FEDERAL COURT OF AUSTRALIA

Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd

[2005] FCA 1794

PRACTICE AND PROCEDURE – application for leave to appeal – whether judgment interlocutory – whether application made within time – whether arguable grounds for appeal exist – application for security for costs

Federal Court Act 1976 (Cth) – s 24(1A), s 56

Federal Court Rules - O 29, O 52 r 10(2A), O 52 r 20

Bates v Omareef Pty Ltd [1998] FCA 536 cited

Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 referred to

Chapman v Luminis Pty Ltd [2002] FCA 496 referred to

Computer Edge Pty Limited v Apple Computer Inc (1984) 54 ALR 767 cited

Cowell v Taylor (1885) 31 Ch D 34 referred to

Cummings v Lewis [1991] FCA 772 referred to

Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 discussed

Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1521 discussed

Jarratt v Seymour (1993) 46 FCR 557 discussed

Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 56 cited

Landsal Pty Ltd (In Liq) v REI Building Society (1993) 41 FCR 421 referred to

Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (1999) 90 FCR 128 referred to

Miki Shoko Co Limited v Merv Brown Pty Limited (1988) ¶ATPR 40-858 referred to

NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584 referred to

Paton v Campbell Capital Limited [1993] FCA 449 referred to

SZBSZ v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 779 referred to

Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252 referred to

Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd & ors

VID 429 OF 2002

YOUNG J

7 DECEMBER 2005

MELBOURNE

THE COURT DIRECTS THAT:

1.         On or before 12 December 2005, the First and Second Respondents file and serve an affidavit giving full explanations of the failure to make delivery up of electronic copies of the RotaTherm Drawings and the Alfa-Laval Drawings, and the destruction of the Compact Disks delivered up to the Applicant’s solicitors on 6 December 2005.

THE COURT ORDERS THAT:

1.                 The Respondents’ Notice of Motion, dated 17 November 2005, seeking leave to appeal the interlocutory judgment of Crennan J, delivered on 28 October 2005, be granted.

2.                 The Respondents provide the Applicant with security for the Applicant’s costs of the appeal by paying into court or providing a bank guarantee in the sum of $50,000, $20,000 of which is to be provided within 21 days of the filing and service of the Notice of Appeal, and the balance of $30,000 to be provided not less than 3 weeks prior to the date fixed for the hearing of the appeal.

3.                 If order 2 is not complied with, the appeal be stayed.

4.                 Liberty to apply be granted.

5.                 Costs be reserved.

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

REASONS FOR JUDGMENT

1                     This case has concerned competing claims to copyright in certain drawings used in the development and manufacture of a direct steam injection cooking machine.  The cooker has most recently been described by the parties as a RotaTherm Cooker.  On 28 October 2005, Crennan J delivered reasons for decision and made a series of declarations and orders in the matter: Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1521.  Those declarations and orders are as follows:

‘THE COURT DECLARES THAT:

1. The applicant is the legal owner of the copyright in the Alfa Laval Drawings referred to in the particulars to paragraph 7 of the third further amended statement of claim.

2. The applicant is the equitable owner of the copyright in the RotaTherm Drawings referred to in paragraph 13 of the third further amended statement of claim (which includes the ‘Gold Peg title block drawings’, as listed in Annexure A to the applicant’s closing submissions). 

3. The first respondent has breached the agreement (as defined in paragraph 11 of the third further amended statement of claim).

4. The conduct of the first respondent in making the representations (as defined in paragraph 16 of the third further amended statement of claim) constitutes conduct in breach of the provisions of ss 52, 53(c) and (d) of the Trade Practices Act 1974 (Cth) (TPA).

5. The second respondent was or has been directly or indirectly knowingly concerned in or a party to the abovementioned contraventions by the first respondent of the TPA within the meaning of s 75B of the TPA, and authorised the conduct of the first respondent constituting breach of the TPA.

6. The conduct of the first respondent described by reference to paragraphs 15, 16, 18, 24 and 25 of the third further amended statement of claim herein constitutes passing off.

THE COURT ORDERS THAT:

7. The first respondent by itself, its servants or agents be restrained forthwith from representing in the course of trade or commerce that:

(a)        the first respondent is authorised by the applicant to manufacture and/or supply cooking machines the same as or substantially the same as the applicant’s RotaTherm Cookers and/or to provide after sales service for the applicant’s RotaTherm Cookers;

(b)        the first respondent is the owner of intellectual property rights in the applicant’s RotaTherm Cookers;

(c)        the first respondent is entitled to use the RotaTherm Drawings to manufacture and/or supply cooking machines;

(d) the first respondent’s Fusion Cooker is sponsored by, approved by, endorsed by and/or affiliated with the applicant.

