may be awarded against it in the event of the appeal being unsuccessful. I should add, in deference to the argument advanced on behalf of Equipment, that I do not regard anything in the conduct of Drainers as justifying my declining to exercise my discretion in its favour. I propose, therefore, to order that security be given. The notice of motion filed on behalf of Drainers seeks an order that Equipment provide sufficient security for Drainers' costs of the appeal and that the security to be provided include a sum of $3,500.00 being the estimated costs of the proceedings in the Supreme Court. Counsel for Drainers did not press that the amount of the security include an amount in respect of the unpaid costs o£ the Supreme Court proceedings and I do not think it would be proper that it should do so. The order of the Court is that Equipment give security to the satisfaction of the District Registrar 8. within 28 days in the sum of $2,000.00 failing which the appeal hercin is to stand dismissed. The costs of this application are to be Drainers' costs in the appeal. IL reserve liberty to either party to apply on seven days' notice. I certify that this and the eight (8) preceding pages are a true copy of the reasons tor judgment herein of the Honour- able Mr. Justice Neaves. .O Ca sy Associate DATED: 2 September 1983.