Hopeshore Pty Limited v Melroad Equipment Pty Limited

Federal Court of Australia|2004-11-09|Before: Branson J

introduction 1 The respondent has moved the Court, in reliance on s 56 of the Federal Court of Australia Act 1976 (Cth) ('the Federal Court Act') and s 1335 of the Corporations Act 2001 (Cth) ('the Corporations Act'), for an order requiring the applicant to give security for the payment of costs that may be awarded against it. For the reasons given below I have decided that the motion should be dismissed. 2 Section 56 of the Federal Court Act provides: '(1) The Court or a Judge may order an applicant in a proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security.'

'(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. (2) The costs of any proceeding before a court under this Act is [sic] to be borne by such party to the proceeding as the court, in its discretion, directs.' 3 The applicant, by its counsel, has acknowledged, for the purposes of the motion for security for costs only, that there is reason to believe that it may be unable to pay the costs of the respondent if it is successful in its defence of this proceeding. The concession of the applicant means that under each of the provisions the Court has a broad discretion, fettered only by the requirement that the Court act judicially, to order the applicant to give security for the payment of the respondent's costs. I have given recent consideration to the content of the requirement to act judicially under s 56 of the Federal Court Act in The Airtourer Co‑operative Limited v Millicer Aircraft Industries Pty Limited [2004] FCA 1400 at [16]‑[17]. It is not necessary here to give consideration to whether the content of the requirement to act judicially is different under s 1335 of the Corporations Act than it is under s 56 of the Federal Court Act. 4 Notwithstanding the breadth of the Court's discretion to make an order for security for costs, there are factors generally recognised as appropriate for consideration in the exercise of that discretion. As Mansfield J observed in Gartner v Ernst & Young (No 3) [2003] FCA 1437 at [10], those factors include: '● the prospects of success in the proceedings, subject to the practical circumstance that the Court will generally not be required to investigate in considerable detail the likelihood or otherwise of success in the action; ● whether an order for security for costs would preclude the applicant from pursuing the claim; ● whether the impecuniosity of the applicant arises out of the breaches of conduct alleged against the respondent; ● the public interest; and ● the timing of the application, namely that it should be brought promptly.' See also Deangrove Pty Ltd v Buckby [2002] FCA 1544 at par [5]. 5 In this case the applicant has contended that, irrespective of the above factors, the conduct of the respondent has been such that it would not be an appropriate exercise of the Court's discretion to require the applicant now to give security for the payment of costs that might be awarded against it. This contention calls for careful consideration of the history of this proceeding.

