University of Sydney v Objectivision Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 385 of 2014

BETWEEN: THE UNIVERSITY OF SYDNEY ABN 15 211 513 464

AND: OBJECTIVISION PTY LIMITED ACN 090 253 697

JUDGE: RARES J DATE: 7 DECEMBER 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 These are two interlocutory applications for security for costs. First, the applicant and first cross-respondent, the University of Sydney, sought orders in its interlocutory application filed on 30 September 2015 that the respondent/cross-claimant, ObjectiVision Pty Limited, provide security in the amount of $674,000. Secondly, the second cross-respondent, Visionsearch Pty Limited, sought orders in its amended application filed today that ObjectiVision provide security in the amount of $869,631. Both applications excluded GST (as will I in these reasons).

The litigation background 2 On 16 April 2014, the University commenced these proceedings against ObjectiVision claiming a declaration that licence agreements between the two had been terminated in January 2011, judgment for a small sum of unpaid licence fees of approximately $19,200, together with declarations of infringement of patents that the University had licensed to ObjectiVision under the licence agreements the subject of the asserted termination. The University also sought an account for damages based on the establishment of its alleged infringements. The licences had been granted in 2000, and ObjectiVision had begun working on exploiting the patents from then. 3 The proceedings have been defended by ObjectiVision. This occurred in the context that, on 29 November 2013, ObjectiVision had previously commenced preliminary discovery proceedings against the University and Visionsearch in which ObjectiVisison succeeded: ObjectiVision Pty Ltd v Visionsearch (2014) 108 IPR 244. Perry J decided that application by granting preliminary discovery in favour of ObjectiVision and made orders for costs, the final calculation of which is unclear at the moment. Her Honour required the University and Visionsearch to pay the costs of their opposition to the preliminary discovery application, but required ObjectiVision to pay them the costs of their provision of that preliminary discovery 4 ObjectiVision used the fruits of its victory to prepare the second further amended cross-claim in these proceedings, that it filed on 25 May 2015, in which it joined Visionsearch as the second cross-respondent. ObjectiVision claimed in that version of the cross-claim substantively that the University and Visionsearch had infringed ObjectiVision's copyright in source code used in the previous licensing arrangement by seeking to exploit the invention or inventions the subject of the patent. In broad effect, ObjectiVision alleged that the University and Visionsearch had copied the source code and also used confidential information that ObjectiVision was entitled to protect. 5 Before that amendment to the cross-claim was filed, in which Visionsearch first became a party to these proceedings, all of the parties to it had engaged in preliminary consideration of the draft of that cross-claim and the newly added claims. Until then, the earlier versions of ObjectiVision's cross-claim were pleaded solely against the University and alleged that, in effect, it had acted in breach of the licensing agreements by, first, seeking to terminate them in January 2011 and secondly, earlier, from at least 27 August 2008, by changing the nature of the principal licence as provided for under the licensing agreements, from being an exclusive to a non-exclusive licence, thereby fundamentally altering the commercial value of the licences to ObjectiVision. 6 The second further amended cross-claim added paragraphs 60-91, which were entirely new claims. These asserted that both the University and Visionsearch had infringed ObjectiVision's copyright and misused its confidential information. As I have noted, until then, Visionsearch had not been involved in the proceedings. ObjectiVision now seeks injunctive relief against the University and Visionsearch so as to prohibit both from using software known as the Terra software. Visionsearch and the University are involved in developing the Terra software in a way, so ObjectiVision claims, that infringes ObjectiVision's copyright in the earlier Opera software that ObjectiVision had written for the purposes of exploiting the original invention under the licence agreements. 7 The University sought orders that, in effect, require a total of $360,000 to be paid by way of security for costs already incurred up to 30 January 2016 and then $50,000 after the University serves its expert evidence on the cross-claim with further tranches of $150,000 not later than 60 days before the trial date, and $140,000 not later than seven days before the trial date. Visionsearch, in substance, seeks the provision of about $300,000 by way of security for the costs incurred to date, albeit it is prepared to wait until 30 June 2016 for that to be provided. It also sought that security totalling $869,631 be provided in similar stages.

