Lenijamar Pty Ltd and others v. AGC (Advances) Ltd [1990] FCA 520; (1990) 98 ALR 200.

Arthur Robinson and

Hedderwicks

Counsel and solicitors for

The Court orders that:

1. The respondent's notice of motion filed 1 July 1992 be dismissed.

2. The order made herein by Northrop J. on 1 June 1992 be varied:

(a) by substituting for the second sentence in the order

numbered 1, the following sentence:

Such security is to be provided within 28 days

of the completion of the mediation proceedings

referred to in orders 4 to 6 of this order in

such form as the parties may agree or in default

of agreement as the Registrar may determine.

(b) by substituting for order numbered 2 the following:

2. In the event that the applicant fails to

provide security within the time limited

by this order or further order,

proceedings on the applicant's application

herein be stayed until further order with

liberty to apply.

3. The District Registrar confer with the solicitors for the parties with a

view to taking such steps as may be necessary to give effect to orders 4 to 6 of the order made by Northrop J. on 1 June 1992, and upon completion of the mediation process that fact and the date thereof be noted on the file.

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

On 1 June 1992 Northrop J. made orders in this matter, inter alia, that:

1. The Applicant provide security in the sum of

$90,000.00 for costs incurred and to be incurred by

the Respondent down to the completion of mediation

proceedings before the Registrar. That is in addition

to the sum of $20,000.00 already provided. Such

security is to be provided within 28 days in such form

as the parties may agree or in default of agreement as

the Registrar may determine. There is liberty to the

Respondents to make such further application for

security for costs as they may be advised on the

completion of the mediation processes.

2. Failure to comply with the order to provide security

within the time limited the Order or further Order,

the proceedings be thereafter stayed.

(The foregoing reflects the text of the order in accordance with the order extracted and signed by the District Registrar. Despite the syntactical deficiencies of the orders, the meaning is beyond question.)

2. The applicant did not provide security within 28 days of the order and on 1 July 1992 the respondent filed a notice of motion seeking the dismissal of the application with costs. The ground upon which dismissal is sought is the applicant's failure to comply with the order for security for costs.

3. The applicant admits to having problems in providing the security. The fact of the matter appears to be that being a foreign corporation with no assets in Australia, in order to obtain a bank guarantee for the amount of the security, it will have to deposit funds equivalent to the amount of the security in an Australian bank and it is at present unable to do so. It is said however that it expects to be able to provide the security as ordered within approximately 6 months.

4. The respondent's notice of motion seeking the order for security sought an order that in the event of the applicant failing to comply, the application be struck out. It is clear from the short ex tempore reasons given by Northrop J. on 1 June 1992 that he considered, but rejected, striking out as the consequence of failure to provide security, but instead he ordered that the proceedings be stayed in default of security being provided.

5. The respondent submits that in the facts of this case the Court has what in effect is an inherent jurisdiction to dismiss the applicant's claim, and relies upon an English decision Speed Up Holdings Limited v. Gough and Co. (Handly) Limited (1986) Fleet St. R 330 for that proposition. For my own part, I think the better view, so far as the Federal Court is concerned, is that section 56 of the Federal Court Act 1976 which confers upon the Court power to order an applicant to give security for the payment of costs that may be awarded against the applicant, and the rule making power contained in section 59 imply that the Court has the jurisdiction to order the dismissal of proceedings in a proper case when security is not provided when ordered. Whether or not Order 10 Rule 7 of the Federal Court Rules is an exhaustive statement of the Court's powers in the event of default being made in providing security for costs is not an issue which needs to be canvassed here but it does provide a sufficient basis for the Court to dismiss an application in appropriate circumstances. The relevant part of the rule provides:

7(1) Where a party fails to comply with an order of the

Court directing that party to take a step in the

proceeding, any other party may move the Court on

notice -

(a) if the party in default is an applicant - for an

order that the proceeding be stayed or dismissed

as to the whole or any part of the relief

claimed by him in the proceeding;

