Microbio Resources Inc v Betatene Ltd Betatene Ltd v Microbio Resources Inc
[1993] FCA 330
•10 May 1993
'330 1 1443 i
JUDGMENT NO. . , a , . . . . . . o . a , a , . . m,,.,,,,, a,e i i
IN THE FEDERAL COURT OF AUSTRALIA l
VICTORIA DISTRICT REGISTRY No VG 300 of 1991 I ! I.
GENERAL DIVISION
1 .-
B E T W E E N : 1.
MICROBIO RESOURCES INC
Applicant
A N D :
BETATENE LIMITED
Respondent
AND
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BETATENE LIMITED !
Cross-Claimant 1
A N D : I l
MICROBIO RESOURCES INC I
Cross-Respondent I t
COURT : NORTHRO? J PLACE : MELBOURNE DATE:
10 MAY 1993 RECEIVED
FEDERAL COURT OF
AUSTRALIA
PRINCIPAL
EX TEMPORE REASONS FOR JUDGMENT
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The motion before the Court is that of the respondent,
brought pursuant to notice dated 4 May 1993 in which the
respondent is seeking an order that the proceeding herein by
the applicant be dismissed and consequential orders.
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There is a long history of this litigation which was
commenced in November 1991 by the applicant, a foreign i corporation apparently without assets in Australia, seeking to enforce its patent rights against an alleged infringement by
1. L the respondent. The respondent has denied infringement and, I ,
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by way of defence, alleges that the patent is invalid and has
cross-claimed seeking rectification of the register. The
subject of the patent involves very complex procedures for the
production of a beta-carotene substance which is used in a
multitude of ways, both in foodstuffs and for medicinal
purposes. There have been a number of interlocutory steps
taken to assist the parties to prepare for the trial,
including orders for inspection of the production of the
substance at the respondent's farm in South Australia. A
large amount of confidential information has been supplied to
the applicant in relation to those inspections. One can
accept, for present purposes, that there are very difficult
and complex questions of fact and law arising in relation to
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the infringement of the patent and, for that matter, also in
relation to the validity of the registration of the patent
but, for present purposes, the difficulty has arisen because
of the fact that the applicant is a foreign corporation
bringing proceedings in Australia.
Under the provisions of the Federal Court of Australia
Act and 028 of the Federal Court Rules, the Court has made - I
orders that the applicant give security for costs. Initially the amount was for $20,000 and then subsequently an order was made on 1 June 1992 that the applicant provide security in the
sum of $90,000, being with respect to costs incurred and to be
incurred by the respondent, down to the completion of
mediation proceedings before the Registrar. This sum was in
addition to the security in the sum of $20,000 already
ordered. Such security was to be provided within 28 days of
the date of the order and be in such form as the parties may
agree or in default of agreement, as the Registrar may
determine.
Liberty was granted to the respondents to make such
further application for security for costs as they may be
advised on the completion of the mediation processes. It was
further ordered that on failure to comply with the order to
provide security within the time limited by the order or
further order, the proceedings thereafter be stayed.
The security was not given within the time specified in that order. Despite this, arrangements were made between the
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solicitors for the parties to try to assist in the
identification of the issues between the parties and in
particular the problems arising from the application and the
statement of claim. The respondents, apparently, pointed out
to the applicants that there were deficiencies in both those
documents. The applicants tried to rectify those deficiencies
by indicating various proposals they had in mind for the amendment of the application and the statement of claim.
Following the failure to give the security, the
respondent moved the court for an order that the application
by the applicant be dismissed. The motion came on for hearing
before Olney J. Evidence by way of affidavit was given before
his Honour. In a reserved decision, his Honour made orders that the respondent's motion be dismissed and made orders varying the orders made on 1 June 1992. The substance of those orders, apart from clearing up what might have been ambiguities in the first order, required the security to be
given within 28 days of the completion of the mediation
proceedings referred to in the earlier order. Those mediation
proceedings have been completed but they did not result in any
settlement or identification of issues.
The time for the giving of the security passed. The applicant did not provide the security. Eventually on 24 August 1992, orders were made, the relevant ones being as follows :
"1. The time for provision of security 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 fails to provide security 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 bring an Application for the dismissal of the proceedings on the Applicant's Application."
The effect of dismissing the proceedings on the
applicant's application would be that the respondents would
still be free to pursue their cross-claim seeking
rectification of the register.
