IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) ) ) GENERAL DIVISION No. G148 of 1983 BETWEEN : W. & K. NO. 1 PTY. LIMITED Applicant AND: THE GREAT OUTDOORS COMPANY LIMITED Respondent ORDER Judge making order: Beaumont, J. Date of order: 26 July, 1983 Where made: Sydney. THE COURT ORDERS THAT: 1. Order that the applicant shall provide within twenty one days of the date hereof security in the sum of $5,000 by way of bank bond in the form acceptable to the Court for the goods of the respondent of these proceedings up to the close of pleadings. 2. Order that these proceedings be stayed until the provision of the security aforesaid. 3. Direct that the said bond be held in safe custody by or on behalf of the Registrar of the Court subject to the further order of this Court. 4. Order that the respondent have liberty to apply from time to time for further security for its costs of the proceedings after close of pleadings. 5. Order that the applicant pay the respondent's costs of the motion for security up to and including today. 6. Order that the motion for security stand over generally with liberty to the respondent to resolve by leave of the Court to be applied for on two days' notice to the applicant. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION No. G148 of 1983 BETWEEN : W. & K. NO. 1 PTY. LIMITED Applicant AND: THE GREAT OUTDOORS COMPANY LIMITED Respondent CORAM : Beaumont, J. (ex tempore) DATED: 21 July, 1983. REASONS FOR JUDGMENT This is an application made under s.533 of the Companies Code of New South Wales. Under that provision, where a corporation 1s a plaintiff in any legal proceedings, the Court, having jurisdiction in the matter may, 1f it appears by credible testimony that there 1s reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and make consequential orders. The application arises in the context of proceedings in this Court based, amongst other things, upon alleged breaches of s.52 and s.53 of the Trade Practices Act, 1974. The evidence adduced by the respondent in the pro- ceedings, the applicant in this application, in the first instance, refers the Court to accounts filed within the Corporate Affairs Commission in South Australia for the year ended 30 June, 1982. It appears from those accounts that the respondent to the application is a trading trust. So much 1s stated in the directors report accompanying the accounts. The accounts, therefore, throw little light upon the ultimate financial position of the company. For example, it shows as current assets the sum of $60.00, being cash at bank, and current liabilities are shown as nil. However, notes to the accounts make it clear that the real activity of the company is to act as trustee of the Griffith Hospital Trust and the Griffith Private Hospital Superannuation Fund. In that respect, the notes to the accounts indicate that the liabilities of the hospital trust total a sum in excess of $2.4 million. However, there is a statement at the end of the notes to the accounts in these terms, and I quote: "The company as trustee as at 30 June, 1982 had a right of indemnity against the assets of the Griffith Hospital Trust which was valued by the directors in excess of $2,405.404.00." It thus appears that it was the opinion of the directors that the right of indemnity would have more than satisfied the liabilities incurred by the trustee company in the course of its trading activities. However, it 1S significant, 1n my opinion, that no attempt was made on behalf of the respondent to this applic- ation to call any director of the company, nor, indeed, to adduce any evidence of its financial position; rather, the respondent to the application was content to rest with the position that the accounts, to which I have referred, would be sought to be tendered. They say in this connection that initially an objection was taken to that tender on the basis that there was no proper evidence as to the source of the material. That objection was later withdrawn after certain further documents were tendered. The applicant in the application further relies upon a telex dated 13 May, 1983 passing from the respondent to the application to the applicant. In that telex there is a state- ment in these terms and I quote: "Due to unexpected acquisition of Boots Camping Sydney. plus large outlay required, we were not able to meet year payments in May. These payments will be made as soon as possible but not later than 3 August, 1983." There is a further statement in the telex that "certain money problems being overcome previously explained". It is said that these problems were caused by a number of matters there specified. In my opinion, the telex alone constitutes evidence upon which I could reasonably form the view that the respondent to the application will be unable to pay the costs of the other side 1f successful in its defence. rs ' However, the matter does not rest there. Without going into further detail at this stage, it is sufficient to say that there is other evidence in the form of conver- sations that various parties deposed to by Mr. Roberts in his affidavit sworn 7 July, 1983. I must say that in the case of two paragraphs, namely, paragraphs 8 and 9 of that affidavit, I am inclined to the view that the evidence is of little weight. However, in paragraph 4 of that affidavit Mr. Roberts deposes to a con- versation with Mr. Kellie in which Mr. Kellie apparently said in October last that the business carried on under the name of Kellie Davis had not made a profit in its trading. : Mr. Roberts was also informed at the tame that trading from the hospitals was subsidising the losses of Kellie Davis. In my opinion, it is significant that the respondent to the application has made no attempt of any consequence to estab- lish what its up-to-date financial position is. I am therefore left in a situation where I must accept the evidence tendered on behalf of the applicant in the application. I am therefore of the view that in the words of the section there is reason to believe that the respondent toa the application would be unable to pay the costs of its opponent 1f successful in its defence. I so hold. | certify that this andthe 3 preceding Pages are a truce ccxy of '3 reasons for juagment here:n of Pre Honcurable Mr Justice Beaumont Ibetey Asscciate Nared D Septem, 1183, -