6. Whilst the first order quoted above may, strictly construed, be said to be an order of the Court directing a party (the applicant) to take a step in the proceeding, the consequences which should flow from a failure to take that step have already been considered and adjudicated upon by the judge who made the order and nothing new has been shown to have occurred in the meantime, apart from the failure of the party to take that step. In these circumstances it is particularly inappropriate for the respondent to now seek the remedy which the judge making the order declined to give. Had the facts changed in the intervening period, or if it could be said that the proceedings have been left hanging over the head of the respondent for an unreasonable period without any real prospect of them ever being prosecuted, different considerations may well apply, but there has been no relevant change since the order was made and this application was brought a mere 2 days after the expiration of the period set by Northrop J. It cannot be said that the applicant's default has been either intentional or contumelious nor that there has been inordinate and inexcusable delay such that the respondent has been seriously prejudiced (see Charlie Carter Pty Ltd v. The Shop, Distributive and Allied Employees' Association of WA and others (1987) 13 FCR 413). Neither has there been a history of non-compliance on the applicant's part such as to indicate an inability or unwillingness to co-operate with the Court and the other party in having the matter ready for trial within an acceptable period nor has the non-compliance yet occasioned delay, expense or other prejudice to the respondent (see Lenijamar Pty Ltd and others v. AGC (Advances) Ltd [1990] FCA 520; (1990) 98 ALR 200).

7. For these reasons I would dismiss the respondent's motion that the proceeding herein by the applicant be dismissed.

8. The proceedings are, as a result of the stay which came into effect upon the expiration of 28 days from Northrop J.'s order, in a most unsatisfactory state. The originating application has been stayed but the fate of the respondent's cross-claim (by which it seeks revocation of the patent on which the applicant's claim is based) is somewhat uncertain. Although the order made by Northrop J. on 1 June 1992 indicates that upon failure by the applicant to provide security "the proceedings be thereafter stayed", it can hardly be contemplated that it was intended that the applicant's default should prevent the respondent proceeding on its cross-claim. It is appropriate that some order be now made to rectify the obvious error in the drafting of the order. But once that is done, the applicant is in the position that it could be forced into Court to defend its patent in circumstances in which to some extent, if not to a very significant degree, the evidence will be the same as it would be in relation to the originating proceeding. It seems undesirable that such a state of affairs should arise and I think that the Court should endeavour to avoid the occasion for absurdity.

9. Another matter which exercised Northrop J.'s mind was the question of mediation. In his order of 1 June 1992 he directed:

4. The matter be referred to a District Registrar for a

further Directions Hearing on a date to be fixed. The

matter is referred with a view to reaching a mediated

settlement or failing that a clarification of issues

and appropriate further directions.

5. Direct the Registrar conducting the Directions Hearing

to exercise all necessary powers of the Court set out

in section 35A(1) of the Federal Court Act and Order

10, R2(a) of the Federal Court Rules.

6. All discussions before the Registrar to be on a

"without prejudice" basis.

10. It is common cause that pursuant to order 4 arrangements were made for a hearing before the District Registrar on 1 July 1992 but it was adjourned when it became obvious that the applicant would be unable to furnish security within the time specified. It is clear from reading Northrop J.'s reasons, and the transcript of the proceedings on 1 June 1992, that his Honour considered that mediation was an appropriate step to be taken if not to settle the proceedings, at least to assist the parties to confine the issues to be litigated. Further, Northrop J. contemplated that there may be circumstances in which the applicant should have a longer period than 28 days within which to provide security, hence, in order 2 the consequences of the proceedings being stayed were to arise upon failure to provide security within the time limited by the order "or further order". The security ordered is expressed to be security for costs incurred and to be incurred by the respondents down to the completion of the mediation proceedings before the Registrar. It would not in my view be inconsistent with what Northrop J. contemplated if the order for security were amended so as to extend the time for the provision of security to a date beyond the completion of the mediation process so as to permit that vital step in the proceedings to be taken. Once that has been achieved it may be that other matters will need to be considered, particularly if the applicant is still unable to provide the required security.

11. Having regard to all of the circumstances of the case, and for the reasons outlined above, I propose to make the following orders:

1. The respondent's notice of motion filed 1 July 1992 be dismissed.

2. The order made herein by Northrop J. on 1 June 1992 be varied:

(a) by substituting for the second sentence in the order

numbered 1, the following sentence:

Such security is to be provided within 28 days

of the completion of the mediation proceedings

referred to in orders 4 to 6 of this order in

such form as the parties may agree or in default

of agreement as the Registrar may determine.

(b) by substituting for order numbered 2 the following:

2. In the event that the applicant fails to

provide security within the time limited

by this order or further order,

proceedings on the applicant's application

herein be stayed until further order with

liberty to apply.

3. The District Registrar confer with the solicitors for the parties

with a view to taking such steps as may be necessary to give

effect to orders 4 to 6 of the order made by Northrop J. on 1 June

1992, and upon completion of the mediation process that fact and

the date thereof be noted on the file.

4. Costs of both parties be reserved.