8. The second respondent by himself, his servants or his agents or any of them howsoever be restrained forthwith from aiding or abetting, counselling or procuring the first respondent in engaging in the conduct referred to in Order 7 herein.

9. The Respondents forthwith execute a Deed of Assignment transferring legal ownership of the copyright in the RotaTherm Drawings (which includes the Gold Peg title block drawings) to the applicant.

10. There be delivery up to the applicant on oath of all copies of:

(a)        the Alfa Laval Drawings;

the RotaTherm Drawings (or the Gold Peg title block drawings),

(b)        in the Respondents’ possession, custody or power.

11. The respondents, until further order, keep full and proper accounts of the sales (and profits from sales) of products, if any, whether cooker components or cookers made or authorised by them to be made in accordance with the Alfa Laval Drawings, the RotaTherm Drawings or any drawings which are copies of such drawings, save and except for drawings relating to steam injectors depicted in Exhibit JZ-94, drawings for the motor and motor shaft, drawings for mechanical seals and drawings for bottom elbows made in accordance with the Great Lakes bottom elbow drawings.

12. The cross-claim be dismissed.

13. The cross-claimant pay the cross respondent’s cost of the cross-claim.

14. The costs other than those on the cross‑claim be reserved.

15. The matter be adjourned to 10:15 am on 7 December 2005 before Kenny J for further orders and directions.’

2                     The orders and declarations followed a lengthy hearing before her Honour in late 2004 and early 2005.  The facts of the case are fully set out in her Honour’s reasons for judgment and I shall not repeat them.  Although many of the orders operated to grant final relief, the orders did not finally dispose of all the issues in the proceeding.  Essentially, the outstanding issues concern a threatened copyright infringement in connection with various component parts and drawings for component parts of the cooker, as well as a defence under s 77 of the Copyright Act 1968 (Cth).

3                     Crennan J explained the limits on the scope of her decision in paragraph 205 of her reasons for decision:

‘The parties agreed that the drawings of the steam injectors made by the first respondent and the drawings of the motor, motor shaft, and mechanical seals have each been industrially applied.  Accordingly, those drawings are outside the ambit of the claim for infringement.  On 1 February 2005, the Court ordered by consent of the parties that the industrial application defence at this trial would be confined to the Kraft Cooking machine rotor drawings and the Great Lakes Cooker bottom elbow drawings.  This has the effect that the proceeding, insofar as the industrial application issues are concerned, will not be determined by the judgment in respect of this trial.  This course was taken by the consent of the parties, as a method of managing an aspect of the case which would otherwise have required further particulars and further discovery, further delay and further significant hearings days.  In effect, a ‘separate question’ has been isolated by the agreed narrowing of the industrial application issues for this trial.  It was always clear that the applicant reserved its position, so that the agreed narrowing of the industrial application issues to the drawings for two components would in no way restrict the applicant from obtaining further particulars in relation to other drawings or other components.  Accordingly, my findings on industrial application, will be interlocutory only, confined, as they will be by agreement, to two components.’

4                     Crennan J found for the applicant on all issues except the personal liability of the third defendant, Mrs Zakis, and the s 77 industrial application defence as it applied to the bottom elbow part.  Her Honour held that she could not be satisfied on the civil standard of proof that Mrs Zakis was in control of the conduct complained of as breaching the Trade Practices Act 1974 (Cth), or that she authorised threatened infringements of copyright: see paragraph 224.  In relation to the bottom elbow part, her Honour held that the production of the elbows involved systematic production falling within the s 77 concept of an industrial application of the relevant design: see paragraph 220.

5                     I have before me two notices of motion.  First, a notice of motion dated 17 November 2005 seeking leave to appeal from the orders and declarations made by Crennan J.  That application for leave is supported by an affidavit of Brian Ward, sworn 17 November 2005.  Secondly, I have before me a notice of motion of 5 December 2005, issued on behalf of the applicant, seeking security for costs in the event of any appeal.  That is supported by an affidavit of Mr Anthony Watson, sworn 5 December 2005.  After the notices of motion were argued before me, I delivered these reasons for judgment ex tempore.

6                     A number of other matters in addition to the motions were raised in the course of the hearing, and I will deal briefly with some of those matters hereafter. 

