In this article we consider the circumstances in which a plaintiff can resist an application for security for costs on the basis that the defendant is, in substance, the aggressor of the litigation, and whether it is possible in those circumstances for the plaintiff to bring an application for security for costs against a defendant.
However, it is sometimes the case that the plaintiff has been compelled to commence proceedings by some act or omission of the defendant, such that the defendant is the legal “aggressor” and the plaintiff is, in substance, in the position of defendant. Some examples of this are provided further below.
Whilst the UCPR includes this circumstance as “a” matter to be considered, Sundberg J in Aquatown Pty Ltd v Holder Stroud Pty Ltd (1995) 18 ACSR 622 (at 623 and 626) (Aquatown) remarked that this factor is “more than a matter to be taken into account” in the exercise of the Court’s discretion and that it would be sufficient, alone, to defeat any application seeking security for costs brought by a defendant.
The following examples illustrate the types of circumstances in which security for costs applications are likely to be dismissed on the ground that the plaintiff / applicant is really in the position of a defendant, and is the "party attacked" rather than the “party attacking”.
Dixon J considered the relevant provisions of the Customs Act, and commented: “It appears to me that the collector is the actor. The notice… is a statutory substitute for judicial proceedings by the Crown against the goods. Its effect is to cast the onus of taking proceedings upon the owner or supposed owner.” [emphasis added]
Latham CJ made similar remarks and the High Court rejected the application for security for costs on the basis that the plaintiff was effectively in the position of the defendant.
Similarly, in Re Travelodge, Australia Ltd (1987) 21 ACTR 17, the applicant was a shareholder in a company that had received a takeover offer. The shareholder refused to accept the offer, and as a result, was served with a notice under the Companies Ordinance 1962, the effect of which was that if the shareholder did not commence proceedings, the respondent would have been entitled to forcibly acquire the applicant’s shares. The shareholder commenced proceedings in the ACT Supreme Court to prevent this from happening, and the respondent applied for security against the shareholder.
Blackburn CJ refused the application for security, and found that the case came within the principle espoused in Willey v Synan, in that the applicant commenced proceedings “in order to preserve to himself a right which he considers a valuable one, which by the combined effect of a statute and the actions of the respondent may be taken away from him”.
The applicant applied to the Court to have the demand set aside, and the respondent made an application for security under section 1335 of the Corporations Act.
The Court found that the applicant was, in a practical sense, ‘forced’ into initiating the litigation in order to avoid a ground upon which it could be wound up. In those circumstances, the Court dismissed the respondent’s application for security, with costs.
AMS commenced proceedings against Warman for a declaration that the threats made by Warman against AMS’ customer were ‘unjustifiable’ under section 202 of the Copyright Act 1968, which provides that a person aggrieved by ‘unjustifiable threats’ of copyright infringement can apply to the court for (among other things) an injunction preventing any further threats, and damages for loss caused by the threats.
Warman applied for security for costs against AMS. AMS resisted the application on the basis that it was really in the position of being a "party attacked" rather than a "party attacking".
Importantly, the court commented that Warman’s letter put AMS “in the position either of suffering losses of sales… or of going to court to assert its rights”. In other words, had AMS done nothing, it would have lost its customer’s sales. Accordingly, the Court refused to grant Warman’s application for security for costs.
The decision of Classic Ceramic Importers Pty Ltd v Ceramica Antiga SA (1994) 13 ACSR 263 (Classic Ceramic) takes the issue one step further – it suggests that it is possible for a plaintiff to bring an application for security for costs against a defendant.
In Classic Ceramic, the plaintiff (“CCI”) commenced proceedings seeking to set aside a statutory demand issued by the defendant (“Antiga”). CCI then brought an application seeking an order that Antiga, a company incorporated in Spain which did not have any business or assets in Australia, provide security for costs. This was an unconventional application because security was being sought by the plaintiff and not the defendant.
In Classic Ceramic, Young J confirmed (at 267) that:
“Commercially speaking, the person who issued the statutory demand is the attacker and an applicant for an order under s 459G is responding to that attack…”
Accordingly, the Supreme Court of NSW stated that because Antiga was the ‘legal aggressor’, CCI had standing to bring an application for security for costs.
Whilst CCI failed to persuade the Court that it ought to exercise its discretion in making an order requiring Antiga to provide security, the decision is a meaningful confirmation that a plaintiff who is compelled to bring proceedings by reason of some action or inaction of the defendant, may be able to obtain security for their costs in prosecuting claims against ‘legal aggressor’ defendants (in appropriate circumstances).
Parties to litigation should understand that for the purposes of considering whether their opponent should be required to provide security for costs, the real character of a party’s role in the context of the dispute over the form and how they are named in the court documents.
If you would like any further information regarding the above or any of the other articles in this series or if you have any feedback generally we welcome you to contact us.