Microbio Resources Inc v Betatene Ltd
[1993] FCA 848
•8 Oct 1993
8 9 8 , 93
JUDGMENT No. ..... ,..., .... ,.,. g. - ,. CATCHWORDS
PRACTICE AND PROCEDURE - Security for Costs - matter struck out for fa~lure to provide security for costs - failure on repeated occasions to provide ordered security - fallure to provide any information as to when payment could be expected - whether judge properly exercised d~scretion.
Federal Cortrt of A~i.sfsl,nlio Act 1976 S. 56(4) Federal Court Rides 0. 28 rr. 4, 5
Le~lijamcrr Ply Limited v AGC (1990) 27 FCR 388 at 395
I ,
REGISTRY
MCROBIO RESOURCES INC v BETATENE LIMITED
Black CJ, Sheppard & Einfeld JJ 8 October 1993
FEDERAL COURT OF
Melbourne
AUSTRALIA PRINCIPAL
IN THE FEDERAL COURT OF AUSTRALIA 1 No. VG 228 of 1993 VI(XOR1AN DTSTRICI REGISTRY GENERAL DIVISION j On Appeal from a judge of the Federal Court of Australia
BETWEEN. MICROBIO RESOURCES INC
Appellant
AND: BETATENE LIMITED
Respondent
COURT: Black CJ, Sheppard & Einfeld JJ
DATE: 8 October 1993 PLACE: Melbourne MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA 1 No. VG 228 of 1993 VICTORIAN DISTRICT REGISTRY 1 GENERAL DIVISION j On Appeal from a judge of the Federal Court of Australia
BETWEEN: MTCROBIO RESOURCES INC
Appellant
AND: BETATENE LIMITED
Respondent
COURT: Black Cl, Sheppard & Einfeld JJ
DATE: 8 October 1993 PLACE: Melbourne EX TEWORE REASONS FOR JUDGMENT
THE COURT. This is an appeal from orders made by a judge of thls Court that the clam of the appl~cant, Microbio Resources Incorporated (Microbio), the appellant in this appeal, be dismissed with cosls and that the security provided by Microb~o for the
respondent's costs (by way of banker's certificate dated 24 January 1992) be applied towards of the respondent's taxed costs. The primary judge also ordered that all conf~dentlal information provlded by the respondent to the apphcant's solicltors or experts be returncd within seven days.
These orders were made on the motlon of the respondent to the proceeding, and the
respondent to thls appeal, Betatene Limited (Betatene). The order dismissing
Microbio's claim was sought by Betatene on the ground that Microbio had failed to
provide secur~ty for costs as ordered by the Court in circumstances we shall outline. Microbio is a corporation incorporated under the laws of the State of Delaware in the
United States of America and is the registered proprietor of an Australian patent
relating to an invention entitled "Naturally Derived Carotene Oil Composition and the Process for the Production thereof." Betatene is a South Australian company which
has been producing and marketing a substance which 1s alleged to infringe Microbio's
patent.
M~crobio commenced the proceeding on 11 November 1993. It claimed that Betatene had infringed its patent and it sougllt an injunction restra~ning Betatene from ~nfringement, damages or an account of profits, and other relief. Betatcne denied the infringement and contended that the patent was invalid; it cross-claimed seeking
rectification of the Register. The primary judge noted that there had been a number of interlocutory steps, many if not all of which had been taken before him, to assist the partles to prepare for the trial. The ~nterlocutory steps included orders for
inspection of Betatene's farm in South Australia where Betatene produces its product. As we have noted, the proceeding was commenced on 11 November 1991 and on 16
December 1991 the first dlrectlons hear~ng was held. On that occasion the judge, Northrop J, ordered Microbio to provide security for costs in the sum of $20,000. On
24 January 1992 security in that sum was prov~ded. On 7 May 1992, Betatene issued
a notice of motion seeking further securlty and on 1 June 1992, Northrop J ordered Microbio to provide further security in the sum of $90,000 to be paid by 29 June 1992. This was the first of the dates upon which the further security was ordered to be paid.
On 1 July 1992, which was only two days after the security was due to be paid,
Betatene issued a notice of motion seeking to have the proceeding dismissed for
failure to comply with the order of Northrop J. That matter came on for hearlng
before Olney J on 14 July 1992. His Honour refused to disnliss the proceeding but
ordered that Betatene prov~de the further security by 27 August 1992. This was the
second of the dates for the glvlng of the securlty.
On 17 August 1992, Betatene's solicitors wrote a letter to the solicitors for Microbio
in the following terms:
"Our cllent 1s willing to agrce to an extension of tlme of six months ( ~ e .
until on or before S January 1993) in which to allow your client to
provlde the ordered securlty for our client's costs on the bas~s that your
cllent agrees to conduct the relnalning stcps in these proceedings as
exped~tiously as posslble so that the matter can be tried a:, soon aspossible and further, that your cllent agrees that such an extension of
further security for the period after completion of the mediation time is wlthout prejudice to our cllent's right to apply at any time for proceedings."