Leave to appeal

7                     The first question raised by the leave motion is whether the orders made by Crennan J are interlocutory in character, with the consequence that leave to appeal is required under s 24(1A) of the Federal Court of Australia Act, 1976 (Cth).  A related question is whether the application for leave was made within the time specified by O 52 r 10(2A) of the Federal Court Rules.

8                     As I have noted, Crennan J did not deal with the entirety of the issues in the proceeding, leaving some matters aside for later adjudication.  In these circumstances, the authorities indicate, in my view fairly clearly, that the orders are to be regarded as interlocutory in character.  The respondents submitted that the orders were interlocutory, relying on a number of authorities, including the High Court decision in Computer Edge Pty Limited v Apple Computer Inc (1984) 54 ALR 767 (‘Computer Edge’).  In that case, Gibbs CJ expressed the relevant test in these terms at 767-8:

‘The test for determining whether a judgment is final, which has been laid down in a number of cases including Carr v Finance Corporation of Australia Limited (No 1) (1981) 147 CLR 246, is whether the judgment finally determines the rights of the parties, and the authorities have held that the court in applying the test must have regard to the legal rather than the practical effect of the judgment.  So that the question in the present case is whether the whole judgment finally determined, in a legal sense, all of the rights of the parties that were at issue in these proceedings.  And the answer is, plainly, that it did not, because it left undetermined the question of whether any, and what, damages were payable.’  

9                     Other cases in this Court, including several Full Court decisions, endorse this test: see, e.g, NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584 at 594 and Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252. 

10                  In its written submissions, the applicant said that under the principles expressed in Computer Edge the judgment would appear to be interlocutory.  The submission went on to note that that proposition may be affected by some doubt arising from the judgment of Finkelstein J in Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (1999) 90 FCR 128 at paragraph 77.  In oral submissions, however, counsel for the applicant did not seriously contend that the orders were other than interlocutory. 

11                  In my view, there is little real doubt about the characterisation of her Honour’s orders as interlocutory.  This characterisation is commonly applied to orders which dispose of part only of a case: see Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 (‘Decor’); Miki Shoko Co Limited v Merv Brown Pty Limited (1988) ¶ATPR 40-858; and Landsal Pty Ltd (In Liq) v REI Building Society (1993) 41 FCR 421.

12                  The next question is whether the application for leave was filed within time.  Order 52 r 10(2A) governs the position.  It relevantly provides as follows:

‘the notice of motion must be filed:

(a)       if the interlocutory judgment is in the nature of a decision on a question under Order 29 — within 21 days after the date on which the interlocutory judgment was pronounced; and

(b)       in any other case — within 7 days after the date on which the interlocutory judgment was pronounced;

or within such further time as the Court or a Judge may allow.’

13                  Sub-rule (2A) has two alternative limbs.  Under paragraph (a), if the interlocutory judgment is in the nature of a decision on a question under O 29, the notice of motion seeking leave must be filed within 21 days of the interlocutory judgment.  In any other case, paragraph (b) provides that the leave application must be made within 7 days after the date of the interlocutory judgment.

14                  In this case, the notice of motion was filed within the period of 21 days, but close to its expiration.  It was not filed within 7 days.  Mr Collins, Senior Counsel for the respondents, said in argument, without objection from Mr Golvan, Senior Counsel for the applicant, that the notice of motion was filed on the footing that the applicable limb of the rule was paragraph (a).  The basis for this view was that the judgment in question was in the nature of a decision on a question under O 29.  Order 29 provides for the hearing of specified questions pursuant to a court order separately from any other question, whether before, at or after any trial or further trial in the proceeding.

15                  In effect, Crennan J’s judgment determined a series of questions separately from other questions that were left for later resolution.  The questions were identified in two different ways.  Pursuant to an order made on 1 February 2005, her Honour undertook a separate determination of infringement and s 77 questions in relation to two identified components of the cooker.  It is undisputed that this aspect of the judgment falls squarely within the concepts envisaged by O 29.

16                  In addition, by the reasons and the orders she pronounced, Crennan J determined other questions, such as the assignment and contract questions, by reference to paragraphs of the pleadings.  In this way, various issues arising on the pleadings were determined by her Honour separately from other questions that were reserved for later consideration and adjudication.

17                  Looking at the matter as one of substance, the better view, in my opinion, is that the leave application fell to be lodged under the first limb of O 52 r 10(2A), that is to say, within 21 days.  On this view, the leave application was lodged within time.  If this view were to be incorrect and paragraph (b) of the sub-rule were to apply, so that a 7 day time limit applied, I would in any event extend time to the necessary extent.