history of proceeding 6 The proceeding was initiated on 28 October 2003 when Lindgren J, as duty judge and proceeding ex parte, gave the applicant leave to file in Court an application, a notice of motion and two affidavits. By the application the applicant sought relief under a number of heads arising out of the supply by the respondent to the applicant, in trade or commerce, of goods and services. Reliance was placed upon the Trade Practices Act 1974 (Cth) ('the TPA'), the Federal Court Act and the common law. The affidavits revealed that the applicant, a civil engineering company that specialises in excavation work, was experiencing problems with certain excavators that it had purchased from the respondent. The applicant alleged that the problems arose, in effect, from design faults in the excavators and that the failure of the excavators to work as required was resulting in a heavy financial burden on the applicant. The affidavits also reveal that the applicant had attempted to resolve its dispute with the respondent before instituting the proceeding but had been unsuccessful. 7 On 30 October 2003, with both parties represented, his Honour made an order in the following terms: 'BY CONSENT (OTHER THAN ORDER 3) THE COURT ORDERS THAT: 1. The amount of $56,849.32 paid into Court this day by the Applicant pending further order is to be placed into an interest bearing account rather than the Litigants' Fund. 2. The respondent its servants or agents be restrained from preventing, interfering or otherwise hindering: (a) access by the applicant's servants or agents to Kobelco 330 Hydraulic Excavator serial number LL06-5768; and (b) removal of Kobelco 330 Hydraulic Excavator serial number LL06-5768 from the possession of the respondent. 3. Notice to Product [sic] and subpoena to be returnable on 19 November 2003. 4. The applicant file a statement of claim and any further affidavit material in chief on or by 21 November 2003. 5. The respondent file any defence and cross claim and any evidence in chief on or by 5 December 2003. 6. The applicant file any defence to cross claim and any evidence in reply on or by 12 December 2003. 7. The proceedings be re‑listed for further directions at 9.30am on 18 December 2003. 8. Liberty to apply on 3 days' notice. 9. Costs of the notice of motion dated 28 October 2003 be reserved.' 8 The orders made by Lindgren J by consent appear to reflect a view by the parties, in which his Honour may be understood to have joined, that the dispute between them was one that could be, and ought to be, resolved within a relatively short timeframe. The amount of $56 849.32 referred to in the order of Lindgren J related to a claim made by the respondent that it was entitled to enforce a lien over one of the excavators sold to the applicant to secure payment to it in that amount. The applicant's agreement to pay the amount of $56 849.32 into Court may be assumed to have been the price of the respondent's agreement to the making of par 2 of his Honour's order. 9 The applicant filed certain additional affidavits and a statement of claim on 21 November 2003 but the respondent did not file a defence, a cross‑claim or any evidence on or by 5 December 2003 or at any time before the further directions hearing ordered by Lindgren J. 10 The proceeding was allocated to my docket. The parties attended before me for the directions hearing scheduled by Lindgren J for 9.30 am on 18 December 2003. On that day, the respondent's counsel advised the Court that, notwithstanding that it had not filed a defence or any cross-claim or evidence in chief nor sought to have the order made by Lindgren J varied, the respondent did propose to defend the proceeding. Further, upon a notice to produce addressed to the respondent being called, counsel for the respondent acknowledged that, although no steps had been taken towards obtaining an order that the notice to produce be set aside, no material the subject of the notice had been brought to Court. He indicated that his client was particularly concerned that 'it not be put under any obligation to produce' software contained in a CD ROM covered by the notice to produce. He advised me that: 'My instructions are, your Honour, that an interlocutory hearing would be the best way to deal with the CDROM issue.' 11 In the circumstances I acceded to a request by counsel for the applicant that the notice to produce be stood over and called again at 9.30 am the next morning. I also stood the directions hearing over to the next morning. As Mr Lee, counsel for the applicant, had advised me that expert evidence was required concerning the alleged problems with the excavators, I urged the parties to give consideration, in the intervening period, to, amongst other things, identifying an expert in whom they both had confidence who might be jointly instructed to prepare a report. I also indicated to the parties that, once the report of an expert was obtained, if a settlement could not be promptly negotiated, I thought that the matter should go to mediation. I urged counsel to seek instructions before 9.30 am the next day as to their respective client's attitude to an order for mediation. 