IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 221 of 1996 BETWEEN: DAVID CHARLES ROBINSON Applicant AND: AWARE INDUSTRIES LImITED First Respondent CHRISTOPHER AVERY Second Respondent PETER McCLOSkY Third Respondent JAMES JOHNSON Fourth Respondent WILLIAM STERLING Fifth Respondent ALLAN BOUNADER Sixth Respondent JUDGE: RYAN J DATE: 27 FEBRUARY 1998 PLACE: MELBOURNE REASONS FOR JUDGMENT HIS HONOUR: There is before the Court a motion on notice dated 27 March 1997 for an order that the applicant provide security for the respondents' costs of this application. It is common ground that the applicant is an undischarged bankrupt and reference has been made to O 28 r 3(1) of the Rules of this Court which provides that: Where, in any proceeding, it appears to the Court on the application of a respondent- (a) that an applicant is ordinarily resident outside Australia; (b) that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent if ordered to do so; (c) subject to sub-rule (2), that the address of an applicant is not stated or is misstated in his originating process; or (d) that an applicant has changed his address after the commencement of the proceeding with a view to avoiding the consequences of the proceeding, the Court may order that applicant to give security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding. It is clear that the present applicant is not ordinarily resident outside Australia and there is no suggestion of any misstatement, or failure to state a change, of address with a view to avoiding the consequences of the proceeding. However, it has been contended that the applicant is suing not for his own benefit but for the benefit of some other person within the meaning of paragraph (b) of O 28 r3(1) because the applicant's trustee in bankruptcy has assigned to the applicant the chose in action, which is the basis of the present application, in consideration of an undertaking by the applicant to pay to the trustee 30 per cent of any fruits of the application. I have been referred by Mr Cameron of Counsel for the applicant to the judgment of Megaw LJ in Ramsey v Hartley [1977] 2 All ER 673 at 682, where his Lordship said: The defendant asks for security for costs. In the High Court, bankruptcy by itself is not a ground for an order for security for costs, any more than the poverty of the plaintiff is a ground. So the defendant had to seek some other ground. The defendant's ground is that the plaintiff is a "nominal plaintiff" under RSC Ord 23, r 1(1)(b). It is said that he is "nominal" because his interest is in no more than 65 per cent of the proceeds if the action succeeds. For the remaining 35 per cent the plaintiff is, as it is put, a "front" for other persons, his creditors. That does not make him nominal plaintiff. Even if it did, I should not, on the evidence here, exercise my discretion in favour of ordering security for costs. The deputy judge was correct in his decision and the reasons therefor. However, there is clear authority in this Court for the proposition that the general discretion to order security conferred by s 56 of the Federal Court of Australia Act 1976 ('the Act") is not limited by the stipulation in O 28 r 3 of the circumstances in which security may be ordered under the Rules. I refer to Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, and the judgment of Jenkinson J in Chester & Fein Property Developments Pty Ltd v Candam Investments Pty Ltd (1985) 61 ALR 729 at 732. Section 56 provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him. (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. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (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. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security. In my view, it is appropriate in exercising the general discretion conferred by s 56 to have regard to the nature of the litigation as well as the circumstances in which it is being pursued by the applicant. In the present case, as I understand it, the litigation is brought principally for contraventions of the Trade Practices Act 1974 in relation to the sale of a business. It is contended that representations were made by the respondents in the sale of that business which were misleading and deceptive and which have caused loss to the applicant as the purchaser of the business. It has been argued by Mr Lacava of Counsel for the respondents that, despite the fact that the action has been on foot for something of the order of two years, the applicant has not yet been able to particularise the quantum of damage which he claims to have suffered as a result of the alleged contraventions of the Trade Practices Act. There is also evidence before the Court that the business the subject of the action has continued to be carried on and is still being carried on by the present applicant's wife. In my view, this is a case where it is appropriate for the Court to exercise its discretion to order security. I have been invited to hold that there is some policy underlying the Act and the provisions in the Rules that a litigant, even an insolvent litigant, should be allowed to pursue remedies which he seeks in this Court without any constraints being imposed by way of security for costs, unless that litigant is a company. I am not persuaded that any such policy should inform the exercise of what appears to be a quite unfettered general discretion conferred by s 56. Having regard to the nature of the litigation, the fact that it has been prosecuted in a somewhat leisurely fashion to this point and to the other circumstances that I have mentioned, I consider it to be an inappropriate exercise of the Court's discretion to allow the respondents to proceed to trial, and perhaps beyond, at the risk of bearing the burden of their own costs even if they were totally successful in resisting the applicant's claim. I therefore propose to make an order for security. Some criticism has been made by Mr Cameron of the estimates made by the solicitor for the respondents of the costs likely to be incurred up to the eve of trial of this matter. However, there is clear authority in the High Court and elsewhere, in cases such as Brundza v Robbie & Co [No 2] (1952) 88 CLR 171 at 175 that the Court in ordering security does not set out to give a complete indemnity against the costs which may be incurred to any point in the trial of the action. Accordingly, I do not propose to adopt with any degree of precision the estimate of costs made by Mr Williams in his affidavit sworn 13 February 1998. Rather, taking a broad view of the matter, and bearing in mind, as I have said, that it is not appropriate to provide a complete indemnity for costs, I propose to order that the applicant provide security for the respondents' costs up to and including the first day of the trial of the application in the sum of $20,000. I shall order that the security be provided within 21 days in a form acceptable to a Registrar of the Court. I shall order that there be a stay of the application until security is provided in accordance with the order which I have just made. I shall adjourn the directions hearing in this matter to a date after the expiration of the time fixed for provision of security, which will be 30 March 1998. The costs of both parties of the application for security will be costs in the cause. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 27 February 1998 Counsel for the Applicant: Mr R Cameron (Respondent in motion on notice) Solicitor for the Applicant: Meltzer Green (Respondent in motion on notice) Counsel for the Respondent: Mr P Lacava (Applicant in motion on notice) Solicitor for the Respondent: Dick & Williams (Applicant in motion on notice) Date of Hearing: 27 February 1998 Date of Judgment: 27 February 1998