C.M.E. Blasting & Mining Equipment Ltd v Rock Tool Refurbishment Solutions Pty Ltd

Federal Court of Australia|2021-03-02|Before: Besanko J

Within 21 days, the Applicant ensure that there is in the Piper Alderman trust account funds in the amount of US$220,000, such funds not to be released from the Piper Alderman trust account except: (a) in satisfaction of an order for costs in favour of the First and Second Respondents, made upon conclusion of the proceeding; (b) upon conclusion of the proceeding with judgment (including any costs orders) and after satisfaction of any costs orders in favour of the First and Second Respondents; or (c) with prior written consent of the parties or upon further order of the Court.
Within 28 days, the Applicant provide to the First and Second Respondents' legal representatives evidence of the payment in compliance with order 1.
In the event that orders 1 and 2 are not complied with, the proceedings are stayed pending further order of the Court.
In the event that the proceeding continues past the completion of evidence, the First and Second Respondents have liberty to apply for further security for costs.
The costs of the Interlocutory application dated 30 October 2020 be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This is an application by the respondents in a proceeding in the Court for security for costs. The Court's power to make an order for security for costs is contained in s 56 of the Federal Court of Australia Act 1976 (Cth) (the Act) and r 19.01 of the Federal Court Rules 2011 (Cth) (the Rules). 2 The orders sought by the respondents are as follows: 1. Within 21 days, the Applicant pay into the Piper Alderman trust account funds in the amount of US$250,000, such funds not to be released from the Piper Alderman trust account except: a. in satisfaction of an order for costs in favour of the First and Second Respondents, made upon conclusion of the proceeding; b. upon conclusion of the proceeding with judgment (including any costs orders) and after satisfaction of any costs orders in favour of the First and Second Respondents; or c. with prior written consent of the parties or upon further order of the Court. 2. Within 28 days, the Applicant provide to the First and Second Respondents' legal representatives evidence of the payment in compliance with order 1. 3. In the event that orders 1 and 2 are not complied with, the proceedings are stayed pending further order of the Court. 4. In the event that the proceeding continues past the completion of evidence, the First and Second Respondents have liberty to apply for further security for costs. 5. The Applicant pay the First and Second Respondents' costs of and incidental to this application. 3 The respondents submit that an order of this nature is appropriate and point to the fact that a similar order was made by the Court in ACP Machinery Australia Pty Ltd v Aerospace Technologies of Australia Limited (P)VID 775/2010. 4 The applicant opposes the making of these orders. However, in the course of negotiations between the parties prior to the hearing of the application, the applicant indicated that it was prepared to consent to the following orders: THE COURT NOTES: A. Mr Tim O'Callaghan of Piper Alderman has given an assurance by letter to the Respondents dated 14 October 2020 that, in lieu of security for the First and Second Respondents' costs, the Applicant has paid US$155,000 into the Piper Alderman trust account in Australia (the Funds) and has given irrevocable instructions that those funds are not to be released except: a. in satisfaction of an order for costs in favour of the First and Second Respondents, made upon conclusion of the proceeding; b. upon conclusion of the proceeding with judgment (including any costs orders) and after satisfaction of any costs orders in favour of the First and Second Respondents; or c. with prior written consent of the parties or upon further order of the Court. THE COURT ORDERS BY CONSENT THAT: 1. The Funds referred to in paragraph A above are not to be released from the Piper Alderman trust account except: a. in satisfaction of an order for costs in favour of the First and Second Respondents, made upon conclusion of the proceeding; b. upon conclusion of the proceeding with judgment (including any costs orders) and after satisfaction of any costs orders in favour of the First and Second Respondents; or c. with prior written consent of the parties or upon further order of the Court. 2. In the event that the proceeding continues past the completion of evidence, the First and Second Respondents have liberty to apply for security for costs. 3. The parties' costs of and incidental to the making of these orders is reserved. 5 Since the preparation of these orders, a further amount of US$25,000 has been paid into the Piper Alderman Trust Account in Australia. The amount in the Piper Alderman Trust Account in Australia, therefore, stands at US$180,000. 6 The applicant is a company based in Ontario, Canada. 7 The key issues which arise on this application are as follows: (1) What assets does the applicant have in Australia which might be available to satisfy an order for costs in favour of the respondents? (2) If an order for security for costs is appropriate, what is the appropriate amount of that security? This issue divides into two issues. They are as follows: (a) What is the appropriate amount for security having regard to the evidence before the Court as to the likely quantum of the costs incurred and to be incurred, to the point where the evidence has been prepared and is complete? (b) Is it appropriate to fix the quantum of security by reference to the costs of enforcing a costs order of this Court in Ontario, Canada and, if so, what is the appropriate amount?

