Banks Farm Holdings Pty Ltd v Gumrange Pty Ltd

REASONS FOR JUDGMENT 1 In this matter, the second and third respondents seek an order that the applicant provide security for costs in the sum of $60,000. The circumstances and background to the present case, including an application for security for costs against the applicant, are set out in my reasons for judgment in Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCA 65. It is unnecessary to outline those circumstances for the purpose of these reasons. One outcome of the reasons for judgment that I delivered on that occasion was that an order was made against the applicant in favour of the first and fourth respondents, who are the Australian respondents, that the applicant provide security for costs in the sum of $15,000. 2 The reasons why I ordered security are set out in [100]-[102] of the reasons for judgment. In substance, I was satisfied that there was a real risk that the applicant would be unable to pay costs, and its circumstances were such that the jurisdiction of the Court to award security for costs was attracted. I indicated at [101] that this is another case where those who will gain the benefit of litigation are standing behind an applicant without being prepared to bear any risks of the litigation. I awarded a fairly nominal sum for security at that stage because there was considerable doubt as to how the various proceedings in this matter would proceed and as to whether the case of the applicant, which is part of a series of cases, would be the one that would ultimately go to trial. Since that application, a number of steps have occurred in the litigation, including an appeal from that judgment, certain matters relating to discovery and a number of case management conferences. 3 The second and third respondents did not enter an unconditional appearance until 19 March 2004. Notwithstanding their awareness of the circumstances that entitled them to apply for security for costs, those respondents did not file the present motion until 22 April 2005. It seems to me that there was a delay of some 13 months, which has not been explained. 4 The applicant opposes the application for security for costs on ten grounds, which are set out in some detail in its outline of submissions. It does not dispute that there is credible testimony to support a belief that the applicant would be unable to pay costs if the second and third respondents are successful. The real dispute goes to questions of discretion. 5 The first of the ten reasons is that there has been inordinate delay in seeking security. In my view the ground of delay is substantially made out but the cases do not make delay a necessarily disqualifying factor. There is no doubt that the application for security should have been made at an earlier point of time. I also accept that the delay has resulted in the applicant incurring costs during the period in which security was not sought. But it does seem to me that the appropriate way to deal with delay is to indicate that I will not be disposed to order any security for any of the costs incurred during the period of delay. Thus, any prejudice that may have arisen as a result of the delay can be adequately compensated for by that approach. Having regard to all the circumstances, I do not regard the delay as such that it should lead to a refusal of the application. 6 The second reason is that the applicant has substantial costs orders against the second and third respondents. That is correct but there is no evidence that enables me to form any view as to the out-of-pocket consequences for the applicant of the applications that led to those orders. The orders were made against the second and third respondents in respect of the costs of the applicants in each of the eight related proceedings. The substantial costs orders, which have not been met to this date, are factors of minor relevance to the discretion, absent any quantification of what the effect of the orders is as far as the applicant is concerned. In these circumstances, the discount factor that I might otherwise apply because of that circumstance is not one that I can reasonably apply, absent any such quantification. I will, however, indicate that if a further application is made for security, I would be prepared to have regard to the burden borne by the applicant in respect of past costs and the financial consequences for it of those costs orders. Thus, while I do not regard the orders as irrelevant, I propose to take them into account on any subsequent application for security for costs. 7 The third ground is that the motion seeking security is made oppressively. I am not satisfied that there is any oppression involved in the application. The fourth factor raises the issue of which proceeding will proceed to trial. It may well be that the present proceeding will not necessarily be one of the cases that proceeds to trial, but that is not a factor against ordering security. It merely goes to the quantum of the security that should be ordered. 8 The fifth ground is said to be the public interest. I am not satisfied that there is any proper basis for the public interest being raised as a ground against the ordering of security. The sixth ground is that the applicant's claims are bona fide. I am prepared to accept that, as I have indicated in my earlier reasons, I am satisfied that a prima facie case has been made out. But the fact that the claims are bona fide does not have the consequence that no security should be ordered. The seventh ground is that the applicant has strong prospects of success. Again, while that is a factor that is to be taken into account, it is not one that in my view disqualifies the application for security because there is also a risk of failure, and the risk of failure is really the circumstance that I have to consider when exercising a discretion as to security for costs. The eighth factor is related, and that is, so it is said by the applicant, the respondent has poor prospects of success. I am not satisfied at this stage on the material that a case of this complexity could enable me to properly form the view that either party is likely to win or likely to lose. There are obviously prospects either way and I do not think I can form a view on the present application as to how the case will finally unfold. 9 The ninth factor is that the applicant has been prejudiced by the delay. I am not satisfied that any disqualifying prejudice has arisen, as I indicated earlier. The prejudice can be compensated for by no security for costs being ordered for the period of the delay. 10 The tenth factor is that the amount sought by way of security is excessive. It does seem to me that the amount of $60,000, which is explained in the material, is an amount that exceeds that which I ought to order in the present circumstances, which include uncertainty as to how this matter will proceed to trial. If this were the only case that will proceed to trial, then it may well be that the sum of $60,000 is appropriate but, as there are so many uncertain circumstances, there is no reason to believe that costs of that order will be incurred hereafter. 11 The factors that led me to order security for costs in relation to the Australian respondents remain the factors that persuade me that, having regard to all the circumstances, this is a case where I should not depart from that course. The factor that is most significant is that this is again a situation where those who would gain the benefit of the litigation are standing behind the applicant without being prepared to bear any of the risks of the costs of the litigation. The figure I ordered for the Australian respondents was $15,000 and, having regard to all the discretionary considerations that I have outlined above, the same figure is appropriate to be ordered on the present application. Whilst the circumstances are not the same, insofar as the general principle is concerned, I am satisfied that that was a reasonable sum on the earlier date and remains a reasonable sum. The main factor behind that conclusion is that on both occasions there is uncertainty as to future costs. The sum of $15,000 is an amount that will reasonably deal with the costs likely to be incurred in the immediately foreseeable future. The orders that I will make are that: 1. Within 30 days, the applicant pay into the Court the sum of $15,000 for security for costs or provide a bank guarantee for the payment of those costs in a form acceptable to a Registrar of the Court. 2. The applicant pay to the second and third respondents 50 per cent of their costs of and incidental to the motion filed on 15 April 2005. 3. Reserve liberty to apply. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel.