Federal Court of Australia

Stasiuk v Monster Energy Au Pty Ltd [2023] FCA 856

ORDERS

THE COURT ORDERS THAT:

1.    Within 21 days the applicant provide security for the respondents’ costs of the proceeding up to the close of pleadings in the amount of $50,000 in a form to be agreed between the parties’ solicitors or, in the absence of such agreement, as determined by a Registrar.

2.    The costs of the respondents’ interlocutory application be reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

NICHOLAS J:

1    Before me is an application for security for costs. The respondents seek security in the amount of $150,000 in respect of their costs of the proceeding up to the close of pleadings.

2    The applicant is a Canadian citizen who resides in the Cayman Islands. He is the owner of Australian Patent No. 2006202191 (“the patent”) entitled “Laser-etched pull tab container opening devices and methods of making the same”. The patent expired on 12 March 2021. The applicant alleges that the respondents infringed a number of the claims including claims 1, 2, 3, 4, 10, 11, 12, 13 and 22, each of which is for a container opening device.

3    The applicant does not resist an order for security but says that the amount should be limited to the costs of registering any costs order made in the respondents’ favour in the Cayman Islands. Both sides rely on expert evidence concerning the enforcement of a costs order made in this Court in the Cayman Islands and the quantum of costs that would be incurred in enforcing such a costs order there. However, the respondents’ primary position is that the security should be calculated in the ordinary way in an amount, as I have said, to cover their costs up to the close of pleadings. The respondents estimate that their party and party costs up to the close of pleadings will be $163,010, but the amount of security sought is slightly less than that (ie. $150,000). Alternatively, the respondents say that if security is to be calculated by reference to the enforcement costs in the Cayman Islands, the appropriate amount is around $110,000.

4    The applicant says that the amount sought by the respondents of $150,000 up to the close of pleadings is exorbitant. His solicitor estimates that $33,500 (or thereabouts) would be reasonable. Given the subject matter of the patent, which appears to involve a not particularly complicated mechanical device, the amount sought does seem very high. For example, it includes an amount of 21 hours of solicitor’s time to prepare a brief to counsel to settle pleadings. There is little or no information provided in the supporting affidavit to explain why preparation of a brief delivered to counsel before any pleadings have been filed should cost so much to prepare. The respondents also include in their calculations an amount referable to security for costs based on the presence of three solicitors and two counsel at the hearing of this application. I do not think that is reasonable.

5    Since the application was heard, the respondents have filed their statement of defence. No cross-claim has been filed. The defence is a relatively straightforward document which, while making various admissions, denies infringement. In addition, the defence alleges that the claims on which the applicant sues are invalid on the ground that the invention of the claims does not involve an inventive step and that the patent does not describe the invention fully. Some brief and very general particulars of the common general knowledge are included together with a reference to two patent applications which are relied on for the purpose of s 7(3) of the Patents Act 1990 (Cth). The defence has been signed by the solicitor for the respondents who is said to have prepared the document.

6    The first question is what should be the Court’s approach to calculating security in this case. The applicant relies on a line of authorities which recognises that, at least in some circumstances, security for costs should be calculated by reference to the costs that would be incurred by the respondents in enforcing a judgment in the foreign jurisdiction in which the applicant resides. The applicant contends that this is the appropriate approach in this case.

7    It is common ground that a monetary judgment of this Court is enforceable in the Cayman Islands by virtue of the procedure available for registration of foreign judgments under the Cayman Islands’ Foreign Judgments Reciprocal Enforcement Act (1996 Revision). Once registered, any costs order made in favour of the respondents against the applicant will be enforceable in the Cayman Islands court.

8    The applicant’s expert, Mr Keeble, has estimated the costs of registering a costs judgment of this Court in the Cayman Islands at around US$10,000 including registration fees and professional costs. That estimate does not cover the costs of addressing any application to set aside the registration once obtained or to enforce the judgment once registered.

9    The respondents’ expert, Mr Stockdale, estimates the costs of registration and enforcement, including the costs of resisting an application to set aside registration, at around US$110,000. That estimate includes an amount of around US$40,000 for legal fees and disbursements to obtain registration of a money judgment on an ex parte basis and US$34,000 to meet any application to set aside the registration.

10    The expert evidence relied on by the respondents does not indicate the basis on which the applicant could seek to set aside the registered judgment assuming it was regularly obtained and I would not allow any sum in respect of what appears to be a purely theoretical contingency that is not shown by the evidence to have any real prospect of materialising.

11    The respondents rely on a number of authorities including the decision of Heerey J in Farmitalia Carlo Erba Srl v Delta West Pty Ltd (1994) 28 IPR 336. In that case the applicant resisted an application for security for costs brought under what was then order 28, rule 3(1)(a) of the Federal Court Rules 2011 (Cth) on the basis that any costs judgment could be registered and enforced in Italy. After referring to the Foreign Judgments Act 1991 (Cth) s 5(1), the Foreign Judgment Regulations (Amendment) SR 143 of 1993, and the decision of Morling J in Barton v Minister for Foreign Affairs (1984) 2 FCR 463, his Honour said at 342:

I would respectfully agree with the conclusion of Morling J in Barton that the court retains a discretion to order security and is not obliged to make such an order once one of the matters referred to in O 28 r 3(1)(a), (b), (c) or ( d) is established. However, Farmitalia cannot in my opinion point to any circumstances which would weigh against the making of the order. It is not suggested that Farmitalia has any assets in Australia which would be available to meet an order for costs in favour of Delta West. Nor for that matter is there any evidence that Farmitalia has available assets in Italy or anywhere else.