The Evidence 8 Each party relies on a number of affidavits. 9 The respondents are represented by DLA Piper. Ms Robynne Lyndsay Sanders is a solicitor and partner of DLA Piper. She has the care and conduct of the proceeding on behalf of the respondents. The proceeding involves the claim by the applicant and a cross-claim made by the first respondent and first cross-claimant. Ms Sanders has affirmed three affidavits in this proceeding. She has over 20 years of experience in litigation and she has been involved predominantly in patent litigation. She states that she has conducted over 30 patent infringement cases over her career. She has had to provide her clients with estimates as to the associated costs of litigation. She has been involved in over 15 cases where costs were recovered following the conclusion of proceedings, including over five cases in which costs were taxed. She has sought security for costs on behalf of her clients in eight cases. Ms Sanders deposes, and I accept, that she has a detailed knowledge of the usual steps required to be completed in patent litigation, the time required to complete those steps and the approximate costs of completing those steps. 10 The respondents also rely on an affidavit affirmed by Mr Alan Macek. Mr Macek is a solicitor and barrister in Toronto, Canada. He was called to the Ontario Bar in 2006 and is a partner of DLA Piper Canada. That firm is part of the DLA Piper global group of firms which includes DLA Piper Australia. Mr Macek's practice is focused on intellectual property litigation and patent prosecution. He deposes to the fact that he has been involved in cases in the Federal Court, Federal Court of Appeal, Court of Queen's Bench of Alberta and the Ontario Supreme Court. He deposes to the fact that most of his litigation work involves cross-border litigation. Mr Macek is the Chair of the Canadian Bar Association Patents Committee and a fellow of the Intellectual Property Institute of Canada and its Information, Communication and Technology Committee. He is also a registered patent agent and a registered trade mark agent. Mr Macek states that on a number of occasions he and the Canadian litigation group at DLA Piper have been involved in cross-border litigation where the impact of foreign judgments in Canada was in issue. He and the group in which he works has been involved in numerous proceedings before the Ontario Supreme Court and the Federal Court involving both applications and actions with interlocutory motions and appeals. 11 The applicant relies on three affidavits of Mr Timothy John O'Callaghan. Mr O'Callaghan is a solicitor who works in Adelaide, South Australia. He is a partner of the firm, Piper Alderman, who are the solicitors acting on behalf of the applicant. He has been a lawyer at Aldermans (later Piper Alderman) since December 1985 and he was admitted to the High Court in about 1986. He has been a partner at Piper Alderman since 1994. 12 The applicant also relies on an affidavit affirmed by Mr Bill Ericson. Mr Ericson is a solicitor and professional legal costs consultant. He has specialised as a legal costs consultant for about 20 years. For the last 10 years he has been the chair of the South Australian Law Society Costs Committee. He states that on a daily basis he assists in the assessment of legal costs in all Australian jurisdictions, including the Federal Court. His work includes the creation of, and advice with respect to, bills of costs, preparing notices of dispute to bills, attending at taxation hearings and advising on security for costs applications. 13 The applicant also relies on two affidavits of Mr Paul Lomic. Mr Lomic is a barrister and solicitor who practices in Toronto, Canada. He is a Certified Specialist in Intellectual Property Law (Trade Mark) by the Law Society of Ontario. He was called to the Bar in 2004. His practice is focused on resolving intellectual property and commercial disputes, including matters involving patents, trade marks, copyright, social media/internet and confidential information. He has handled both preliminary and final hearings as lead counsel for a broad range of matters. He has appeared in the Ontario Court of Justice, Ontario Superior Court of Justice, Federal Court, Federal Court of Appeal and various tribunals, including the Trademarks Opposition Board. He was lead counsel in a matter before the Ontario Supreme Court of Justice (Dead End Survival, LLC v Marhasin [2019] ONSC 3569 (Dead End Survival)). He acted on behalf of the plaintiff in that matter which had obtained a judgment in excess of $2,000,000 and which sought to enforce an order of a foreign jurisdiction regarding trade mark infringement.

The Parties 14 The first respondent is Rock Tool Refurbishment Solutions Pty Ltd, a company duly incorporated according to the laws of Australia. The second respondent is the sole director of the first respondent. 15 The applicant is C.M.E. Blasting & Mining Equipment Ltd. The Sjolander family control the applicant. Construction Mining Equipment (CME Sweden) was established by Mr Robert Sjolander in 1978 in Gothenburg, Sweden. The business of CME Sweden included the design, manufacture (or causing the manufacture of) and sale in Europe of grinding cups for servicing and reconditioning rock drill bits. The applicant was incorporated in Canada (Ontario) in 1980 when the Sjolander family moved to Canada in order to expand the business to North and South America. Since 1982, the applicant has designed, manufactured, sold and commissioned grinding systems for professional drilling operations around the world. Mr O'Callaghan deposes that the applicant is an industry leader with a constantly expanding product range. He deposes that the applicant sells grinding systems used for grinding the hard metal inserts or workings tips of rock drill bits (percussive or rotary), of which the primary product manufactured and sold by the applicant is the semi-automatic button bit grinding machines. He deposes that these grinding machines have a recommended retail price in the order of $65,000 each. 16 Mr O'Callaghan deposes to a number of matters indicating that the applicant has a connection with Australia. First, the applicant has regularly exhibited its products at trade shows in Australia since 1982 until about 2001 and it has advertised in industry publications throughout the world, including Australia. In approximately 1993, the applicant established an Inventory of its equipment and replacement parts in Australia. From 2001, its authorised reseller in Australia has been P & N Quiggan Pty Ltd trading as Mining and Construction Supplies (MCS) in Queensland. Mr O'Callaghan deposes that MCS sells the applicant's goods across Australia, with a natural focus on mining regions in Queensland, South Australia, Northern Territory and Western Australia. 17 Mr Bo Sjolander is one of the sons of Mr Robert Sjolander and he is the person who has provided instructions to Mr O'Callaghan. He is the Chief Operating Officer of the applicant and he lives in Canada. He informs Mr O'Callaghan that over the past 38 years, the applicant has established a reputation within the relevant mine drill sharpening market in Australia as a Canadian based international company with a strong commitment to Australia. Mr O'Callaghan's instructions are that the applicant enjoys a solid relationship with many international companies who are similarly committed to Australia and he gives as examples Sandvik, Boart Longyear, Robit, Mitsubishi Materials Trading Corporation, Epiroc and Mincon.

The Proceeding 18 In their written submissions on this application, the respondents provided a summary of the proceeding which is a sufficient description for present purposes: 11. CME is the registered proprietor of three Australian patents which it asserts are infringed by both Respondents. Patent No 2004213070 (Patent 1) is to a grinding machine and a method of using a grinding machine to sharpen drill bits. Patent No 2001254560 (Patent 2) is to grinding cups having certain features, as is Patent No 2001239059 (Patent 3). 12. The proceedings were commenced by CME on 17 March 2020. Initially, allegations were made of patent infringement in respect of Patents 1, 2 and 3 and contravention of the Australian Consumer Law. On 11 May 2020, CME served amended pleadings dropping the claim of infringement of Patent 3. On 5 October 2020, CME served draft amended pleadings which introduced claims for copyright infringement and infringement of Patents 1 and 2 in respect of certain RTRS products and reintroduced claims for infringement of Patent 3. Shortly thereafter, on 8 October 2020, CME served revised draft pleadings which continued the new patent claims but altered the copyright claim and introduced claims for inducement to breach contract and conversion. Most recently, on 20 October 2020, CME filed and served further revised draft pleadings, together with an application for leave to amend, which drops the copyright claim but adds a further claim for detinue and continues to assert the new patent claims, conversion and inducement to breach contract. On the same day as the hearing of the application for security, I granted leave to the applicant to file the further revised draft pleadings referred to in paragraph 12 of the respondents' written submissions.