18                  I accept Mr Collins’ explanation that the respondent took the view, not unreasonably, that the applicable time period was 21 days under the first limb of the sub-rule.  If that view were mistaken, there is nothing to suggest that it was anything other than an unsurprising and genuine mistake.  Mr Golvan did not seriously oppose the grant of an extension of time, having heard the explanation that was proffered by Mr Collins.

19                  Accordingly, I proceed to deal with the substance of the leave application.  The principles governing the grant of leave to appeal are well established, and there was no dispute about them before me.  The respondents’ submissions referred to the Full Court decision in Decor at 398-400.  The respondents propounded a test drawn from a passage appearing in the Full Court’s judgment in Decor at 400:

‘In the present case, the interlocutory decisions in respect of which leave is sought are certainly attended with difficulty, and their correctness is open to dispute.  If they are wrong, significant consequences will be suffered by the applicants.’

The respondents also relied on the Full Court’s observation that leave is more readily granted from interlocutory decisions determining substantive rights.

20                  The passage quoted by the respondents affords one way of expressing the test.  Perhaps the more common formulation is that used by the Full Court of this Court in Jarratt v Seymour (1993) 46 FCR 557 at 559 where Lockhart and Beaumont JJ, with whom Sheppard J agreed, said that the relevant considerations were:

(a)               whether in all the circumstances the judgment of the primary judge was attended by sufficient doubt to warrant it being reconsidered by the Full Court; and

(b)               whether substantial injustice would result if leave were refused, supposing the decision was wrong.

21                  As I observed in the course of argument, this case is not the common case of an interlocutory order being the subject of an application for leave to appeal. The orders in question operate by way of permanent relief.  They are interlocutory only because there are other issues in the case that have not yet been disposed of.  In these circumstances, the authorities indicate that some other considerations come into play.

22                  In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564, French J, with whom Beaumont and Finkelstein JJ agreed, said this at paragraph 43:

‘But such artificiality [the possible artificiality of the distinction between legal effect and practical effect] as may arise can be overcome by a sensible exercise of the discretion to grant leave informed by the underlying policy of that requirement. Interlocutory orders cover a spectrum from those concerned solely with the mechanics of case management and pre-trial preparation to those which may, for one reason or another, have a significant impact upon the scope and outcome of the proceedings.  If the order, the subject of the application for leave to appeal, is concerned with the mechanics of the pre-trial process then the scales are likely to be weighted against the grant of leave.  However, if while interlocutory in legal effect it has the practical operation of finally determining the rights of the parties “a prima facie case exists for granting leave to appeal” - Ex parte Bucknell (1936) 56 CLR 221 at 225; Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 400; Minogue v Williams [2000] FCA 125 at [18].’

23                  A similar view was expressed by Bennett J in a recent migration case: see SZBSZ v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 779 at paragraph 11.

24                  The observations I have just cited apply with some force in this case, as Crennan J has made orders granting permanent relief in respect of many of the key issues, leaving certain other issues aside for further adjudication. 

25                  The grounds of appeal are set out in Mr Ward’s affidavit.  Senior Counsel for the applicant accepted that the grounds were arguable.  They cannot be dismissed as vexatious, or trivial, or other than genuine.  However, many of the grounds raise, or depend on, factual issues.  I accept that there may also be issues of principle concerning the implication of terms on grounds of business efficacy, and the construction and application of s 77 of the Copyright Act. 

26                  Mr Collins took me to certain passages in the judgment of Crennan J to illustrate the issues that will arise in relation to her Honour’s construction and application of s 77 of the Copyright Act.  In the respondents’ submission, an issue of principle will arise as to what falls within the scope of industrial application, and to what extent industrial application permits some kind of human refinement or finishing of products or designs that were based on copyright drawings. 

27                  While questions of principle may arise, it is also possible that the questions on appeal may ultimately reduce to ones concerning the application of the principles discussed by Crennan J at paragraphs 210-13 of her judgment to the facts of the case, or, more particularly, to the precise manufacturing process applied to particular components.  On that view, the s 77 issues may come down to questions of evidence and fact and degree, rather than legal principle.