Again there were dealings between the solicitors for the
parties in an attempt to clarify the pleadings and the
application. The dealings came to nothing. The date, 8
January 1993, has passed. Security has still not been given.
There has been no affidavit filed by the applicant showing its financial position at the moment. Eventually on 4 May of this year, notice of the present motion was given and this motion
has come on for hearing. There are detailed affidavits, both
by the solicitor for the respondent and a director of the
respondent, pointing out matters which, it is said, are
relevant and should be used to support an order to have the
applicant's claim dismissed.
After the luncheon adjournment the parties, by agreement,
handed to the Court a letter from the solicitors for the
applicant to the respondent's solicitors dated 6 May 1993 but
received on 10 May. The letter reads:
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" W e refer t o your let ters o f 14 A p r i l and 4 May 1993. W e have now ob ta ined i n s t r u c t i o n s i n r e l a t i o n t o the m a t t e r s
r a i s e d . On o u r i n s t r u c t i o n s , our c l i e n t remains unable t o pay the f u r t h e r $200,000 s e c u r i t y ( a very s u b s t a n t i a l
m o u n t ) which h a s been ordered . The f i n a n c i n g d e c i s i o n
expec t ed before the end o f l a s t month h a s been d e f e r r e d t o 15 May, we a r e i n s t r u c t e d . Our c l i e n t a c c e p t s t h a t the proceedings must be s tayed
u n t i l i t can p rov ide s e c u r i t y .
However, it does not accep t t h a t the proceedings do n o t
have s u b s t a n t i v e m e r i t or t h a t your client i s i n a n y way
p re jud i ced by the proceedings b e i n g s t a y e d for the t i m e b e i n g .
In t h o s e c i rcums tances , the proceedings ought n o t be
d i sm i s sed . '
Again it is noted, there is no affidavit from any person in the United States of America who can speak from personal
knowledge as to the financial position of the applicant; or as
just what its structure is. It appears that one reason for
the difficulty arising is that the banks in Australia required a cash deposit before giving the security of the type required in this case. It is important to note that the reasons given
in that letter for the failure to give security is similar to
and forms a pattern which is apparent from the affidavits
mentioned and filed on behalf of the respondent, that the time
at which the applicant was saying it could give security was
set, the time passing without security being given, further
discussions then taking place between the parties as to the
clarifying of issues, the attention of the applicant being
drawn to the absence of security and another date being given:
a continual story of delay, delay and delay.
It must be mentioned at this stage that the requirement
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of security being given by a foreign company commencing
proceedings in an Australian court is designed to protect
respondents or defendants from being in a position that if
there are no assets of that company in Australia a successful
defendant or respondent would not be in a position to recover
costs awarded against the applicant or plaintiff. A foreign
of that legal requirement for security and act accordingly. company commencing proceedings in this Court should be aware When the matter first came on for hearing today counsel
for the respondent relied on 010 r7 of the Federal Court
Rules. After hearing submissions on behalf of the applicant
it became apparent that there is no outstanding order which
could be relied upon to found the power of the Court to make
an order under that provision. In those circumstances it is
necessary to look both to s56 of the Federal Court of
Australia Act, and 028 r5 of the Federal Court Rules. The
effect is basically the same and I shall refer to 028 r5.
"5. (1) Where the court orders that the applicant provide security for costs, it may order:
(a) that the proceeding on any claims by the applicant for relief be stayed until security is provided; or
(b) that if the applicant fails to comply with the order to provide security within the time limited in the
order, the proceeding be thereafter stayed or
dismissed.(2) Subject to subrule ( 3 ) , the Court may set aside or
vary any order made under this Order.
(3) Where a proceeding stands dismissed pursuant to an
order under this Order, that order shall not be set aside
or varied except in special circumstances."
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Prima facie this is a case where the Court should,
pursuant to the leave granted in the order of 24 August 1992,
give serious consideration to dismissing the application.
Even in the absence of liberty to apply, in the exercise of
the discretion to vary an interlocutory order, a Court should
give serious consideration to dismissing the application. The
long history of the non-compliance with the order for securiry for costs is really very extreme. The applicant seeks to obtain the benefit of the jurisdiction of this Court, but does
not accept the responsibilities which go with that benefit.
