Morwood v. Chemdata Pty Ltd

[1995] ATPR 41-429

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(Decision by: Lockhart J)

Computerad Australia Pty Ltd
v Chemdata Pty Ltd & Others

Court:

Judge:
Lockhart J

Judgment date: 1 September 1995

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Decision by:
Lockhart J

REASONS FOR JUDGMENT

LOCKHART J.

The Court has before it the following notices of motion:-

•

a motion by the first, second and third respondents to "strike out the proceedings" as against the first applicant, Mr Morwood and to "strike out the proceedings" as against both applicants in so far as they raise claims against the third respondent, IMS Australia Pty Limited;

•

a motion by the fourth to twelfth respondents to the same effect;

•

two motions, one by the first, second and third respondents, and the other by the remaining respondents, for security for costs as against the second applicant, Computerad Australia Pty Limited;

•

a motion by Mr Morwood and Computerad to add as the thirteenth respondent the Dun & Bradstreet Corporation, a United States corporation incorporated in Connecticut.

I shall deal first with the motions to strike out the proceedings as logically they come first.

The further amended statement of claim (the statement of claim) is a complex document; it alleges breaches of ss. 45, 46, 52 and 53 of the Trade Practices Act 1974 (the TP Act). The relief claimed in the further amended application (the application) includes injunctions and damages in excess of one billion dollars. The relief is sought pursuant to ss. 80, 82 and 87(1) of the TP Act. The allegations made in the statement of claim raise a large number of complex questions of fact and law.

The statement of claim asserts amongst other things:-

"5. Chemdata and Amfac are and since February 1994 have been wholly owned subsidiaries of IMS.

6. Since at least 1985 pharmacists within Australia have used computer software in the course of dispensing prescribed drugs (dispensary software).

7. By in or about 1988 most pharmacists in Australia used dispensary software in the course of dispensing prescribed drugs.

Particulars

The use of dispensary software by pharmacists has been encouraged by the Commonwealth Department of Health which has imposed a fee for the provision to it, otherwise than by means of computer, of prescribed information relating to the dispensing of prescribed drugs.

8. There is and has since 1985 been a market within Australia for the supply of dispensary software to pharmacists (the dispensary software market).

9. At all material times since 1988 Chemdata has had a substantial degree of power in the dispensary software market within Australia.

Particulars

Chemdata's share of the dispensary software market is approximately 86% of the market which is in excess of five times the combined market share of its competitors. It is able to maintain prices for monthly software updates at approximately 3.5 times the price of its largest competitor.

Chemdata supplied approximately:

(a)

800 of 2,500 computerised pharmacies by 1987,

(b)

2,100 of 3,650 computerised pharmacies by 1989, and

(c)

4,500 of 5,200 computerised pharmacies by 1991.

10. Amfac is and at all material times since 1988 has been a major supplier of computer hardware to retail pharmacists within Australia.

11. From 1988 Chemdata and Amfac jointly marketed their respective goods and services to retail pharmacists within Australia under the registered business name 'Amfac Chemdata' and under the name 'Amfac Chemdata Pharmacy Management System'.

12. The use of dispensary software including the Chemdata software enables and enabled pharmacists to record and collect information concerning each prescription dispensed (prescription data).

Particulars

The prescription data which can be recorded by means of dispensary software includes National Health Service (NHS) numbers which are identifying numbers allocated by the Commonwealth Department of Health to each drug available on prescription in Australia and which are provided by that department to suppliers of dispensary software, including Chemdata, for incorporation into their dispensary software.

14. There is and at all material times there has been a market within Australia for the provision of prescription data for reward to interested persons especially pharmaceutical manufacturers (the prescription data market).

15. The prescription data which pharmacists can record and collect by means of dispensary software including the Chemdata software is information which can be provided for reward to interested persons especially pharmaceutical manufacturers thereby enabling a person collecting that information to enter the prescription data market.

16. Chemdata, IMS and individual pharmacists are each in a position to supply prescription data to interested persons for reward and are thereby each in a position to compete with the other in the prescription data market.

17. IMS has and at all material times has had a substantial degree of power in the prescription data market within Australia.

Particulars

IMS is and since prior to 1988 has been the major supplier of prescription data to interested persons for reward within Australia.