28                  Be that as it may, I accept there are arguable grounds for an appeal.  It is simply not possible, nor is it necessary or desirable, for me to examine the merits of the appeal in any extensive way, or in the way in which the Full Court may ultimately proceed.  I am satisfied that there are genuine and arguable grounds of appeal.  In all the circumstances, and having regard to the permanent nature of the relief, I am satisfied that sufficient doubt attends her Honour’s judgment to warrant the grant of leave to appeal.

29                  I am also satisfied that if leave is not granted, substantial injustice might result. That is primarily because of the consequences in time and cost of the alternative pathway, which would involve a trial of the outstanding issues before any appeal takes place.  In his affidavit of 17 November 2005, Mr Ward deposes that the remaining issues to be determined in the trial relate solely to the applicability of the industrial application defence to the remaining components of the cookers.  He further deposes that given the volume of drawings and number of components involved, the time and expense that would be involved in analysing and adducing evidence about the manufacturing process involved in making each of the components would be very considerable.

30                  Mr Ward went on to say that:

‘Continuing with the trial of the proceeding is very likely to involve each of the parties in great expense, which will be wasted in the event that the Full Court determines that Justice Crennan erred in determining there was an agreement between Gold Peg and Kovan about ownership of copyright in the drawings.  Further, a great deal of time and effort will be wasted in the event that the Full Court determines that Justice Crennan’s conclusion as to the meaning of the phrase “applied industrially” was wrong.’

31                  Mr Ward’s evidence sits comfortably alongside Crennan J’s explanation of the reasons why it was appropriate to confine the first hearing to two components only.  Her Honour, in paragraph 205 of her judgment, said that without that confinementthe case:

‘would otherwise have required further particulars and further discovery, further delay and further significant hearing days.’

32                  I am satisfied that there would be significant prejudice if leave were not to be granted, and the case were to proceed by way of further particulars, further discovery and a further hearing in relation to the outstanding issues.  The time and expense involved in further litigation might be wasted if, on the critical issues that have already been the subject of the judgment, her Honour’s findings were to be varied or overturned.

33                  Notwithstanding this material, the applicant submitted that the trial of the outstanding issues should be relatively straightforward.  However, I propose to proceed on the basis outlined by Crennan J.

34                  I do not think it is really an option to grant leave and, in parallel as it were, embark on further interlocutory processes or even a further hearing in relation to the outstanding issues.  That course may involve wasted time, effort and expense.  It would also eliminate or diminish the benefit that Crennan J sought to achieve by dividing the trial in the first place.  Accordingly, I propose to grant leave to appeal. 

35                  In relation to the outstanding issues I do not propose to make any order formally staying the proceedings.  I propose to reserve liberty to apply to the parties in relation to the outstanding matters.  For the time being, however, I propose not to make any directions about the further hearing of the outstanding issues, simply leaving them in abeyance.  I turn then to the other notice of motion concerning security for costs. 

security for costs

36                  The power of this Court to make an order requiring security for costs is found in s 56 of the Federal Court Act.  The power is a discretionary one.  It is not limited by the provisions of O 28 r 3.  So much was established by the decision in Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 3-4.

37                  This application concerns the provision of security by an appellant.  In that situation O 52 r 20 applies.  It provides:

‘Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required.’

38                  The effect of this rule is essentially to qualify the position described in the case of Cowell v Taylor (1885) 31 Ch D 34 at 38.  As the applicants rightly pointed out to me, the significance of O 52 r 20 is that it casts an onus upon a party who says that an appellant ought to be required to provide security: see Paton v Campbell Capital Limited [1993] FCA 449.  In Bates v Omareef Pty Ltd [1998] FCA 536 (‘Bates’), Hill J explained the operation of O 52 r 20 at 4:

‘although the Court has a jurisdiction to order costs in an appeal which jurisdiction is conferred upon it by statute, there is no presumption that a costs order will be made for security.  Indeed, quite to the contrary, a costs order would not be made unless the party seeking security can persuade the Court that the general rule that security not be ordered should not apply in the circumstances of a particular case.’

See also Chapman v Luminis Pty Ltd [2002] FCA 496 at paragraph 10. 

39                  There are considerations that point in either direction in this case.  The affidavit material before me indicates that there is a very substantial risk that if the appeal fails the unsuccessful appellant will not be able to meet the costs of the successful respondents to the appeal.  That risk enlivens my discretion to make an order for security for costs.

