Carneys Lawyers have been acting for a bank note dealer and his Company who have been sued by another bank note dealer for monies allegedly not paid. As the Plaintiff is a Company and it failed to provide evidence that it was financially sound, our clients filed a Notice of Motion for Security for Costs seeking that the action be stayed unless and until the Plaintiff provided security for costs of the Defendants. Under relevant Court rules (Click here for the relevant NSW Uniform Civil Procedure Rule) if a Plaintiff is a company and there is reason to believe that it will be unable to pay the costs of the Defendant if ordered to do so, the Defendant can make an application to the court that the action be stayed unless and until the Plaintiff provides security for the future costs that the Defendant will incur in the court proceedings, on the assumption the Defendant may be successful and obtain a costs order against the Plaintiff. The action is stayed until the security is provided.
The security is to be given in such manner or on such terms as the court may direct. Whilst it is usually cash it can also be a bank bond or some other form acceptable to the court. By requiring production of financial returns of the Plaintiff the District Court Judge was satisfied the Plaintiff was in a poor financial position and ordered that the Plaintiff provide valuable bank notes to be held by its solicitors to a value of $50,000.00 to meet an anticipated cost obligation of $33,000.00.
The Plaintiff offered a 1932 five pound note and two 1966 and 1967 $10.00 notes as security. The Defendants said in an Affidavit those notes were not marketable, that it would take years to sell them, that they were overpriced, that there was no demand for them and that it held comparable $10.00 notes which it had not been able to sell for years. It provided evidence from dealers confirming those matters.
The Defendants filed a further Notice of Motion seeking orders that the notes offered by the Plaintiff did not satisfy the Order for Security made. The Judge was satisfied the notes were not marketable. He ordered that the Plaintiff provide security by its solicitors holding $33,000.00 in cash or that its solicitors hold bank notes to a value of $50,000.00 to the satisfaction of the Defendants. This means that unless the cash is paid or unless the notes are marketable and satisfactory to the Defendants, then the action is stayed and the Plaintiff cannot proceed. The Judge ordered that the Plaintiff pay the Defendants costs.
The Order for security to be given by holding bank notes is somewhat unusual. Normally it would be cash or a bond. Because the action was between two bank note dealers the Judge undoubtedly thought this could be provided by the Plaintiff without difficulty. There was an express or an implied obligation to ensure that the notes were marketable. That would mean they could be sold without difficulty. The Defendants said "marketable" meant they could be sold within one month. Offering notes that were overpriced for their quality and with little demand, did not satisfy the Order.
Stephen Titus
Accredited Specialist - Commercial Litigation
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