Ecopave Australia Holdings Pty Ltd v Adbri Masonry Group Pty Ltd

REASONS FOR JUDGMENT 1 By its interlocutory application dated 18 July 2012, the respondent, Adbri Masonry Group Pty Ltd ("Adbri"), seeks an order that the applicant, Ecopave Australia Pty Ltd ("Ecopave"), provide security for Adbri's costs in the proceeding in the sum of $88,125 pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) and s 1335 of the Corporations Act 2001 (Cth). 2 The substantive proceeding is one in which Ecopave seeks a de novo review of a decision of a delegate of the Registrar of Trademarks to uphold Adbri's opposition to the registration of a trademark by Ecopave. 3 On 5 August 2011, Buchanan J dismissed a prior application for security for costs by Adbri; see Ecopave Australia Holdings Pty Ltd v Adbri Masonry Group Pty Ltd [2011] FCA 892. Apart from Ecopave having a paid up capital of $3.00, Buchanan J said there was no evidence before him about its capacity to meet a costs order. 4 The material now before the Court shows that Ecopave and those who stand behind it are impecunious. Mr Owerhall, one of the directors of Ecopave, has given evidence that Ecopave intends to apply to the Australian Taxation Office ("ATO") for endorsement as a tax deductible gift recipient. He anticipates that Ecopave will receive sufficient funds, by way of tax deductible gifts, to meet any security for costs order. No timeframe is advanced for the lodging of this application, let alone its consideration by the ATO. Therefore, I can see little prospect of sufficient funds being received in the reasonably foreseeable future. 5 I am not satisfied that Ecopave has any realistic prospect of meeting any costs order which may be made against it in this proceeding. I am satisfied that there is credible evidence before the Court that Ecopave will be unable to pay the costs of Adbri to date. I am also satisfied that Ecopave will be unable to pay the costs of Adbri up to and including a contested hearing, should the proceeding reach that stage. 6 Ecopave submits that, nonetheless, there are discretionary considerations which militate against the making of an order for security for costs. The first such consideration is that the application has not been made promptly. That is strictly true, given that the proceeding was commenced in June 2011. An earlier security for costs application was made in late June 2011 and determined on 5 August 2011. It was rejected for lack of evidence. The proceeding has not progressed towards trial in any meaningful way in the interim. After the transfer of the matter to the Victoria District Registry in November 2011, the Court has dealt with two failed interlocutory applications of Ecopave for Mr Owerhall to have leave to represent it. There has also been a six month hiatus between those applications, at the request of Mr Owerhall. Much of the material which provides evidence of the impecuniosity of Ecopave and its directors has arisen from affidavits filed on behalf of Ecopave in those interlocutory matters. 7 When viewed in context, the application for security for costs, albeit made for the second time, has not been made at a late stage in the proceeding. Rather, it has been made at a time when little has been done to progress the matter towards trial. 8 Ecopave also points to the prior failed application for security for costs before Buchanan J as a discretionary basis to refuse the current application. That submission is rejected. The current matter falls to be determined on its merits, based on the material now before the Court. The prior judgment does not act as an estoppel on a further application on proper material. To the extent that the existence of the prior failed application is a factor to be taken into account, it is of negligible assistance to Ecopave. 9 Ecopave next submits that the proposed security for costs order is oppressive. It says that it will result in the denial of an impecunious litigant's right to litigate. However, one may ask why should Adbri be forced to defend a proceeding, in circumstances where it has little to no prospect of recovering any costs if successful? 10 Courts have been reluctant to frustrate litigants who are impecunious as a result of the actions of their opponents in litigation. However, it is conceded that the impecunious state of Ecopave and its directors has not flowed from the actions of Adbri. 11 Ecopave submits that its proceeding has a reasonable prospect of success and has been brought in good faith. On the other hand, Adbri points to the decision of the delegate of the Registrar of Trademarks in its favour as a clear and cogent one. It is always difficult at an early stage of any proceeding to make an assessment of the prospects of success. This is even more so when the hearing is de novo. 12 Ecopave has not demonstrated that the delegate's decision is clearly flawed. Notwithstanding that Ecopave genuinely considers it has reasonable prospects of success in the current proceeding, such a consideration does not outweigh the important fact that Ecopave is unlikely ever to be in a position to meet any adverse costs order made at the conclusion of a contested trial. At best, the consideration whether Ecopave has a reasonable prospect of success is a neutral one. So much is conceded by Ecopave. 13 Adbri has sought the quantum of $88,125 for security for its costs. That sum is based on the assessment of an experienced commercial solicitor. Its reasonableness is not in contest. The Court was inclined to grant a lesser amount, on the basis that, if those who stand behind Ecopave are determined to pursue the current application, they might take steps to raise funds sufficient to meet a moderate security for costs order. Ecopave did not support the making of an order for any amount other than a nominal amount of costs. There is no utility in so doing. 14 Accordingly, the Court considers that an order for security for costs should be made, largely in the form sought by Adbri. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.