12 The transcript of the directions hearing held on 19 December 2003 reveals that when the applicant's notice to produce was again called, counsel for the respondent sought leave to file in Court a notice of motion by which orders were sought, first, that the notice be returnable instanter and, second, that the notice to produce be set aside. Counsel for the respondent again indicated that no material the subject of the notice to produce had been brought to Court. The applicant did not oppose the notice of motion being returnable instanter. However, the respondent proved unable to press its motion as it had no affidavit evidence available to support the motion. The respondent did, however, file in Court, with leave, an affidavit sworn by the respondent's solicitor. After offering an explanation for the failure of the respondent to comply with par 5 of the order made by Lindgren J on 30 October 2003, the affidavit concluded: '12 In the circumstances, the Respondent will be in a position to: (a) Deliver its Defence to the Plaintiff's claim by Tuesday 23 December 2003. (b) File its lay witness statements in mid to late February 2004 and possibly its expert witness statements by late February 2004. (c) Deliver its Counterclaim by mid‑February 2004.' 13 Counsel for the applicant stressed the urgent need of his client, which was facing a liquidated damages claim pursuant to a large excavation contract, to have the issues the subject of the proceeding resolved. He offered to the Court, and to counsel for the respondent, short minutes of order that provided for the appointment by the Court of an expert. 14 I adjourned the directions hearing for a short time to allow the parties to hold an informal conference in which the respondent's solicitor, who was in Melbourne, could participate by telephone. When the directions hearing resumed a little over half an hour later, I was offered short minutes of an order that I was advised could be made by consent. There was discussion between the Court and the parties with respect to the precise terms of the short minutes, and after a brief further adjournment to allow counsel for the respondent to obtain further instructions, I made the following order: 'BY CONSENT THE COURT ORDERS THAT: 1. Respondent to file and serve its defence on or by 24 December 2003. 1a. Respondent to file and serve any cross claim and any lay affidavit evidence on or by 23 January 2004. 2. Applicant to request particulars of the respondent's cross claim, if so advised, on or by 2 February 2004. 3. Respondent to provide replies to any request for particulars of the respondent's cross claim by the applicant on or by 9 February 2004. 4. Applicant to file a defence to any cross claim on or by 13 February 2004. 5. Parties to exchange verified lists of documents listing documents which: (a) it proposes to rely upon in support of its case; or (b) of which it is aware which, to a material extent, adversely affect its own case or support the other party's case on or by 13 February 2004. 6. Matter listed for directions at 9.30am on 20 February 2004 with the intention of fixing a date for trial. 7. Respondent to pay the Applicant's costs of today. 8. Pursuant to order 34 rule 2(1) the court appoint Hugh Frazer as an expert to enquire into and to report upon the question referred to in schedule 1 hereto. 9. The report of the expert be furnished to the Court and the parties in accordance with order 34 rule 3 on or by 1 February 2004. 10. The parties by [sic] jointly and severally liable to the Court expert to pay the amount charged by the expert for the preparation of his report being remuneration at the rate referred to in schedule 2 hereto with the issue reserved of the extent, if any, to which any sums hitherto paid by the applicant to the court expert are to be taken into account in determining the several obligations of the parties. 11. Pursuant to order 72 rule 1, but without having the effect of adjourning the proceedings, the parties attend for mediation of the whole of the proceedings before the Honourable Tony Fitzgerald QC or such other mediator as is agreed between the parties at a date and time to be appointed but after receipt of the report received by the court and the parties in accordance with order 34 rule 3. 12. Liberty to apply on 48 hours' notice.' 15 The respondent did not file and serve a defence on or by 24 December 2003. Nor did it file a cross‑claim by 23 January 2004. Although I had advised the legal representatives of the parties respectively of the obligation of parties to comply with orders of the Court, and they had each received a letter from my associate that advised them: 'In the event that a party finds that it will not be able to comply with directions made by Justice Branson, that party should consult with all other parties and with the associate. In such circumstances the directions may, if it is considered appropriate by Her Honour, be varied without further attendance at the Court. However, parties are reminded that requests for variations of directions, especially those made by consent or at the request of that party, ought to be rare. Legal practitioners have a responsibility to assist the Court in the formulation of realistic directions, and to take all reasonable steps to ensure that directions, once made, are complied with',

