Canvas Graphics P/L v Kodak (Australia) P/L

[1994] FCA 595

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JUDGMENT No. a.. " . . .--- , .

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) No. SG 45 of 1994

BETWEEN:

GRAPHICS PTY LTD

H RECEIVED v)	ADDellant
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B	31 AUG 1994	H	- and -
JZODAK (AUSTWIAI PTY LTP

Respondent

B TEMWEEJJSONS FOR JUXWiNZ

-8 von Doussa J.

W: Adelaide

: 20 July 1994

This is an application for security for costs by a respondent to an appeal. Judgment was entered in the principal action in favour of the appellant Canvas Graphics Pty Ltd ("Canvas") by O'Loughlin J on 13 May 1994. After some amendment, the effect of the judgment was that Canvas recover $171,053, and two-thirds of its costs of the action, from the respondent to this appeal, Kodak Australia Pty Ltd ("Kodak"). It should be noted that the trial had gone for something in excess of 50 days, and that followed on a trial exceeding 100 days of a related matter wherein Canvas, by a cross-claim, sought a large award of damages against Heidelberg Graphics Equipment Pty Ltd ("Heidelberg") and Miles Inc. Whilst the two actions were related, the trials were conducted separately. It is relevant that the trial judge by the time he came to the Kodak matter had been well instructed on the

technical issues that arose by reason of the earlier trial.

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Canvas, as the appellant in the present appeal, seeks to have the quantum of the judgment increased to $461,576 plus a further amount for lost profits which is not quantified; and if the appeal were to succeed, it also seeks an order for full costs of the trial against Kodak. Kodak has lodged a cross- appeal seeking to set aside the judgment in favour of Canvas, to have judgment entered on a cross-claim for $116,473, and for an order in its favour for costs of the trial.

Kodak now seeks the order for security for costs of the appeal. There is no need to set out the informatron available to the Court about the financial plight of Canvas and those who stand behind it as shareholders and directors. It is plain that the company is hopelessly insolvent and that in the event that it were required to pay any amount as costs of the appeal to Kodak, it would be unable to do so from rts present resources, nor would those who stand behind the company as shareholders and directors be able to do so from their resources. It is, moreover, apparent that even if both the

Heidelberg Graphics Equipment case were to succeed, the	appeal against the Kodak judgment and the appeal in the
proceeds of the judgments in both actions would be unlikely to be sufficient to discharge the outstanding liabilities of Canvas.
It may be accepted that a respondent to an appeal is in the ordinary course entitled to an order for security for costs if it is established by the respondent that there is a

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likelihood that the appellant will be unable to pay or otherwise satisfy the respondent's costs of the appeal if the appeal should fail. In my view the outcome of this application for security turns on that basic proposition. If the cross-appeal is put to one side, I consider Kodak is sufficiently secured for its costs of the appeal, should the appeal fail, by virtue of the judgment that is already entered against it.

Kodak is presently obliged to pay Canvas $171,053, together with two-thirds of the costs of a very long trial. The amount of security that is sought by Kodak against Canvas is $37,227. At first sight, if Kodak were to succeed, it could set that amount off against the judgment and the order for costs, and recover its costs of the appeal in that simple way. It is, however, contended by Kodak that that is too simplistic because complicated cross-charges were put in place by way of orders for security for the costs of the trial in the other matter in favour of Heidelberg and Miles Inc over

any chose in action that Canvas might have as a result of

judgment in the Kodak matter, and vice versa. The relevant

order that applies in the case of any chose in action in favour of Canvas arising out of the Kodak action was made in the Heidelberg action on 13 August 1993. The order there was that the cross-claimants, Canvas and others, provide security in the amount of $64,000 to each of Heidelberg and Miles Inc by way of charge over any chose in action to which they might become entitled from, inter alia, the proceeds of the Kodak

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action. If both of those charges were called upon to the full, that would reduce the entitlement of Canvas under the Kodak judgment by $128,000. In my view, assuming that the appeal by Canvas were to fail, and leaving aside the cross- appeal. there would in this event still be sufficient margin left to adequately secure Kodak for the costs of the appeal.

Further, it seems to me that in considering the charge in favour of Heidelberg which has been given over any chose in action which Canvas has arising out of the Kodak action, the Court would have the power on the appeal to order that costs of the appeal awarded in favour of Kodak be set off against the judgment. In my view it would be reasonable to anticipate that the Court would exercise that power. In any event, even if the Court did not do so, I think it is highly likely that as a matter of general law Kodak could set off the costs awarded in its favour in the appeal against the judgment and order for costs made against it at trial so that the charge in favour of Heidelberg operated only on the net balance due to

Canvas.

Against this conclusion counsel for Kodak argues that regard should be had to the cross-appeal. It 1s contended that the cross-appeal has prospects of success, and if it were to succeed, that would eliminate the judgment and in turn the order for costs in favour of Canvas, so that Kodak would have no outstanding liability from which to recoup the costs of the appeal; on the contrary it would be looking to recover the

costs of the trial and a judgment on the cross-claim.

In my opinion the cross-appeal should not be brought to account. By seeking an order for security for costs against Canvas on the appeal and also raising the prospect of the success of the cross-appeal, I consider Kodak is endeavouring to obtain an order for security to support the success of its cross-appeal. That is not a legitimate exercise. Moreover, and quite independently of that conclusion, in my view it would be grossly unfair to allow the cross-appeal to stand so that that could proceed with Kodak attacking the judgment unless at the same time Canvas is able to proceed with its appeal to argue that the judgment not only is right but is insufficient. In my view this is not a case where security ought to be ordered and I dismiss the notice of motion.

I will reserve the question of costs of the notice of
motion until after a resolution of the appeals in both the

Kodak matter and the Heidelberg matter, or until further

order. There will be liberty to apply.	I certify that this and the 4 preceding pages are a true copy of the Reasons for Judgment of Mr Justice von Doussa.
Associate
Counsel for the claimant	.	Mr J Wells QC
Solicitor for the claimant	Thomsons
Counael for the respondent	:	EIr N Morcombe QC

Solicitor for the respondent :	White Berman
Date of hearing	20 July 1994