The Foreign Judgments Act is concerned, as its short title indicates, with the enforcement of foreign judgments in Australia. Judgments of the courts of another country can be registered and enforced in Australian courts if, in the words of s 5(1), “the Governor-General is satisfied that in the event of the benefits conferred by this part being applied to money judgments given in the superior courts of a country, substantial reciprocity of treatment will be assured in relation to the enforcement in that country of money judgments given in all Australian superior courts, the regulations may provide that this part extends in relation to that country”. By the Foreign Judgments Regulations.(Amendment) SR 143 of 1993, the specified courts of a number of different countries were declared by the Governor-General for the purposes of s 5(1) including the following Italian courts: Corte Suprema di Cassazione, Corte di Assise, Corte d'Appello and Tribunale.

Accepting for the purposes of argument that I can treat the regulation as evidence of the fact that a judgment of the Federal Court of Australia could be enforced in one or more of the Italian courts specified, that seems to me to be quite insufficient to meet the prima facie case established for the application of O 28 r 3(1)(a). There is no evidence that Farmitalia has assets available in Italy or in some other country or countries or that, if it did, an Australian judgment registered in Italy would be-enforceable in such other country or countries. While there is no suggestion that Farmitalia is insolvent, this is a case where security for costs has been at issue between the parties for some time and Farmitalia has chosen not to put forward any evidence as to what its assets are and where they are located. I do not see any good reason for not exercising the power conditioned by the rule. The practical consequence of accepting Farmitalia’s argument would be that a litigant ordinarily resident outside Australia would be able to resist any application under O 28 r 3(1)(a) merely by showing, that he, she or it was ordinarily resident in one of the countries specified in the Foreign Judgments Regulations. I do not think the Foreign Judgments Act or the Regulations should be treated in this way as an amendment, sub silentio, of O 28 r 3(1)(a).

12    His Honour’s decision was applied by Besanko J in CME Blasting & Mining Equipment Ltd v Rock Tool Refurbishment Solutions Pty Ltd [2021] FCA 160. Having referred to the decision of Jagot J Maxim’s Caterers Ltd v Magnona Pty Ltd (No 1) [2010] FCA 450, in which the applicant was shown by evidence to have substantial assets in Hong Kong, his Honour said at [50]-[51]:

[50]    In this case, there is no evidence about the applicant’s assets and liabilities, the location of those assets, and how difficult or easy it may be to enforce a judgment against them. It can, I think, be said that the applicant is a sizeable company with international trading relationships, but the evidence before the Court does not go beyond that.

[51]    In the circumstances, I do not consider it appropriate to fix the quantum of security by reference to the costs of enforcing a costs judgment of this Court in Canada. In the circumstances, I do not need to consider the quantum of security fixed on that basis and the dispute between Mr Macek and Mr Lomic.

It is important to note that the evidence in that case showed that there was no relevant legislative provision for the enforcement of a costs order made in Australia in Ontario, Canada.

13    In the present case, the applicant has not led any evidence as to his financial circumstances. On the other hand, the respondents have not sought to explore that topic in evidence whether by the issue of a notice to produce or otherwise. All the evidence shows is that the applicant has resided in the Cayman Islands since 1997.

14    It is well established that the Court’s power to award security for costs is discretionary. The discretion is a broad one that must be exercised judicially having regard to the circumstances of each case. I take into account the fact that the applicant is a natural person and a longstanding resident of the Cayman Islands. It is not suggested by the respondents that the applicant has arranged his affairs with a view to frustrating or defeating the efforts of the respondents, or any other potential creditor, to enforce judgments or claims. Nor is it suggested by the respondents that the applicant’s claim lacks substance. On the other hand, it is also relevant that the applicant has not adduced any evidence as to his financial circumstances and, in particular, whether he has any assets located in the Cayman Islands. In my opinion, it would not be in the interests of justice in this case to limit the amount of security by reference to the costs of enforcing a judgment against the applicant in the Cayman Islands if there are no assets in that jurisdiction against which a costs order may be satisfied.

15    The applicant says that, as a natural person, he would not ordinarily be required to provide security for costs if he resided within the jurisdiction. It was submitted that, in those circumstances, the respondents should not be any better off by reason of the applicant living in the Cayman Islands given that any costs judgment can be enforced against him there. I do not accept that argument. The fact that the applicant is ordinarily resident outside the jurisdiction provides the justification for requiring him to provide security for costs if the Court is otherwise persuaded that it is appropriate that he should do so. That said, the amount of security sought by the applicant for its costs through to the close of pleadings is in my opinion manifestly excessive.

16    In the result, I consider it appropriate to make an order requiring the applicant to lodge security for costs in respect of the respondents’ costs through to the close of pleadings in an amount of $50,000 in a form to be agreed between the parties’ solicitors, or in the absence of such agreement, determined by a Registrar. I should make it clear that I am willing to revisit the question of how any additional security for costs should be calculated in respect of costs incurred by the respondents after the close of pleadings in light of any further evidence that the applicant may wish to adduce in relation to assets owned by him in the Cayman Islands which would be available to satisfy any costs order registered in that jurisdiction. Whether or not I adopt that approach in relation to any additional security that is sought by the respondents would likely depend on what that evidence disclosed and the amount of further security sought by the respondents.

17    The respondents have had some success in obtaining an order for security in respect of their costs through to the close of pleadings but for an amount that is much less than what they sought. In the circumstances I will reserve the costs of their interlocutory application.

18    Orders accordingly.

Associate:

Dated:    27 July 2023