18. At all material times since in or about 1988, for consideration paid to Amfac as its agent, Chemdata granted to all retail pharmacists to whom it supplied its dispensary software (the Chemdata software) a non-exclusive, non-transferable licence to use the Chemdata software on certain terms and conditions (the Chemdata Licence).

19. It is and was at all material times an express term of the Chemdata Licence that a licensee pharmacist would:

(a)

keep all information recorded on Chemdata software confidential and secret;

(b)

not use information recorded on Chemdata software for any purpose other than that for which it was acquired and not disclose or otherwise use that information for his own benefit or for the benefit of a third party without the prior written consent of Chemdata; and

(c)

not add to, amend or make any alterations to the Chemdata software.

Particulars

Clause 8(a), (b) and (d) of the Chemdata Licence.

20. Computerad has developed and is the proprietor of computer software which functions as a computerised continuing education, communications and marketing system for pharmacists and which also functions as a means of collecting and recording prescription data (the Computerad System).

Particulars

The Computerad System is designed to provide four principal services:

(1)

A continuing education service for pharmacists. A pharmacist is able to access this service during quiet periods in the pharmacy whilst maintaining immediate access to the dispensary software as required. This service can be updated on a monthly basis at no cost to the pharmacist.

(2)

Prescription Linked Messages. When a pharmacist is dispensing a particular drug he or she fills out an on-screen form within the dispensary software which includes details such as the patients name and address and the NHS number. By observing the NHS number as it appears in the dispensary software, the Computerad system can prompt the pharmacist with messages specific to the particular drug which is being dispensed. For instance, whilst a pharmacist is in the process of dispensing a particular drug which produces gastric side effects the Computerad system, which has recognised the NHS number, will display a message reminding the pharmacist of the drugs side effects and prompting the pharmacist to counsel the patient and/or recommend an over- the-counter product such as antacids.

(3)

Full Screen Time Linked Messages. When a pharmacist's computer has not been utilised for a specified period, the Computerad system automatically displays a full screen message. These messages rotate in a series totalling a maximum of twenty-five. A message remains on the screen until the next keystroke at which point the system automatically reverts back to its previous position in the dispensary software.

(4)

Capture of market research data. The system observes and records data of commercial interest to pharmaceutical manufacturers on the usage of prescribed drugs. It does so with complete anonymity so far as the patient and the particular pharmacy are concerned. The method used is similar to the 'prescription linked messages' method described above.

...

23. There is a market within Australia for the supply to interested persons, especially pharmaceutical manufacturers, of opportunities to market products and services to pharmacists either directly or indirectly by:

(a)

means of computerised messages advertising those products and services; and/or

(b)

sponsoring computerised continuing education packages written for and directed to pharmacists.

...

26. The Computerad System is designed to and can in fact interact with the particular dispensary software run by a pharmacist including the Chemdata software in a way which does not add to, amend, make any alteration to or inhibit in any way the operation of that dispensary software including the Chemdata software.

Particulars

The Computerad system is 'memory resident' software which functions by reading certain information recorded on the dispensary software. That information operates as a trigger for the operation of the Computerad system. The principal trigger for the operation of the Computerad system is the NHS numbers. The Computerad system does not interrupt the pharmacist's normal dispensing routine nor does it interfere with the structure or operation of the dispensary software or involve any copying of the dispensary software nor use of, addition to or interference with the dispensary software source code.

27. Chemdata is and at all material times since 1988 has been in a position to prevent or attempt to prevent the operation and commercial viability of the Computerad system.

Particulars

(a)

Since 1988 Chemdata has controlled the greatest proportion of the dispensary software market, see the particulars to paragraph 9 above.

(b)

To the extent that the operation of the Computerad system is dependent upon reading the NHS number recorded in the dispensary software, Chemdata is in a position by various means to alter the location of the NHS number as it appears in the Chemdata software and thereby disable the operation of the Computerad system.

(c)

The Chemdata Licence provides, on its face, a power in Chemdata to prevent pharmacists from providing to Computerad information which is in no way confidential to Chemdata.

...

