Sovereign Hydroseal Pty Ltd v Steynberg

Judgment (8 paragraphs)

[1]

On or before 2 September 2020, the Prospective Applicants provide security for the Prospective Respondent's reasonable costs of compliance with Order 2 in the amount of $10,000 by payment into Court, provision of bank guarantee or such other means as the parties may agree.
Pursuant to rule 7.23 of the Federal Court Rules 2011 (Cth), and subject to order 3, by 23 September 2020, the Prospective Respondent give the Prospective Applicants discovery on affidavit of documents in the categories set out in Annexure 'A' (Discovery Documents).
Each Discovery Document will be confidential and may only be disclosed to or inspected by the Prospective Applicants' external Australian legal representatives, patent attorneys, counsel and experts who have signed a confidentiality undertaking in the form contained in Annexure 'B' to these orders.
The Prospective Applicants have liberty to apply to the Court for orders permitting the disclosure of the Discovery Documents to any other person.
If, by 2 months from the date of the Prospective Respondent's compliance with order 2, none of the Prospective Applicants has commenced a proceeding against the Prospective Respondent, the Prospective Applicants will pay the Prospective Respondent's reasonable costs of, and incidental to, the application for preliminary discovery, and the compliance with these orders, otherwise the costs are reserved to the proceeding brought by the Prospective Applicant(s). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ANNEXURE 'A' Definitions: In this Attachment, the word 'documents' has the meaning defined in the Dictionary of the Federal Court Rules 2011 (Cth). The following documents: (1) An example of each technical data sheet, formulation, product label, and any other document which records or set outs the chemical composition of any and all products which have been used by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013 to seal cracks, joints, voids, or passages, including but not limited to: (a) the product known as 'NOH2O' (NOH2O); (b) the product known as 'N-LICS' (N-LICS); (c) any rubber grout product that is injected under pressure into cracks, joints, or voids (Rubber Grout Product); and (d) any sealing product (that is injected under pressure into cracks, joints, or voids) which contains latex as a component or forms part of the product formulation (Latex Product). (2) An example of each data sheet, order form, brochure, advertising material, flyer, and any other document which states, lists or describes any and all products which have been offered, provided or supplied to any customer or potential customer by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013 to seal cracks, joints, voids, or passages including but not limited to the products: (a) NOH2O; (b) N-LICS; (c) any Rubber Grout Product; and (d) any Latex Product. (3) An example of each technical data sheet, formulation, and any other document which records or sets out the chemical composition of the latex in any Latex Products which have been received from any supplier (including communications from any such supplier by which such documents were conveyed to the Prospective Respondent) or which have been offered, provided or supplied to any customer or potential customer by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013. (4) Invoices, receipts, ledgers, and any other documents which record or evidence the number and nature of: (a) supplies of products to seal cracks, joints, voids or passages including but not limited to the products NOH2O, N-LICS, any Rubber Grout Product, and any Latex Product; or (b) services rendered to seal cracks, joints, voids or passages using any products including but not limited to the products NOH2O, N-LICS, any Rubber Grout Product, and any Latex Product, made by the Prospective Respondent or any person or entity under his control or authority to any and all customers since 24 June 2013. (5) An example of each manual, instructions sheet, and any other document which records or evidences the method or process used since 24 June 2013 by the Prospective Respondent to seal cracks, joints, voids or passages using any products including but not limited to the products NOH2O, N-LICS, any Rubber Group Product, and any Latex Product. ANNEXURE 'B' CONFIDENTIALITY UNDERTAKING No. WAD 85 of 2020 Federal Court of Australia District Registry: Western Australia Division: General SOVEREIGN HYDROSEAL PTY LTD & ORS Prospective Applicants JOHANNES MACHIEL STEYNBERG Prospective Respondent I, ………………………………………. of ................................................................................, undertake to the Court and to the Prospective Respondent that, in relation to the documents discovered by the Prospective Respondent pursuant to the orders made by McKerracher J in relation to Federal Court Proceedings No. WAD85 of 2020 (Discovery Documents) and the information contained in the Discovery