The Legal Principles with respect to Security for Costs incurred and to be incurred in the Proceeding 19 There was no dispute about the relevant legal principles with respect to security for costs incurred and to be incurred in the proceeding. The applicant accepted the respondents' summary of the relevant principles in their written submissions as follows: 7. Principles relevant to the provision of security for costs are well known. An order for security for costs involves the exercise of discretion, which is "effectively unlimited or confined": Lim v Comcare [2016] FCA 1346 at [18] (Wigney J). The Court is required to weigh all of the circumstances of the particular case in determining whether an order should be made, and in what form: Botsman v Bolitho [2018] VSCA 111 at [36] (Whelan and Niall JJA). The issue to be resolved in making or refusing an order is essentially one of "risk management": Stapleton v Fairfax Media Publications Pty Ltd [2019] FCA 1418 at [6] (Flick J) citing French J (as he then was) in East Grace Corporation v Xing (No 1) [2005] FCA 219 at [6]. The Court usually takes a "broad brush" approach to the determination of the amount, and in that regard the process of estimation embodies to a considerable extent reliance upon the "feel" of the case after considering relevant factors: Wainter Pty Ltd v Freehills (A Firm) (No 2) [2009] FCA 770 at [9] (Barker J); see also Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 515 (French J). As to factors relevant to the exercise of discretion, they include the quantum of risk that the applicant cannot satisfy an order for costs, discretionary matters relevant to the particular case, and whether an order for security for costs would shut the applicant out from pursuing its claims: Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972. 20 The applicant added that the Court's discretion is a wide one and must be exercised according to the facts of the particular case. Further, there is no presumption in favour of an order for security for costs against a foreign applicant unless it is also shown that the applicant has no assets in the jurisdiction

The monies in the Piper Alderman Trust Account 21 Piper Alderman hold the amount of US$180,000 in their trust account. This came about in the following way. 22 The inquiry of the applicant's solicitors by the respondents' solicitors as to security for costs and whether the applicant had any assets in Australia came to the attention of Mr Bo Sjolander. He offered to place further assets in the jurisdiction (see below as to why Mr Sjolander considered this an offer to place further assets in the jurisdiction) in the form of funds to be held in the Piper Alderman Trust Account together with irrevocable instructions that the funds only be used to meet any cost order in favour of the respondents. Mr Sjolander requested that the funds be retained in US dollars as that is the preferred currency of the applicant in terms of its international dealings. Amounts from time to time have been paid by the applicant to Piper Alderman which have been placed in the firm's trust account such that there is presently in its trust account an amount of US$180,000. Mr O'Callaghan states that this is equivalent to about AU$255,000. Mr O'Callaghan deposes that these funds are subject to irrevocable instructions from the applicant that they are only to be used to meet any cost order in favour of the respondents. He deposes that the funds will not be otherwise released until this proceeding has come to an end and after any costs orders in favour of the respondents has been satisfied, unless it is with the prior written consent of the respondents or an order of the Court. Mr O'Callaghan has engaged in correspondence with the respondents' solicitors in relation to this issue. He deposes that he has acknowledged his position as an officer of the Court and that it was in that capacity that he assured the respondents' solicitors that his firm holds the funds together with the above instructions which he considers to be irrevocable. He states that from time to time he has given oral and written advice to the applicant on this issue. He has declined to provide the respondents with a copy of any document recording his instructions because he considers such a document to be the subject of legal professional privilege and because such a document must be understood in the context of written and oral advice which he has provided to the applicant and the discussions which he has had with Mr Sjolander from time to time. The advice is the subject of legal professional privilege which is not waived. Mr O'Callaghan deposes that, in his opinion, the interpretation which the respondents or their advisers might make of any documented instructions is irrelevant, given the assurances he has made to the respondents in his capacity as an officer of the Court. Notwithstanding the orders which the applicant has indicated it is prepared to agree to, it does not want the Court to make an order pursuant to s 56 of the Act and r 19.01 of the Rules. 23 Leaving aside the difference between the parties as to the amount sought, being $70,000, the respondents do not accept a position whereby the applicant's solicitors hold monies pursuant to instructions which those solicitors consider to be irrevocable. Ms Sanders deposes that she has been involved in a matter in which "irrevocable instructions" were provided by a client in relation to monies held in trust for a particular purpose. She deposes that in that matter irrevocable instructions were given by a client to their legal representatives as required by a settlement agreement, but at a later date, the client provided contrary instructions to their legal representatives. The legal representatives commenced proceedings in the Victorian Supreme Court to discharge the funds to the Court. The party seeking to rely on the irrevocable instructions commenced proceedings in the Supreme Court of New South Wales for specific performance of the settlement agreement to secure the release of the funds. Ms Sanders deposes that that was "at significant additional expense". Ms Sanders produces the "Amended Commercial List Statement" for that case. She deposes that the proceeding in Victoria was discontinued following the transfer of the monies to the Supreme Court of New South Wales to be the subject of that proceeding. Ms Sanders draws the conclusion that: … despite the purportedly irrevocable instructions being given, the lawyers in receipt of those instructions did not distribute the funds (consistent with the irrevocable instructions) given the later contrary instructions.

