Austpole Industries Ltd v Kilpatrick Green Pty Ltd

[1991] FCA 912

WZ/ Q\

JUDGMENT NO. ........ ..... .... .-----

CATCHWORDS

PRACTICE AND PROCEDURE - security for costs - whether

applicant unable to pay costs of respondent if respondent

successful - delay by respondent in applying.

Cor~oration Law S. 1335.

KILPATRICK GREEN PTY. LTD. v. AUSTPOLE INDUSTRIES LIMITED and

S	A
VG No. 338/90
GRAY J. MELBOURNE 13TH DECEMBER 1991.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
GENERAL DIVISION	1
)
VICTORIA DISTRICT REGISTRY	1
B E T W E E N :

AUSTPOLE INDUSTRIES LIMITED

Applicant

-and-

KILPATRICK GREEN PTY. LTD.

Respondent

AND BETWEEN:

KILPATRICK GREEN PTY. LTD.

Cross-Claimant

-and-

AUSTPOLE INDUSTRIES LIMITED

First Cross-Respondent

-and-

STATE ENERGY COMMISSION OF WESTERN AUSTRALIA

Second Cross-Respondent

EX TEMPORE REASONS FOR JUDGMENT

JUDGE :	Gray J.
W: Melbourne
DATE :	13th December 1991

The view that I have formed is that this application for security for costs must fail. I do not regard it as having been established that the applicant corporation will be unable to pay the costs of the respondent if the respondent is successful in its defence.

The latest balance sheet of the applicant in evidence is that as at 30th June 1990. Prior to that date,

the applicant had incurred accumulated losses in excess of

$3.8 million, but these are set in the balance sheet against

share capital of over $4.6 million. The nett assets, after

liabilities of a mere $6000 have been deducted from total

assets, amount to $740,032. Those are made up in the balance
sheet of current assets of $37,433, property, -plant and

r

equipment of $483,935, and intangible assets of $225,000. The applicant ceased trading in March 1990, so it is unlikely to have incurred any major losses since that time.

The manner in which the application for security for costs has been pursued has been by way of endeavouring to attack the credibility of figures in the 1990 balance sheet and to indicate where it is thought that the applicant's position might have deteriorated since that time. It is true that there might have been some deterioration in the property, plant and equipment. It is true that the applicant has

application. Those costs have been paid by the sale of four	incurred $100,000 worth of legal costs in relation to this
trucks and the use of part of the proceeds of that sale. It is also true that there was a qualification in the auditor's report with respect to the value of intangibles, but there is now evidence from the auditor that he considers the value of certain patents and other rights to be reasonable, as it is expressed.
It is necessary to take into account a number of matters that have been put by counsel for the respondent. It
is true that attempts have been made to sell the assets of the
applicant, but buyers have not been forthcoming. It is also
true that the value of some of the intangibles might not be
quite what is expressed. Indeed, the value might depend on
the outcome of this proceeding, which concerns the ,enforcement

C

of an alleged patent. It is true that further legal costs will be incurred by the applicant in prosecuting this proceeding. Even taking all of those matters into account, it is apparent that, if the figures in the 1990 balance sheet are to be accepted in any way, there would still be plenty of assets available from which the applicant could pay the costs of the respondent if the respondent is successful in the proceeding.

I have also taken into account the fact that the

applicant has been somewhat selective in the way in which it

has placed evidence before the Court in relation to the	application. In particular, it has not provided a more
up-to-date balance sheet. I have to allow for the proposition that it may not wish to do so because its position may appear to be worse than in the 1990 balance sheet if it were to do
SO. Even allowing for that, given the fact that the
respondent carries the onus under S. 1335 of the Corporations
Law of establishing by credible testimony that there is reason
to believe that the applicant will be unable to pay its costs,
I have reached the conclusion that the onus has not been
discharged.
I should say also that, if I were of the other view, I should nevertheless dismiss the application for security for
costs on the basis of delay. The authorities cited by counsel
for the applicant seem to indicate that a court should lean
against granting orders for security for costs-where the

*

application is made late in the proceeding and an applicant has been caused to incur considerable legal costs. The present proceeding has gone to a considerable extent with respect to interlocutory steps and there is evidence that the applicant has incurred $100,000 worth of legal costs in its own application.

It is said on behalf of the respondent that the financial position of the applicant was not known until inspection of discovered documents took place on 19th August of this year and that then prompt action was taken by letter

prompt action was taken after a reply refusing security was	dated 5th September, asking for security for costs. Further
received, that reply having been dated 13th September. It must also be said, however, that it was open to the respondent to some degree to investigate the financial position of the applicant prior to inspection of documents, if it were at all concerned about the question of security for costs. Its concern might well have arisen from a document described as a business profile, which is in evidence, and which on the evidence was in the possession of the respondent .even prior to the commencement of this proceeding. I should not therefore regard it as just to grant an order for security for costs which might have the effect of rendering the applicant's expenditure of $100,000 on its legal costs as wasted.
For those reasons, the application for security for costs is dismissed. I order the respondent t5 pay the

.-

applicant's costs of the application for security for costs.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment of the Honourable Justice Gray.

Dated: 30.01.9?

L 7%- - 4

Associate

ADDearances:

Counsel for the applicant:  Mr. Hines

Solicitors for the applicant:	Freehill, Hollingdale and Page.
Counsel for the respondent:	Mr. Hess
Solicitors for the respondent:	Corrs Chambers Westgarth.
Date of Hearing:	12th and 13th December 1991, Melbourne.