Documents (Discovery Information): (1) I will keep the Discovery Documents and Discovery Information confidential at all times and I will only use the Discovery Documents and Discovery Information for the purposes of determining whether the Prospective Respondent has infringed the Prospective Applicants' intellectual property rights, and in the course of any legal proceeding in which it is alleged that the Prospective Respondent has infringed those rights. (2) Subject to paragraph 3 below, the Discovery Documents and Discovery Information will not be disclosed by me (either in whole or in part) either directly or indirectly to any person including the Prospective Applicants, their servants and agents without the prior written consent of the Prospective Respondent, unless such disclosure is expressly authorised by the Prospective Respondent or a Court. (3) The Discovery Documents and Discovery Information may be disclosed by me to: (a) a Court in the conduct of a Proceeding; (b) the Prospective Applicants' external Australian legal representatives, patent attorneys, counsel and experts who have signed a confidentiality undertaking in the same form as this document; (c) the Prospective Respondent, his legal representatives, patent attorney and counsel; (d) any other person provided: (i) the prior written consent to such disclosure has been obtained from the Prospective Respondent (if self-represented) or his legal representatives, who will not unreasonably withhold such consent; or (ii) the Court has made orders permitting disclosure to that person; and provided that person has signed a confidentiality undertaking in the same form as this document. (4) I will upon the conclusion of any Proceeding, or upon request by the Prospective Respondent: (a) return or cause to be returned to the Prospective Respondent (if self-represented) or his legal representatives all copies of the Discovery Documents held by me; or (b) destroy any documents (including any electronic copies) made or caused to be made by me or given to me recording any or all of the Discovery Information. (5) I will promptly notify the Prospective Respondent if I become aware of any unauthorised use or disclosure of any Discovery Documents or Discovery Information.

THE DISCOVERY ORDERS 2 Sovereign has sought to narrow the scope of the categories of documents it seeks in relation to a potential claim for patent infringement against Mr Steynberg. The narrowed scope is demonstrated by the following marked-up amendments to its proposed discovery orders: (1) An example of each Ttechnical data sheets, formulations, product labels, and any other documents which records or set outs the chemical composition of any and all products or treatments which have been used by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013 to seal cracks, joints, voids, or passages, including but not limited to: (a) the product known as 'NOH2O' (NOH2O); (b) the product known as 'N-LICS' (N-LICS); (c) any rubber grout product that is injected under pressure into cracks, joints, or voids (Rubber Grout Product); and (d) any sealing product (that is injected under pressure into cracks, joints, or voids) which contains latex as a component or forms part of the product formulation (Latex Product). (2) An example of each Ddata sheets, order forms, brochures, advertising materials, flyers, and any other documents which states, lists or describes any and all products or treatments which have been offered, provided or supplied to any customer or potential customer by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013 to seal cracks, joints, voids, or passages including but not limited to the products: (a) NOH2O; (b) N-LICS; (c) any Rubber Grout Product; and (d) any Latex Product. (3) An example of each Ttechnical data sheets, formulations, and any other documents which records or sets out the chemical composition of the latex in any Latex Products which have been received from any supplier (including communications from any such supplier by which such documents were conveyed to the Prospective Respondent) or which have been offered, provided or supplied to any customer or potential customer by the Prospective Respondent or any person or entity under his control or authority since 24 June 2013. (4) Invoices, receipts, ledgers, and any other documents which record or evidence the number and nature of: (a) supplies of products to seal cracks, joints, voids or passages including but not limited to the products NOH2O, N-LICS, any Rubber Grout Product, and any Latex Product; or (b) services or treatments rendered to seal cracks, joints, voids or passages using any products including but not limited to the products NOH2O, N-LICS, any Rubber Grout Product, and any Latex Product, made by the Prospective Respondent or any person or entity under his control or authority to any and all customers since 24 June 2013. (5) An example of each Mmanual, instructions sheets, and any other documents which records or evidences the method or process used since 24 June 2013 by the Prospective Respondent to seal cracks, joints, voids or passages using any products including but not limited to the products NOH2O, N-LICS, any Rubber Group Product, and any Latex Product. 