SECURITY FOR COSTS - application for security to be provided by corporate applicant for respondents’ costs of defending patent infringement proceedings brought by it and an individual applicant - discretionary considerations - complete overlap of issues to be determined as between both applicants and the respondents and no security sought as against the individual applicant - delay in applying - no security ordered.
COSTS - whether leave to tax costs orders necessary where applicant relies on O 62 r 7(1)(a) and (c) the Federal Court Rules - leave necessary because costs orders made in an “interlocutory proceeding” within O 62 r 3(3) - leave to tax refused.
Corporations Law - s 1335 Federal Court Rules - O 4 r 9, O 19 r 1, O 62 r 3, O 62 r 7
GEORGE STACK & ANOR v BRISBANE CITY COUNCIL & ORS QG 28 OF 1994
DRUMMOND J BRISBANE 12 DECEMBER 1996
FEDERAL COURT OF AUSTRALIA No. QG 28 of 1994 QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION
BETWEEN:GEORGE STACK
First Applicant
AND:G S TECHNOLOGY PTY LTD
Second Applicant
AND:BRISBANE CITY COUNCIL
First Respondent
AND:DAVIES SHEPHARD PTY LTD
Second Respondent
AND:DAVIES SHEPHARD (QUEENSLAND) PTY LTD
Third Respondent
MINUTES OF ORDERS
CORAM: Drummond J DATE OF ORDER: 12 December 1996 WHERE MADE: Brisbane
THE COURT ORDERS THAT:
The second and third respondents’ motion is dismissed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
FEDERAL COURT OF AUSTRALIA No. QG 28 of 1994 QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION
BETWEEN:GEORGE STACK
First Applicant
AND:G S TECHNOLOGY PTY LTD
Second Applicant
AND:BRISBANE CITY COUNCIL
First Respondent
AND:DAVIES SHEPHARD PTY LTD
Second Respondent
AND:DAVIES SHEPHARD (QUEENSLAND) PTY LTD
Third Respondent
CORAM: Drummond J DATE: 12 December 1996 PLACE: Brisbane
REASONS FOR JUDGMENT
By notice of motion, the second and third respondents seek an order that the second applicant give security in the sum of $174,242 “for the costs of the second and third respondents of and incidental to this proceeding”. They also seek orders designed to entitle them to enforce payment of the costs the subject of orders in this action made by Cooper J on 4 August 1995 and myself on 2 July 1996; the first…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Stack v Brisbane City Council [1996] FCA 1114
Case
[1996] FCA 1114
Decision Date
CaseChat Overview and Summary
The respondents, Davies Shephard Pty Ltd and Davies Shephard (Queensland) Pty Ltd, sought an order that the second applicant, G S Technology Pty Ltd, provide security for the costs of the respondents of and incidental to the proceedings. They also sought orders designed to entitle them to enforce payment of the costs the subject of orders in this action made by Cooper J on 4 August 1995 and Drummond J on 2 July 1996. The amount claimed by way of security was limited to an estimate of the respondents’ costs of defending the proceedings incurred and to be incurred between 5 November, when the notice of motion was filed, and the commencement of the trial. The claim for security was limited to a claim brought under s 1335 the Corporations Law for security to be provided by the second applicant. Drummond J considered the second applicant’s financial statements for the year ended 30 June 1993, the most recent available, and its annual returns to the Australian Securities Commission for each of the 1991 to 1995 years. These showed operating profits before income tax of $3,527 in the 1992 year and $50,471 in the 1993 year, with losses of $93, $214,863 and $84,891 in the 1991, 1994 and 1995 years. Current liabilities substantially exceeded current assets at the end of each of the 1992 to 1995 years; non-current tangible assets had fallen from $189,439 at the end of the 1993 year to $5,494, two years later. The second applicant described its only substantial non-current asset as its “intellectual property relating to plastic water meters”. This included the petty patent the subject of the applicants’ claims; this patent had expired and the Commissioner of Patents had refused to extend its term, although the second applicant was challenging this refusal in other proceedings in this Court. These intellectual property rights were brought to account at the directors’ own valuation of $352,950. Drummond J was satisfied that there was reason to believe that the second applicant would be unable to pay the costs of the respondents if successful in their defence. The discretion to order security was therefore enlivened. Drummond J concluded that the respondents were not entitled to the security they sought. There was a complete overlap between the issues which would have to be determined, as between both applicants and the respondents, in the first phase of the litigation that was to proceed to judgment. The individual applicant was an essential party. It could not be suggested that the individual applicant was only joined, in effect, as a subterfuge to provide a foundation for meeting any claim for security that might be made on an impecunious corporate applicant who was the only applicant truly interested in the action. No attempt had been made to claim security from the individual applicant. In contrast to the approach the respondents took to the second applicant, no attempt had been made to suggest at any stage of the proceedings that the individual applicant might be unable to pay the respondents’ costs of their defence, if it succeeded. Drummond J did not therefore regard the second applicant as under any obligation to demonstrate that the individual applicant might be capable of meeting the second and third respondents’ costs of successfully defending the proceedings. Drummond J further considered that delay by a respondent in seeking security for costs was a factor to be taken into account in the exercise of the discretion. The proceedings were commenced on 17 March 1994. Five days later, the second and third respondents, by their solicitors’ letter, set out detailed reasons for thinking that the second applicant would be unable to pay their costs of a successful defence and put the second applicant on notice that, in the absence of satisfactory proof of its capacity to meet those costs, application would be made for security. This issue was pressed for a time by the respondents and thereafter resurrected from time to time. However, the application for security was only filed well over two and a half years later, on 5 November. It was filed after the second applicant had been embroiled in extensive interlocutory litigation with those respondents and related litigation instigated by one of those respondents; the pleadings were on the point of closing, although discovery and preparation of witness statements remained to be carried out. Drummond J noted that the second and third respondents had only moved for security after the second applicant had been allowed to incur what must be very significant expense in bringing the action to its present stage. Drummond J considered that the second and third respondents had not satisfactorily explained the delay in bringing their application for security, while allowing the second applicant to incur substantial costs in the intervening period in preparing the matter for trial. Drummond J concluded that this was not a case in which an impecunious corporate applicant should be ordered to provide security, at least for the second and third respondents’ costs of the proceedings up to and including a determination on the issues of validity of the patent. Drummond J also considered the second and third respondents’ claim for leave to tax the costs the applicants were ordered to pay on 4 August 1995. Drummond J rejected the respondents’ submissions that they were entitled to proceed to tax both sets of costs without any further order because the costs orders themselves were final orders. Drummond J concluded that the costs orders in question were interlocutory and that the respondents were not entitled to tax those costs without any order directing taxation being necessary. Drummond J further concluded that the demands of justice did not require a departure from the general rule in the particular case. Drummond J accordingly refused the respondents leave to tax the costs which the applicants had been ordered to pay on 4 August 1995. Drummond J also refused to grant leave to the respondents to tax now the costs Drummond J ordered the applicants to pay on 2 July 1996. Drummond J dismissed the respondents’ motion. The second and third respondents would have to pay the applicants’ costs of the motion. The first respondent, who adopted the other respondents’ argument on the costs aspect of the motion and who unsuccessfully sought leave to tax its costs, would have to pay one half of the applicants’ costs of this motion, unless it showed good cause why different costs orders should be made by filing and serving concise written submissions by 20 December 1996. In that event, the applicants would have liberty to file and serve concise and relevant submissions in reply.