Lanepoint Enterprises Pty Ltd (Receiver & Manager Appointed) v Australian Securities and Investments Commission

REASONS FOR JUDGMENT 1 This is an application by the respondent, Australian Securities and Investments Commission (ASIC), for an order that the appellant, which is now in liquidation, provide security for costs of the appeal. 2 The appellant has appealed against the orders of the primary judge which placed it into liquidation. The orders were made on the application of ASIC. I have on a previous occasion ordered pursuant to s 471A of the Corporations Act 2001 (Cth), that the appellant be represented in the appeal by one of its directors, Ms Carey. 3 ASIC seeks that the security for costs of the appeal be provided by the appellant by way of a bank guarantee in the amount of $21,000. 4 Order 52 r 20 of the Federal Court Rules (the Rules) provides as follows: Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required. 5 In FubilanCatering Services Limited (Incorporated in Papua New Guinea) v Compass Group (Australia) Pty Ltd [2007] FCA 2111, I observed at [10]-[11]: It was then put to me that O 52 r 20 of the Rules contemplates a different weighting in respect of the grant of security for costs in respect of an appeal as opposed to an application at first instance. I accept that O 52 r 20 of the Rules does implicitly provide that the Court would be less inclined to order security for costs in respect of an appeal than in respect of an application at first instance. However, in my view, all it does is effect a differential in the weighing of the various elements which one takes into account. It certainly does not mean that the matters which are relevant at first instance, such as the fact that the appellants are resident out of Australia, cease to be relevant. 6 In this case, however, there is one factor which is equally significant, whether the proceeding in question is an application at first instance, or an appeal. That factor is that the appellant is in liquidation and has been found to be insolvent. This factor weighs very heavily in favour of the grant of the application for security for costs. 7 In order to counter the weight which is attached to that factor, one would have to find that the grounds of appeal are particularly strong. In this case I am unable to reach that conclusion. 8 The grounds of appeal essentially attack the exercise of the discretion of the primary judge in dealing with, at the instance of ASIC, the merits of the claim that an amount of approximately $6.6 million was owed by the appellant to the responsible entity of the Westpoint Income Fund, notwithstanding that the actual parties to the disputed debt were still in negotiations. An element of the complaint is that the primary judge erred in finally determining that the debt was owed by the appellant, when the issue before him, so it was said, was only whether there was a bona fide dispute that the debt was due. 9 There is also a contention that the primary judge did not take into account all the relevant factors in determining whether the appellant should be wound up. There were, so it was contended, other options available short of winding-up which should have been considered in light of the factors referred to in the grounds of appeal, which included that the appellant was not trading, and that there was support for it from the related entities. 10 None of the grounds of appeal permits me to conclude, at this stage, that the prospects of success are so strong that they mitigate the risk of ASIC not recovering its costs if successful in the appeal. 11 Mr Campbell, on behalf of the appellant, contended that I should have regard to the fact that it was likely that the security for costs would have to be provided by Ms Carey and there was no evidence that Ms Carey was incapable of providing that security. 12 In my view, that is not the correct way to approach the matter at this stage of the proceeding. I have regard only to the fact that the appellant, which is the party to the appeal, is insolvent and in liquidation. Having been given the power to conduct the appeal on behalf of the appellant, it would fall to Ms Carey to ensure that any order that the appellant provide security for costs is complied with. The way in which Ms Carey deals with that is really a matter for her. The question of how costs should be dealt with or paid, if the appellant is unsuccessful in the appeal is ultimately one for the Full Court. 13 In my view, it is appropriate that the appellant provide security for costs of the appeal. 14 The next issue is the form that the security for costs should take and the amount of the security. In my view, the appropriate amount would be $16,000, which is a figure between the two estimates which have been provided to the Court. The appropriate manner by which the security is to be provided, is by way of a bank guarantee in a form which is acceptable to the District Registrar of this Court. 15 Accordingly, I will make orders which give effect to these reasons but I will hear from the parties as to when the security should be given. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.