3 The principal amendments made concern the identification and production of 'exemplar' documents (where appropriate), which avoids the categories being construed as requiring production of each and every possible document falling within each category, including duplicates. Sovereign says the amendments made are intended to aid Mr Steynberg's task of gathering the documents and complying with the discovery orders. Category 4 concerns the issue of potential quantum of damages (if liability for infringement were to be established), and so does not contain the 'exemplar' amendment found in the other categories. 4 Categories 1, 2 and 4 have also been amended to omit the word 'treatments' which was the subject of some discussion about the precision of the categories during the hearing of this matter. 5 Mr Steynberg has so far in this proceeding strongly opposed Sovereign's application, principally on the ground that there is no evidentiary foundation to Sovereign's belief that it may have a right to obtain relief. In view of the contrary conclusion being reached in Sovereign (No 1) (at [67]-[68]), Mr Steynberg now proposes that he give discovery in the following, significantly narrowed, categories: 1. An example of each technical data sheet, formulation, product and label which records or set outs the chemical composition of the products that he has used in his business since February 2019 to seal cracks, joints, voids or passages including: (1) any rubber grout product that is injected under pressure into cracks, joints or voids (Rubber Gout Products); and (2) any sealing product (that is injected under pressure into cracks, joints or voids) which contains latex as a component or forms part of the product formulation (Latex Product); and (3) Data sheets (which might include details relating to formulation) and which may record or set out the chemical composition of latex that he uses. 2. Invoices which record or evidence the number and nature of: (1) supplies of products to seal cracks, joints, voids or passages including but not limited to any Rubber Grout Product, and any Latex Product; or (2) services or treatments rendered to seal cracks, joints, voids or passages using any any [sic] Rubber Grout Product, and any Latex Product, made by the Prospective Respondent or any person or entity under his control or authority to any and all customers since February 2020. 6 Aside from what appear to be some minor amendments to the phrasing of Sovereign's minute, the principal changes which Mr Steynberg proposes to the categories are: (1) A removal of Sovereign's Categories 2, 3 and 5 which relate (broadly) to: (a) Materials that Mr Steynberg has offered or provided to any customer or potential customer; (b) Materials that Mr Steynberg has received from any supplier or which have been provided to any customer or potential customer; (c) Materials which record or evidence the method used by Mr Steynberg. (2) Addition of the following words into Category 1: Data sheets (which might include details relating to formulation) and which may record or set out the chemical composition of latex that he uses. (3) A narrowing of the timeframe to commencing from February 2019 in Sovereign's Category 1 and February 2020 in Sovereign's Category 4 as opposed to 24 June 2013; and (4) An omission of all references to 'NOH2O' and 'N-LICS'. 7 In support of these limited categories, Mr Steynberg has filed an affidavit sworn by him on 13 August 2020, to which is annexed correspondence between his solicitor Mr Vinod Kalyan and Sovereign's solicitors. He submits that his form of the discovery categories should be preferred to Sovereign's primarily because he does not have the documents that Sovereign seeks. 8 With respect to Sovereign's Category 2, it is said that Mr Steynberg does not have any 'order forms, brochures, advertising materials' apart from the flyer which is already in evidence in these proceedings (see Sovereign (No 1) at [42]-[45]). With respect to Sovereign's Category 3, it is said that although Mr Steynberg does not provide 'technical data sheets' to his customers, he is obligated to provide technical data sheets in respect of all products he uses. It is for this reason that he proposes the additional wording under Sovereign's Category 1 reproduced above (at [6(2)]). 