29. Since in or about October 1988 Chemdata has prevented and continues to prevent the operation and the commercial viability of the Computerad system by:

(a)

refusing to deal with Computerad on a commercial (or any other) basis in relation to the distribution and operation of the Computerad system;

(b)

threatening to prevent pharmacists from using the Computerad system by resort to contractual rights purportedly arising under clauses 8(a), (b) and (d) of the Chemdata Licence;

(c)

threatening to prevent pharmacists from using the Computerad system by resort to intellectual property rights, in particular copyright in the Chemdata software, alleged to be infringed by the operation of the Computerad system;

(d)

threatening to disable the operation of the Computerad system by moving the location of the NHS number as it appears in the Chemdata software;

(e)

failing to withdraw the refusal to deal set out in (a) above and the threats set out in (b), (c) and (d) above.

Particulars

At a meeting in or about October 1988 Morwood on behalf of Computerad was informed by Edward Llewellyn Crook on behalf of Chemdata that should Computerad attempt to integrate the Computerad system with Chemdata software then Chemdata would consider, and would so advise its licensees, that such action was an infringement by its licensees of the Chemdata licence. In addition Morwood was informed by Crook at the same meeting that Chemdata would render ineffective any attempt by Computerad to integrate the Computerad system with the Chemdata software by regularly moving the location of the NHS number and/or altering the screen layout in the Chemdata software. The applicants also rely upon the letter dated 6 June 1992 from the solicitors for Amfac and Chemdata to Computerad.

...

31. The Computerad system does not of itself, or in its mode of operation, infringe Chemdata's copyright in the Chemdata software.

32. Chemdata has no lawful entitlement to prevent or attempt to prevent pharmacists from using the Computerad system by resort to or purported reliance upon its copyright in the Chemdata software.

...

35. By its conduct set out in and under paragraphs 29 and 30 above Chemdata, contrary to s 46(1)(b) of the Act, is taking and has taken advantage of its substantial degree of power in the dispensary software market for the purpose of preventing entry by Computerad into one or other or all of the markets referred to in paragraphs 14, 23, 24 and 25 above.

36. By its conduct set out in paragraphs 29 and 30 above Chemdata, contrary to section 46(1)(c) of the Act, is taking and has taken advantage of its substantial degree of power in the dispensary software market for the purpose of deterring or preventing Computerad from engaging in competitive conduct in one or other or all of the markets referred to in paragraphs 14, 23, 24 and 25 above.

37. By relying or purporting to rely upon its contractual rights pursuant to clauses 8(a), (b) and (d) of the Chemdata Licence, Chemdata in breach of section 45(2)(b) of the Act is giving and has given effect to a provision of a contract which has, or is likely to have, the effect of substantially lessening competition in one or other or all of the markets referred to in paragraphs 14, 23, 24 and 25.

38. The provisions of clause 8 of the Chemdata Licence:

(a)

are between persons who, for the purposes of sub-sections 4D(1) and (2) and section 45 are competitive with each other;

(b)

have the purpose of preventing, restricting or limiting the supply of services to or from persons such as Computerad or pharmaceutical manufacturers or competitors or potential competitors of Chemdata and IMS, and are thereby exclusionary provisions and unlawful by reason of section 45 of the Act.

Particulars

(a)

The pharmacist licensees are competitors or potential competitors with Chemdata and IMS in the prescription data market.

(b)

The services to persons such as Computerad or pharmaceutical manufacturers or competitors or potential competitors of Chemdata or IMS are the supply of prescription data.

(c)

The services from such persons are services of a kind referred to in and under paragraph 20 above and the benefit of the operation of the Computerad System.

39. By relying or purporting to rely upon its contractual rights pursuant to clauses 8(a), (b) and (d) of the Chemdata Licence, Chemdata is giving and has given effect to an exclusionary provision in breach of section 45 of the Act.

40. By reason of the conduct of Chemdata and Amfac referred to in paragraphs 35, 36, 37 and 39 the Applicants and each of them have suffered loss and damage.

Particulars

(a)

Computerad's damages are set out below in terms of lost business opportunities and money wasted.

(b)

The First applicant's damages are the reduction in value in his shares in Computerad or the loss of the opportunity of obtaining value in his shares in Computerad, that loss of opportunity being both as to the capital value of the shares and the recurrent value of the dividend from the shares. These damages of the First Applicant are directly referable to the loss to Computerad of the business opportunities referred to below.

(c)

Computerad's lost business opportunities.

