Marelic v Comcare

[1993] FCA 599

Attention: Judgments Clerk

Please find herewith two (2)
iudcrments in the matter of
ist-call Video Rights Ltd. v.

BRISBANE

CBL Video Pty. Ltd. G181 of 1992.
They are dated respectively
9 August , 19 9 3 and- l9 ~ u ~ u s t ,
1993. There is to be NO

DISTRIBUTION of these ?dgments.

With thanks/! .'I .l

JUDGES' CHAMBERS
FEDERAL COURT OF AUSTRALIA
ADELAIDE STREET ~~ ~~

JUDGMENT No. ........ ...,. 549, ,..,. ,., 93

IN THE FEDERAL COURT OF AUSTRALIA

OUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION	No. G181 of 1992
BETWEEN:

IST CALL VIDEO RIGHTS LTD.

(A.C.N. 010 875 340)

- AND:

CBL VIDEO PTY. LTD.

(A.C.N. 011 024 721)

Respondent

JUDGE MAKING ORDER	Cooper J.
WHERE MADE:	Brisbane
DATE OF ORDER:	19 August, 1993

MINUTES OF ORDER

THE COURT ORDERS:

1.                    That the application to vacate the orders for security for costs, a stay pending provision of security and costs all made on 9 August, 1993 is dismissed.

The applicant pay the respondent's costs of the application to be taxed,

if not agreed. - 2 SEP 1993

FEDERAL COURT OF

AUSTRALIA

PRINCIPAL i

-TRY .

- Note: Settlement and entry of orders is dealt with in Order 36 of the Federal &urt

Rules.

IN THE FEDERAL COURT OF AUSTRALIA

OUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION	No. G181 of 1992
BETWEEN:

IST CALL VIDEO RIGHTS LTD.

(A.C.N. 010 875 340)

- AND:

CBL VIDEO PTY. LTD.

(A.C.N. 011 024 721)

Cooper J.

Brisbane

19 August, 1993

REASONS FOR JUDGMENT

This is an application to vacate an order for security for costs made by

me on 9 August, 1993 which order I stayed to enable this application to be made.

The basis upon which the application is brought is an allegation that

between the hearing of the original application for security for costs and the delivery

of judgment the business of the respondent has been allowed to run down so that if the applicant succeeds on the principal application the respondent company will be a mere shell against which no judgment can be effectively executed.

The evidence establishes that a company, Eagle Entertainment Pty. Ltd.,

was incorporated on 13 June, 1991. On 12 November, 1991 Mr. and Mrs. Shannon

were appointed directors of the company. On 19 March, 1993 the company changed its name to Peacock Films Pty. Ltd. On 21 May, 1993 Peacock Films Pty. Ltd.

granted a fixedtfloating charge to Esanda Finance Corporation Ltd. In June, 1993

Peacock Films Pty. Ltd. began to advertise for sale videos in the trade magazines. In

June, 1993 and thereafter the number of new releases offered for sale in the same

magazines by the respondent fell.

Since June, 1993 Peacock Films Pty. Ltd. has offered for sale in the

magazines a greater number of filtns than the respondent. Both companies operate

from the same premises at Bundall on the Gold Coast.

The applicant, in support of the order sought, read an affidavit of

Norma Boogerd who deposed :-

"I. bz tlze nzo~ztlrr of Marclz, April, May arrd Jurze, 1993 I was employed by CBL Kdeo Ply Ltd as a Telenzarketer.

2.                    T?le comparty CBL Video Py Lfd traded from

prenrires situated at 5/71 Uptorz Street, Bzcrrdall irz tlze City of

t11e Gold Coast.

3.                    Duri~zg nly lime tvitl~ ilie conipatly attofl~er

conzparly Peacock Fi lm Ply Ltd ako traded fronz the same
premises.

4.   Wzilst I was employed by CBL Video Pty Ltd

no otlrer business otller rlratz Peacock Films Pty Ltd traded
from tlrose same premises.

5.                    I was irrstructed by Mrs. Lyrlrte Slzarz~zon to

answer tlze teleplzorte tvitli tlre worh or similar to tlze words 'Tlzatzk you for callirlg may I llelp you'. If (lie penon ilzen wished to discuss either CBL Films or Peacock Film the

appropriate ir~ornratiorz was supplied'!

