FEDERAL COURT OF AUSTRALIA

Jesse James v Nolmont Pty Ltd (subject to a Deed of Company Arrangement) (ACN 010 874 834) [2007] FCA 1604

JESSE JAMES, WEST COAST CHOPPERS INC and VANILLA GORILLA L.P. v NOLMONT PTY LTD (Subject to a Deed of Company Arrangement) (ACN 010 874 834) and

NOLMONT PTY LTD (Subject to a Deed of Company Arrangement) (ACN 010 874 834) v JESSE JAMES and WEST COAST CHOPPERS INC

VID 1136 OF 2004

RYAN J

12 OCTOBER 2007

MELBOURNE

THE COURT ORDERS THAT:

1.         The applicants provide security in the sum of $90,000.00 in a form acceptable to the Registrar of the Court for the respondent’s costs up to and including the first day of the trial of the action.

2.         The security referred to in paragraph 1 of this Order be provided within 28 days of this day, and in default, the application be stayed until further order.

3.         The Order made on 24 May 2007 for interim or provisional security for costs be discharged.

4.         The costs of all parties of the motion for security for costs be costs in the cause.

5.         The respondent’s motion on notice dated 10 September 2007 for the provision of further or better discovery be stood over to a date to be fixed.

6.         The time fixed by paragraph 1(c) of the Order of 21 September 2007 for the filing and service of a supplementary list of documents verified by affidavit by the respondent be extended to 26 October 2007.

7.         Liberty be reserved to any party to apply on not less than 48 hours notice in writing to the other parties.

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

REASONS FOR JUDGMENT

1                     There is before the Court a motion by the respondent that the applicants provide security for the costs of the respondent, Nolmont Pty Ltd (“Nolmont”), in defending the proceeding.  The amount sought in the notice of motion is $282,840.95.  The ground invoked for the provision of security is that the applicants are resident out of the jurisdiction and have no assets within the jurisdiction.  There was a suggestion earlier in the tortuous history of interlocutory proceedings in this action that the third respondent, Vanilla Gorilla LP, which on 29 August 2007 was added as an applicant, might be entitled, as a licensor of the subject trademarks, to royalties payable by a licensee or licensees in Australia.  However, that suggestion has not been developed to a point where the Court can identify any funds in this country to which any applicant has or is likely when judgment is given in this action to have, an immediate and indefeasible right. 

2                     In my view, Nolmont should not be required to realise its presumptive entitlement to payment of its costs in the event of its successfully defending the action by recourse only to assets as speculative as an unquantified stream of royalties flowing on some completely unidentified terms to Vanilla Gorilla or either of the other applicants.  The grant or withholding of an order for security for costs is in the wide discretion of the Court, although the presence of a foreign applicant with no readily accessible assets within the jurisdiction is a potent factor in favour of its exercise;  see PS Chellaram and Company Ltd v China Ocean Shipping Company (1991) 102 ALR 321. 

3                     One of the principal factors said to weigh against affirmative exercise of the discretion in this case is that Nolmont has raised a cross-claim, which itself puts in issue the validity of the subject trademark, thus placing Nolmont effectively in the position of an applicant.  I retain the clear impression that in this action the applicants are the real moving parties or “the aggressors”, as the expression is sometimes used, and that the cross-claim for revocation would not have been raised or pursued if the action had not been instituted or revived in April 2006 by leave to proceed after Nolmont had gone into administration;  cf, Farmitalia Carlo Erba SRL v Delta West Pty Ltd (1994) 28 IPR 336.

4                     Another countervailing consideration invoked by the applicants is the impecuniosity of Nolmont itself.  It is said at paragraph 17 of the applicants’ written submissions in opposition to the motion;

‘If security were ordered against the Applicants the situation could arise that their claim is stayed and yet the identical issues would have to be defended with no prospect whatsoever of there being any money from Nolmont to cover costs or damages.’

I do not regard that contention as persuasive. 

5                     As already indicated, I consider it unlikely that Nolmont would pursue its claim for revocation if there were no substantive claim for infringement being maintained against it.  If a stay should have that effect, the present applicants would be in the position of defendants and could raise their own application for security for costs. 

6                     It was next put that I should give some countervailing weight to the fact that the applicants’ claim has been made bona fide and has reasonable prospects of success.  It is undesirable for me to canvas today those aspects of the evidence to which Ms Strong referred as illustrating the strength of the applicants’ cases on various causes of action which have been pleaded in this case.  Nor is it appropriate to resolve today the prima facie cogent objections to the admissibility of passages in an affidavit of Kenneth James Taylor, sworn 8 October 2007 and designed to illustrate the strength of part of the applicants’ case. I am prepared to assume both that the applicants have instituted the proceedings bona fide, and have reasonable prospects of success.  However, I do not regard those factors, either alone or in conjunction with other available considerations, as outweighing the undesirability of allowing a foreign applicant to pursue a complex claim for relief without being called upon to ensure that it can be responsible for the other parties’ costs in the event that the claim should fail. 

7                     I accept that there has been some delay by Nolmont in formally moving for security.  Some of that delay is explicable by reference to the history of negotiations between the parties on the issue of security.  In any event, the matter of delay, I consider, can be accommodated by an appropriate quantification of the order for security.  I also accept that, as a general rule, an order for security should not provide a complete indemnity for a respondent’s costs incurred, or to be incurred, during the period covered by the order;  see Brundza v Robbie & Co (No 2) (1952) 88 CLR 171, at 175. 

8                     In the circumstances, I consider it to be an appropriate exercise of the Court’s discretion to order that;

1.                  The applicants provide security in the sum of $90,000 in a form acceptable to a Registrar of the Court for the respondent’s costs up to and including the first day of the trial of the action. 

2.                  The security referred to in paragraph 1 of this Order be provided within 28 days of this day and, in default, the application be stayed until further order.

3.                  The Order made on 24 May 2007 for interim or provisional security for costs be discharged.

4.                  The costs of all parties of the motion for security for costs be costs in the cause. 

5.                  The respondent’s motion on notice dated 10 September 2007 for the provision of further or better discovery be stood over to a date to be fixed.

6.                  The time fixed by paragraph 1(c) of the Order of 21 September 2007 for the filing and service of a supplementary list of documents verified by affidavit by the respondent be extended to 26 October 2007.

7.                  Liberty be reserved to any party to apply on not less than 48 hours notice in writing to the other parties.

Associate:

Dated:         22 October 2007