By a letter dated 19 August 1992, the solicltors for Microbio agreed to that proposal.
They wrote:
"We refer to your letters of 17 and 18 August, 1992. The Appl~cant
agrees to the proposal made in your letter ot 17 August, 1992. The
Applicant also intends filing amended Particulars of Infringement."
On 24 August, Northrop J extended the time for the provlsion of security to 8 January
1993; this was the third date to which time had been extended. The judge made the
following orders:
"1. The time for provlsion of securlty for costs specified in Order 1 of the Order, made on 1 June, 1992 be extended to 8 January 1993. 2. In the event that the Applicant fail$ to provide securlty on or before 8 January 1993, the proceedings on the Applicant's Application herein be stayed until further order with liberty to apply and the Respondent be at liberty to brlng an Application for the dismissal of the proceedings on the Applicant's Application. 3. The Applicant provide a copy of its proposed amended Application, amended Statement of Claim and amended Particulars of Infringement to the Respondent on or before 15 September 1992. 4. The Directions Hearing be adjourned to 21 September 1992. 5. The further hearlng of the Motion, notlce of which is dated 18 August 1992, be adjourned to a date to be fixed. 6. Costs, including the costs of the Motion to date, be reserved."
On 5 January 1993 the solicitors for Microbio wrote to the solicitors for Betatene stating in substance that they had been instructed by their client that it would not be
In a posltion to provide the addit~onal
security of $90,000 ordered by Northrop J on
the date agreed by the parties. namely 8 January 1993. The letter continued:
"Although our client has actively pursued this matter and continues to do so, it does not expect to be in a position to provide further security before Aprll 1993.
The matter will now be stayed unless your cllent agrees to proceed."
| I | On 14 April 1993, the solicitors for Betatenc agaln wrote to the solicitors for | |||
| i | I |
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| I | Microbio on notice that if security for its costs was not provided by 4pm on 30 April | |||
| 1993, Betatene, "may have" no alternative but to issue a notice of motion seeking | ||||
| orders that M~crobio's application be dismlssed. | ||||
| ||||
| whlch amongst other thlngs, an lmmedlate ex~lanation was sought as to why Microbio had failed to comply with the order to provide security for costs. The relevant part of | ||||
| that letter 1s as follows: |
"Your cllent has faded to comply with paragraph 1 of the Order of Mr Justlce Olney made on 24 August 1992 and further has offered no explanation for its fallure to prov~dc security for our cllent's costs.
Clearly t h ~ s is totally unacceptable. Both our cllent and the Federal Court of Aust~alia are ent~tled to know why your client has failed to provide the ordered security withln the extended time period. It IS our client's opinion that your cllent's s~lence
Indicates that it IS either:
(b) ~ t s default is intentional or contumelious and your client is
seeklng to delay the proceeding In order to obtain a commercial
advantage over our cllent.
Our client seeks an lrnlnedlate explanation as to why your client has failed to comply with the order to prov~de secur~ty for our cllent's costs."
On 4 May 1993, Betatene Issued a notice of motion seeking to have Mlcrobio's
proceeding dismlssed for failure to comply w ~ t l ~ the order that had been made by
Northrop J on 24 August 1992.
A letter was sent by the solicltors for Mlcroblo to Betatene's solicitors, dated 6 May1993 but received on 10 May, which referred to instructions from Microbio that it
remained unable to pay the further security. The letter reads:
"We refer to your letters of 14 April and 4 May 1993. We have now obtained instructions in relation to the matters raised. On our instructions, our client remains unable to pay the further $100,000 security (a very substantial amount) whlch has been ordered. The financing decision expected before the end of last month has been deferred to 15 May, we are instructed.
Our cllent accepts that the proceedings must be stayed until it can provlde securlty.
However, it does not accept that the proceedlngs do not have substantive merlt or that your cllent is in any way prejudiced by the proceedings belng stayed for the time belng.
In those c~rcumstances, the proceedlngs ought not be disrnlssed."
The amount referred to of $100,000 should, of course, read $90,000. It will be noted that the letter does not say that the securlty that had been ordered would be provlded soon or, indeed, at all. The letter conveyed the instructions of the solicitors for Microbio, but it did not purport to set out Mlcrobio's ftnancial position. It did not
offer any real explanation as to why the securlty that the Court had ordered had not
been provided and there was no evidence on afcidavlt from anyone who could speak of the financial affairs of Microbio. There was no suggestion that Microbio required more tlme to put that evidence before the Court.