The applicant's Inventory in Australia 24 The applicant gave evidence through Mr O'Callaghan that since 1993 and throughout 2020, it owned substantial assets in the jurisdiction, being the Inventory of its equipment and replacement parts held for sale in Australia. As previously stated, that Inventory is held by MCS in Queensland. Mr O'Callaghan deposes that the Inventory includes multiple items of the grinding machines of the applicant and associated grinding cups and other parts. He deposes that whilst the precise value of the Inventory will fluctuate from time to time (decreasing when product is sold and increasing when new shipments of product arrive), the total value of the Inventory in the jurisdiction at any point in time is generally in the order of several hundred thousand dollars. He deposes that, although the Inventory is held at the premises of MCS, the ownership of the Inventory remains with the applicant until it is sold to a customer. In a later affidavit, Mr O'Callaghan sets out, on information provided by Mr Sjolander, the approximate value in Australian dollars and based on recommended retail prices of the Inventory held in Australia at the end of each month since October 2019. This evidence was objected to by the respondents on the basis that it is hearsay evidence. I indicated that I would rule on that objection after I had heard submissions. As it was, the applicant did not place a great deal of weight on the applicant's Inventory in Australia in the course of its oral submissions. Nevertheless, hearsay evidence is admissible on an interlocutory application and I will receive the evidence. However, there are a number of difficulties in placing any reliance on this evidence. 25 Ms Sanders deposes that it is not clear upon what basis the Inventory could be used to satisfy a costs order in favour of the respondents. She deposes that it is not clear whether the respondents could take control of those assets or if some third party would have a claim to them. Furthermore, it would be necessary for the assets to be liquidated (if possible) before the respondents could recover any of their costs. In a later affidavit, she elaborates on these difficulties and makes an additional point. In its Statement of Claim, the applicant asserts that the sale of its grinding machines without a licence to use the software required to operate those machines amounts to conversion and detinue. The software is required to operate the machines and without the right to use the software, Ms Sanders deposes that the value of the applicant's grinding machine is no more than its spare parts value. In her opinion, in those circumstances, the value of any machines in Australia ought not to be included in an assessment of the applicant's assets in the jurisdiction. In her third affidavit, Ms Sanders states that a search of the Personal Properties Security Register for MCS does not show a registered security interest in favour of the applicant over MCS, including any stock held by MCS.