9 Mr Steynberg's position with respect to Sovereign's Category 5 is set out in a letter from Mr Kalyan to Sovereign's solicitors dated 25 June 2020: Our client advises that he does not have any manual, instruction sheets (other than those that he receives with products regarding their application) or any other documents which record or evidence the method or process used by him to sealed [sic] cracks, joints, voids or passages. He says that most of his knowledge is in his head and that which he had [sic] learned with experience. Only if he using [sic] a product that was previously not used that he will look up and follow the technical data sheets or directions on the product. (Emphasis added.) On this basis, it is submitted that Mr Steynberg does not have, and therefore cannot discover, the documents in Sovereign's Category 5. His apparent possession of manuals and instruction sheets that are provided to him with products is not explained. 10 As to Sovereign's Category 4, Mr Steynberg submits that he does not have any receipts or ledgers, but is willing to provide all invoices, albeit only from as early as February 2020. 11 With respect to the significantly shorter timeframes, Mr Steynberg again relies on Mr Kalyan's letter of 25 June 2020 in which it is revealed that Mr Steynberg moved his residence in February 2019 and that 'in the course of moving, he has thrown away most of his paperwork and other things regarding his business which he had not used for some time.' No explanation is given for why the timeframe in Sovereign's Category 4 has been further shortened to February 2020. 12 Finally, Mr Steynberg says that NOH2O is not a product that he uses and so he cannot provide documents in relation to it. He also asserts that N-LICS is not a chemical product but a name given by him to his process for waterproofing. It is an acronym for 'Nano Liquid Injection Containment System.' Mr Steynberg has previously made this point in his first affidavit sworn on 18 May 2020. However, as is made clear in Sovereign (No 1) (at [56] and [61]), Mr Steynberg has also described N-LICS as some form of liquid on his website and in an email to Sovereign's private investigator. 13 Sovereign contends that the Court should not entertain any of Mr Steynberg's proposed amendments to its categories of discovery when they have first been raised at this late stage in the proceeding. Mr Steynberg had the opportunity to proffer different categories at the hearing of the application but he chose instead to oppose the application on the ground of the absence of a reasonable belief. Sovereign submits that Mr Steynberg is seeking to re-agitate matters which have been determined and is engaging in an exercise inconsistent with what is expressed in Sovereign (No 1) (at [72]) that Sovereign has 'made out its entitlement to relief principally in the form of orders sought…'.

COSTS 22 In Sovereign (No 1) (at [73]) I foreshadowed the possibility of determining the costs of this application in line with the approach taken by Finkelstein J in SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 (at [32]) that Sovereign pay Mr Steynberg's costs unless substantive proceedings are commenced within a certain period: see also MMD Design and Consultancy Limited v Camco Engineering Pty Ltd [2019] FCA 1803 per O'Bryan J (at [65]). Sovereign now seeks an order in these terms, giving it six months within which to commence proceedings. 23 Mr Steynberg opposes such an order and instead presses for his costs of the application to be paid by Sovereign on an indemnity basis. He says that unlike the parties in SmithKline Beecham, which were multinational pharmaceutical companies, he operates a one-man business with a net profit in the 2018-2019 financial year of $31,233.00. He will also have to forego work to comply with the discovery orders made which will affect his livelihood. In contrast, he submits that his costs of the application would have 'no effect on the financials of Sovereign' based on the evidence of Mr Deon Van Dyk (director of first and second prospective applicants) that Sovereign has 'provided services throughout the whole of Australia and in many countries.' 24 Mr Steynberg relies on the decision of Kenny J in J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340 in which her Honour ordered that the prospective applicant pay the costs of the prospective respondent on an application under r 7.23, albeit not on an indemnity basis. Her Honour considered a number of cases where an order in the form adopted in SmithKline Beecham was inappropriate (at [14]-[17]): 14 There have been occasions, however, when an order deferring the disposition of costs until the conclusion of a potential trial has not been considered appropriate. In C7 in connection with a preliminary discovery application under O 15A r 6 of the former Federal Court Rules, Gyles J said (at [50]-[51]): … It needs to be borne in mind that this is an extraordinary jurisdiction. It provides for compulsory access to the private affairs of members of the community in order that somebody else can determine if they have a case against that party and the threshold set by O 15A r 6(a) is not very high. There is much to be said for the view that a respondent in these circumstances is entitled to put the applicant to proof except in a clear case. Some judges have been disposed to make orders which, to a greater or lesser extent, leave