Arnold v Queensland

[1987] FCA 148

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT

OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY	)	No.G 502 of 1986
)

DIVISION	GENERAL	)
BFJlWEEN :
ERA POLYMERS PTY. LIMITD

First Applicant

GEORGE PAPAMANUEL

Second Applicant

m:

UNIROYAL AUSTRALIA PTY. LIMITD

First Respondent

SCHENECTADY CHEMICALS AUSTRALIA

PTY. LIMITED

Second Respondent

UNIROYAL AUSTRALIA PTY. LIMITED

Cross-Claimant

ERA POLYMERS PTY. LIMITED

First Cross-Respondent

GEORGE PAPAMANUEL

Second Cross-Respondent

CORAM: FOX J.

: - D 9 MARCH 1987

REASONS FOR JUDGMENT

(EX TEMPORE)

FOX J.

I am hearing together two applications for security for

costs, brought separately by the t w o respondents to the principal

2 .

proceedings.

The proceedings have been on foot for some time and in

December last were the subject of interlocutory applications. No

point has been taken concerning the lateness of the applications,

but many documents have been filed over the period, and there

have been several Court hearings. usually of short duration.

Some time after the proceedings had been commenced, the first

respondent. Uniroyal Australia Pty. Limited, cross-claimed

against the first and second applicants, the latter apparently

being added as an applicant as a result of the cross-claim.

The principal proceedings allege breaches of sections

4 5 ( 2 ) , 4 6 ( 1 ) and 4 7 ( 5 ) of the Trade Practices Act 1974, while the

cross-claim alleges breaches of confidence in relation to

confidential material. Against the respondent Schenectady there is a further claim for breach of s.52 of the Act. The subject

matters of claim and cross-claim are associated, but the latter

does not arise by way of defence to the former.

It was contended on behalf of the second respondent that

the second applicant, George Papamanuel, did not allege anything

against it, OK claim relief against it. On any view this is not

quite accurate, but, by joining, or being joined, as an

applicant, George Papamanuel becomes party to all allegations

against the respondents. He is in fact the managing director of

the first applicant as well as being, with his wife, owner of

half the paid-up capital of the company which is $4.00 .

3 .

The applicants for security relied upon s.533 of the

Companies Code, although reference was also made to 5.59 of the

Federal Court of Australia Act	1976.	No security was sought
directly against Mr Papamanuel.

Evidence was produced that the first applicant, ERA

Polymers Pty. Limited was worth little, in net terms something of

the order of $3000 - $4000. It nevertheless had had, and largely

retained, a substantial volume of trade in pre-polymer compounds.

Mr Papamanuel was, and seemingly is, of some means, having, apart

from any other property, fairly valuable accommodation in which

he resided, and another property, apparently an investment,

valued at $100,000, which was mortgaged to a bank to obtain

funds, as necessary, for the first applicant.

The main purpose of the legislation relied upon is to

ensure that companies of little or no worth are not used by

persons or companies of means to bring litigation, without the

latter incurring any risk as to costs. In such a case an order

for security has to be met by the principal, that is to say the

guiding hand. On the other hand, as has so ofter been said, care

is to be taken not to prevent	a litigant from proceeding with
its, or his, case simply because	it, or he, is poor. The line is

a difficult one to draw. and involves an examination of many

circumstances concerning the case. The fact that claim has the

public interest aspect of reliance on Part IV of the T r a d e

Practices Act, is doubtless	a factor against risking the stiflinq
of proceedings.

4 .

The present case has the unusual feature that the person

who would have to provide any security ordered against the first

applicant is the co-applicant Mr Papamanuel. In that situation

he can be ordered to pay costs directly. The rationale of the

rule, therefore, is largely displaced.

It has been submitted that Mr Papamanuel could

discontinue at will, and thus escape primary liability. I do not

think this could be clone so readily, or without an obligation to

pay costs, and if and when	it did happen, the matter	of security
could be re-examined.

It is my view, therefore, that there should be no order

as to security for costs.

I should say that the amount of security sought by the

first respondent is $209,000 and by the second respondent

$80,000. The evidence is that the applicants are likely to incur

costs in these amounts. The costs already incurred are said to

be in total $117,000. It does seem to me to be appalling that to

prosecute a trade practices matter in reliance on the

sub-sections mentioned, in a case not of a wide importance, the

total burden of costs contemplated, according to conservative

calculations, should be nearly half million dollars.

I dismiss the applications.

-?

\

5.

I certify that this and the

four ( 4 )

preceding pages are

asons

Honour Mr. Associate

Counsel for the Applicant:	J. M. Ireland	with
Ms.A.Bowne

Solicitors for	the Applicant:	Corrs Pavey Whiting	&
Byrne

Counsel for the First Respondent:	J. J. Garnsey
Solicitors for the First Respondent:	R. B. Kandy & Co.
Counsel for the Second Respondent:	M. Walton
Solicitors for the Second Respondent:	Sly & Russell
Date of hearing:	6 March 1987

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