no request was made by the respondent's solicitors for the orders made by me on 19 December 2003 to be varied.

16 The report of the court appointed expert was filed on 3 February 2004. 17 The directions hearing scheduled for 20 February 2004 was in fact held on 26 February 2004. As at that date the respondent had filed and served a cross‑claim but, although the matter was not drawn to my attention and I overlooked it, it had still not filed and served a defence. I was advised that the respondent had not filed all of its lay evidence. On that day I made the following orders: '1. Time be extended for the Respondent to file and serve any further affidavits on the question of liability to 10 March 2004 but the Respondent be prevented, without leave of the Court, from relying on any affidavit on the question of liability served after 10 March 2004. 2. The Applicant to file any affidavits in reply on the question of liability on or by 25 March 2004 and the Applicant be prevented, without leave of the Court, from relying on any affidavits in reply on the question of liability served after 25 March 2004. 3. The Respondent be granted leave to rely on its filed cross claim. 4. The Applicant to file and serve a defence to the cross claim on or by 5 March 2004. 5. The Applicant to file and serve any expert report on the question of damages on or by 15 March 2004. 6. The Respondent to file and serve any expert report on the question of damages on or by 12 April 2004. 7. Time to comply with Order 5 of 19.12.03 be extended to 15.3.04. 8. Liberty to restore on 48 hours notice. 9. Costs reserved. 10. The associate to Justice Branson be authorised, after receiving assurances that the parties have complied with the timetable, to list the matter for hearing.' 18 Under cover of a letter dated 5 April 2004 my associate received from the applicant's solicitors a minute, signed by the solicitors for the parties respectively, of the following consent order: '1. Extend to 9th April 2004 the time within which the applicant and the respondent are to file and serve verified lists of documents; 2. Extend to 12 April 2004 the time within which the applicant is to file its affidavits in reply; 3. Parties to attend mediation before Mr Tony Fitzgerald QC on a date to be agreed after 13 April 2004; 4. Extend to 26th April the time within which the respondent to file and serve any expert report on the question of damages.'

19 The respondent filed a verified list of documents on 14 April 2004 and a defence on 30 April 2004. On 26 May 2004 it filed the notice of motion pursuant to which it has applied for an order that the applicant provide security for its costs. 20 The respondent's motion for security for costs was, by consent, listed for hearing on 20 July 2004. On that day, and not by reason of any fault on the part of the respondent, the application for security for costs was adjourned part‑heard to 3 August 2004. However, before the Court adjourned, counsel for the applicant, Mr Lee, drew the Court's attention to the order concerning the mediation of the proceeding. The transcript records that, amongst other things, Mr Lee said: 'I just raise it for this reason that as far as I understand it, my client is ready, willing and able to attend a mediation, subject to Mr Fitzgerald's availability during the course of the next fortnight, prior to this matter returning. To the extent that the mediation is not convened then a submission will be made on the next occasion that that will be a very powerful discretionary consideration indeed in resisting the application for security.' 21 Mr McLure, counsel for the respondent, had been briefed only in respect of the security for costs application and was not in a position to respond to the issue raised by Mr Lee. I expressed my surprise that the parties had not attended before a mediator and my concern that the respondent might be seeking to gain an advantage by stringing out the proceeding in the hope that the applicant would become insolvent. 22 I was subsequently advised that the parties had agreed to attend a mediation conference. By consent the hearing date of 3 August 2004 was vacated. A directions hearing concerning the part‑heard application for security for costs was scheduled for 7 October 2004. 23 On 7 October 2004 Mr Lee again appeared for the applicant but Mr Owens of counsel appeared for the respondent. Mr Lee gave oral notice that his client would invite the Court to make the following orders on the application for security for costs:

The respondent's motion seeking security for costs be dismissed; 2. The respondent pay the applicant's costs of the motion, including the costs of 7 October 2004 on an indemnity basis, and 3. The applicant have leave to tax the costs forthwith.

At the close of the directions hearing held on 7 October 2004 I directed that further consideration of the application for security for costs take place on 22 October 2004.

24 On 22 October 2004 the applicant was again represented by Mr Lee. The respondent was on this occasion represented by Mr Fennessy of counsel. The respondent was granted leave to supplement its evidence on the application for security for costs by reading an affidavit sworn by the respondent's solicitor, Mr Hill. 25 Mr Hill was cross‑examined by Mr Lee. Mr Hill agreed that he understood that the Court has ordered his client to attend mediation upon Mr Frazer's report being filed. When it was suggested to him that he took it upon himself, notwithstanding the Court's order, to take the position that it was too early to mediate he responded: 'That's not my position, Mr Lee, I mean I do act on my instructions. The position quite simply was in February we had no idea what your quantum was. You had not filed any particulars of what your cost was. The respondent took the view that it was appropriate at least to see what your damages were before we mediated. It was pointless conducting a mediation without that information. That information wasn't filed till March if my memory serves me.'