costs to be determined after the result of preliminary discovery and inspection is known, and even to depend upon, to some extent, the fate of the litigation which ensues. I am not persuaded of the merit of that approach. An application pursuant to O 15A is a discrete application and may never lead anywhere. There is no reason why a party which is out of pocket because of costs should await some indefinite future event. Taking all things into account, in my opinion the proper order in the present case is that the applicant pay 50% of the costs of each of the first to eighth respondents to the application. In the event that proceedings do eventuate and the applicant succeeds, then it may be arguable that the applicant should be compensated in those proceedings for the burden of this costs order (and perhaps for its own costs). That, however, would be a matter for the trial judge in that proceeding. 15 There are other occasions besides C7, when a judge has taken the view that the prospective applicant should pay the costs of a preliminary discovery application, notwithstanding the applicant's success: see Hoyts Multi-Plex Cinemas Pty Ltd v Fox Entertainment Precinct Pty Ltd [2003] FCA 1347 at [15] (where the preliminary discovery application was ultimately resolved consensually) and Riley at [18] (on the basis that the preliminary discovery applicant was seeking "an indulgence from the Court"). 16 Principle and the authorities indicate that it is not useful to speak of a conventional rule as to costs in cases such as the present: see also Apache Northwest Pty Ltd v Newcrest Mining Ltd (2009) 182 FCR 124 at 146-147 [90] per Flick J. The disposition of costs will depend on the circumstances of the case, including the conduct of the parties, the likely nature of any prospective cause of action and the likely passage of time before any such matter would be resolved at trial. Section 37M of the Federal Court Act should also be borne in mind. 17 In the circumstances of this case, it seems to me desirable that the disposition of costs should not depend on the initiation and outcome of litigation following preliminary discovery. Further, as has been repeatedly affirmed, the jurisdiction to order preliminary discovery is an extraordinary one since an order for preliminary discovery involves an invasion of the prospective respondent's private affairs in order to determine whether or not a case can properly be brought against the prospective respondent. This feature has been said to justify an order that the preliminary discovery applicant pay the respondent's costs of the preliminary discovery application even when the application is successful. (Emphasis added.) 25 In Vaughan Super, the parties were in agreement that preliminary discovery should be given and as to the categories to be discovered. The only issue in dispute was the costs of the application. That is not the case in this proceeding, and her Honour's statement of the factors to be considered (at [16]) is apposite. A similar approach was adopted by Besanko J in Procter v Kalivis (No 3) [2010] FCA 1194 (at [17]): First, the jurisdiction to make an order for preliminary discovery is an extraordinary jurisdiction. There is a sense in which a respondent is entitled to remain passive until the applicant makes out a case for preliminary discovery: Glencore International AG v Selwyn Miners Limited (2005) 223 ALR 238 at 241 [15] per Lindgren J. Secondly, if the respondent does not take an adversarial approach to the application for preliminary discovery and in fact provides discovery then it may be appropriate to make the type of order sought by the respondents in this case. Thirdly, if the respondent does take an adversarial approach then it may be appropriate to order that it pay the costs caused by that adversarial approach: Re Steffen; Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520. The costs caused by an adversarial approach would not necessarily include the costs of complying with an order for preliminary discovery. (Emphasis added.) 26 In Airways Corporation of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [2002] NSWSC 521 Simpson J held that a prospective respondent who adopts an adversarial approach to the application should pay the costs of the application (at [10]-[11]): 10 …The defendants had persistently refused to cooperate. They defended the application on two bases that were not in the result sustained. It would have been a simple matter for them to have provided the plaintiffs with the information the plaintiffs sought, and which the defendants ultimately yielded. In my opinion, the defendants must live with the consequences of their decision to defend the proceedings. I appreciate that this view may not be in accordance with that of the English Court of Appeal in Totalise Plc, and in particular the view of that Court that a costs order would not ordinarily be made where: "the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it". 