(i)

Australian Market:

Second applicant's projected annual profit before tax (pbt):
1989	$107,459
1990	1,942,569
1991	4,197,301
1992	4,602,941
1989-1992 pbt:	$10,850,270
Second applicant's 1989-1992 loss: $10,850,270
1993	5,000,880
1994	5,434,249
1995	5,977,673
1993-1995 pbt:	$16,412,802
Second applicant's 1993-1995 loss:	$16,412,802
Second applicant's projected 1995 Australian market value (based on multiple of ten times projected 1995 (pbt):	$59,776,730
Second applicant's damage:	$59,776,730

(ii)

Canadian, United States of America, United Kingdom and Irish Markets:

Computerad had commenced to develop and market the Computerad system in Canada, the United States, the United Kingdom and the Republic of Ireland by entering into agreements with a Canadian corporation (801402 Ontario Inc.) and English companies and another person (Premier Nominees Limited, CIMAP Limited and Roger Barrs). It was essential for the successful commencement and development of the Computerad System in those countries that Computerad be able to develop its operation successfully in Australia. The conduct of Chemdata and Amfac prevented Computerad developing its system in those markets. The projected worth of those markets is set out below.

Canada and the United States of America:

Second applicant's projected annual profit before tax (pbt):

1991	$15,808,811
1992	32,112,471
1991-1992 pbt:	$47,921,282
Second Applicant's 1991-1992 loss:	$47,921,282
1993	$35,323,718
1994	38,856,090
1995	42,741,698
1993-1995 pbt:	$116,921,506
Second applicant's 1993-1995 loss:	$116,921,506
Second applicant's projected 1995 Canada and the United States of America market value (based on multiple of ten times projected 1995 (pbt):	$427,416,980
Second applicant's damage:	$427,416,980
United Kingdom and Irish Markets:
Second applicant's projected annual profit before tax (pbt):
1991	$611,207
1992	3,851,276
1991-1992 pbt:	$4,462,483
Second applicant's 1991-1992 loss:	$4,462,483
1993	$6,072,800
1994	6,680,080
1995	7,348,088
1993-1995 pbt:	$20,100,968
Second applicant's 1993-1995 loss:	$20,100,968
Second applicant's projected 1995 United Kingdom and Ireland market value (based on multiple of ten times projected 1995 (pbt):	$73,480,880
Second applicant's damage:	$73,480,880
Second applicant's total loss and damage:
Loss: Years 1989 to 1992	$63,234,035
Years 1993 to 1995	$153,435,276
Damage:	$560,674,590
Total
Loss and Damage:	$777,343,901

(iii)

Damage Based on Future Earnings:

The projected profit in 1995 in each of the markets above totalling $56,067,459 times a multiple of 10: $560,674,590.

(iv)

Computerad's Wasted Expenditure: $747,114 by way of current liabilities being creditors and other borrowings of Computerad.

41. If, as it has threatened to do, Chemdata informs licensees under the Chemdata Licence that they will be in breach of the Chemdata Licence by using the Computerad system, Chemdata will engage in conduct in trade or commerce which is misleading or deceptive or which is likely to mislead or deceive contrary to section 52 of the Act in that any such information will be incorrect.

42. Further or alternatively, if, as it has threatened to do, Chemdata informs licensees under the Chemdata Licence that they will be in breach of Chemdata's copyright in the Chemdata software or in breach of the Chemdata Licence by using the Computerad system, Chemdata will, in connection with the supply or possible supply of the Computerad system or in connection with the supply or possible supply of Chemdata software have made a false or misleading representation in trade or commerce concerning the existence or effect of a right contrary to section 53(g) of the Act.

43. By the entry into the Chemdata Licence with, and the subsequent provision of the Chemdata software to, pharmacists with the provisions of clause 8 in the Chemdata Licence, and without Chemdata or Amfac telling pharmacists that such provisions were unlawful as exclusionary provisions, such conduct since 1988 in all the circumstances was misleading or deceptive or likely to mislead or deceive contrary to section 52 of the Act.

44. The applicants have suffered loss and damage by the breach referred to in paragraph 43 above by being denied the opportunity to deal with pharmacists without the wrongful threat of enforcement of an unlawful contractual provision.

