JUDGMENT No, 6O7 BS LIMITED DISTRIBUTION CR TCHHORDS FRACTICE AND PPCCEDUPE - Security for costs - Applicants consisting of 2 natural person and a company, both 1mpecuniosus - Mhether effect of an order would be to stifle the litigation - Significance of the fact, 1m relation to the company, that co-applicant 15 a natural person - Whether natural person 15 a necessary party to the proceeding. NSH G.521 of 1986 BARBARA ANN CAMERON & ANOR v PURAL PRESS LIMITED §& ORS Wilcox J Sydney 4 March 1988 LIMITED CPISTRIBUTION IN THE FEDEPAL COURT OF AUSTRALIA 1 ) NEW SOUTH WALES DISTRICT REGISTRY | NSW G.521 of 1986 SENERAL DIVISION ) BETWEEN: BARBARA ANN CAMERON First Applicant GAMESTER PTY LIMITED Second Applicant AND: RURAL PRESS LIMITED First Pespondent JOHN LINDSAY PARKER Second Respondent TIMOTHY ROY STARKEY Third Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 4 MARCH 1988 MINUTES OF ORDER THE COURT ORDERS THAT: ts l. The Notices of Motion filed on 10 February 1987 and 18 December 1987 whereby the respondents to the principal proceeding seek orders in relation to security for costs each be dismissed. tJ The respondents to the principal proceeding pay the costs of the applicants to the principal proceeding of the motions. Note: Settlement and entry of orders is dealt with in Order 26 of the Federal Court Rules. LIMITED DISTPIBUTION IN THE FEDEPAL COURT OF AUSTPALTA NEW SOUTH WALES DISTRICT PEGISTRY NSW G.521 of 1986 we ew GENERAL DIVISION BETWEEN: BARBARA ANN CAMERON First Applicant GAMESTER PTY LIMITED Second Applicant AND: RURAL PRESS LIMITED First Respondent JOHN LINDSAY PARKER Second Respondent TIMOTHY ROY STARKEY Third Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 4 MARCH 1988 REASONS FOR JUDGMENT There are before the Court two Notices of Motion, filed respectively on 10 February 1987 and 18 December 1987, each of which seek orders that the applicants provide security for the respondents' costs. There are two applicants in the principal proceeding, Barbara Ann Cameron and Gamester Pty Limited. Gamester 15 2 company controlled by Miss Cameron. [It has a paid up capital ef only two dollars and no realisable assets. Miss Cameron has some minor assets but it 1s common ground that she would not be in a position to comply with any order for payment of the respondents' costs in the principal proceedings. Miss Cameron has been, and continues to be, reliant upon legal aid for the financing of the applicants' case. The principles applicable to an application for security for costs, made against an impecunious company, were discussed by Burchett J in Cameron's Unit Services Pty Limited 7 Kevin R W Whelpton & Associates (Australia) Pty Limited (1986) 13 FCR 46. I need not repeat them here. There is no question as to the power of the Court to order security ina proper case. It may be accepted that there will often be a proper case for an order where the applicant 15 a company whose assets would be likely to prove insufficient to meet the costs of the respondents if they were successful in their defence. But proof of that fact does not entitle the opposing party to an order for security as of right. The likely impecuniosity of the applicant means merely that there is a discretion to make an order for security. The question remains how that discretion ought to be exercised. As Burchett J noted, in Bell Wholesale Co Pty Limited v Gates Export Corporation (1984) 2 FCR 1 at p.4 a Full Court of this Court described that discretion as "unfettered", and commented that "each case must depend on its own circumstances". tad In the present case two matters are put against the application for security. First, it is said that the effect of such an order -- whether against both applicants or against Gamester alone -- would be to stifle the litigation. I am satisfied that this 15 so; at least insofar as Gamester's claim is concerned. The solicitor for the respondents has astimated the costs of discovery and inspection alone as lying between $24,000 and $36,000. Whilst I think that means could probably be devised to reduce significantly the extent of the necessary discovery, and hence the cost, the estimate underlines the fact that the pending litigation is extremely complex. Although it is not possible at this time to estimate the duration of a final hearing, 1t is obvious that the matter would take several days. Any security sufficient to give to the respondents a reasonable assurance that their taxed costs would be met would plainly be beyond the capacity of the applicants to provide. Upon the evidence before me the applicants could not do more than provide a token amount by way of security. In expressing my conclusion about the likely stifling of the action, I do not overlook what was said in Bell Wholesale about the necessity for those standing behind an impecunious company to demonstrate that they will not be able to provide the security from other -- including their own -- resources. But, 1n this case, the company is owmed by Miss Cameron, whose inability to provide security is clear. The second basis upon which the applicants resist the application for security rests upon the principle -- described ty Megarry VC in Pearson v Naydler £19773 1 WLR 897 at p.902 as "ancient and well established" -- that a natural person who sues will not be ordered to give security for costs, however poor he or she may be. The applicants say that this principle is not only an answer to the application, insofar as it is made against Miss Cameron, but that it is also a reason for declining to make an order against Gamester. Counsel refers to James v Australia and New Zealand Banking Group Limited (1985) 9 FCR 442. In that case the applicants were all natural persons except one, a company called Yallambee Pty Limited. Toohey J refused the application, as against all applicants, because of delay but he did go on, at pp.446-447, to advert to the significance -- 30 far as Yallambee was concerned -- of the fact that some of the applicants were natural persons: "Tf, contrary to the views I have expressed, I were minded to make an order for security against Yallambee Pty Ltd but not against the other applicants, I would consider it inappropriate