IN THE FEDERAL COURT OF AUSTRALIA) QUEENSLAND DISTRICT REGISTRY ) No. QG 76 of 1994 GENERAL DIVISION ) BETWEEN : ROADPACKER AUSTRALIA PTY LTD Applicant AND : DAVID WARWICK HANDEL First Respondent AND : REYNOLDS TECHNOLOGIES PTY LTD (ACN 063 394 829) Second Respondent CORAM: Spender J PLACE: Brisbane DATE: 25 October 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The motion be dismissed. 2. The respondents on the motion are to have their costs of the motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA) QUEENSLAND DISTRICT REGISTRY ) No. QG 76 of 1994 GENERAL DIVISION ) BETWEEN : ROADPACKER AUSTRALIA PTY LTD Applicant AND : DAVID WARWICK HANDEL First Respondent AND : REYNOLDS TECHNOLOGIES PTY LTD (ACN 063 394 829) Second Respondent CORAM: Spender J PLACE: Brisbane DATE: 25 October 1995 REASONS FOR JUDGMENT This is an application for security for costs. It seems to me that it is based on s. 1335 of the Corporations Law although that does not distinctly appear from the application. The nature of the application and the relevant approach seems to me to be clearly set out in the judgment of von Doussa J in Beach Petroleum N.L. v Johnson (1992) 2 ACSR 404 and which in Set Technologies Pty Ltd v Lewis (1993) 10 ACSR 61, I respectfully approved. I think that on the material before me there is a reason to believe that there is a real chance that the applicant corporation will be unable to pay all of the costs of a successful defendant, and so the discretion to order security for costs arises. I am conscious of what is said by Mr Calabro as to the encouraging health of the company in its present circumstances and that it may be in a position ultimately to be able to pay costs, but I think there is a real chance that it may not be able to, and therefore I have to consider whether, in the circumstances here, I should order the provision of any security. The primary reason I do not is because of the delay in bringing this application, accompanied by the expenditure of considerable costs during the period of that delay on the part of the respondents to the motion for security. It is said by Mr Newton on behalf of the applicant for security, that it is only recently, on receipt of information that came into its possession as a result of the provision of a summary of sales by the applicant which is set out in exhibit RDS8 to an affidavit of Rodney Deo Sahay, which was filed on 29 September 1995, that it became aware of the need for an application for security. I have some difficulty in accepting that this is the case. The material shows that the applicant is a $2 company. As at May of last year the applicants for security were aware that "strike out" process was in progress at the Australian Securities Commission in respect of the applicant company. While I am cautious not to accord too much weight to the contents of a facsimile, there is also evidence that Mr Handel, one of the applicants for security, wrote to a distributor of the applicant before the commencement of these proceedings referring to "financial problems" of the applicant. Looking at the matter objectively, it seems to me that had any real effort been made to discover the true financial position of the applicant at the time of the application, or in the months since, the conclusion would have been that the circumstances permitting a court to order security for costs existed, and that an application for security could and should have been made. It is perhaps an unfortunate coincidence that the 1992 annual report for the applicant, showing an excess of liabilities over assets, that clearly would have put the present applicants on notice concerning the basis for an application for security, was filed on 20 May 1994, being the same day on which a company search on behalf of the present applicants was made and simply indicated that strike out proceedings were in progress. It is probable that it was only hours after that search that the annual return for 1992 was filed. No real explanation has been given for why the inquiries only recently made were not undertaken earlier, and I do not accept the submission that a basis existed on which the present applicants could think that the applicant company was healthy until only recently. It seems to me that here the justice of the matter requires me to decline the ordering of security, because quite substantial expense has been incurred by the applicant in the principal proceedings. It is deposed that costs of approximately $40,000 have been expended thus far by the applicant in the principal proceedings. As Mason CJ in Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533 said, at 534:: " In these circumstances, it is obvious that the major steps preparatory to the hearing of the appeal have been taken, so that the appeal is ready for hearing and the bulk of the costs of the appeal would already have been incurred by the second appellant. In the result, the application for security comes at the heel of the hunt. What is more, the respondent has had reason to believe, at least since 8 March 1990, that the source of funds previously available to the second appellant was no longer available. In this situation, the respondent was in a position to seek security as early as 11 May 1990 when special leave was granted on the second occasion. As a general rule, applications for security for costs should be made promptly and before significant expense is incurred by the appellant. " In this particular case the present applicant has come not only after the litigation had reached proceedings when, towards the end of last year, I invited the parties to approach the Registrar to have the matter set down for trial, but again after a further bout of pleadings by way of an amended statement of claim and the provision of particulars of it this year. It is suggested, as a basis for resisting security, that the parlous economic position of the applicant has been occasioned by conduct of the other side, in particular, Mr Handel. The position there, it seems to me, is contentious. It is not possible to accord to that circumstance much significance on the present application. I am not able to conclude on the disputed contentions that the impecuniosity is likely to have been caused by the conduct of one of the parties seeking security, and I am very much left in the position of ignorance as to whether that claim will be made good or not. For those discretionary reasons, I decline to order security for costs. Should I have reached a conclusion that this was a case which called for the provision of security, I indicate that I would have ordered security in an amount of approximately $40,000. It seems to me that the timing of the matter indicates that I should, as a matter of fairness, look essentially at costs to be incurred from the date of the application for security. Recognising that there are a number of factors which might affect the quantum of the costs hereafter, and conscious also that security for costs is meant not to be a full and total indemnity, I would have thought that an amount of about $40,000 would have been the sum that I would have ordered by way of security. However, because of the circumstances to which I have referred I decline to make any order. As to the costs of the motion, it seems to me that the respondents to the motion should have their costs of it but I will not make an order permitting the present taxation of those costs under O 62. The motion is dismissed and the respondents of the motion are to have their costs of it. I certify that the preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender. Associate Date: 25 October 1995 Counsel for the applicant : Mr A. B. Crowe instructed by : Barwicks Counsel for the responents : Mr C. Newton instructed by : Stephens & Tozer Date of Hearing : 25 October 1995