45. Each of:

(a)

Amfac;

(b)

IMS (from February 1994);

(c)

the fourth to sixth respondents as directors of Chemdata until February 1994;

(d)

the seventh respondent as director of Chemdata;

(e)

the ninth and tenth respondents as directors of Amfac until February 1994;

(f)

the eight and eleventh respondents as directors of Amfac;

(g)

the twelfth respondent since about 1991,

has aided, abetted, counselled or procured and was directly or indirectly knowingly concerned in the contraventions of the Act referred to herein.

Particulars

(i)

As to the second respondent, the applicants restate the particulars provided and given in relation to breaches of sections 45(2)(b)(ii), 46(1)(b), 46(1)(c) and 52 of the Act herein.

(ii)

Amfac was at all material times the agent of Chemdata for Dispensary Software Licence Agreements and by such conduct was a person directly or indirectly knowingly concerned, within the meaning of section 75B of the Act, in the contraventions by Chemdata of Parts IV and V of the Act in that by reason of paragraph 18, Amfac was the agent for Chemdata and was directly or indirectly knowingly concerned with the conduct of Chemdata set out in paragraphs 35, 36, 37, 39 and 43 herein, causing the applicants to suffer continuing loss and damage including the loss of opportunities to obtain commercial advantages and profits in markets in Australia, Canada, the United States of America, the United Kingdom and Ireland by such conduct in breach of the Act.

(iii)

As to the third respondent, the applicants restate the particulars provided and given in relation to breaches of sections 45(2)(b)(ii), 46(1)(b), 46(1)(c) and 52 of the Act herein.

(iv)

Since February 1994 IMS has owned and controlled Chemdata and Amfac and by such conduct is a person directly or indirectly knowingly concerned, within the meaning of section 75B of the Act, in the contraventions by Chemdata and Amfac of Parts IV and V of the Act in that by reason of paragraph 5 IMS was directly or indirectly knowingly concerned with the conduct of Chemdata set out in paragraphs 35, 36, 37, 39 and 43 herein, causing the applicants to suffer continuing loss and damage including the loss of opportunities to obtain commercial advantages and profits in markets in Australia, Canada, the United States of America, the United Kingdom and Ireland by such conduct in breach of the Act.

(v)

As to the fourth, fifth, sixth, seventh, eighth, ninth, tenth and eleventh respondents, the applicants restate the particulars provided and given in relation to breaches of sections 45(2)(b)(ii), 46(1)(b), 46(1)(c) of the Act herein.

(vi)

At all material times the fourth, fifth, sixth and seventh respondents were directors of Chemdata, and the eighth, ninth, tenth and eleventh respondents were directors of Amfac, and by such conduct were persons directly or indirectly knowingly concerned, within the meaning of section 75B of the Act, in the contraventions, as set out in paragraphs 35, 36, 37 and 39 herein, by Chemdata of Part IV of the Act causing the applicants to suffer continuing loss and damage including the loss of opportunities to obtain commercial advantages and profits in markets in Australia, Canada, the United States of America, the United Kingdom and Ireland by such conduct in breach of the Act.

(vii)

As to the twelfth respondent, the applicants restate the particulars provided and given in paragraph 29 in relation to breaches of section 46 of the Act herein.

(viii)

The twelfth respondent was actively involved with Chemdata and Amfac, and was a person who, directly or indirectly, was knowingly concerned within the meaning of section 75B of the Act, in the contraventions by Chemdata and Amfac of Part IV of the Act, in that by reason of the letter of 6 June 1992 in paragraph 29 herein, the twelfth respondent was a person who was directly or indirectly, knowingly concerned in the contraventions by Chemdata and Amfac of Part IV of the Act causing the applicants to suffer continuing loss and damage including the loss of opportunities to obtain commercial advantages and profits in markets in Australia, Canada, the United States of America, the United Kingdom and Ireland by such conduct in breach of the Act."

Counsel for the respondents argued that the only basis on which the statement of claim asserts that Mr Morwood has a cause of action is as a shareholder of Computerad. (It is agreed that Mr Morwood has 90% of the issued share capital of that company.) It was argued that in these circumstances there is no cause of action known to the law on which Mr Morwood can rely. I have been referred to various cases including Elna Australia Pty Limited v International Computers (Aust) Pty Limited (No 2) (1987) 16 FCR 410 especially at 418; Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 109 ALR 638 at 643 and 647; also Kaze Constructions Pty Limited v Housing Indemnity Australia Pty Limited (1990) 12 ATPR 41 -017. These cases were referred to also as authority for the proposition that for a claim for damages to be sustained under s. 82 of the Act, there must be some sufficient cause or nexus linking the conduct said to contravene the Act with the recoverable loss or damage. It was argued that there is no such cause or nexus with respect to any claim by Mr Morwood.