to do so. If such an order were made and were accompanied by a stay of proceedings, the remaining applicants would he placed ina very difficult position. By definition, no order for security would have been made against them but they would be faced with the option of not proceeding to trial until the order for security had been met (a most unlikely contingency) or proceeding to trial with an action that was not properly constituted for one of the parties would effectively be missing." Counsel for the respondents accept the general principle celating to natural persons; but they contend that 1t 1s inapplicable fo this case because -- upon a proper analysis of the pleadings -- Miss Cameron is not a proper party to the proceeding. Counsel submit that, if a case is atherwise one for an order for security for costs against a corporation, security is not to be denied because of the unnecessary joinder of an impecunious natural person. No application has been made for the stay or dismissal of the principal proceeding, insofar as it isa proceeding brought by Miss Cameron, upon the basis that it does not disclose a cause of action available to her or that she lacks standing. Notwithstanding this, I have, at the aunvitation of counsel, myself examined the Amended Statement of Claim so as to determine whether it can properly be said that, upon the facts alleged therein, Miss Cameron is not a proper party to the proceeding. The Amended Statement of Claim alleges a number of transactions between the parties. Put shortly, the claim is that, prior to 1984, Miss Cameron had planned and developed a magazine relating to agricultural, veterinary and rural chemicals, to be known as "Farm Chemicals Magazine". Qn 19 March 1984 a written agreement was made between Miss Cameron and the first respondent, Rural Press Limited, for the acquisition of the magazine. There was also a service agreement whereby Miss Cameron was appointed managing editor of the magazine for the calendar year 1984. Allegations are mn made that misleading statements were made by the second respondent, on behalf of the first respondent, regarding the form of these agreements and also regarding the intentions of the first respondent in connection with the regular publication of the magazine and compliance with the service agreement. Section 52 of the Trade Practices Act 1974 15 relied upon. The applicants also rely upon s.46 of the Trade Practices Act, contending that the first respondent was ina position substantially to control various relevant markets and that 1t took advantage of its market power, shortly prior to the agreements, by increasing the chemical advertising content of its own publication "Farm" and by informing Miss Cameron that, is she did not sell her magazine to it, the first respondent would increase its competition so as to put her out of business. The Amended Statement of Claim further alleges that the first respondent did not allow Miss Cameron to act as the managing editor of the magazine, particulars being given. The pleading then goes an to allege an agreement dated 31 May 1984 for the repurchase of the magazine by Miss Cameron on behalf of a company to be formed. This company was apparently Gamester, the second applicant. The Amended Statement of Claim alleges that, at the time of this agreement, the respondents knew that certain things needed to be done by them but failed to do these things, so that the second applicant rescinded the repurchase agreement. It is further claimed that ancillary agreements were made by Miss Cameron with the respondents, relating to a licence to occupy certain premises, eelating to printing charges and regarding work to be done by the respondents whilst Miss Cameron was on holidays. The applicants allege that, at the time of negotiating these various agreements, the respondents made false representations as to their intentions. They rely upon s.52 in connection with those matters. Furthermore, they allege that the respondents caused Miss Cameron to enter into the repurchase agreement by intimidation. Various breaches of the repurchase agreement, and also the ancillary agreements, are alleged. The applicants also allege further representations which, they say, constitute breaches of s.52 of the Trade Practices Act. Paragraph 58 of the Amended Statement of Claim sets out the damage alleged by the applicants. Significant items of damage are attributed to Gamester but there are also claims on behalf of Miss Cameron, including financial losses. The above is merely a summary of a lengthy and complex pleading. I say nothing upon the questions whether the various claims are good in law or are well-founded in point of fact. These are not matters about which I need to form any opinion at this time. It is sufficient to note that, according to the Amended Statement of Claim, Gamester only came into the picture towards the end of the events alleged -- sometime after the repurchase agreement of 31 May 1984. If there were earlier breaches of the Trade Practices Act causing damage, as claimed, that damage must have been suffered by Miss Cameron personally. Even in respect of the period after ?1 May, there are allegations of various losses suffered by Miss Cameron personally. Upon the case sought to be made, Miss Cameron 15 clearly a necessary party. The remarks of Toohey J in James are apposite. Each of the matters relied upon by the applicants is, in my view, a proper reason for concluding that this is not a case in which an order should be made for the provision of security for costs. In combination, they require me to exercise the discretion of the Court by refusing the application. The application will be refused. The respondents to the principal proceedings must pay the applicants' costs of the motions. I certify this and the seven (7) preceding pages to be a true copy of the Reasons for Judgment of his Honour Justice Wilcox. Associate: ump Date: 4 March 1988 Sfounsel for the Applicants: Mr R J Bainton QC with Mr A S Martin Solicitors for the Applicants: Sly & Russell Counsel for the Respondents: Mr A B Shand QC with Mr J S P Kinross Solicitors for the Respondents: Law & Milne Date(s) of hearing: 18 December 1987