The commercial background 8 Until the global financial crisis loomed in early 2007, the major shareholder of ObjectiVision, MOD Resources Limited, a public listed company, had been providing it with funding. In early 2007 MOD indicated that it was no longer prepared to fund the development of a second version of the means of exploiting the University's patents. As a result, there was a capital restructuring of ObjectiVision in circumstances which I will explain shortly, under which MOD became a 14% shareholder instead of the majority shareholder. Hamisa Investments Pty Limited maintained a 15% shareholding, and Arthur Cheng, ObjectiVision's chief executive officer, and his company OV2 Pty Limited acquired a 70 % shareholding. Two other members of ObjectiVision, namely, the University and Prof Alexander Klistorner, had shareholdings of 0.74% and 0.07% respectively. 9 In its audited accounts dated 16 October 2007, ObjectiVision recorded a net loss of about $405,000 for the financial year ended 30 June 2007. In the preceding financial year it had made a loss of about $410,000. Its balance sheet showed accumulated losses as at 30 June 2007 of about $11.7 million, which it had funded substantially by contributed equity of $11.9 million. Its total equity as at 30 June 2007 was recorded as about $173,000 in the audited accounts. The notes to those accounts indicated that they had been prepared on a going concern basis but that the ability of the company to continue as a going concern was dependent upon two factors: first, the remittance of a research and development tax offset from the Australian Taxation Office, and, secondly, the ability of ObjectiVision to raise sufficient additional working capital by way of an equity issue. 10 That unpromising qualification to the accounts matured into worse news. The draft minutes of the directors meeting held on 9 August 2007 recorded Mr Cheng, as chief executive, reporting to the board about ObjectiVision's financial position. The draft minutes recorded that the board resolved that, until further funding had been secured, the cash flow forecast from August to December 2007 be updated for actual cash flows on a monthly basis and circulated to the board. The draft noted that the company had not been able to present the new AccuMap 2 prototype to the World Glaucoma Congress in Singapore in July 2007 due to its funding constraints, and that the directors were considering approaching a potential investor for funding. 11 Mr Cheng's report to the board of 7 December 2007 was even more dire. He said: MOD's decision not to provide interim financial backing for OV's Commercial Ready Grant application in March 2007 has been the subject of much debate at the Board and management levels. The impact that this decision has had on the company's present position is significant and cannot be overemphasised. 12 In the same report, Mr Cheng said that as at February 2007, (i.e. before MOD's decision to cease its funding), the AccuMap 2 prototype was three to four months away from completion but that assessment had been pushed back significantly. His report went on to refer to the need for further funds, and that mezzanine financing, rather than seed or venture capital, would be sought. He said that Medcorp's decision not to underwrite the grant application had meant a major reworking of ObjectiVision's plans as well as "the unraveling of preliminary arrangements that had already been put in place into terms of personnel recruitment, exhibitions, regulatory consultants, clinical trials, etc". The report went onto say: The unnecessary loss of the CRG opportunity is not only financially costly. It continues to affect the ability of OV [ObjectiVision] to attract alternative investor support by: • Undermining the company's ability to present a proper management team to investors, a very important part of what sophisticated investors look for. • Sending the wrong signal to investors that OV's shareholders are no longer supporting the company. • Losing faith with its supporters including the scientists who provided CRG references for OV who will now be reluctant to even update them. • Forcing OV to use sub-optimal technical resources and thereby restricting its ability to move forward. • Placing additional pressure on OV to raise capital at a time when the complexities of running the company are increasing exponentially and the budget is dwindling. 13 Mr Cheng's report then explained the potential for capital raising and the fact that only three or four out of perhaps 20 to 30 private equity companies that had previously been active in the medical field remained so. I would interpolate that that position is unsurprising, given the evolving impact of the global financial crisis at that time and as it developed into 2008. He then reported: Much as it would like to, OV management cannot simply press a magic capital-raising button and watch funds flow in on cue. Investors will insist that certain investment conditions are met and processes in place before they act. It takes time and a lot of work for these conditions and processes to work their way through the system particularly after they have been significantly disrupted by events of the recent past. 14 The board met next on 31 December 2007 and Mr Cheng again reported to it. The board noted that he would continue to seek capital raising alternatives during his termination period which would end on 31 January 2008, with the balance of his termination fee to be paid out then. The board also noted that no further operating expenditure could be incurred by the company and that it had a net cash position as at 28 December 2007 of $3,400, although Mr Cheng advised that the list of creditors was not complete and there were legal and patent cost invoices that had not yet been received. The company resolved that Mr Cheng would provide written notice to the University as a matter of urgency: … that the Company's current financial position is such that it cannot meet the commitment of maintaining the virtual reality goggle patent. The Company is seeking external funding to address the issue, prior to the responses deadline of 4 January 2008. However it is unlikely this will occur. 15 On 3 January 2008, Mr Cheng wrote, as a director and chief executive officer, to the University's Greg Fernance, who was also a director on ObjectiVision's board. He noted that another director, Mark Clements, had requested that he inform the University that he had given notice to the vehicle through which Mr Cheng was engaged to terminate its service to ObjectiVision effective on 14 December 2007 and that he had been directed to stop all further expenditure by ObjectiVision forthwith. The letter noted that the board of MOD had that day rejected the proposal by ObjectiVision's management, including Mr Cheng, founding scientists and technical consultants, to take over the company "given the inevitability and imminence of OV's demise" and that Mr Cheng had been given instructions to wind the company up. 16 On 26 February 2008, the University wrote to Mr Cheng, as director and chief executive officer of ObjectiVision, noting that under cl 7.1 of the principal licence agreement, ObjectiVision was required to sell a minimum number of units of the product exploiting the invention, and had failed to do so by target dates in September 2006 and the preceding year. The University asserted that this was a breach of the licence agreement. Its letter noted that under cl 7.3 of the licence agreement if ObjectiVision had failed for any reason to achieve the minimum performance criteria, the University in its sole discretion could make the licence non-exclusive or otherwise review it. The letter notified ObjectiVision that if it did not remedy the breaches by achieving the minimum performance criteria within the next three months, the University intended to render the then exclusive licence granted to ObjectiVision non-exclusive or otherwise review it. 17 Ultimately, on 27 August 2008, the University wrote to Mr Cheng advising him that as a result of its earlier asserted breach of the licence agreement, the University made the licence non-exclusive from the date of the letter. This asserted change to the nature of the licence is the subject of ObjectiVision's complaint that the University's conduct was itself a breach of the licence. That complaint had formed a substantive part of ObjectiVision's defence to the University's claim and its cross-claim immediately prior to the amendments that joined Visionsearch and added the new causes of action on 25 May 2015. 18 Although the two interlocutory applications for security for costs have been filed somewhat recently, the parties had been in discussions seeking to resolve the issue from early 2015. In the meantime, ObjectiVision has served an expert report by Robert Zeidman. He opined that there is substantial copying of the Opera source code in the Terra source code, albeit that they are written in different programming languages. He said that he had been able to see references to the Opera source code and the AccuMap invention in the Terra source code, and that was obtained in the preliminary discovery proceedings, which, he opined, provides a foundation for, among other things, his opinion that there had been copying.