The claim by Mr Morwood for damages (para 40(b) of the statement of claim) is for the reduction in value of his shares in Computerad or the loss of the opportunity of obtaining value in his shares in Computerad, that loss of opportunity being both as to the capital value of the shares and the recurrent value of dividend from the shares. These damages are said to be directly referable to the damage to Computerad of lost business opportunities.

In my opinion Mr Morwood is not entitled to recover damages in the circumstances as pleaded in the statement of claim. In Prudential Assurance Co Limited v Newman Industries Limited (No 2) [1982] 1 Ch 204 it was held at 210:

"A derivative action is an exception to the elementary principle that A cannot, as a general rule, bring an action against B to recover damages or secure other relief on behalf of C for an injury done by B to C. C is the proper plaintiff because C is the party injured, and, therefore, the person in whom the cause of action is vested. This is sometimes referred to as the rule in Foss v Harbottle (1843) 2 Hare 461 when applied to corporations, but it has a wider scope and is fundamental to any rational system of jurisprudence."

The Court said at pp. 222-223:

"But what [a shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a 'loss' is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. His only 'loss' is through the company, in the diminution in the value of the net assets of the company in which he has (say) a 3 per cent shareholding. The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company."

These passages were cited with approval by Wilson J. in Gould & Anor v Vaggelas & Ors (1985) 157 CLR 215 at 245. Prudential Assurance was also cited with approval by Gibbs C.J. at 219-220 and Brennan J. at 253.

There is, of course, a fundamental distinction between a claim by a shareholder for damages for the loss which he has personally suffered which is separate and distinct from the loss suffered by the company, a distinction recognized in Gould v Vaggelas by Gibbs C.J. at 220. But in that case the plaintiffs were held not to be entitled to recover damages for the decline in the value of their shares in the company (see judgment of Gibbs C.J. at 224).

Mr Morwood does not allege any other loss or damage which is a separate or distinct loss or damage from that suffered or alleged to be suffered by Computerad. In my opinion it is plain on the statement of claim as it is presently framed that Mr Morwood, as distinct from Computerad, is not a person who has suffered loss or damage within the meaning of ss. 82 or 87(1) of the TP Act.

Statements of claim should not be struck out in a summary way at this stage unless it is clear beyond peradventure that this should be done. I am satisfied that this is such a clear case where the statement of claim should be struck out so far as claims are made by Mr Morwood based on damages under s. 82 and s. 87(1) of the TP Act.

The claims of Mr Morwood for injunctive relief based on s. 80 of the TP Act are however in a different position because it is well established that any person can claim injunctive relief under s. 80. There is abundant authority for that proposition in this Court commencing with Parish v World Series Cricket Pty Limited (1977) 16 ALR 181 . The claims made by Mr Morwood for injunctive relief under s. 80 of the TP Act should not be struck out.

As to the motion to dismiss the third respondent, IMS Australia Pty Limited (IMS), as against both applicants I was referred in particular to paragraphs 5, 45 and particular (iv) on p 18 of the statement of claim (being a particular with respect to paragraph 45) by counsel for the first, second and third respondents. The basic point made by counsel was that the cause of action asserted against IMS is that it is the parent company of two wholly owned subsidiaries, namely, Chemdata and Amfac, being the first and second respondents and that the assumption made in the pleading is that IMS has knowledge of the activities of its subsidiaries. It was argued that it is impossible to impute the knowledge of the subsidiaries to the parent company merely because of that corporate relationship between them.

This submission is sound in my opinion and accordingly the statement of claim should be struck out as against the third respondent. Mr Morwood foreshadowed that he may seek leave to amend the statement of claim by asserting as against the third respondent that on the facts it actively controlled the activities of its two subsidiaries, the first and second respondents. This is not a matter which I shall take into account now as I am not hearing any motion to amend.

