Checked‑Out Pty Ltd v Eagle Eye Inspections Pty Ltd of NSW [1999] FCA 1565 | Case summary

EX TEMPORE REASONS FOR JUDGMENT 1 Before me are two motions seeking security for costs incurred by the respondents. One of the motions is that of the first four respondents, it is supported by the recently joined fifth respondent; the other is of the remaining seven respondents. 2 The motions were both filed some time ago, but in the press of other matters which were agitated at the time were not then dealt with. On 26 August 1999 the first applicant paid into court the sum of $65,000. That payment was made following certain negotiations between the first applicant and the first four respondents. An order was made in chambers on 26 August, to the effect that the sum paid be security for the respondents' costs, subject to further order of the court. It was the first submission of the first five respondents today that the sum of $65,000 be treated simply as security for their costs, so that the matter would be dealt with today, principally at least, as a contest between the sixth to twelfth respondents and the applicants as to the security to be provided for the costs of those respondents. 3 However, as argument proceeded it diverted, I think, substantially to the question, what was the appropriate security, if any, to be ordered at this stage of the proceedings in total for the costs of all twelve respondents; and that I think is the appropriate way in which to deal with the matter. Plainly the intention underlying the order of the Court made on 26 August was that the $65,000 paid in ought to be regarded as security for the costs of all respondents; and it would be inappropriate, in my view, to vary that order so as to treat the sum already paid in any other way. 4 The question then is whether it is appropriate now to order that the first applicant provide security for the costs of the respondents in addition to the $65,000 already held. On that issue each respondent has read evidence of a solicitor, deposing as to the likely length of the proceedings and as to the costs likely to be incurred. 5 It may be said generally that the estimates take a global form, are not detailed and are based, in one case, upon an estimate of an eight day hearing and, in the other case, are based to a large extent upon a view formed at this stage of the proceedings as to the extent of both the interlocutory proceedings and the evidence required at trial which may be expected to result from the particular allegations made by the applicants against the sixth to twelfth respondents. 6 The applicants in turn have read evidence as to the first applicant's financial situation and that of its shareholder Ms Wilczak. The first applicant itself appears on that evidence to be plainly insolvent, though it has in its bank account a sum of approximately $88,802 and its only liabilities are debts owed to Ms Wilczak and to her de facto husband (Mr Hardcastle), the second applicant, who in turn has advanced a substantial sum of money to the company, of which the $88, 802 to which I have referred is the residue remaining after what is described as the meeting of various obligations and apparently some payments (though what payments - particularly, their quantum - does not appear) to enable it to conduct this litigation. In addition, it appears that the security already provided has come from the sum lent to the first applicant. 7 Ms Wilczak also gives evidence which is apparently intended to show that the financial difficulties in which the first applicant is now enmeshed result, at least in part, from the conduct complained of at least on the part of the first five respondents, perhaps of all respondents. The precise extent, however, to which that is so, or said to be so, does not really appear, nor does it appear with clarity that the only person standing behind the first applicant, and in a position to benefit from a successful outcome of this proceeding, is Ms Wilczak, its shareholder. Indeed, on one view Mr Hardcastle, who has provided to the first applicant all the funds it now has, might well be thought to be in that situation as well, despite the fact that, although previously a shareholder, he no longer is one. I do not think, however, that the evidence of Ms Wilczak is sufficient for me to conclude either that those standing behind the first applicant are, if this were relevant, not in a position to provide security, or that the financial position of the first applicant, as it is now, results, to a substantial extent, from the actions alleged against any of the respondents. 8 In any event there is no suggestion by the applicants that it is not appropriate that any security for costs be provided. The question therefore resolves itself to one of amount and particularly to the extent to which the amount already provided ought to be regarded as security for the likely costs of the whole of the proceeding. I have mentioned that the estimates given are global; there is no attempt to state in detail how they are arrived at and it appears that they have been made on an indemnity basis. I say that because each of the affidavits dealing with the estimates refers to costs likely to be incurred by the relevant respondents, without any statement that costs actually incurred have been discounted so as to produce an estimate on a party and party basis. Certainly neither group of respondents has submitted that the estimates should be regarded as anything other than estimates of costs actually to be incurred. 9 Despite the number of times they have already been before the Court, the proceedings are at a very early stage. Indeed, although an amended application and a further amended statement of claim have been filed following hearings concerning the adequacy of earlier pleadings, no defences have been filed and, of course, discovery is still some distance in the future; likewise, of course, the preparation of evidence. In the circumstances it is very difficult to form any clear view of what costs precisely are likely to be incurred by whom in the course of these proceedings, or of what the extent of the interlocutory course of the proceeding, including discovery, is likely to be. 10 The respondents suggest that the extent of the interlocutory proceedings and the length of the trial are both likely to be considerable, and they may well prove right; but at this stage one does not know, certainly with any precision. It would not at all surprise me if the sum of $65,000 were, in the end, to prove inadequate as security for the costs on a party and party basis of all respondents, but there is no basis on which I can form any view of the likely extent of that inadequacy at this stage and to order any further sum by way of security now would, I think, amount to no more than guesswork. Something more precise may be possible when the proceeding is substantially further advanced and much more is known about its likely course than is known now. 11 I think therefore these are the only courses sensibly open to me now: I might make no further order for security, but indicate that it is open to the respondents, as it is in any event, to apply for further security if in circumstances existing later they can justify seeking a greater sum; alternatively, while leaving it similarly open, I might order that some further relatively small sum be provided now by way of security on the footing that I have an impression, a clear one but no more than that, that it is likely that $65,000 may in the end prove to be inadequate. 12 I think I know too little to make a sufficiently confident assessment of what is likely to occur in these proceedings, and of what costs are likely to be incurred, to justify selecting any particular sum by way of further security at this stage. Accordingly I decline to order the provision of additional security. I think it is appropriate that I order, at least for the avoidance of doubt, that the sum of $65,000 paid into Court on 26 August 1999, and the investments representing that sum, be security for the costs of all respondents in this proceeding. 13 I am not convinced that it is necessary to give leave to file further notices of motion in the future, seeking that the amount provided by way of security be increased. But I indicate that it is open to the respondents to apply at a later stage in the proceeding for further security upon evidence establishing in appropriate detail the likely extent of the additional costs which they expect to incur. The costs of the motions will be reserved. 14 There is one final matter which must be mentioned, by way of addendum to the reasons which I delivered orally at the conclusion of the hearing. When the notices of motion were filed there was one applicant only, Checked‑Out Pty Ltd. An amended application has recently been filed, however, together with a further amended statement of claim. That was done pursuant to the leave of the Court. Significantly, Mr Hardcastle has been joined as second applicant. No reference was made, in argument, to that state of affairs, and I overlooked it. I have altered my reasons to reflect the present parties. More significantly, however, nothing was said about the effect that the presence of a natural person as an applicant might have on the outcome of the motions, and my reasons taken no account of a possibility that his presence might, if taken into account, have affected it. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.

Checked‑Out Pty Ltd v Eagle Eye Inspections Pty Ltd of NSW

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