one #2 LIMITED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No.G 169 of 1985 GENERAL DIVISION BETWEEN: PROFESSTONAL COMPUTER RESOURCES INC. Applicant/Cross-Respondent AND: PROFESSTONAL COMPUTER RESOURCES (AUSTRALIA) PTY. LIMITED First Respondent /Cross-Claimant AND: GRAHAM _ BROGDEN Second Respondent CORAM: FOX J. DATE: 2 FEBRUARY 1987 AN .- VE f) 13 FEB 1987 , FEDEPAL_COURT OF ' eG Tar ca REASONS FOR JUDGMENT (EX TEMPORE) This is an application for securitv for costs made in respect of a cross-claim bv the cross-respondent aaainst the eross-claimant who is the first respondent to the primarv praceedinas. The primarv proceedinas were commenced bv the present applicant, The application for securitv is made under s.533 of the Companies Code 1981 (N.S.W.), although s.56 of the t- Federal Court of Australia Act 1976 has a provision which is in respects in wider terms. The interrelation of these sections was dealt with in Bell Wholesale Pty Limited v. Gates Export Corporation (1984) 8 ACLR 588. The primary proceedings, as I have called them, relv on s.52 of the Trade Practices Act 1974. The respondents thereto are the present cross-claimant. and an individual, who is sued in reliance ons.75B of the Act. The latter has also filed a cross-claim but no application for securitv has been made in his masse. The case has had a lona history with manv steps, and with manv documents filed. The primarv proceedings were initiated by an application oon 8 July 1985, and an interlocutorv injunction was granted against the two respondents to prevent them carrying out a certain course of conduct, upon an undertaking as to damages which I understand is still subsisting. At a relatively earlv stage an application was made for an order for security for costs against the applicant, which I understand is a United States company, and an order was made which still subsists. The cross-claim in question was filed on 8 November 1985 and was amended in minor respects in the following vear. Since the primarv application was filed some four or five directions hearings have taken place. some after the eross-claim in question was filed. The applicant has on several occasions been seriouslv behind in complvinag with some of the orders made. There have not been any formal pleadings in the principal matter, but there have been statements of claim and defence in the cross-claims. An order has been made that the whole matter proceed bv wav of affidavit evidence, The case proceeded to a hearing before Jenkinson J. last vear, but, without reaching finalitv. was adjourned to enable the second respondent to cross-claim against the applicant. This was done, but the case is not yet ready to proceed. An important element in the dispute is whether a licence agreement made between the applicant and the respondents, or one or both of them, still subsisted at the time the application was brought. The applicant contends it had been terminated whereas the respondents say that it was current at that time and perhaps it is said that it is still current. The injunction which was aranted and the relief which is sought in the principal proceedings relate to the conduct which would be justified under the aareement were it is existence, and in that event the applicant could not succeed. The cross-claim with which I am dealing contains, in addition to the contention that the agreement subsisted, a claim for damages for its breach. The evidence in support of the application for securitv discloses that the respondent company is virtually without assets. It has balanced its budget bv bringing in an assumed amount for qoodwill and deducting accumulated losses, which amount to some $26,000, while showing unsecured debts owing to it of some $13,000. It is submitted bv counsel on behalf of the respondent that if the matters had praceeded in some other wav fuller information about the assets of the respondent could have been provided. However, we have to proceed now on the basis of the evidence which has been adduced. As I have said, this says, virtually, that the first respondent is without means. It is said by counsel that if the agreement to which I have referred has not been wrongly terminated the company midght now be ina very much more prosperous position. In mv view the case is not one, whether one turns to s.533 of the Companies Code or to s.59 of the Federal Court Act, in which an order should now be made for security for costs. The position is doubtless a highly unusual one but I base my decision largely upon the fact that the cross-claim in respect of which security is now sought for the most part constitutes a defence to the proceedings as brought, and raises matter directly concerned with the agreement, the existence or non-existence of which must be at the heart of the proceedings. Put shortly, I see the cross-claim as largely a matter of defence. There are two other matters which affect mv decision: ene is the lonq time for which the proceedinas have been under way, the long time that has elapsed since the cross-claim was filed, and the many steps that have been taken. It is more customary to cast this consideration in terms of delay but, to say the least, it would be very difficult to arrive at any real estimate of where preiudice would mostly fall flowing from the lateness in making the application. The proceedings were commenced in July 1985 and the cross-claim in question was filed in November 1985. Since then there have been many documents filed. some directions hearings and the start of a hearing. Another matter concerns a difficulty which confronts courts not infrequently in this type of application, and that is whether impecuniosity should be a basis for ordering security to be given. I do not need to say much about that in the present case because basically one returns to the consideration already mentioned, namely, that the cross-claim arises out of the eriginal application. Apparently in July 1985, a notice was qgiven under s.364 of the Companies Code bv the applicant but no further steps have been taken in reaard to it. I am therefore of the view that the present application should be dismissed with costs. (Discussion ensued) The only further order I make is that the matter be listed for hearing or for further directions before Jenkinson J. at a date to be determined. I certify that this and the four (4) preceding pages are a true copy of the Reasons for Judgment herein of his Honour CB, la, Fox. Y _— ~ Associate Dated: 2 February 1987 Counsel for the Applicant/Cross-Respondent: Mr L G Foster Solicitors for the Applicant/Cross-Respondent: Baker & McKenzie Counsel for the Respondents/Cross~-Claimant: Mr W Hodagekiss Solicitors for the Respondents/Cross-Claimant: Schrader Coyle Date of hearing: Sydney: 2 February 1987