Security for Costs Order Against Liquidator Denied

Security for Costs Order Against Liquidator Denied

Security for Costs order background:

Hambleton & Anor v Idec Solutions Pty Ltd (‘Hambleton’) is a recent Queensland District Court case which examined whether a security for costs application will be granted where a liquidator is a party to a proceeding.

In simple terms, court orders which require security be provided to cover legal costs in a proceeding are granted where an unsuccessful claimant could potentially not afford to pay the successful defendant’s legal costs. If a security for costs order is made, the claimant will be required to provide security to the court to be used for payment of the defendant’s legal costs if the defendant is successful at trial and a costs order is made in their favour.

Hambleton arose over two separate contracting disputes with Idec Solutions. In April 2019 the Second Plaintiff (M&B) was wound up in insolvency, and subsequently in December 2019 Idec Solutions filed the application seeking security for its costs.

M&B agreed that if it was the only plaintiff to the proceeding then it would be appropriate to award security for its costs. However, the issue arose as the First Plaintiff, Mr Hambleton, was the liquidator of M&B. Consequently, there was no reason to believe that Mr Hambleton would not be able to pay Idec Solutions’ costs if ordered to do so.
Mr Hambleton and M&B contended that security for costs orders should not be granted unless the order would be equally appropriate to both plaintiffs to the proceedings.

Decision of the District Court for security cost order

The main factual issue at the centre Hambleton was whether there was reason to believe that Mr Hambleton would not be able to pay Idec Solutions’ costs. The onus to make out this proposition fell on Idec Solutions, who failed to persuade Justice Porter that this would be the case.

Secondly, the Court relied upon Harpur v Ariadne Australia Ltd (‘Harpur’), another case that explored security for costs where there are multiple plaintiffs. Harpur established the proposition that when there are numerous plaintiffs, security should not be ordered against one unless it would be appropriate to do so against all.

Accordingly, reliant upon the Harpur principle and the lack of evidence presented by Idec Solutions, the application for security for costs against Mr Hambleton and M&B was dismissed.

Key Takeaways

Hambleton highlights that it is unlikely for the Court to order a security for costs when a liquidator is a plaintiff to the proceeding.

If you are currently in a dispute, and you believe you should obtain a security for costs order or simply want more information, please contact us on 1300 749 709 to see how one of our experienced litigation lawyers can assist you.