11 However, in my opinion, the litigation as it proceeded was adversarial in nature, or at least akin to adversarial litigation. The plaintiffs were, as I decided, entitled to the information they sought; while the defendants were equally entitled to resist the production of that information, the consequences of their making a judgment which turned out to be wrong are the same as such consequences for any other unsuccessful litigant. (Emphasis added.) (See also Steffen v Australia and New Zealand Banking Group Ltd [2009] NSWSC 883 per McDougall J (at [32]-[33]); Dallas Buyers Club LLC v iiNet Limited (No 3) [2015] FCA 422 per Perram J (at [3])) 27 Mr Steynberg additionally relies on a Calderbank offer which was put to Sovereign's solicitors in a letter of 22 June 2020 and referred to in further correspondence of 25 June and 12 August 2020. The Calderbank offer was not accepted by Sovereign. The offer is in the following terms: … 3. Offer: a. The Prospective Applicants pays $15,000.00 as 50% of the cost, expense and loss of profits that I have incurred and suffered to date. b. I will agree: i. for an expert having necessary qualifications, such expert to be appointed by agreement between the parties, and failing such agreement, appointed by the Court. ii. The expert will be given access to the following documents for the purpose of determining if I am in breach of Patent No. 2012216392 ("Patent"): 1. Technical data sheets, formulations, product and labels which record or set out the chemical composition of the products of treatment that are currently used in my business to seal cracks, joints, voids or passages including a. any rubber grout product that is injected under pressure into cracks, joints or voids (Rubber Gout Products); and b. any sealing product (that is injected under pressure into cracks, joints or voids) which contains latex as a component or forms part of the product formulation (Latex Product); c. Please note that: i. NOH2O is not my product (and my recollections is that NOH2O was the name given to the product or application that Sovereign was using under their expired patent no. 739427). ii. N-LICS is not: 1. a chemical, 2. a chemical product; or 3. an ad mixture but a name I have given to the complete system (that is, the site assessment, the process and products I use for waterproofing). It is an acronym for "Nano liquid injection containment system". 2. Data sheets, order forms, brochure, advertising material, flyers and any other documents (if any) which state, list or describe any and all products or treatment which I offer, provide or supply to my customer to seal cracks, joints, voids or passages including but not limited to: a. any Rubber Grout Products; and b. any Latex Product. iii. The Expert's scope of work is make [sic] a finding and inform Prospective Applicants and me of his finding whether I have in my control documents that show that I have breached of the Patent [sic]. iv. The Expert to execute a Confidentiality Deed before he is given the access that he will maintain strict confidentiality regarding the information that he will gain by being provided access and will not share that information with the Prospective Applicants other than to report his finding as set out in paragraph 3.b.iii above. c. The Prospective Applicants will pay: i. All costs and expenses of the Expert; ii. My reasonable costs on an indemnity basis in giving effect to the terms of this offer (assuming it is accepted) including the drawing up of the Confidentiality Deed; iii. My costs and expenses of attending the Expert to provide him with the access and in providing the information as set out in this offer at $75.00 per hours plus GST. iv. Any other expenses that I am put to as a result of providing access, information and documents to the expert, and without limiting, my reasonable legal cost on an indemnity basis if I need to obtain advice or respond to any correspondence or steps taken by the Prospective Applicant's in the course of the access inspection and inquiries by the Expert. … (Emphasis in original.) 28 Sovereign submits that the reasons given in Sovereign (No 1) do not reveal that Mr Steynberg has achieved a better result in these proceedings than the offer made. The two categories of documents offered are narrower than the five categories Sovereign seeks. This position is affirmed by my ruling above (at [21]) that Sovereign's amended categories of discovery have been sufficiently narrowed. 29 The principles governing the award of indemnity costs on the basis of the rejection of a Calderbank offer are well established: Sealed Air Australia Pty Limited v Aus-Lid Enterprises Pty Ltd [2020] FCA 388 per Kenny J (at [52]) citing Kiefel v State of Victoria [2014] FCA 411 per Tracey J (at [37]-[40]). As noted by Kenny J in Carey v Freehills [2013] FCA 1258 (at [15]-[16]), the offeror must demonstrate that the offeree's rejection was unreasonable: 15. A Calderbank offer is a "well recognised means of making offers of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted": see Jones v Bradley (No 2) [2003] NSWCA 258 at [5], quoted with approval by Finkelstein J in Brookfield Multiplex Limited v International Litigation Funding Partners Pte Ltd (No 4) [2009] FCA 803 ("Brookfield Multiplex") at [9]. 