When asked whether he had made an application to relist the proceeding in order to have the order varied, Mr Hill responded:

'Well, I believe, Mr Lee, that there was no time limit to when the mediation was to be conducted and so I didn't make any application, no. My view has always been and my client's position has always been that it wanted to understand the case that was being presented against it before it mediated and that includes the quantum of its claim and that includes the issues of liability relating to this matter. My client has always taken the view that to mediate effectively it needs to have a proper understanding of all the issues in this case. 26 Mr Hill further agreed that 'initially we took the view that Mr Frazer's appointment was inappropriate'. I interpolate that, having regard to the circumstances in which the order appointing Mr Frazer was originally made (see [11] above), this seems a surprising position for Mr Hill to take. Mr Hill further agreed that he formed the view, after his employees had made inquiries of the creditors of the applicant, that the applicant was 'teetering on the brink of insolvency'. Correspondence between the parties' respective solicitors received in evidence suggests that the relevant inquiries were probably made in about August 2004. 27 Mr Hill's cross‑examination then proceeded as follows: Mr Lee: 'And the attitude you took was that it was not in your client's interests to have this matter proceed to mediation in accordance with the order of the court, that's right, isn't it?' Mr Hill: 'No, Mr Lee. My client was prepared to mediate when any winding up application had been dealt with if in fact that had occurred. As I have maintained, my client has always been in the position where it's willing and prepared to mediate but in the fact of winding up applications its concern was to determine whether those applications were going to proceed. It's really a matter of timing of the mediation, the parties had agreed.' Mr Lee: 'Mr Hill, you understood the question I asked you didn't you?' Mr Hill: 'Yes.' Mr Lee: 'Did you consider when you formed the view concerning my client teetering on the brink of insolvency that it was in your client's interest to defer the mediation? Yes or no, if that's possible?' Mr Hill: 'Yes.' Mr Lee: 'That's what you went about doing didn't you?' Mr Hill: 'Yes.' 28 Correspondence between the parties' respective solicitors received in evidence also discloses the following:

(a) By letter dated 16 February 2004 the applicant's solicitors made strong complaint about the respondent's failure to comply with the timetable set by the Court for the preparation of the proceeding for hearing. This letter includes the following assertion:

'The applicant has paid into court a very substantial amount of money. … the monies paid into court represent the working capital of the applicant. The respondent's actions in dragging this matter out continue to put the applicant under unnecessary financial pressure.' (b) By letter dated 15 July 2004 the applicant's solicitors wrote: 'We note that as long as 19 December 2003 the court ordered that the parties attend a mediation of this matter. As we understand your client's position, it was that any mediation be deferred until the affidavit material was complete. Now that he [sic] material has been completed we see no reason why compliance with the extant court order should be further delayed. In this regard, we have made enquiries with the Honourable GE Fitzgerald QC who has indicated that the following dates are convenient: Dates upon which Mr Fitzgerald is available which are also suitable to the applicant are as follows: 2 August 2004; 5 August 2004; 6 August 2004' (c) By facsimile transmission dated 16 July 2004 the respondent's solicitors replied: 'With regard to your invitation to arrange for an early mediation. Our client is prepared to consider an early mediation if your client provides proper security for costs and the proceeding is not otherwise stayed.' (d) Following correspondence by which agreement was sought as to a suitable date and venue for mediation, the respondent's solicitors, in a letter dated 23 August 2004, wrote: '… we have recently been advised there is an Application for Winding Up against Hopeshore Pty Limited listed for Monday 30 August next. In light of the information, we propose that the mediation between our client be postponed sine die as we believe there is no point in mediating when your client is facing a Winding Up Application.' (e) The solicitors for the respondent thereafter maintained the position that the respondent considered it inappropriate to mediate while the applicant faced a winding up application.

