IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. NG 3090 of 1997 BETWEEN: BOULTON FACTORS (NSW) PTY LIMTIED (IN LIQUIDATION) (ACN 003 532 590) Applicant AND: LEONARD ROY WALKER First Respondent PARA FACTORS PTY LIMITED (ACN 002 843 003) Second Respondent JUDGE: O'CONNOR J DATE OF ORDER: 1 July 1998 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Applicant give further security for costs in the sum of $50,000 by depositing the said sum into ANZ Bank, Bathurst and Castlereagh Streets, Sydney, account number 3533-80328 by close of business on 5 August 1998. 2. The Applicant provide the particulars set out in the letter from Holman Webb to Brown & Partners dated 17 June 1998 by close of business on 31 August 1998. 3. The Applicant pay the Respondent's costs of today's proceedings. 4. These proceedings be stayed until such time as the further security for costs is provided. 5. Parties have liberty to apply on 3 days notice. 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 3090 of 1997 BETWEEN: BOULTON FACTORS (NSW) PTY LIMTIED (IN LIQUIDATION) (ACN 003 532 590) Applicant AND: LEONARD ROY WALKER First Respondent PARA FACTORS PTY LIMITED (ACN 002 843 003) Second Respondent JUDGE: O'CONNOR J DATE: 1 JULY 1998 PLACE: SYDNEY REASONS FOR JUDGMENT By notice of motion filed on 23 June 1998, the respondents have sought orders: (a) for particulars of the applicant's Further Amended Statement of Claim dated 5 June 1998; and (b) further security for costs in the sum of $50,000. Particulars The applicant sought leave to file a Further Amended Statement of Claim dated 5 June 1997 which was not opposed by the respondents. The respondents submit that the Further Amended Statement of Claim does not address the significant deficiencies in earlier pleadings in terms of lack of proper particulars. The respondents submit that allegations of breach of directors duties, fraud and conspiracy (as alleged in the Further Amended Statement of Claim) are serious matters and therefore must be pleaded clearly and specifically and require proper particularisation. The respondents requests for particulars to the allegations in the Further Amended Statement of Claim is set out in correspondence from the respondents' solicitors, Holman Webb to the solicitors for the applicant, Brown & Partners, dated 17 June 1998. The applicant submits that upon an objective reading and assessment of the causes of action pleaded in the Further Amended Statement of Claim, full particulars have been provided and that there is no proper basis for the seeking of further and better particulars. Security for Costs On 10 October 1997, an agreement between the parties was noted by the Court in that: "The applicant agrees with the respondent to retain in the bank account referred to in the Schedule below, the sum of $15,000 on account of security for the respondents' costs in the proceedings, and to pay from the said account the amount of any costs order (as agreed or taxed) in the favour of the respondents in these proceedings up to the amount of $15,000. SCHEDULE Account in the name of the applicant with ANZ Bank, Bathurst and Castlereagh Streets, Sydney Branch, Account No. 3522-80328." In these proceedings the respondents submit that this further application arises from the significant enlargement of the scope of the action in view of the amended pleadings, ie the Further Amended Statement of Claim. Under s 1335 of the Corporations Law and s 56 Federal Court of Australia Act 1976 and O 28 r 3(1)(b) Federal Court Rules, the Court has a discretion whether to grant security and, if so, on what terms, having regard to all relevant considerations. The respondents puts that relevant considerations to be taken into account by me in making my decision in this matter include: - reason to believe the applicant is unable to pay costs; - evidence that the applicant cannot satisfy any costs order which might be made against it; - the applicants prospects of success in these proceedings; - reasons for the applicant's impecuniosity; - whether an order for security for costs would stifle the proceedings. On this issue it is submitted by the respondents that it is not whether those persons who stand behind the applicant are unwilling to fund the applicant, but whether they themselves are impecunious; and - quantum of the security sought. The applicant submits that there must be exceptional circumstances to warrant the making of an order for security for costs against a Liquidator who is taking reasonable steps to recover moneys on behalf of creditors. The applicant also submits that the authorities raised by the respondents in support of their application can be distinguished from the present case, save for Hession v Century 21 South Pacific Ltd (in liquidation) (1992) 28 NSWLR 120, in that the facts of those other authorities do not deal specifically with the circumstances of security in relation to a winding up by a Liquidator. The applicant also submits that the agreement of 10 October 1997 contemplated the expeditious provision of expert evidence from the respondents as to solvency which was not served until 17 June 1998 and it was founded upon factors other than the mere question of notional security for the costs of the respondents and that the respondents claim for further security is without merit. Decision The orders sought will be made, amended to allow the applicant to hold a meeting of creditors and interview witnesses for the purpose of providing appropriate particulars. There is not issue in this proceeding that the applicant is insolvent. However there is not evidence provided by the applicant as to the financial state of the persons who stand behind the applicant. I consider it relevant that security for costs has already been provided. The applicant does not challenge either the fact that the proceedings are enlarged nor the assessment of costs made by the respondents' solicitor, Mr Allsop. I have considered all the factors put to me by the parties and applying the principle enunciated Hession v Century 21 South Pacific Ltd (in liquidation) the following orders will be made: 1. The Applicant give further security for costs in the sum of $50,000 by depositing the said sum into ANZ Bank, Bathurst and Castlereagh Streets, Sydney, account number 3533-80328 by close of business on 5 August 1998. 2. The Applicant provide the particulars set out in the letter from Holman Webb to Brown & Partners dated 17 June 1998 by close of business on 31 August 1998. 3. The Applicant pay the Respondent's costs of today's proceedings. 4. These proceedings be stayed until such time as the further security for costs is provided. 5. Parties have liberty to apply on 3 days notice. The Notice of Motion is allowed. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Connor J Associate: Dated: 1 July 1998 Counsel for the Applicant: M J Cohen Solicitor for the Applicant: Brown & Partners Counsel for the Respondent: F Gleeson Solicitor for the Respondent: Holman Webb Date of Hearing: 1 July 1998 Date of Judgment: 1 July 1998