Pearse v Wiseguy Pty Ltd

EX TEMPORE REASONS FOR JUDGMENT 1 This is a motion in an appeal filed by the respondent, Wiseguy Pty Ltd, against the appellant, Warren Victor Pearse seeking security for costs under s 56 of the Federal Court of Australia Act 1976 (Cth). 2 The appeal itself relates to a decision of a Federal Magistrate which summarily dismissed an application by Mr Pearse to have a bankruptcy notice set aside under s 41 of the Bankruptcy Act 1966 (Cth). Mr Pearse acknowledged in those proceedings that he was in debt to Wiseguy in the amount of $6,609.30. He nonetheless claimed that Wiseguy owed him a substantially greater sum of money than that debt. In support of that he referred to legal proceedings that had been initiated in the District Court of South Australia claiming the sum of $299,450.00 from Wiseguy. The stated plaintiff in that proceeding was a company, Oakstaff Pty Ltd, which was apparently trustee for a unit trust called FM Media Trust, the sole beneficiary of that trust allegedly being Mr Pearse. Mr Pearse was also the sole director of Oakstaff Pty Ltd. It is clear on material filed before me that he is not a shareholder in that company. 3 The Magistrate dismissed Mr Pearse's application on the short ground that Mr Pearse as debtor had no set off, counter claim or cross demand against Wiseguy by virtue of those proceedings, those proceedings being conducted by a third party. The notice of appeal filed against the Magistrate's judgment challenges findings of fact made by the Magistrate. It appears from that judgment that the facts as found were based on evidence provided by Mr Pearse and are consistent with the pleadings in the District Court action which are in evidence before me. It equally seems to be the case that the errors allegedly made by the Federal Magistrate are founded on information which was not before the Magistrate. It would seem that a new case is sought to be run on the appeal. It is not necessary for me on the present motion to express a firm view as to the prospects of the appeal although I would have to say that I do not consider them to be at all strong: cf Chapman v Luminis Pty Ltd [2002] FCA 496 at [17]; given what I have said above. 4 The sum of money founding the bankruptcy notice resulted from a costs order in proceedings in the Supreme Court of South Australia between Mr Pearse and Wiseguy which was determined adversely to Mr Pearse. That proceeding arose out of business dealings between Mr Pearse and Wiseguy relating to the purchase and sale of FM radio licences and equipment and which still remain the subject of dispute between them. In the proceeding Wiseguy sought successfully to have set aside a statutory demand served on it by Mr Pearse in respect of an alleged debt arising from the non-return of a deposit paid under a sale contract that had been terminated. 5 The District Court proceedings brought by Oakstaff Pty Ltd to which I have referred was summarily dismissed by a judge of that Court on 10 February 2005 on the apparent basis that Oakstaff was not the proper plaintiff. Mr Pearse had been provided with an opportunity to bring an application to be substituted as plaintiff but had not done so within the time directed by the District Court. I would note that in dismissing Oakstaff's action, the judge ordered it - I note not Mr Pearse - to pay Wiseguy's costs on a indemnity basis. I would also note that Mr Pearse has foreshadowed bringing fresh proceedings in his own name in respect of the dispute the subject of the dismissed proceedings. 6 For the sake of completeness I would note that in the matter the subject of the present appeal Roberts FM ordered Mr Pearse to pay costs in the sum of $2,080.00. 7 The apparent basis of the motion is that Mr Pearse has had costs orders made against him and has not complied with them. This, when coupled with his alleged failure to make payments either on time or at all under contracts he had with Wiseguy (contracts I would note which are the subject of the parties' ongoing dispute) and the limited prospects of the appeal itself make it fair and just to require Mr Pearse to secure Wiseguy's costs of the appeal. 8 Turning now to the principles which inform the exercise of judicial discretion under s 56 of the Act, I would note the following. It is well accepted that the discretion conferred by section 56 is unfettered and that each case must depend on its own circumstances: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4; and must be determined without any particular predisposition: Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 511. 9 The courts have over time identified considerations of which account will typically be taken in determining an application for security for costs. I need only refer to the formulation of Hill J in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 at [50,635] and of Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197. Of those principles the following are of some importance to the present matter: (i) What are the chances of success of the appellant?