I turn to the motion of Mr Morwood to join Dun and Bradstreet as the thirteenth respondent. This motion was heard ex parte. The assertion is that IMS has been since 1988 a wholly owned subsidiary of Dun and Bradstreet. Mr Morwood sought to insert an allegation to this effect in paragraph 5 and to add as a particular to paragraph 45(iii)(a) the following:

"The Dun and Bradstreet Corporation incorporated in the State of Connecticut, United States of America, as the ultimate holding company of IMS Australia Pty Limited, has owned and controlled IMS at all relevant dates and by such conduct is a person directly or indirectly knowingly concerned, within the meaning of section 75B of the Act in that by reason of paragraph 5(i) the Dun and Bradstreet Corporation was directly or indirectly knowingly concerned with the conduct of Chemdata set out in paragraphs 35, 36, 37, 39 and 43 herein, causing the applicants to suffer continuing loss and damage including the loss of opportunities to obtain commercial advantages and profits in markets in Australia, Canada, the United States of America, the United Kingdom and Ireland by such conduct in breach of the Act."

As the statement of claim is to be struck out as against the third respondent there is no purpose to be served in joining Dun and Bradstreet because the claim that is foreshadowed against it is derivative through the third respondent. In short, as no case will remain as against the third respondent there can be no case as against Dun and Bradstreet. Accordingly the notice of motion to join Dun and Bradstreet shall be dismissed.

I turn then to the two motions for security for costs as against Computerad. The evidence establishes that Computerad is not an active trading company. It was struck off the register of the ASC, but a court order was made on 22 August 1994 restoring its name to the register. The nominal value of all its issued shares is $1,000. The latest accounts of Computerad filed with the ASC were included in the 1993 annual return and they show total assets of $714,063 and total liabilities of $705,053 leaving shareholders' equity at $9,010. This material is confirmed in Morwood's affidavit of 2 March 1995. In para 8 of that affidavit he says that the company is insolvent and therefore not trading.

Prima facie an order for security for costs should be made, but arguments were advanced by Mr Lee, solicitor, who appears for Computerad, to resist an order for security. First, he argued that the conduct complained of in the proceeding against the respondents is the very conduct that has caused the financial impecuniosity of Computerad. Secondly, he submitted, that the real applicant is Mr Morwood and that Computerad is a secondary party to the proceeding and that no substantial additional costs will be incurred by any of the respondents because of the retention of Computerad as a party.

As I read the statement of claim and understand the causes of action it is plain to me that Computerad is not a nominal party. It is a very real party to the proceeding and, as I have already found, Mr Morwood does not himself have a cause of action; the cause of action, if any, is the cause of action of Computerad.

It is very difficult to determine at this stage of the case what substance, if any, there is in the assertion that the conduct complained of in the proceeding is the conduct which brought Computerad to its present financial position. There is no evidence to support the assertion, only the allegations themselves in the statement of claim.

The present position is that the claim of Mr Morwood has been dismissed, leaving Computerad as the only applicant; and its claim as against IMS has also been dismissed. Although I am not persuaded that any case has been made out to substantiate the claim that the woes of Computerad have been caused by the conduct complained of in the statement of claim, this position may change when discovery is complete and the applicants' evidence in chief is filed. I think the proper course in the interests of justice is to stand this motion for security for costs over to a date after pleadings are complete, discovery and inspection of documents has taken place, and affidavits have been filed. I realize that in the meantime substantial costs will be incurred by the respondents and I have evidence to that effect by the solicitor for the first, second and third respondents. However, one would hope the very large estimate of costs given in relation to discovery will be substantially reduced by case management procedures in this Court. Once I have seen the affidavit material to be adduced on behalf of the applicants I can then be in a position to determine the question of security for costs, so that is the course I propose to take. I shall, however, leave it open to the respondents to restore the motion for security to the list upon reasonable notice if they wish to do so in the event of charged circumstances. Any further motion by Mr Morwood or Computerad to further amend the statement of claim may have a bearing on the time at which it may be appropriate to further consider the motion for security for costs.

I direct the first, second and third respondents to bring in short minutes of order on a date to be fixed to give effect to these reasons for judgment. On that day I shall hear also any motion by Mr Morwood or Computerad to further amend the statement of claim. To that end any prospective motion by Mr Morwood or Computerad must be filed and served returnable for that day together with all affidavits in support.

I certify that this and the preceding twenty-seven (27) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.

Associate:

Dated: 1 September 1995