Cool Sonic International Inc v Cool Sonic Research Pty Ltd [1999] VSC 344 | Case summary

Supreme Court of Victoria|1999-09-16|Before: Warren J

INJUNCTION - security for undertaking for damages - foreign party - method of assessing amount of security - criteria to be applied - necessity for evidence of alleged devaluation of an asset

These proceedings are brought by the plaintiff as a foreign litigant seeking to protect its alleged interest in certain intellectual property largely consisting of or relating to audio-telephony based electronic products. The plaintiff seeks relief against the first defendant, its former subsidiary, but now placed in voluntary liquidation as of 1 September 1999, and the liquidators. Among other matters, the plaintiff claims total ownership of the intellectual property said to have been purchased by it from Techniplan International by agreement dated 15 December 1998.

Before me is an application for an interlocutory injunction, security for costs and security for undertaking for damages. Security for costs is sought because the plaintiff is a foreign litigant and acknowledges that it has no assets within the jurisdiction.

All matters have been a compromised save for the amount of security for the undertaking for damages. The plaintiff proposes the sum of $20,000, the first and second defendants propose the sum of $100,000.

On the basis of the evidence on affidavit as it stands before me in support of the injunction application, I consider the amount to be imposed ought be balanced by weighing up the competing factors and evidence between the parties. I determine the security for the undertaking for damages on the basis of a sum for $50,000 for the following reasons.

Firstly, on the basis of the evidence, the plaintiff has a good arguable case of ownership of the relevant intellectual property. Secondly, there is some evidence of an agreement by a party to purchase an asset consisting of part of the intellectual property in dispute from the first and second defendants for the sum of $100,000. Of that much I can be satisfied. This agreement provides the basis for the amount of security of $100,000 sought by the first and second defendants. However, there is some scope for hesitation or reservation concerning the agreement. No contract or formal offer is produced. The offer is made by the third defendant, one Jeremy Bloom, who was a director and shareholder of the plaintiff at the time of the purchase and acquisition of all of the assets and intellectual property by the plaintiff from Techniplan. Mr Bloom arguably, therefore, had knowledge of that which the first defendant did and did not own and that which it could and could not assign. On the basis of the evidence before me, there is some cloud over Mr Bloom's role, his bona fides and the efficacy of the $100,000 offer. Furthermore, Mr Bloom was involved in events that led to the first defendant being placed in liquidation. There may be therefore some doubt as to his capacity to actually pay the amount of $100,000. Mr Bloom has not taken the opportunity to clarify these matters on affidavit for the first and second defendants.

Thirdly, it is said the reasonableness of the $100,000 sought is borne out by the fact that there is a further offer for the purchase from the first and second defendants of other intellectual property by a company, Switching Systems, for the sum of $300,000. I allocate no weight to that factor at all because of the prevailing uncertainty of the terms of the offer and the fact that one Anthony Landsell is associated with both the offeror and the plaintiff. A cloud likewise remains over his role on the evidence at present. Mr Landsell has not taken the opportunity to clarify these matters on affidavit for the first and second defendants.

Fourthly, and most significantly, there is no expert evidence in a proper form before me as to the alleged decline or, for that matter, the total loss of value of the asset constituted by the intellectual property Mr Bloom has sought to purchase and said to be worth $100,000 at present. Mr Gregory Keith, one of the liquidators of the first defendant, has deposed on affidavit that there will be a deterioration in value of the asset sought to be sold for $100,000 if a sale is delayed by these proceedings. Whilst I accept he so states to the best of his knowledge, before imposing a large security sum as sought by the plaintiffs, I would require expert evidence on the matter. In any event, the plaintiff says I should discount the sum of $100,000 and, accordingly, it agrees to pay $20,000. It is conceded that the discount factor is a "guess" as to the potential diminution in value of the property. On the basis of the submissions, it is a difficult matter to assess. There is no expert evidence on the "guessed" discount factor. The best the court can do in such circumstances is balance the competing arguments.

Fifthly, the plaintiff, although a foreign litigant, has been forced to pursue its alleged rights against the defendants and hence be pro-active in so doing. Accordingly, in my view, notwithstanding its foreign status, the amount imposed as security for an undertaking for damages ought be balanced against the real and likely damage the first and second defendants could suffer as a result of the proposed undertaking of restraint. There is sufficient doubt and uncertainty surrounding the offer of $100,000 and the risk of devaluation to cause me to substantially reduce the amount of security sought by the defendants.

Finally, in stating my reasons, I emphasise that I ought not be regarded as having determined the merits of the plaintiff's claim and the evidence on a full basis. This application comes before me on an interlocutory basis and, furthermore, has been compromised by the parties to a significant extent. I have not been required therefore to analyse definitively the true strength of the cases of the parties. My findings are based upon the evidence as it stands at present. The evidence will, in all likelihood, be expanded upon and refined.

Accordingly, I make orders in accordance with the minutes as amended. I initial the minutes and place the minutes on the court file.

Cool Sonic International Inc v Cool Sonic Research Pty Ltd

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Judgment (12 paragraphs)

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