40                  I will not recite all the evidence concerning the risk of impecuniosity that is set out in the affidavit material.  It includes evidence that a Californian corporation holds a fixed and floating charge over the assets of the first respondent in the sum of $250,000, no properties are owned or otherwise held by the first respondent, no company accounts are available for the first respondent, and that the respondents confront heavy costs bills, actually or potentially, in relation to the concluded hearing before Crennan J.  Not only is there a substantial risk that the respondents will not be able to meet the costs of an unsuccessful appeal, there is also no obvious alternative way in which the respondents could obtain funds to meet the orders for costs that would be made if they failed in the appeal. 

41                  Another factor going to my discretion to order security for costs concerns the prospects of success of the appeal.  Whilst I accept that there are arguable grounds for an appeal, it could not be said that Crennan J’s decision is open to serious doubt or even that there are reasonable prospects of success on the appeal.  Having listened to counsels’ submissions and having carefully read the judgment, I have no reason to think that it contains significant errors.

42                  Many of the grounds depend on an evaluation of the evidence and I am in no position to attempt such a task.  The appellants will confront a very heavy task in displacing factual findings, some of which have been influenced by her Honour’s views concerning the credit of witnesses.  The fact that an appeal turns heavily on the evaluation of evidence by a trial judge was a factor that was taken into account by Beaumont J in Cummings v Lewis [1991] FCA 772 in awarding security for costs against an appellant.

43                  It is also relevant that the proposed appeal is an interlocutory appeal, and that the successful applicant does not have the benefit of a costs order in its favour except in one relatively minor respect.  Crennan J reserved the costs of the proceedings, other than the costs of the cross-claim which she ordered the respondents to pay.  In paragraph 234 of her judgment, Justice Crennan said that:

‘it is appropriate to reserve the costs, other than those on the cross-claim, until such time as the extent of the applicant’s success in the proceeding can be assessed in the light of final determinations on ‘industrial application’ issues in the respondents’ current defence to the applicant’s claims of infringement of copyright and given the reservation of rights explained above.’

Notwithstanding this ruling, and the fact that the respondents succeeded on two issues, the applicant submitted that I should vacate this order, and instead order that the respondents pay all of the applicants’ costs of the concluded hearing.  I decline to do so.

44                  The affidavit evidence filed by the applicant establishes that the applicant’s taxed costs of the proceedings to date are likely to be in the order of $800,000.  The reservation of these costs means that the applicant is not yet in a position to enjoy all of the fruits of its victory.  The interlocutory appeal will prolong this situation.

45                  Mr Collins’ primary submission was that there should be no security, but the alternative position he advanced was that, if any security were to be awarded, it should be limited to an amount of $50,000 payable in two tranches: $20,000 within 21 days of the filing and service of the notice of appeal and a balance of $30,000 to be provided not less than three weeks prior to the date fixed for the hearing of the appeal.  Mr Collins accepted that granting security at this level was unlikely to frustrate the appeal. 

46                  In all the circumstances, I consider that it is a proper exercise of my discretion to make an order for the payment of security for costs by the prospective appellants in the sums set out in paragraph 34 of the respondents’ written submissions.  That is, $20,000 within 21 days of the filing and service of the notice of appeal and a further $30,000 to be provided not less than three weeks prior to the date fixed for the hearing of the appeal.  The order will state that security can be provided either by making a payment into Court or by providing an appropriate bank guarantee.

other matters

47                  In the course of submissions, the applicant drew my attention to the following matters.  Crennan J made an order that there be delivered up to the applicant on oath all copies of the Alfa-Laval drawings and the RotoTherm drawings that were in the respondents’ possession, custody or power.  Some 10 compact discs were delivered up by the respondents, but they had been rendered unreadable by being scratched, so they could not be used.  Further, electronic files containing the relevant drawings had been deleted from the computer equipment on which they were stored. 

48                  These issues arose late in the piece.  There was no motion before me concerning these matters, nor any affidavit material.  Mr Collins said that an explanation had been provided by letter dated 6 December 2005.  The only order sought by the applicant was a direction that the first and second respondents provide an explanation as to what has happened in relation to the compact discs that were rendered unusable and the electronic files that were deleted.  I propose to direct that such an affidavit be provided by the first and second respondents. 

49                  Quite sensibly, the parties indicated to me that they would discuss what steps could be taken forthwith to retrieve the electronic information that had been deleted.  In addition to making the direction for an affidavit explaining the circumstances giving rise to these matters, I will reserve liberty to apply.  I do not propose to make any other orders in relation to this aspect at this stage, but I do wish to say that I regard this issue as a serious one. 

Associate:

Dated:              9 December 2005