The quantum of security by reference to the costs incurred or likely to be incurred in the proceeding 26 Ms Sanders has provided detailed evidence of the costs the respondents have incurred to date and the costs they are likely to incur up to the completion of evidence. Mr Ericson does not provide an alternative estimate. In his opinion, the material produced by Ms Sanders does not contain sufficient information for him to provide a meaningful estimate of the likely costs recoverable on a party/party basis for the respondents' costs to the completion of evidence. Mr Ericson does identify areas in Ms Sanders' estimate which lead him to the conclusion that the estimate is "significantly too high". He expresses the opinion that he would only be able to provide a reliable estimate of his own if he was provided with the respondents' bills to date and details of the counsel fee assessment. 27 Ms Sanders states that to date, the respondents have incurred legal costs of just over $197,000 excluding GST, being $158,853.41 in fees and $38,717.19 in disbursements, including filing fees and counsel fees in defending the proceedings brought by the applicant. In her first affidavit, she provides a broad indication of the tasks which have been carried out to date. She also provides a breakdown as between the various solicitors of the costs. Mr Ericson is critical of this estimate because Ms Sanders' identification of broad areas of work does not include information as to the amount of time taken by her or others involved in the task. He also suggests that the hourly rates being charged by those working on the matter and, in particular, Ms Sanders seem too high. Ms Sanders seeks to meet these criticisms in her second affidavit by estimating the costs in relation to each broad area of work and by pointing to the fact that her rates, and those of her team, reflect the complexity and difficulty of the matter. 28 Ms Sanders provides an estimate of the costs of the security for costs application of $20,000 and an estimate of the costs of preparing evidence of $350,000 to $450,000. Mr Ericson makes similar criticisms of these estimates. 29 Overall, and subject to a matter to be identified, Ms Sanders' estimate of costs incurred and to be incurred until the close of evidence is in the range of $547,000 to $647,000 excluding GST. 30 Ms Sanders states that based on her experience, it is reasonable to expect at least a 65% recovery rate if the costs were assessed on a party/party basis which gives rise to a range of approximately $355,000 to $420,550 based on the figures set out above. The amount of security sought by the respondents is US$250,000 which is the equivalent approximately of AU$355,000. Mr Ericson observes that Ms Sanders bases her estimate of 65% on rates charged in other litigation, but does not depose to whether they are the same as that charged in this action, or the team working on that litigation was similar, or that they were of similar complexity. Ms Sanders states in a later affidavit that the other matters to which she had regard were of similar levels of complexity and involved multiple causes of action, multiple patents and a similar or larger number of pieces of prior art. 31 Ms Sanders also deposes that she considers that additional costs will be incurred as a result of the applicant introducing further causes of action. She estimates these costs to be in the order of $160,000.

The quantum of security having regard to the costs of enforcing a costs order against the applicant in Ontario, Canada 32 Mr Lomic deposes that a judgment of this Court would be recognised and enforced in Ontario "by way of the common law". He deposes that the Ontario Supreme Court of Justice in the Dead End Survival case confirmed that foreign judgments can be recognised and enforced by way of applications rather than actions and that this is a quicker and less expensive process similar to motions proceeding by way of affidavits and exhibits. Mr Macek broadly agrees with this summary of the holding in that case. 33 Mr Lomic describes the application procedure as a simplified procedure where a party files a notice of application, affidavits and written argument. A responding party may file responding evidence, followed by both parties having the option to conduct cross-examinations followed by the responding party's written argument. He deposes that as with any court procedure in Ontario, it is possible to file interlocutory motions during an application. Mr Lomic deposes that if there are no material issues of fact in dispute, then the enforcement of a foreign judgment can be done by way of application. Mr Macek agrees and goes further and states that even if there are material issues of fact in dispute, the enforcement of a foreign judgment may still proceed via an application, rather than an action. He agrees that Mr Lomic's summary of the procedures followed in an application are broadly accurate. He adds that if it were necessary to file an action rather than an application to enforce a foreign judgment, the procedures would be similar except documentary and oral discovery would need to be undertaken prior to the hearing and witnesses could be examined in court at trial rather than cross-examination out of court prior to the hearing which is the case for an application. 34 Mr Lomic deposes to the fact that generally, foreign debts will be enforced absent fraud, a denial of natural justice or a public policy violation. Generally, the enforcing court is not interested in the substantive or procedural law of the foreign court that granted judgment and the court in Ontario will not relitigate the underlying litigation that gave rise to the judgment. If the foreign judgment is proven and is final, the court in Ontario will enforce the foreign court's judgment with a judgment of its own. The substantive merits of the foreign judgment will not be relitigated and although the creation of new defences is possible, there is only a small list of defences to the enforcement of a foreign judgment. 