TANNING RESEARCH LABORATORY INC v O'BRIEN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P 14 March 1988 [1988] NSWCA 153 COSTS — security for appeal — need for "special circumstances" to be shown — appeal by liquidator of company — cross-appeal by creditor — lack of liquid assets of company proved — whether security should be ordered to protect respondent to appeal — order made in associated litigation produces payment into Court — whether Court would infer that funds available if so required from the same backer — held: security for costs of appeal would not be ordered because of (a) appeal by liquidator appears bona fide; (b) claimant has filed cross-appeal; (c) appeal already listed for hearing in near future; and (d) claimant has delayed in bringing motion. Lydney & Wigpool Iron Ore Company v Bird (1883) 23 Ch D 358; P G Gabel Pty Limited (In Liquidation) v Katherine Enterprises Pty Limited (1977) 29 FLR 108, 113 applied. — Reasons for requirement of promptness in such applications explained. Supreme Court Rules, Pt51, Rule 11(1). ORDERS 1. Motion dismissed. 2. Claimant must pay the opponent's costs. Kirby P In the litigation between the claimant and the opponent, Cohen J made orders on 3 June 1987 which two days later the opponent, the liquidator of Hawaiian Tropic Pty Limited, sought to test in this Court by way of appeal. In due course, the claimant filed a cross-appeal challenging the amount of the debt which Cohen J permitted the claimant to prove against the liquidator. The present motion is for security for costs. Pt51 Rule 11 of the Supreme Court Rules provides that the Court of Appeal may in special circumstances order that such security as the Court of Appeal thinks fit be given for the cost of an appeal. I am dealing with the motion pursuant to the powers conferred on me by s46 of the Supreme Court Act, 1970. The matter is a finely balance one. On the one hand, it is proved by an affidavit of Richard Hamilton Fisher, which was read and is untested and unanswered, that the company of which the opponent is the liquidator has substantial debts and what can only be described as modest assets. In the last return of assets and liabilities which is annexed to Mr Fisher's affidavit, it is shown that the liabilities owing to unsecured creditors are $98,103. The assets, being real estate, are shown as worth $20,000 only. There has been associated litigation between the parties in the Equity Division of the Court. That suit concerned a licence agreement, upon the details of which Ineed not dwell. In that litigation, as a result of an order which was made, a sum of $10,000 was paid into Court on behalf of the company Hawaiian Tropic Pty Limited (In Liquidation). It is suggested that from that fact I should draw the inference that, if an order for security for costs were made in response to the present motion, the same source as found the $10,000 for the litigation in the Equity Division would find a similar ready supply of capital to fund the litigation in this Court to the protection of the claimant which might otherwise have to rely on the apparently negligible assets of the company as proved. 2 UNREPORTED JUDGMENTS The opponent objected that such an inference would be mere speculation and that there was no specific evidence that such funds could readily be produced in the present appeal were an order for security of costs now to be made. However, the Court operates in the real world and it would seem likely to me, particularly in the absence of any cross-examination of Mr Fisher or evidence to answer his affidavit, that were security ordered as is now sought, the same source as found the $10,000 paid into Court would find the fund in order to sustain security for the costs of the present appeal to permit it to proceed. On the other hand, a number of considerations suggest that this is not such a case as would warrant an order for security for costs as the Rule provides. First, the appeal is brought by a liquidator. There is no suggestion that the appeal is otherwise than bona fide. A short glance at the amended notice of appeal would suggest that it is. I would expect that the liquidator would not bring an appeal which was otherwise than bona fide. I approach the matter on that basis. Secondly, there is a cross-appeal by which the claimant seeks to test the order of Cohen J that only $55,502.63 may be proved by the claimant in the liquidation. The claimant contends that the true indebtedness is a sum of US$179,000. The claimant is presumably serious about the prosecution of the cross-appeal. Although it was suggested that the orders might be framed which would protect the opponent in the event that the appeal could not proceed for want of security, I consider that I must approach the matter assuming that in the appeal, which is already listed for hearing, there would exist a serious thrust and counter thrust in relation to testing the decision of Cohen J. Thirdly, and most relevantly, the opponent objects to the delay which has attended the bringing of this motion. That delay is one of more than six months. The appeal was filed, as I have said, on 5 June 1987. The motion for security for costs was not brought until February 1988. The first letter in which such a motion was foreshadowed, and which is annexed to Mr Fisher's affidavit, is dated 15 January 1988. It has often been said that delay on the part of a party seeking an order for security for costs is a discretionary consideration to be taken into account in determining whether such security should be ordered. Particularly is this so where the Rule requires that security should only be ordered in special circumstances. See Lindney Wigpool Iron Ore Company v Bird (1883) Ch D 358, and P G Gabel Pty Limited (In Liq) v Katherine Enterprises Pty Limited (1977) 29 FLR 108 at 113. Fourthly, the appeal has now been listed for hearing for one day on 12 May 1988. An order now made for the giving of security for costs might occasion delay in ensuring compliance. It might result in disturbance of the day for hearing which is already fixed. In these circumstances, although the application is finely balanced, I am of the opinion that the delay just tips the scales against the making of the order that is sought. The reason behind the rule which requires promptness in the bringing of motions of the present kind is obvious. Parties have a right to appeal. The appellate right is now well established in this jurisdiction. The Rule of Court requires that orders such as are now sought should only be made in special circumstances. A party is therefore entitled to proceed with an appeal on the basis that no order for security will be made unless it is promptly sought and promptly made so that the party, in deciding whether to prosecute the appeal, is in a position to take into early account any order for security made in deciding whether to do so. At this stage, appeal books have been filed. Perhaps briefs have URJ TANNING RESEARCH LABORATORY INC v O'BRIEN (Kirby P) 3 been delivered to counsel for the hearing. Accordingly, the special circumstances which are required by the Rule have not been made out. I would therefore decline to order the security sought by the claimant. Although the proceedings were properly brought (in the sense that the motion was highly arguable) the claimant has failed in the motion. The normal consequence must follow, that is the claimant must pay the costs of the motion. Although it may be said that this adds a burden where the bringing of the motion was understandable and reasonable, the failure of the motion is a consequence of the Rule of the Court and of the frequently repeated authority that such motions should be brought, if at all, promptly. Accordingly the orders which I make are:- 1. Motion dismissed, and 2. The claimant must pay the opponent's costs.