SPX Corporation v Environmental Products Amalgamated P/L

[1992] FCA 696

IN THE FEDERAL COURT OF AUSTRALIA JUDGMENT NO.

No VG 342 of 1991

GENERAL DIVISION

B E T W E E N :

ant

A N D :

Respondent

ixK!u:	NORTHROP J
PLACE :	MELBOURNE

m: 3 AUGUST 1992

EX TEMPORE REASONS FOR JUDGMENT

As I have indicated, I propose to make an order for

security for costs. I now express, in very short form, the

reasons for so ordering.

for costs.

This proceeding was commenced in November 1991, but it

was not until 19 June 1992 that the respondent by motion

sought an order for the security of costs. The delay in so moving is explained, L think, by the correspondence between the parties. There were attempts being made to ascertain the

position of the applicant and to see if some possible

arrangement could be reached without coming to the Court.	In
those circumstances, delay, in my opinion, does not act against the respondent pursuing now its motion for security

The claim for costs is based clearly and almost, I might

say, solely, upon 028 r3(l)(a) of the Federal Court Rules, suggestion that the applicant will not be in a position to pay costs if it is ordered so to do, but it is outside the

namely, that the applicant is ordinarily resident outside

jurisdiction of this Court. In these circumstances it is not

unusual, in fact quite common, for an order to be made for follows :

security for costs. The position is stated, for instance, in

"When suing or applying to the court, a foreign company may be ordered to give security for costs unless it has sufficient available assets within the jurisdiction ...".

Several other exceptions are then listed, none of which is relevant for present purposes.

In the present case, the applicant is seeking orders

based upon infringement of patent. The respondent is

defending that action. One of its defences is that the patent defence, and is to be treated as a defence. The applicant's submission is not accepted.

registration should be revoked as being invalid. It was put
that this, in reality, was making the respondent the moving
party in that it was seeking an order which would affect the
applicant as against all persons in Australia. Reference was
made to some paragraphs in the book by Mr Delaney, Security
for Costs. But in my opinion that is not the true analysis.

The main argument against the ordering of security for

costs was based on the fact that the applicant operates in that subsidiary has substantial assets within Australia, and that there is a suggestion that that subsidiary would pay the costs if an order were made against the applicant. Reference was made to correspondence where this matter was referred to. In my opinion the fact that there is in Australia a subsidiary of a company ordinarily resident outside Australia, is not of itself a sufficient reason why there should be no order for security for costs.

Reference was made also to Halsbury Vol 37 para 299 at

page 227:

"Where the plaintiff, although ordinarily or even
permanently resident out of the jurisdiction, can show

that he has substantial assets or property within the

jurisdiction which can be reached by judicial process,
security will not be ordered.	It must be shown that the

assets or property are of a fixed or permanent or certain

nature, and that they can be available for costs."

In the present case, the subsidiary is a separate

corporation. It is not a party to the proceedings and any
order for costs made against the applicant could not, without
more, be enforced against the subsidiary in Australia. There
is a suggestion, as I said, that there was an agreement
between the parties that the Australian subsidiary would and
could pay the costs but I am not satisfied that that agreement
is of sufficient clarity to become enforced in a court of law
and so bind the applicant. There is no doubt that the
applicant could direct the subsidiary to make payment but that
would depend upon an action taken by persons outside Australia
and would not give a right in itself for the respondent to sue

for the costs in Australia. I am satisfied that there are

sufficient assets in the subsidiary to pay the costs but that
of itself is not sufficient. In my opinion, this is a case
where the respondent is able to rely upon 0 28 r 3(l)(a) and
that there is nothing to show that there are sufficient assets
of the applicant in Australia to satisfy any orders for costs
if made against the applicant. For these reasons, in my

opinion, there ought to be an order for security for costs.

The question of the quantum of the security does give

rise to difficulties in that the details of the amount being sought were only included in an affidavit filed on behalf of the respondent sworn on 31 July this year and apparently only

served even more recently. In that affidavit the solicitor

for the respondent says that the costs already incurred, on a
party and party basis, are of the order of $15,000 and that
the anticipated costs up to the date for trial, including
discovery, inspection and preparation of expert evidence,
would be in the vicinity of $45,000 to $65,000. In these
circumstances, the deponent goes on to say that he believes
that the respondent's likely party and party costs in
preparing this matter for trial would be considerably higher
and may easily exceed $80,000 and they are seeking an order in

the amount of $50,000.

To some extent, the evidence is unsatisfactory in that

there is not sufficient particulars showing how the amount is
made up. At the same time, the amount to be awarded should be
of a practical amount and reasonable having regard to the
likely costs. In the circumstances I propose to order that
security in the sum of $40,000 be given. This is only up
until trial and would not prevent the respondent making a
further application for security in the light of material then

existing.

As to the form of the security, various matters were

raised in the course of argument and in these circumstances,
it is thought most desirable that the Court should merely
order that security be given but in a manner to be agreed upon

between the parties.

Accordingly, the following orders are proposed with

respect to security for costs.

"1. The applicant give security for the payment of the

Respondent's costs that may be awarded against it in
the sum of $40,000, to be provided by 17 August
1992, such security to be in a manner to be agreed
upon between the parties and in the absence of
agreement in a manner to be determined by the Court.

2.    The proceedings be stayed after 17 August 1992 unless security has been provided in accordance with Order 1.

3.    The parties' costs of the motion for security be reserved."

I certify that this and the preceding five (5) pages are a

true copy of the Ex Tempore Reasons for Judgment of the

Honourable Mr Justice R.M. Northrop.

Associate:	/J	ghb3-
Date:	/ & k'wdt'f /':'/L	7