The evidence of Ms. Boogerd is against a finding that the business of

the respondent is being run down or diverted to Peacock Films Pty. Ltd. There is no suggestion of switch selling or that the business of Peacock F~ims Pty. Ltd. is being passed off as the business of the respondent. It is clear that there are two businesses

being operated apparently at least since March, 1993 offering for sale film videos in

respect of which each holds the respective copyright or a licence from the copyright

holder for sale. In this sense the companies are competitors.

There is no evidence that the respondent has at this time available to it

rights to sell videos beyond those which are presently advertised for sale. Nor is there any evidence as to the source of the rights Peacock Films Pty. Ltd. is exploiting and the number of releases made available to it for sale. There is no evidence that Peacock Films Pty. Ltd. or those who control it are diverting to Peacock Films Pty.

Ltd. film rights offered to the respondent. Nor is there any evidence that the

Shannons are preferring the interests of Peacock Films Pty. Ltd. to the interests of the

respondent in acquir~ng film rights.

So far as the trade magazines show, the respondent is still in business

and trading, albeit that it is advertising fewer new release videos for sale.

Ms. Curtis who is a shareholder in the applicant and a director of it also
holds half of the issued share capital of the respondent. As I have said previously in

this matter, one of her complaints is that she has been frozen out of the management of the respondent. However, the validity of her complaint in that regard does not

arise in this litigation for adjudication. If she believes that the affairs of the respondent are being conducted in a way which is prejudicial to her interests as a shareholder in the respondent, or that the Shannons in the management of the respondent have got themselves into a position of conflict of duty and interest, the remedy lies in her own hands.

At the highest, the evidence establishes that the respondent now has a

competitor which is controlled by Mr. and Mrs. Shannon, who are the holders of the other half of the issued share capital of the respondent. Such competition may, but not necessarily must, damage the business of the respondent. It may be that the portfolio of films held by the respondent and the nature of its market enables the

respondent to trade profitably with the level of new releases it is advertising in the

trade magazines.

It was submitted on behalf of the applicant that the failure of the

respondent to call evidence explaining why the number of new releases advertised for

sale had fallen enabled me to draw the inference from the proven facts that the business of the respondent was being run down in order to defeat any judgment the applicar~t might obtain.

Two things must be said in relation to such a submission. Firstly, there

must be established facts from which the inference as a matter of strict logical deduction can be drawn. Secondly, the absence of evidence proving the contrary

which might have been called is a circumstance which may be taken into account in

5.   I

favour of drawing the inference. The absence of such evidence does not mean the

inference must be drawn.

There are a number of possible explanations for a fall in the level of

advertising. For example, the respondent may not have access to new releases or the finance to purchase the intellectual property rights. To choose the explanation

contended for by the applicant is merely to speculate and is inconsistent with the established fact that the business continues to exist, continues to advertise and is, when public inquiries are received, treated in the same manner as when inquiries are made of Peacock Films Pty. Ltd. The established primary facts do not allow the inference to be drawn that the respondent is engaging in the conduct for the purpose

contended for.

Even if I were persuaded that the business of the respondent was

declining, it would be one factor to place in the balance as to whether the justice of the case required that an order be made for security for costs. In my reasons for judgment on the application for security for costs I identified the factors which	weighed heavily in favour of the making of an order. Those factors totally outweigh a	possible decline in the financial well being of the respondent due to the competition
from Peacock Films Pty. Ltd. The persons who stand to benefit from this litigation
still refuse to come out from behind the corporate veil of the applicant and accept a personal liability for any costs which may be awarded in the respondent's favour. The
applicant itself is, in my view, insolvent. The justice of the case requires that security for costs be provided.

In all the circumstances I decline to vacate my order of 9 August, 1993.

THECOURTORDERS:

1.                   That the application to vacate the orders for security for costs, a stay

pending provision of security and costs all made on 9 August, 1993 is
dismissed.

The applicant pay the respondent's costs of the application to be taxed,

if not agreed.

I certify that this and the preceding fwe (5) pages are a

true copy of the reasons for judgment herein of his
Honour Mr. Justice Cooper.

Date: 19 August, 1993 ~ & v l & o [email protected]/&WW

Associate

Solicitors for the Applicant:  Mr. English of English & Co.

Counsel for the Respondent:	Mr. R. Perry
Solicitors for the Respondent:	McCullough & Robertson
Date of Hearing:	19 August, 1993
Place of Hearing:	Brisbane
Date of Judgment:	19 August, 1993