ObjectiVision's current financial position 19 In those circumstances, there is no issue between the parties that ObjectiVision has a bona fide claim, although both the University and Visionsearch deny the substantive allegations against them, including those in respect of the breach of copyright and misuse of confidential information. 20 The above background provides a context in which the applications for security have been brought and resisted. There is no dispute that ObjectiVision, in its current financial position, would not be able to pay an order for costs of any substance. Its financial report for the year ended 30 June 2014 shows that it had an operating loss of $111,000 and, in the preceding financial year, an operating loss of nearly $140,000. That report also showed that the company paid consultants fees in each year of about $150,000 and received income of nearly $100,000 in each year. There is no explanation in evidence as to exactly what ObjectiVision did or is doing to earn or expend those moneys. Other evidence suggests that its registered office is a mere postal address and is not occupied by it. Mr Cheng is still the substantive owner of ObjectiVision. 21 In his affidavit sworn only this morning Nathan Mattock, ObjectiVision's solicitor, said that: Mr Cheng and his wife, Lesley, have solely funded ObjectiVision in these proceedings; Mr Cheng had sought funding of the litigation from two of the other shareholders, MOD and Hamisa, but that neither had agreed to provide the funding; and if ObjectiVision were ordered to pay an amount of security for the University and Visionsearch, Mr and Mrs Cheng would be able to provide funding to ObjectiVision to meet that obligation for the following amounts, namely $100,000 within two weeks of the order being made and a further $100,000 by the end of January 2016. 22 Mr Mattock drew attention to the fact that $50,000 of ObjectiVision's money was still held on trust for the costs of the University in the preliminary discovery application, and that Perry J had ordered the University to pay 15% and Visionsearch to pay 35% of ObjectiVision's costs in those proceedings which, prior to assessment, totalled more than $200,000. Mr Mattock said that her Honour had also ordered ObjectiVision to pay the University and Visionsearch's reasonable costs of compliance with the preliminary discovery orders. Mr Mattock thought that the balance of those various costs orders would leave ObjectiVision in some funds out of the $50,000 held on trust but that assessment process had not occurred, at this stage. Mr Mattock then said that if any further security than he had mentioned were ordered to be payable by ObjectiVision, Mr and Mrs Cheng would not be able to continue with the proceedings the subject of this security application without attempting to raise further funds. 23 He said that one such means was obtaining further investors in ObjectiVision but that that was inhibited by the fact that the licence agreements had been terminated and therefore the company was not able to exploit the products known as AccuMap 1 and AccuMap 2. 24 The University and Visionsearch's solicitors both filed affidavits in which they set out details of that work and significant costs that each of their clients had already incurred in defending the proceedings on the breach of copyright and confidential information part of the cross-claim to date and the anticipated even more significant work and costs of that part of the proceedings up to the conclusion of the trial. In his affidavit, the University's solicitor Scott Bouvier, estimated its total solicitor client costs at about $940,000. According to Visionsearch's solicitor, Morgan Lane, its total estimated solicitor client costs will be approximately $880,000. The solicitors arrived at their various estimates by discounting what they estimated to be the amounts that might be taxed off were those costs submitted for taxation. 25 Mr Mattock challenged those assessments of the costs on the basis that he considered the amounts incurred to date to be quite disproportionate to what was necessary as work that had to be done and that the estimates for future costs were also significantly larger than he would think appropriate and were, in his words, "excessive". 26 Neither side descended to calling costs experts or assessors. I must proceed on the basis that the views held by each of the respective lawyers is a bona fide view, but that without any proper means of taxing or having the costs assessed in detail, it is very difficult to form a view as to what is likely to be an appropriate amount to be incurred or recovered beyond what Mr Bouvier and Mr Lane, as the two solicitors responsible for actually undertaking the work, have said was appropriate. In addition, I note that Mr Bouvier explained in his affidavit, in some detail in about 30 subparagraphs, what work his firm had done for the University in looking at the copyright infringement and breach of confidence claims by ObjectiVision.

