Wallis Industries Pty Ltd v Westralian Diamond Drillers

[1990] FCA 813

JUDGMENT No. &!.3. ../.?..Q-

IN THE FEDERAL COURT	)	NOT FOR DISTRIBUTION
OF AUSTRALIA
WESTERN AUSTRALIA	1
DISTRICT REGISTRY	)
GENERAL DIVISION	NO. WAG 52 OF 1989
B E T W E E N :	WALLIS INDUSTRIES PTY. LTD.

Applicant

and

WESTRALIAN DIAMOND DRILLERS

PTY. LTD.

Respondent

and

WESTRALIAN DIAMOND DRILLERS

PTY. LTD.

Cross-Applicant

and

WALLIS INDUSTRIES PTY. LTD.

First Cross-Respondent

and

11 MAR 1991

FEDERAL COURT OF GRAEME DUNCAN WALLIS

AUSTRALIA

PRINCIPAL

REQISTRY Second Cross-Respondent

CORAM: LEE J.

DATE : 12 SEPTEMBER 1990

this motion is made, an applicant for security for costs is	the Companies (Western Australia) Code 1981, pursuant to which
required to present credible testimony from which there is reason to believe that'a corporation will be unable to pay the costs of a defendant to proceedings prosecuted by the corporation, in this case a cross-claim, if the corporation fails in those proceedings. That obligation is not met by the material placed before the Court.
A study of the accounts filed by the respondent corporation for the year ending 30 June 1989, now over a year old, shows that the cross-claimant's net worth deteriorated from the previous year. Although it continued to trade, its trading position was not as sound as the year before. The cross-claimant experienced a drop in gross profit of almost 25 per cent from $1.6m to $1.2m, but apparently engaged in significant trading activity. The net result was a loss of $21,000. In the previous year a net profit of $26,000 was recorded. No doubt, if trading losses continued after June 1989, the controllers of the cross-claimant would have to review the company's position and determine whether the
before the Court in respect of the cross-claimant's financial company could properly incur further liabilities. All that is
affairs since 30 June 1989 is a concession that the company has continued and is continuing to trade. The inference of financial status available from that fact must be favourable to the cross-claimant unless there is further evidence to show that inference to be unsound.
No other material has been provided in support of the motion and I am not satisfied that grounds have been established for the exercise of the powers provided by s.533.
However, if I were wrong in that regard and if I should have been satisfied that there was evidence of impecuniosity sufficient to ground a belief that the cross- claimant could not meet an order for costs if unsuccessful in its cross-claim, there would be other reasons why I would not be persuaded to exercise my discretion and make an order in this matter. They are as follows.
The real nub of the cross-claim lies in the applicant's claim. It may be that the applicant, as first cross-respondent in conjunction with the second cross- respondent, may need to make clear in its defence to the cross-claim that the cross-respondents plead illegality in respect of any claim by the cross-claimant for loss of profits expected to be earned from the use of equipment the applicant
defence to the cross-claim would flow directly from the alleges infringes the applicant's patent monopoly. Such a
applicant's claim and would only succeed if the applicant succeeded upon its claim.
If the claim succeeded there would be no other aspect of the cross-claim that could survive a finding of patent infringement if it were the fact that the profit- earning activities of the cross-claimant depended on the use of infringing equipment. As the discussion has gone today it does not appear that there is a dispute about that and what is being spoken about in the cross-claim is equipment the applicant alleges to be infringing equipment.
Now, it may be that if the matter is so pleaded it would be appropriate to stay the cross-claim pending determination of the applicant's claim in which event some costs on the cross-claim could be averted.
In any event, I do not think that too much time would be required in the conduct of the action as a whole to determine the issues of the cross-claim.
The cross-claim does not involve complex litigation. not the cross-claimant had any prospect of earning income in It would be a simple matter of fact to ascertain whether or
the period alleged and to determine whether there was any causal connection between the conduct of the cross-respondents and the purported loss.
Although I appreciate that the costs of such a hearing incurred may include a significant portion incurred prior to the hearing in matters related to the cross-claim alone, I do not consider the cross-claim to be of such a substantial nature that it warrants the grant of an order for security for costs in respect of it. In the circumstances, therefore, I will refuse the motion.
However, I will give leave to the cross-respondents to amend their defence to the cross-claim and I will also consider at an appropriate time any application that the cross-claim not be heard at the time of the hearing of the claim.

EX TEMPORE REASONS FOR JUDGMENT

For several reasons I am not satisfied that it is
appropriate to make an order on this motion. Under s.533 of

I certify that the preceding

five ( 5 ) pages are a true copy of the

Reasons for Judgment of his Honour Mr Justice Lee.

Associate: / P 63 p..U

Counsel for the Applicant: Mr M.W. Odes

Solicitors for the Applicant: Parker & Parker

Counsel for the Respondent: Mr A.J. Goldfinch
Solicitors for the Respondent: Sly & Weigall

Date of Hearing: 12 September 1990 Date of Judgment: 12 September 1990