It has not deigned to give detailed information of why it is
facing financial difficulties. At the same time there is
evidence before the Court suggesting that the applicant is
relying upon the existence of these proceedings in Australiain order to affect activities by the respondent in selling its products overseas, in particular in Japan and the United
States of America. Despite all that, it has been argued on behalf of the applicant that here the Court, in its
discretion, merely stayed the proceeding by the applicant and
the self-executing order resulting from the absence of
security, and that the Court should allow the proceedings to
continue, even though stayed, to suit the convenience of the
applicant.In my opinion there is no substance in that submission. This is a case where the Court, in the exercise of the powers
conferred upon it by 028 r5, should consider whether it should make the order as sought by the respondent. In support of the making of the order is the long history of the non-payment of
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security by a foreign corporation in circumstances where
security should have been given, where the respondent has
incurred very large sums of money already, both before and
after the time of the orders, and also subsequently tried to
reach some form of agreement as to the issues raised between
the parties. If in due course the respondent succeeds in its defence it may not be in a position to recover any of those
costs against the applicant.
During the course of submissions reference was made to a
number of authorities, and in particular Leniiamar Ptv Limited
v AGC (Advances) Limited (1990) 98 ALR 199, a judgment of a
Full Court of this Court. In particular reference was made to
at pages 207 and the following pages in the joint judgment of
Wilcox and Gummow JJ, and at page 214 to 215 in the judgment
of Pincus J.
That was a case that was based on 010 r7 but much that
appears there is of assistance. It must be remembered,
however, that that case was based upon a different provision
to that relied upon in this case. Therefore that decision is
not directly relevant for present purposes. At the same time
the reasons make it clear that the discretion given by 010 r7
is unfettered, subject to the condition being satisfied for
the basis of the power to be exercised. Although references
made to those factors may be important, and in particular the
fact of the Court management system in the Federal Court, the
older authorities no longer have any real application.
Counsel for the applicant in the present case urged on
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the Court the fact that since there was no direct order of the
Court relevant to the present purposes, the Court was forced
to go back to the old common law principles before dismissing
an application or a writ. In my opinion there is no
foundation for that, particularly as it transpires now that
the order for the dismissal of the applicant's claim is based
upon 028 r5.
I have had regard to all the material set out in the
affidavits filed on behalf of the respondent. It is true that
to some extent the problem arises from the fact that a claim has been made that the action by the respondent is in breach
of the applicant's patent. There has been no suggestion by
the respondent that they proceed by way of seeking a
declaration that they are not in breach of the patent, but
that in my opinion is no bar to why the applicant's claim
should not be dismissed.
The respondent, if so advised, is able to continue with its cross-claim for the rectification of the register.
Whether it will do so or not, if the applicant's claim is
dismissed, is not yet known, but, in my opinion, having regal-d
to the history of the matter, the failure to give security,
the fact that the applicant is a foreign corporation and the
large amount of costs already incurred by the respondent, and the fact that it is facing problems in marketing its products having regard to the existence of the proceedings this is a
case where, pursuant to 028 r5, the Court should order that
the applicant's claim be dismissed. In those circumstances it
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is necessary to work out just what orders should be made.
The first order is that the applicant's claim contained
in the application herein be dismissed with costs. Of
necessity that would include any costs which have been costs
in the cause or reserved and would include the costs of the
motion of 4 May 1993. Counsel for the respondent has urged that the costs of the motion of 4 May 1993 should be taxed as between solicitor and client. Based on the fact of the long
delay and the absence of any affidavit material explaining
that delay, it being argued that this almost amounts to an
abuse and that in those circumstances a Court should vary the
normal order for costs. I see no basis for so ordering and I
refuse the second order sought. The costs of that motion will
be on the normal basis of party and party costs. I do not need to make an order on that point specifically.
Following further submissions, the following orders were
made :
That the applicant's claim in the applicant's application be dismissed with costs.
That the security provided by the applicant for the respondent's costs by way of Bankers Certificate dated 24 January 1992 and filed herein be applied towards payment of the respondent's taxed cost.
3 . That all confidential information provided by the
respondent to the applicant's solicitors or experts be
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returned within seven days.
4 . That the operation of this order be stayed until 21 days after the publication of the written reasons for decision orally given today.
5. publication in writing of the oral reasons given today.
I certify that this and the preceding ten (10) pages are a
true copy of the Ex Tempore Reasons for Judgment of the
Honourable Mr Justice R.M. Northrop.That the time limited for any appeal be 21 days after the
Associate:
Date: iq W3
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