This situation, Betatene contended, suited Mtcrob~o very well, because the existence of the lltigatlon was having a detrtmental effect on Betatene. That detrimental effect was deposed to in an affidavit sworn by a d~rector of Betatene, Mr Harry Rosen, in support of the application for the dismissal of the proceeding. Mr Rosen referred to several matters which he said were prejudicial, including the diversion of customers, adverse effects on goodwill and effects on future expansion. H e also referred to the
diversion of time and resources. It is significant that Mr Rosen was not cross-examined on that aff~davit when the application to dismiss the proceeding was
heard by the primary judge.It 1s also important to note that there was no appl~cation by Mlcrobio pursuant to leave reserved in that behalf by Northrop J In August 1992 to vary the terms upon which security was to be provided or, indeed, to dlspense with security altogether in the light of any changed circumstances. In fact, as counsel for Betatene pointed out, the time within which the secur~ty was to be prov~ded pursuant to the order of Northrop J of 24 August 1992 was a time that had been fixed by consent.
The power of the Court to dismiss the proceeding in these circumstances 1s undoubted. It is derived from S. 56(4) of the Fedetnl Cozirt of A~istrulia Act whlch
provides:
under this section, the Court or a Judge may order that the proceeding "If securlty, or further security, is not given in accordance with an order or appeal be dismissed."
Order 28 rules 4 and 5 of the Rules of the Federal Court also deal with the matter:
"4 Where the Court orders an applicant to glve securlty for costs, the secunty shall be g~ven in such manner, at such tlnie, and in
such terms ( ~ f any), as the Court may by order direct. Where the Court orders that the applicant provide security for 5(1) costs, it may order-
(a) that the proceeding on any claims by the applicant for relief be stayed until securlty is provided; or
(b) that if the applicant faik to comply with the order to provide security withln the time limited in the order, the
proceeding be thereafter stayed or d~smissed."
Northrop J concluded that in the proper exercise of his discretion he should make the
orders sought by Betatene, and so the proceeding was dismissed.
Before us on appeal counsel for Mlcrobio polnted to various aspects which he said were indicative of error in the exercise of the primary judge's discretion. He contended that the terms of the order made by Northrop J on 24 August 1992 were such that the order was exhausted once S January 1993 came with no secur~ty having been provided, and that no reliance could thereafter be placed upon 0. 25 r. 5.
Insofar, it was said, as the learned judge relied upon the liberty granted to Betatene
to apply to dismiss the application in the event that security was not provided, his
Honour should have been gu~ded by the principles referred to by Lord D~plock in
Blrrkctt v Jflmes [l9781 AC 297 at 318. In our view, however, quite different pr~nciples apply where, as here, the power in
questlon is a power to d~smiss for the failure to provide security for costs: see in this
respect the specific provisions of S. 56(4) of the Federrrl Cortri o j Alrstrfllirr Acf. Moreover, as was pointed out by a Full Court of th~s Court in LeiziJanz~r Ply Limited v
AGC (1990) 27 FCR 358 at 395, the fundamental dltferences in procedure between the Federal Court of Australia and the English courts a t that time must be borne in mind when considering the English cases.
1
It 1s sufficient for us to say that there can be no doubt about the power of the primary
judge to make the orders he did, and we do not consider that his discretion was
limited in the manner suggested by counsel for Microbio. In the result, we are quite
unpersuaded that the learned primary judge's discretion has been shown to have been affected by any error. Indeed, we would observe that the failure of Microbio to make any application to vary the order for seculity or to place before the primary judge any evidence at all as to why it had not complied with the order for security, part~cularly
having regard to the three extensions of time for compliance, was a powerful
consideration in favour of making the orders that it is now sought to challenge.
It was alqo said that the primary judge ought, in effect, to have grven Microbio one
more chance by making a self-executing order for disn~issal if security was not provided within a further specified time. It seems, however, that this course was not
suggested to his Ilonour, and in any case there was nothing before his Honour to
suggest that security would in fact have been provided if that course had been taken. The Court is careful to see that orders for security for costs do not work injustice to parties against whom such orders are made, but if those parties do not comply with
the orders and give no ev~dence or explanation as to why they have not complied with them, they cannot be heard to complaln of injustice if, after a considerable length of time, and extensions of time, the ultimate sanction of dismissal is applied. It is incumbent upon parties in such circumstances to provide evidence of their position.
We would add that we see no substance in the argument that Betatene had weakened
its position in relation to security for costs by getting the action ready for trial and
incurring costs in doing so. Betatene wanted the action to come on for trial, and
cannot be blamed for moving ahead with it whllst at the same time maintaining its insistence that security should bc provided. For these reasons we d~smiss the appeal
with costs.
I certify that this and the preceding 9
pages are a true copy of the Reasonsfor Judgment herein of the Court.
APPEARANCES
Appellant Counsel: Mr B Hess Solic~tor:
Arthur Rob~nson & Hedderwicks Respondent Counsel: Mr B Caine Solicitor: Freehill, Hollingdale & Page Date of Hearing S October 1993 Date of Judgment 8 October 1993
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