29 The applicant has challenged the bona fides of the respondent with respect to the mediation conference that was held before the Hon Tony Fitzgerald QC and subsequently adjourned. As the mediation process is not complete, I have not considered it appropriate to make any findings in this regard.

the nature of mediation 30 Mediation has been defined as follows: 'Mediation is a process in which the parties to a dispute, with the assistance of a neutral third party (the mediator), identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement. The mediator has no advisory or determinative role in regard to the content of the dispute or the outcome of its resolution, but may advise on or determine the process of mediation whereby resolution is attempted.' (National Alternative Dispute Resolution Advisory Council: Alternative Dispute Resolution Definitions, reprinted March 2000 at p 5) 31 Mediation is a process whereby, as the above definition confirms, parties to a dispute are assisted in identifying options to resolve the dispute between them. The options available to the parties to resolve their dispute may be wide and flexible when compared with the orders that would be open to be made by a court were their dispute litigated. The options available to the parties at mediation may include a win‑win option. Options available early in the history of a dispute may not be available later. 32 Court referrals to mediation reflect judicial appreciation of the skills of experienced mediators. The skills required of a mediator are different skills from those required of a litigator. A well‑conducted mediation is not simply an occasion for each side to give consideration, with the assistance of the mediator, to the strength of its legal case and concomitantly to the extent to which it may be willing to compromise on its formal legal position. The respective business operations of the parties in this case led me to conclude that, provided it could take place at a relatively early stage in the dispute resolution process, mediation could well result in the identification of options for resolution of the dispute that would not be available to the Court.

relevance of respondent's conduct 33 The position adopted by the respondent's solicitors that it was pointless to conduct a mediation prior to the applicant quantifying its claim against the respondent reflects a failure to appreciate the true nature of mediation. The important consideration, however, is that the position adopted by the respondent's solicitors was, as they must have been aware, inconsistent with the manner in which the Court had made it plain that it wished this matter to be managed. Management of a proceeding within the Court is a responsibility of the Court. The efforts in this case both of Lindgren J as duty judge, and me as docket judge, were unambiguously directed to seeking prompt resolution of the dispute between the parties and minimisation of the risk of the applicant being wound‑up, for whatever reason, before the matter the subject of its application was determined. 34 As mentioned above, the critical interlocutory orders that have been made in this case have been made by consent. In the circumstances it is, as I have already commented, curious that Mr Hill holds the view that some of them were inappropriately made. Nonetheless, he is entitled, privately, to hold such view with respect to the Court's orders as he wishes. However, his duty as a legal practitioner representing a client in this Court is to assist the Court in the management of the proceeding that involves his client. It is inconsistent with that duty for him to act as though an order of the Court requiring a party to take a step in a proceeding is a mere recommendation that the party is free to comply with or disregard as it thinks best. It is important to the proper working of this Court that it may operate on the basis that the legal representatives of parties understand their responsibilities to the Court and will work with the Court to ensure that its caseload is managed efficiently and with due regard to the interests of justice. 35 I am satisfied that in this case the solicitors for the respondent have not acted in the way demanded by their duty to the Court. I am satisfied that the respondent's solicitors understood that my order of 19 December 2003 was intended to facilitate an early mediation of the dispute between the parties. I am further satisfied that the respondent's solicitors took the view that an early mediation would not be in their client's best interests and acted in a way calculated to defer the mediation that had been ordered by the Court. 36 In Cropper v Smith (1884) 26 Ch D 700 at 710 Bowen LJ observed: '… I think it is a well established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. Speaking for myself, and in conformity with what I have heard laid down by the other division of the Court of Appeal and by myself as a member of it, I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy, and I do not regard such amendment as a matter of favour or of grace.' 37 In State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 ('State of Queensland v JL Holdings') the High Court endorsed the approach adopted in Cropper v Smith. In a joint judgment Dawson, Gaudron and McHugh JJ at 155 observed: 'Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties.' 38 I am not invited in this case to shut the respondent out from raising any arguable defence to the applicant's claims against it or to shut it out from raising any issue by way of counterclaim. Nothing in State of Queensland v JL Holdings detracts from the acknowledgement by Toohey and Gaudron JJ in Sali v SPC Ltd (1993) 116 ALR 625 at 636 that the contemporary approach to court administration recognises that the conduct of litigation is not merely a matter for the parties but is also a matter for the court. Few meaningful sanctions are available to a court where it does not receive the co-operation to which it is entitled from legal practitioners. In a case where the explanation for the lack of co-operation is a desire to achieve an advantage for a client, it does not strike me as unjust for the lack of co-operation to be weighed in the balance in determining whether a discretion vested in the court should be exercised in favour of that client. 39 For this reason I regard the conduct of the respondent's solicitors discussed above as a factor that I am entitled to take into account on this application. It is not necessary for me to decide whether, as the applicant contended, the conduct of the respondent has been such that it is unnecessary to consider any other factors in determining whether it would be an appropriate exercise of the Court's discretion to require the applicant now to give security for the payment of costs that might be awarded against it.

