Messrs Sheahan Sims, the Australian and New Zealand Banking Group
and Anthony Broome (as liquidator of Ramsay Airconditioning
SA
Pty Ltd) be joined as parties to these proceedings as to the
interpleader issues therein.
2. Order that the defendant
do within 28 days of today pay
into court the sum of $157,633.69, in addition to the monies
already paid in to the credit
of this action to abide the outcome
of the proceedings, the amount being made up of the sum of
$153,022 referred to in paragraph
7 of the affidavit of C.S.
Jenkins filed on 3/9/92, together with an additional sum of
$4,611.69 which, together with an
amount of $15,319.53 already
paid into court is intended to make up the total sum of
$19,931.22 which is referred to in paragraph
9 of the affidavit
of C.S. Jenkins previously referred to.
3. Costs of this morning's hearing reserved.
4. C for
C."
13. The amount of $157,633.69 was duly paid into court in terms of the order.
It was said to represent the proceeds of guarantees
held by the third
respondent as security for the due completion of work by the appellant.
14. Pursuant to the order of a Master
the plaintiff filed an amended
statement of claim in the principal action.
15. That document pleaded the alleged contractual history
between the
relevant parties and, inter alia, asserted a right to the moneys paid into
court as against the first, second and third
respondents. Relevant defences
have been filed to that statement of claim. It is to be noted that the
appellant's statement of
claim also asserts a balance liability said to be due
by the third respondent to it under the alleged contractual arrangements
between
the two parties.
16. Against that background the first and second named respondents made
application to the Master for an order
for security for costs pursuant to
section 1335 of the Corporations Law.
17. That application was resisted by the appellant, essentially
upon the
basis that the circumstances did not fall within the section, because, it was
said, the appellant was not, for the purposes
of the interpleader issues, a
"plaintiff" within the meaning of the section. The relevant portion of
section 1335 reads as follows:-
"(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."
18. The basic reasoning of the Master was expressed in these terms:
"I return, therefore, to both parties
being claimants and,
effectively plaintiffs. The plaintiff has not filed any material
taking issue with the defendants' allegations as to the
real
plaintiff and the state of the plaintiff's finances. There is
credible evidence that the plaintiff will not be able
to meet the
defendants' costs were they to be successful and that any claim
for costs would have to rank with other unsecured
creditors in
what at this time, upon the unavailable evidence, in the real
likelihood that there will be no significant payment
to such
creditors. The papers establish that the plaintiff is insolvent.
These proceedings can only be maintained with the
financial
support of the secured creditor Craminster Pty Ltd. That Company
has not sought to respond in the usual way to
the telling
inferences to be drawn from the material filed by the defendants
in support of this application. The inference
to be drawn,
therefore, is that most favourable to the applicants. Hence, the
plaintiff Company is under the control of
a receiver and manager
appointed by the secured creditor Craminster pty. Ltd. In such
circumstances it is appropriate to
order that the company provide
security for costs: Sent v. Jet Corporation of Australia Pty.
Ltd. [1984] FCA 178; (1985) 3 ACLC 397. This is so as, upon the test set out by
von Doussa J in Beach Petroleum NL and Anor. v. Johnson and
ors. [1992] FCA 110; (1992) 7 ACSR 203 at 204, it appears 'by credible testimony
that there is reason to believe that if the (defendants are)
successful circumstances
may then exist in which the plaintiff
will be unable to pay the costs'. The decision of Perry J in
Troisi Steel Fabrications
pty. Ltd. v. Johns Perry Industries
pty. Ltd. (1992) 165 LSJS 333 also supports such a conclusion
allowing, as he did there, that the funds in dispute should not
be used in the calculation
of what the financial position of the
plaintiff may be at judgment because the fate of the monies in
Court 'is very much
in issue in the action' (p.333). There, as
here, a receiver was behind an otherwise impoverished plaintiff."
19. Before embarking
upon a consideration of the detailed submissions of the
parties it is convenient to summarize a number of salient principles
applicable
to applications for security for costs made pursuant to section
1335. As applicable to this case they are:-
. the section
confers an unfettered discretion upon the
court without giving rise to a predisposition in favour of any
party. However,
that discretion falls to be exercised in light
of a number of well established broad principles. (John Arnold's
Surf Shop
Pty Ltd (in liquidation) v Heller Factors Pty Ltd and
Anor (1979) 22 SASR 20.)
. As was said by Ormrod J in Visco v Minter (1969) P 82 at 85,
"there is no magic in a name" - for the court is required to
construe the word "plaintiff" in section 1335 as a reference
to
the party, however described on the record, who is, in substance,
in the position of a plaintiff in the proceedings in
question. A
defendant who seeks to counterclaim may well be in that position
(Thunderdome Racetiming and Scoring Pty Ltd
and Anor v Dorian
Industries Pty Ltd and Anor [1992] FCA 291; (1992) 109 ALR 196).