35 Mr Lomic deposes that the costs of enforcing a foreign judgment depend upon the approach of the parties to the proceeding. An unopposed application is likely to result in costs of CA$10,000 or less, approximately AU$10,450. An opposed application with cross-examinations, responding evidence, responding written argument and a hearing could cost a party between CA$18,000 and CA$38,000. 36 Mr Macek sets out the material which must be placed before a court in Ontario before it recognises the judgment of an Australian court. As I understand it, a recognition takes place by the court in Ontario making an order in similar form to that of the order made by the foreign court which it is asked to enforce. The order would need to be executed in the same way as an order originally obtained in the domestic court. Mr Macek states that under Ontario's Courts of Justice Act where a person obtains an order to enforce an obligation in a foreign currency, the order will require payment of an amount in Canadian dollars sufficient to purchase the amount of the obligation in the foreign currency. It would then be incumbent on the respondents in this case to convert that amount in Canadian dollars to Australian dollars. 37 Mr Macek deposes that Mr Lomic's estimate of costs in relation to an unopposed application is lower than he expected. His estimate is CA$15,000. He deposes that in his experience, an unopposed application would take from two to six months to be determined in the normal course, although it could take slightly longer to arrange a hearing date at the moment as the courts are experiencing a delay due to COVID-19. In Mr Macek's opinion, the costs of an opposed application involving contested cross-examination, preliminary motions, appeals or other procedural steps, could be as high as CA$200,000. In addition, there would be a further delay in resolving the application and it might take 12 months before the application is even heard. In Mr Macek's experience, contested proceedings can take as long as two to five years to be resolved if there are interlocutory motions and the possibility of appeals. Mr Macek concludes his analysis by expressing the view that if a party wishes to oppose an application and make it as difficult as possible to enforce the Australian costs order, they could find a number of procedural matters they could raise requiring several interlocutory motions. This would make it likely that an enforcement application would take one to three years to be determined and cost approximately CA$150,000 in fees. 38 I note that in some cases a foreign applicant undertakes in an application of this nature not to seek security for costs against the party seeking to enforce judgment in the foreign jurisdicton. No such undertaking has been offered by the applicant in this case. 39 In Mr Lomic's second affidavit, he states that there are limited specific defences available under Canadian law in respect of recognising and enforcing foreign judgments. He identifies them as he had previously as fraud, denial of natural justice and a violation of public policy and expresses the view that none of the three specific defences would likely be applicable and/or successful in this case. He expresses the view that fraud is unlikely to be relevant and it is unlikely that a court in Ontario would find that the procedure of the Federal Court of Australia is contrary to Canadian notions of fundamental justice. He expresses the view that it is unlikely that a Canadian court would find that Australian law about patent infringement and consequential orders for costs was contrary to the Canadian concept of justice or basic morality.

Analysis 40 In my opinion, there is too much uncertainty about the respondents' ability to obtain access to the applicant's Inventory in Australia in order to satisfy a costs order made by this Court to take the applicant's Inventory in Australia into account. 41 With respect to the monies in the Piper Alderman Trust Account, there is a risk as identified by Ms Sanders by reference to the case to which she refers, that irrevocable instructions will be revoked and there will be difficulty and delay experienced by the respondents in obtaining access to the funds. In my opinion, that is not a risk that the respondents should face. 42 In my opinion, the respondents have made out a case for security for costs. 43 As to the quantum of security fixed by reference to costs of the proceeding incurred and to be incurred, I generally accept the evidence of Ms Sanders. She has significant experience in the area which she has brought to bear in preparing her estimates. Having said that, there are unknowns in predicting party and party costs recovery and I would tend to favour a conservative estimate, particularly where further light might be brought on the likely costs (and possibly the merits) in later applications for security. I also need to bear in mind the matters raised by Mr Ericson and the fact that, as I think his evidence makes clear, estimates are just that and the true position will only be known after a taxation. 44 If the quantum of security is fixed by reference to the costs in the proceeding incurred and to be incurred, then I would fix the quantum in the amount of US$220,000. 45 The applicant submits that if I reach this point, I should fix the quantum of security by reference to the costs of enforcing an Australian costs judgment in Ontario, Canada. The applicant submits that that approach results in a much lower figure than US$220,000. There are two issues. First, there is an issue as to whether the approach of ordering security by reference to the costs of enforcement in the foreign jurisdiction is the correct approach in this case, and secondly, if so, the quantum of security. 