Diamond & Anor v Birdon Contracting Pty Limited & Anor

Land and Environment Court (NSW)|2006-11-07|Before: Lloyd J, Beazley J

The Applicant was made bankrupt on 5 September 2000 in proceedings number N7561/2000. Annexed and marked with the letter "A" is a current extract from the Insolvency and Trustee Service Australia.

4 The Court has an unfettered discretion to order a party instituting proceedings in the Court to give security for the payment of costs that may be awarded against that party: s 69(3) of the Land & Environment Court Act 1979. The principles that have been conventionally applied to applications for security are those set out by Beazley J in KP Cable Investments Pty Limited v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198. The considerations said to be relevant by her Honour in that case may be summarised as:

(2) The strength and bona fides of the case in which security is sought;

(3) Whether the impecuniosity of the applicant results from the respondent's conduct, the subject of the claim;

(4) Whether the application for security is oppressive in the sense of denying an impecunious citizen or organisation a right to litigate;

(5) Whether there are persons standing behind the plaintiff applicant who are likely to benefit and be willing to provide the security;

(6) Whether persons standing behind the plaintiff applicant have offered any personal undertaking to be liable for the costs, and if so, the form of any such taking;

(7) Whether the applicant for security is in substance the plaintiff or the proceedings are defensive in nature. 5 Care must be taken in adopting this judgment of the Federal Court because in Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82, the New South Wales Court of Appeal held that cases on security for costs under s 56 of the Federal Court of Australia Act 1976 should not be applied to applications under s 69(3) of the Land & Environment Court Act 1979. Nevertheless the principles described by Beazley J are available as a general guide and I am prepared to apply them, but modified by the qualifications to those principles as explained in Melville. 6 The first consideration is whether the application for security has been brought promptly. The answer to the question is clearly "Yes". 7 The second consideration is the strength and bona fides of the case in which security is sought. I am prepared to assume for the purpose of this motion that the case brought by the applicants in this case is an arguable one. 8 The third consideration, whether the impecuniosity of the applicant results from the respondent's conduct, the subject of the claim, is not a consideration which is relevant here. 9 The fourth consideration is whether the application for security is oppressive in the sense of denying an impecunious citizen or organisation the right to litigate. It is here that the comments of Heydon JA in the Court of Appeal in Melville become relevant. His Honour observed at 112. To contrue s 69(3) as permitting security orders against all plaintiffs, including impecenious natural persons, does not deprive persons in the position of the claimant of any fundamental right. A citizen in her position who brought a case had a right under the general law to have her case determined on its merits even if she were impecunious because if she could not prosecute her case, no-one could. But the proceedings she has brought under s 123(1) are not her case in the sense to which the rule about impecunious plaintiffs generally applied. The proceedings she has brought are not specifically hers: anyone could have brought them. There was justification for the general law rule so far as it assisted enforcement of the law by the only person who suffered from a breach of the relevant rule of law and the only person who could enforce it. A statutory change in that rule effected by s 69(3) which prevents persons like the claimant from proceeding with s 123(1) litigation while leaving many others able to do so does not prevent the merits of the controversy from being determined. The purposes of the legislation can be vindicated by those other persons.

10 And then a little later his Honour states: Though the claimant did not rely on them, the Federal Court cases on s 56(1) of the Federal Court of Australia Act (Cth) should not be applied to s 69(3). None of them explain how s 56(1) relates to the general law rule. In all of them the result would be justified apart from the general law rule. While the general law rule is of a kind which would call for clear language if it were to be abolished, it is hard to see how language much clearer than that used in s 69(3) could have been employed. 11 The decision of Heydon JA in the Court of Appeal (with whom Young CJ in Eq agreed) is of course binding upon me. It supplies a complete answer to the fourth consideration raised by Beazley J in KP Cable Investments.

12 The fifth consideration is whether there are persons standing behind the plaintiff applicant who are likely to benefit and be willing to provide security. That does not seem to be relevant here. Although Mr Richardson is the second applicant, we know nothing about him, nor do we know whether he is willing to provide security. As I have noted, there is no evidence before me that Mr Diamond acts for Mr Richardson. 13 The sixth consideration is whether persons standing behind the plaintiff applicant have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking. Neither of the applicants in the present case, nor any other persons, have offered any personal undertaking to be liable for the costs. 14 The final consideration, whether the applicant for security is in substance the plaintiff, or the proceedings are defensive in nature, is not a relevant consideration here, since the respondents did not institute the proceedings. 15 For the reasons stated by Heydon JA in Melville I am inclined to grant the relief sought and to make an order for the security for costs. Accordingly there will be an order in the terms of par 4 of the first respondent's notice of motion dated 11 October 2006 and an order in the terms of par 5 of that same notice of motion. Is there anything else? WEBSTER: Only in regard to, in respect of the rest of the notice of notion. I wonder if your Honour would just stand that over generally. The other relief sought. That was in regard to paragraphs 2 and 3.

HIS HONOUR: Paragraphs 2 and 3 of the first respondent's notice of motion of 11 October 2006 are stood over generally. 16 The formal orders therefore are:

(1) The applicants provide security for costs of the first respondent in the sum of $50,000.00 or, alternatively, in the form of a bank guarantee in the sum of $50,000.00. (2) That in default of the provision of security for costs in Order (1) the application be permanently stayed or stayed until any further order of the Court. (3) Paragraphs 2 and 3 of the first respondent's notice of motion, dated 11 October 2006, are stood over generally.

WEBSTER: Your Honour, only the costs the notice of motion, your Honour. 17 HIS HONOUR: The costs must follow the event. There will be an order that the first applicant pay the costs of the notice of motion for security for costs. WEBSTER: Thank your Honour.

I hereby certify that the preceding 17 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Diamond & Anor v Birdon Contracting Pty Limited & Anor [2007] NSWLEC 92

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