. Who is, in truth and in substance, the "plaintiff" must be
decided by the real merits of the case and not by the mere
form
of the proceedings (Rhodes v Dawson (1886) 16 QBD 548). So it
may often be that, in the context of interpleader proceedings,
the nominal plaintiff is not the attacker, but the
person
attacked by the party who is, nominally, the defendant. In such
a situation the defendant may properly be regarded
as the true
plaintiff when a question of security for costs arises (Willey v
Synan [1935] HCA 76; (1935) 54 CLR 175, Amalgamated Mining Services Pty Ltd v
Warman International Ltd and Anor [1988] FCA 309; (1988) 19 FCR 324).
. It follows that, if the course of the proceedings is such
that, in effect, a party is forced to become a plaintiff due
to
claims advanced by another party who is, in reality, initiating
the type of "self help" procedures adverted to in the
John
Arnold's Surf Shop Case, then it may well be inappropriate to
order security for costs against that plaintiff. (See
also Bryan
E Fencott and Associates Pty Ltd v Eretta Pty Ltd and Ors [1987] FCA 102; (1987)
16 FCR 497.)
. If both parties to interpleader issues are, in truth, each
plaintiffs, then each may properly be the subject of an order
for
security for costs if the normal pre-conditions for the making of
such an order exist in relation to that party. (Tomlinson
v The
Land and Finance Corporation Ltd (1884) 14 QBD 539, Tudor
Furnishers Ltd v Montague and Company and Finer Production
Company Ld (1950) 1 Ch 113.) To those broad principles I would
only desire to add one further reference to a concept first
enunciated by Jordan CJ in
In re the Will of F B Gilbert
(deceased) [1946] NSWStRp 24; (1946) 46 SR (NSW) 318 and adopted by the High Court
in Adam P Brown Male Fashions Pty Ltd v Philip Morris
Incorporated and Anor [1981] HCA 39; (1981) 148 CLR 170:-
"... there is a material difference between an exercise
of discretion on a point of practice or procedure and an exercise
of discretion which determines substantive rights. In the former
class of case, if a tight rein were not kept upon interference
with the orders of Judges of first instance, the result would be
disastrous to the proper administration of justice. The
disposal
of cases could be delayed interminably, and costs heaped up
indefinitely, if a litigant with a long purse or a litigious
disposition could, at will, in effect transfer all exercises of
discretion in interlocutory applications from a Judge in
Chambers
to a Court of Appeal."
20. In the instant case what is essentially in issue is a dispute between the
appellant and
the first and second respondents (whose interests I take to be
virtually co-incident). As I understand what has been put to me the
appellant
says that the moneys in question were due to it under a novated contract with
the third respondent, who admits that they
were properly payable by it to the
appellant for work done for it.
21. On the other hand the first and second respondents assert
that the moneys
in question are payable to them or one of them - either because they are
subject to a deed of assignment referred
to in the pleadings (which deed
relates to the taking over by the appellant of the benefit of a contract,
previously held by an associated
company, with the third respondent) or,
alternatively, the moneys are, by reason of relevant dealings between the
parties, impressed
with a contractual liability, on the part of the appellant,
to account for the moneys in question in a particular manner, for the
benefit
of the first and second respondents.
22. The riposte of the appellant to those suggestions is that the moneys in
question
are payable by the third respondent to it for work done subsequently
to the deed of assignment and that the first and second respondents
have no
beneficial interest in them.
23. Against that background I take the view of the Master to have been that,
in essence, both
the appellant and the first and second respondents are
equally claimants to the money and thus are, in substance, equally plaintiffs.
24. What was not then before him, but is now a matter of record on the file,
is that the first and second respondents have, since
the order appealed
against, both filed a defence running to some 48 pages (which denies the right
of the appellant to recover the
moneys in issue, essentially on the basis
which I have above outlined), and also lodged an application for leave to file
a formal
counterclaim against the appellant, seeking positive orders entitling
them to recover the moneys paid into court, to the exclusion
of the appellant.
25. There is, accordingly, no doubt that, as assessed by the Master, the
first and second respondents are, in
substance, plaintiff parties. The real
question to be posed and answered is as to whether, within the concept
espoused in Tomlinson
and Tudor Furnishers, it may fairly be said that,
viewing the situation realistically, the appellant itself is no less an equal
plaintiff.
26. In reality it is undeniable that the situation in this case is that, so
far as the subject moneys of the present appeal are
concerned, the original
defendant has dropped out of the contention. It admits that it owes the
moneys in relation to the work done
for it. What is left is a situation in
which two separate claimants who, as between themselves, have been parties to
a most involved
series of commercial dealings and are in contention as to what
rights (if any), vis a vis the subject moneys, have been vested in
them as a
consequence of those commercial dealings.
27. It seems to me that the ultimate conclusion which may fairly be drawn is
that the relevant parties are, indeed, equal claimants to the moneys and that
each is therefore susceptible to an application for
security if the factual
pre-conditions for that application can be made good against the party in
question.
28. I do not suggest that the matter is devoid of difficulty
but, at the end
of the day, I cannot see that there is any proper basis for interfering with
what the Master has done - the assessment
of the situation which he made was
properly open 10 to him and, in any event, what is under consideration is an
interlocutory procedural
matter falling fairly and squarely within the
principle espoused in the Adam P Brown Case.
29. In the circumstances the appeal must
be dismissed.