46 The strongest case for taking this approach is one where two conditions are satisfied: (1) There is reciprocal enforcement of judgments legislation in the two jurisdictions; and (2) There is evidence that the foreign applicant is reputable and financially substantial. 47 In this case, there is no reciprocal enforcement of judgments legislation between Australia and Ontario, Canada. In order to enforce a costs order of this Court in Ontario, Canada, the respondents would have to sue at common law for debt, a process that Young JA said in Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd [2011] NSWCA 84 at [34] "is recognised everywhere as being an inconvenient and convoluted process". 48 The absence of the first condition is not fatal to an approach of fixing the quantum of security by reference to the costs of enforcement in the foreign jurisdiction, but it would emphasise the need for the Court to examine carefully the circumstances in order to ensure the respondents are not subject to any "unacceptable disadvantage" by reason of the applicant's foreign residence (Maxim's Caterers Ltd v Magnona Pty Ltd (No 1) [2010] FCA 450 (Maxim's Caterers) at [6] per Jagot J; Austin, Nicols & Co Inc v Lodestar Anstalt [2009] FCA 1228 at [23]-[24] per Lindgren J). 49 The absence of the second condition may be fatal to an approach of assessing the quantum of security by reference to the costs of enforcement in the foreign jurisdiction. In this respect, it is sufficient to refer to what Jagot J said in Maxim's Caterers (at [7], [8], [9] and [13]): 7 To the extent that Magnona stressed the breadth of the discretion it may be accepted that the discretion is to be exercised judicially having regard to the facts of the particular case. The difficulty for Magnona is that its submissions did not grapple with the considerations of justice underlying the discretion to order security for costs. In Farmitalia, for example, the enforceability of a costs order against the applicant in Italy was inadequate to persuade Heerey J not to make the order because there was simply no evidence that the applicant had any assets in Italy or elsewhere against which the costs order could be enforced. Accordingly, the schemes for reciprocal enforcement of judgments between Australia and Italy, as Heerey J found, could not undermine the respondent's prima facie entitlement in that case to an order for security. As Heerey J said at 342: 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). 8 The same cannot be said in the present case. Maxim's is not merely asserting reciprocal enforceability between Hong Kong and Australia. Maxim's has adduced evidence of substantial assets in Hong Kong, as well as evidence of the steps required to enforce a costs order against it in Hong Kong. Moreover, Maxim's made an open offer to Magnona to provide security in the amount of $15,000 (on its evidence, a generous estimate of the costs of enforcement in Hong Kong) together with an undertaking not to seek any order for security for costs in respect of any application for enforcement in Hong Kong. These factors present a different case from that in Farmitalia. 9 In Logue at [40] Weinberg J cited Farmitalia as authority for the proposition for which it stands, namely, that "a litigant ordinarily resident outside Australia cannot resist an application under O28 r3 merely by showing, without more, that he is ordinarily resident in one of the countries specified in regulations made under the Foreign Judgments Act 1991 (Cth)". In Logue the observation applied because there was evidence of the applicant having put in place a scheme to ensure his assets were outside Australia. Further, and as Weinberg J said at [55], the applicant's assets in Logue: … are not fixed, and can readily be moved beyond the reach of the respondents, should any order for costs be made against him. At any rate, the applicant has chosen not to provide the Court with any evidence regarding his current financial position. That is, of course, his right, and there may be sensible reasons from a forensic point of view as to why he would be reluctant to reveal the strength of his finances. However, it does not follow that, in a case of this type, the Court cannot take into account the absence of such evidence in determining whether to order security for costs. … 13 In other words, this is a case where, on the available evidence and other than to the extent of the costs of enforcement of a costs order in Hong Kong, the fact that Maxim's is ordinarily resident outside Australia does not place Magnona at any greater risk in terms of its capacity to enforce a costs order than would be the case if Maxim's were ordinarily resident inside Australia. In this case, accordingly, the weight which foreign residency and lack of assets within Australia would ordinarily attract is largely, if not wholly, offset by the evidence that enforcement of any costs order in favour of Magnona will be able to be enforced in Hong Kong against Maxim's substantial assets in that jurisdiction with relative ease pursuant to procedures which are well defined and known. Using the words of McHugh J this is a case where, on the evidence, Maxim's "can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction" (P S Chellaram & Co at 323). (See also Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336 at 342 per Heerey J; see also the remarks of Allsop CJ in Augusta Ventures Limited v Mt Arthur Coal Pty Limited [2020] FCAFC 194; (2021) 384 ALR 340 at [86].) 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. 52 I fix the quantum of security in the amount of US$220,000. I will reserve the question of the costs of this application. I will hear from the parties on that question. Rather than another round of written submissions, I would be disposed to list the matter for short oral submissions at a case management hearing of the substantive proceeding. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko.

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