other factors 40 Turning to the factors identified in [4] above, I do not consider it appropriate on this application to give detailed consideration to the applicant's prospects of success in the proceeding. I am satisfied that its claim is made bona fide and has some apparent merit. 41 As mentioned above, for most of the life of this proceeding, the respondent has enjoyed the benefit of security in respect of the lien asserted by it in respect of one of the excavators. The applicant has consequently been required to continue its business operations with its capital reduced by the amount of that security. The order which the respondent now seeks may be expected to further reduce the funds available to the applicant either directly or by restricting its capacity to borrow funds. I am unable to rule out the possibility that an order for security for costs, in other than a nominal sum, would preclude the applicant from pressing its claim. This application has been argued on both sides on the premise that the applicant's final position is precarious. 42 I am not able to conclude that the applicant's impecuniosity arises out of the breaches of conduct alleged against the respondent, but it seems likely that the alleged breaches have contributed to the applicant's financial difficulties. 43 The only public interest factor, additional to those explicitly identified in [4] above, that I consider should be given weight on the present application is the public interest in efficient and effective court administration and in parties and their legal representatives co‑operating with the Court to ensure the efficient management of the Court's case load. 44 The respondent's notice of motion seeking an order that the applicant provide security for its costs was filed just over three months after the date by which, had my order of 19 December 2003 been complied with, the matter would have been ready to be listed for trial - assuming it not to have been earlier resolved by mediation. Although the record of the applicant, so far as compliance with the Court's orders is concerned, is not without blemish, its record of non‑compliance is of a different order of magnitude to that of the respondent. I do not consider that any non‑compliance by the applicant has contributed to the overall delay experienced in the preparation of this matter for hearing. I do not regard the present application as having been brought in a timely way.

conclusion 45 Having regard to all of the matters identified above, I do not consider that it would be an appropriate exercise of the Court's discretion under either subs 56(1) of the Federal Court Act or s 1335 of the Corporations Act to make an order that the applicant give security for the respondent's costs. 46 The motion will be dismissed with costs. As the applicant's contention that its costs should be paid on an indemnity basis forthwith was based in part on allegations concerning the respondent's conduct with respect to the mediation being conducted by the Hon Tony Fitzgerald QC, I consider it appropriate to defer consideration of the contention until the mediation process is complete. I will therefore reserve for later consideration, if necessary, the questions of whether the costs should be paid on an indemnity basis and made payable forthwith. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Associate: Dated: 9 November 2004 Counsel for the Applicant: M Lee

Counsel for the Respondent: On 20 July 2004 D McLure On 7 October 2004 N Owens On 22 October 2004 T Fennessy

Date of Hearing: 20 July, 7 October and 22 October 2004

Court Corporations Act 2001(Cth)s 1335

Trade Practices Act 1974(Cth)

At a glance

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Judgment (21 paragraphs)

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