Security for Costs
29 This Court's power to make an order for security for costs is derived from the Federal Court of Australia Act 1976 (Cth), s 56, and, in turn, O 28 of the Rules of this Court. The power is exercisable in the unfettered discretion of the Court with, as the authorities emphasise, an eye to all the circumstances of the case: see Allstate Life Insurance Co v ANZ Banking Group Ltd (1996) 134 ALR 187 per Lindgren J at 197-201. The fact that B W Offshore in incorporated outside the jurisdiction and that it holds no assets in the jurisdiction will normally weigh heavily in the exercise of the discretion: see Barton v Minister for Foreign Affairs (1984) 2 FCR 463 per Morling J, esp. at 469.
30 The general principle applicable to the exercise of the discretion in a case like the present has been explained in these terms by McHugh J in Chelleram v China Ocean Shipping Co (1991) 102 ALR 321, at 323;
"To make or refuse to make an order for security for costs involves the exercise of a discretionary judgment. That means that the court exercising the discretion must weigh all the circumstances of the case. The weight to be given to any circumstance depends not only upon its own intrinsic persuasiveness but upon the impact of the other circumstances which have to be weighed. A circumstance which may have very great weight when only two or three circumstances have to be weighed may be of minor significance when many circumstances have to be weighed. However, for over 200 years, the fact that a party, bringing proceedings, is resident out of the jurisdiction and has no assets within the jurisdiction has been seen as a circumstance of great weight in determining whether an order for security for costs should be made. Indeed, for many years the practice has been to order such a party to provide security for costs unless that party can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction."
31 Accordingly, in the absence of some particularly weighty special circumstance or set of circumstances, or countervailing factor, the incorporation of an applicant company overseas and the absence of any assets owned by it in the jurisdiction will ordinarily dispose a Court to exercise the discretion by requiring the provision of security for costs. Incorporated under the laws of Bermuda and with its headquarters in Norway, B W Offshore prima facie attracts the application of that approach. The question then becomes, is there any special circumstance or countervailing factor of great weight in this case?
32 Mr O'Keefe QC, who appeared with Mr M Scott of counsel for B W Offshore, contended primarily that there should be no order for security because it is impossible to distinguish between the respondents' costs of defending the claim and of prosecuting their cross-claim. Reference was made to Energy Drilling Inc v Petroz NL (1989) 11 ATPR 40-954, where Gummow J reiterated the discretionary nature of the power to order security, but noted at 50,422 that an applicant's residence outside the jurisdiction "does not necessarily invite an exercise of discretion in favour of ordering security, the question being how justice will best be served in the particular case."
33 I have not been persuaded by the arguments advanced on behalf of B W Offshore. I can discern nothing in the circumstances of the case, as so far revealed, or the respective positions of the parties, to outweigh the general practice to which McHugh J referred in Chelleram. That is not to say that the general practice should be elevated to something higher than an assumption or a guide as to how the discretion to order security for costs is to be exercised. No doubt there will be cases in which the fact of a defendant body's incorporation overseas and the fact of its holding no assets in the forum jurisdiction will not be determinative as to the making of an order for security. However, the combination of foreign incorporation and a lack, or a paucity, of local assets, as I said in James v Nolmont Pty Ltd (Subject to a Deed of Company Arrangement) (No 2) [2009] FCA 697 at [3], will be a "potent factor" in the exercise of that discretion. Attached to that factor is the considerable difficulty which I infer would confront the respondents in enforcing an order for costs overseas particularly in light of the evidence adduced by Mr Grieve about B W Offshore's financial performance during 2008. Accordingly, I do not regard this as one of the rare cases in which a countervailing factor, or a combination of such factors militating against the provision of security should prevail.
34 It then becomes necessary to quantify the security which should be ordered at this stage of the proceedings. The parties have advanced widely disparate estimates of the costs for which security is sought. Those estimates, I accept, have been made in good faith and are informed by a wealth of specialised expertise. However, they proceed on quite different assumptions and a divergent understanding of the costs for which an order in the exercise of the relevant discretion can be framed to provide security.
35 A sum ordered by way of security need not be a precise estimate of the costs, actual or projected, of the party in whose favour the order is to be made. It should be an amount likely to satisfy an order for party and party costs to the relevant point in the litigation but is not conceived as providing an indemnity in respect of that party's costs: see Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 per Fullagar J, at 175, ordinarily so far as costs are expended up to the first day of trial. Too great a degree of precision is not necessary or, in all likelihood, helpful or even possible. As Lindgren J said in Allstate Life Insurance Co, supra, at 197:
"The amount is in the discretion of the court and should be such sum as the court thinks just, having regard to all the circumstances of the case. Obviously, a factor of prime importance will be the amount of a respondent's costs which an applicant, if unsuccessful, will be ordered to pay to the respondent if the proceeding continues to a determination by the court. But the estimation of that amount involves many factors, some of them imponderable. Generally speaking, it cannot be assumed that a failure by an applicant will be on any particular basis. Moreover, the course of events down to and during the trial may be relevant to the particular order for costs to be made. The assessment of the work which will be done in the respondent's interests is also difficult."
36 In my view, "all the circumstances" of the present case includes a consideration of which party, in substance, is the true "aggressor" in the proceeding. In other words, it is necessary to have regard to what, on the pleadings, is the primary case advanced. From my presently limited acquaintance with the case, I am persuaded that B W Offshore, having by its statement of claim defined most of the issues in dispute between the parties, is properly to be characterised as the "aggressor" or moving party. However, paragraphs 75-80 of the current cross-claim filed on 17 April 2009, most of which are reproduced at [7] above, allege that the making by B W Offshore of a representation on which Anzon relied and to which s 51A or s 52 of the Trade Practices Act 1974 (Cth) ("the TPA") applies. That claim is made in relation to the pre- LOI negotiations which have been put in issue by the statement of claim and the defence. Minds may differ as to whether the cross-claim is "genuinely defensive" (see Interwest Ltd v Tricontinental Corporation (1991) 5 ACSR 621 per Ormiston J, at 627-8ff), but it is not necessary to come to a concluded view on that question. It is enough to notice that it is a claim which has been erected upon the same sub-stratum of facts as the claims made in the statement of claim.
37 That consideration militates against an attempt, at this stage, to isolate the respondent's costs of defending B W Offshore's claim from Anzon's costs of prosecuting its cross-claim. That is not to say that some allowance or discount from the amount of security should not be made to take account of the presence of the cross-claim. The principal difficulty in quantifying the amount of security flows from the complexity of the litigation and the unpredictability of the extent to which various members of the respondents' legal team will be involved in what is likely to be a myriad of interlocutory and preparatory activity before the trial commences. However, that difficulty cannot justify the Court in declining to exercise the discretion at all. Doing the best I can, and taking an appropriately "broad-brush" approach to the task, I consider it reasonable to order that B W Offshore provide security in the sum of AUD$550,000 for the respondents' costs up to and including the first day of trial.