16. Mere refusal of a Calderbank offer followed by a result more favourable to the offeror than that represented by the offer does not of itself warrant an order for indemnity costs: see Black v Lipovac (1998) 217 ALR 386 ("Black v Lipovac") at 432. To justify an order for indemnity costs in favour of the party who made the Calderbank offer, the offeror must show that the refusal to accept it was unreasonable in all the circumstances: see Black v Lipovac at 432-433; Brookfield Multiplex at [11] and the authorities there cited. The reasonableness of the conduct of the offeree is to be viewed in the light of all the circumstances as they existed when the offer was rejected. The fact that the offeree ultimately failed to make out its case does not of itself mean that it acted unreasonably in rejecting an offer: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 at 127 [28]. (Emphasis added.) 30 I agree with Sovereign's contention that the offer put by Mr Steynberg was less favourable than the relief to which Sovereign is entitled. In those circumstances, Sovereign cannot be exposed to an indemnity costs order against it on the basis of refusing the Calderbank offer. In any event, although there has clearly been difficulties in the conferral between the parties, including an earlier letter of demand from Sovereign which I accepted provided an unreasonable timeframe for compliance (see Sovereign (No 1) at [30]), it cannot be said that any of this conduct was unreasonable to the extent that an indemnity costs order would have been justified. 31 Although previous authorities have indicated that there is no conventional rule as to costs on an application for preliminary discovery (Vaughn Super (at [16]); Procter (at [14])), Sovereign relies on Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 (Burley J) for the proposition that the ordinary rule that costs follow the event should apply where an adversarial approach is adopted (at [27]): Where a prospective respondent elects to enter the fray and vigorously contest the application, it becomes exposed to the risk that it should bear a costs consequence similar to the position it would be in were it a party to proceedings proper. Where the contest on an application is limited to the prospective applicant being put to proof of the elements of r 7.23, then even a successful prospective applicant may be liable to pay the costs. Conversely, where each point is hard fought, the prospective respondent is exposed to the risk that it will be visited with some or all of the costs in the event they are unsuccessful. In such circumstances, it may be inappropriate to defer a costs order to the outcome of any prospective litigation. (Emphasis added.) 32 Mr Steynberg has opposed this application from the outset and Sovereign has effectively succeeded in obtaining the relief it sought. In these circumstances, Mr Steynberg is exposed to the risk of a costs order against him. Sovereign however, seeks an order that they bear the costs of the proceeding unless substantive proceedings are brought against Mr Steynberg within six months. This was the time period ordered in SmithKline Beecham and MMD Design, however it is a significant length of time for Mr Steynberg to await the finalisation of this matter. A shorter period of two months was fixed in Procter however discovery had already been given in that case. An order that Sovereign pay Mr Steynberg's costs of the proceeding unless substantive proceedings are brought within two months from the date on which discovery is given is the appropriate order in this case. 33 As to the costs of compliance with the discovery orders, the parties have agreed to an order that Sovereign provide security in the sum of $10,000. Mr Steynberg seeks an additional order that Sovereign pay his costs in making discovery and providing inspection of discovered documents. Such an order is unnecessary given the order that Sovereign will provide security, the sum of which will be available to cover Mr Steynberg's reasonable expenses in compliance. 34 Sovereign's written submissions also indicate disagreement between the parties as to Sovereign's proposed order that it be given liberty to apply for orders permitting the disclosure of the discovery documents to any other person. It says Mr Steynberg seeks additional wording to the effect that Sovereign pay his costs of any application made in exercise of that liberty. Despite what may have ensued between the parties during conferral, the proposed orders filed by Mr Steynberg provide no such additional wording. The order for liberty to apply with respect to the confidentiality regime is agreed.

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