Encore Holdings Pty Ltd v Plastech Industries Pty Ltd

[1997] FCA 915

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA  DISTRICT REGISTRY	)  VG 131 of 1997
)
GENERAL DIVISION	)

BETWEEN:	ENCORE HOLDINGS LTD First Applicant VIVA MAGNETICS LTD Second Applicant
AND:	PLASTECH INDUSTRIES PTY LTD Respondent

JUDGE:	HEEREY J
PLACE:	MELBOURNE
DATE:	27 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The respondent’s notice of motion be dismissed.

1. There be no order as to costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
VICTORIA DISTRICT REGISTRY	)   VG 131 of 1997
)
GENERAL DIVISION	)

BETWEEN:	ENCORE HOLDINGS LTD First Applicant VIVA MAGNETICS LTD Second Applicant
AND:	PLASTECH INDUSTRIES PTY LTD Respondent

JUDGE:	HEEREY J
PLACE:	MELBOURNE
DATE:	27 AUGUST 1997

REASONS FOR JUDGMENT

This motion concerns an order for security of costs which I made by consent on 4 July 1997.  The order was in terms that the applicants provide security for the respondents’ costs of the proceeding, such security up to and including discovery and inspection to be the total sum of $30,000, to be provided in a form acceptable to the Registrar as follows:

(a)$15,000 on/or before 18 July 1997;

(b)$15,000 within 14 days of the close of pleadings.

The proceeding is one which the applicants complain of infringement of a patent, and the respondents have brought a cross-claim alleging invalidity. 

In the course of negotiations leading up to the order for security the respondents’ solicitors said in a letter dated 1 July 1997, amongst other things, that:

The security sought should be by a major trading bank in Australia.  We mean, for example, ANZ, Westpac, NAB, Commonwealth Bank or Citibank.

Pursuant to the order the applicant has produced an undertaking dated 17 July 1997 from the Hong Kong and Shanghai Banking Corporation Limited of Eastern Southern District Corporate Banking Centre, Hong Kong.  It is not disputed that the terms of this undertaking otherwise comply with the order.

What is said is that the Hong Kong Bank is not registered as a foreign company in Australia and that Hong Kong, which since 1 July 1997 forms part of the People’s Republic of China, is not a scheduled country for the purposes of the Foreign Judgments Act 1966 (Cth).  Therefore, it is said, the security is not sufficient because it is given merely by another foreign corporation and any order for costs which the respondents might obtain could not be registered and enforced in Hong Kong. 

As a matter of procedure I think I can deal with this either as an application to vary the consent order made on 4 July or alternatively as a review of the acceptance of the security by Deputy Registrar Moore which was confirmed by a fax of 21 July 1997.

In support of the motion counsel for the respondents pointed out that uncertainty had followed the handover of administration in Hong Kong and in particular that there had been a challenge to the validity of all laws in the territory.  That challenge was brought in the context of a criminal trial.   The accused claimed that because of alleged non-compliance with the legal requirements of the handover there was now no law in Hong Kong.  However, the Hong Kong Court of Appeal rejected that challenge and ruled that the Hong Kong legal system continued after the transfer to Chinese rule and that the provisional Legislative Council installed by Beijing was legally entitled to administer the territory.

I have come to the conclusion that I should not accede to the motion.  Sitting as a commercial court, I think this court has to adopt a business-like and realistic approach to these matters.  The Hong Kong and Shanghai Bank is a great financial institution.  Hong Kong is one of the leading financial and business centres of the world.  As a matter of practicality, the risk of the Hong Kong Bank’s undertaking for $30,000 not being complied with is so remote as to be disregarded for all practical purposes.  There is always a risk of a major financial institution failing, but that is equally the case with Australian banks - indeed an eventuality which in the not too recent past went uncomfortably far beyond the realm of mere conjecture.  The motion will be dismissed. 

I certify that this and the preceding  page are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:            27 August 1997

Counsel for the Applicant:	Mr G C McGowan
Solicitor for the Applicant:	Davies Ryan de Boos
Counsel for the Respondent:	Mr W G Muddle
Solicitor for the Respondent:	Catherine Carney & Associates
Date of Hearing:	4 August 1997
Date of Judgment:	27 August 1997