Fodare Pty Ltd v Shearn [2009] NSWSC 1140

New South Wales Supreme Court

CITATION : Fodare Pty Ltd v Shearn [2009] NSWSC 1140

HEARING DATE(S) : 15 October 2009

JUDGMENT DATE : 27 October 2009

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

DECISION : Security for costs ordered.

CATCHWORDS : PROCEDURE - security for costs - action by company in liquidation - proceedings commenced by company through its liquidator - liquidator without funds - commencement of proceedings assisted by substantial creditor - that creditor unwilling to provide financial assistance - not shown that he is unable to do so - security to be provided - approach to quantum where respective solicitors express different views

CATEGORY : Principal judgment

Fodare Pty Limited - Plaintiff PARTIES : Doris Emily Elizabeth Shearn - First Defendant Kathleen Anne Hirtzell - Second Defendant

FILE NUMBER(S) : SC 3048/09

COUNSEL : Mr J T Johnson - Plaintiff Mr M J Cohen - First and Second Defendants

SOLICITORS : Garland Hawthorn Brahe - Plaintiff Dignan & Hanrahan - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

TUESDAY 27 OCTOBER 2009

3048/09 FODARE PTY LIMITED v DORIS EMILY SHEARN & ANOR JUDGMENT

1 The defendants seek an order that the plaintiff provide security for costs. 2 The plaintiff is a company in liquidation. The proceedings were instituted after commencement of the winding up. The decision to sue was a decision of the liquidator, Mr Clout, but it is clear that he relied on advice and information given to him by a solicitor, Mr Dennis. 3 Mr Dennis was (and is) a significant creditor of the plaintiff. He obtained a judgment against the company. It is on his application that the winding up order was made. 4 The approach to be taken to an application for security for costs in proceedings commenced by a company at the instigation of its liquidator was outlined by Hodgson JA in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105. After referring to cases in which the liquidator (as distinct from the company) is plaintiff and observing that a liquidator is generally regarded in the same way as a natural person plaintiff, his Honour said (at [45]): "Where the plaintiff is a company in liquidation, and not the liquidator, then security for costs will more readily be ordered, although the court's discretion is unfettered ( Bell No 2 ) and there is no presupposition in favour of granting security ( Bryan E Fincott P/L v Eretta Pty Ltd (1987) 16 FCR 497 ( Bryan )). However, the court will not refuse to order security on the ground that this will frustrate the litigation unless the company proves that those who stand behind the company and would benefit from the litigation are unable to provide security ( Bell No 2 )." 5 In the present case, there is the added factor that the plaintiff is, it seems, the trustee of a family trust. That factor has a significance emphasised by the Full Federal Court in Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176, a case to which Hodgson JA referred. The Full Court said: