Austeur Pty Ltd & Ors v Stoat Pty Ltd [1995] FCA 99

CATCHWORDS SECURITY FOR COSTS - Application for security for costs - when applicant in proceedings is a corporation which will be unable to pay its costs - claim that corporation's impecuniosity caused by action of respondent Corporations Law, s 1335 No. NG 22 of 1995 AUSTEUR PTY LIMITED & ors v STOAT PTY LIMITED

MOORE J SYDNEY 10 MARCH 1995

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 22 of 1995 ) GENERAL DIVISION ) BETWEEN: AUSTEUR PTY LIMITED First Applicant PAUL SIMPSON Second Applicant MARINA PAATH Third Applicant XIN XIN LIU Fourth Applicant AND: STOAT PTY LIMITED Respondent JUDGE: Moore J PLACE: Sydney DATE: 10 March 1995 ORDER OF THE COURT THE COURT ORDERS THAT: 1. The application for security for costs is dismissed. 2. Costs of the application are reserved. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 22 of 1995 ) GENERAL DIVISION ) BETWEEN: AUSTEUR PTY LIMITED First Applicant PAUL SIMPSON Second Applicant MARINA PAATH Third Applicant XIN XIN LIU Fourth Applicant AND: STOAT PTY LIMITED Respondent JUDGE: Moore J PLACE: Sydney DATE: 10 March 1995 REASONS FOR JUDGMENT An application has been filed under the Trade Practices Act 1974 seeking injunctive relief, damages, an order requiring the repayment of purchase moneys and an order setting aside certain security documents. The respondent has made an application under s1335 of the Corporations Law that the first applicant provide security costs in the sum of $42,500. The background to the proceedings is briefly this. The first applicant purchased a business from the respondent which involved the operation of a night club and restaurant. The respondent provided vendor finance which was secured. The second and third applicants are a married couple and are directors of the first applicant as is the fourth applicant. The business did not trade, it is alleged, as the applicants were led to believe it would by the respondent. Security for costs is sought under s1335 which directs attention to the capacity of a corporation to pay its costs. There must be credible evidence that the corporation will be unable to pay the respondent's costs. If there is, the Court has a discretion whether to order security be provided: see Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289 at 297. In the present case the first applicant did not put in issue its capacity to pay any costs that might be awarded against it if its application failed. Indeed the following is said in an affidavit of the second applicant: "The First Applicant is not able to provide security for costs because the net receipts of the business acquired from the Respondent have not been as represented by the Respondent at the time of purchase of the business. The First Applicant has not been able to accumulate sufficient reserves and has had to borrow the moneys as deposed above. The level of receipts has also rendered the value of the business which is the principal asset of the First Applicant negligible."