ObjectiVision's submission 27 In essence, ObjectiVision resisted the applications for security in two ways. First, it argued that the applications should be refused because, if granted, they would have the effect of stultifying its litigation of its new claims and, secondly, that the amounts claimed were excessive, in the event that an order for security were thought appropriate. Despite what is recorded in its 2014 accounts, that had only been produced on a notice to produce this morning in court, ObjectiVision accepted in its oral submissions that the inference from those accounts was that it did not conduct operations and did not have any functional AccuMap 2 machines or other products available for sale. But, it contended that its purpose for being incorporated and the way in which it pursued its corporate objectives until the termination of the licences had been to exploit the invention and the AccuMap devices. It argued that the termination of the licences, in effect, meant that it now has no way of meeting an order for security or raising money to do so. That was because, ObjectiVision contended, the very purpose for which it was incorporated cannot be pursued while the termination of the licence remains unrectified by the Court. 28 ObjectiVision argued that the University had been involved in, or responsible for, its current financial position. It argued that an order for security would stultify its ability to pursue the cross-claim which, at least prima facie, appears to have merit and the support of its expert, Dr Zeidman. ObjectiVision argued that the breach of copyright and confidential information claims that it makes are, in substance, defensive of the claims by the University against it. ObjectiVision argued that Visionsearch is a proper and necessary party to that claim, albeit that it accepted that its claim against Visionsearch is, of itself, not defensive because Visionsearch makes no claim at all against ObjectiVision and is merely sued by it as a wrongdoer. 29 ObjectiVision claimed that both the University and Visionsearch had materially contributed to the financial position in which ObjectiVision now finds itself. ObjectiVision also argued that there is significant overlap in the matters giving rise to the University's case against it relating to the licence agreements, the alleged breaches of those agreements and its defence that the University itself was in breach for terminating the principal licence agreement and earlier making it a non-exclusive licence with the issues that ObjectiVision has now raised in its new copyright and confidential information claims. It argued that there will be an overlap in the evidence of the various witnesses to be called and that, in substance, the breach of copyright and confidential information claims are, if not inseverable from the balance of the proceedings, so materially connected to them that it would be exposed to the risk of an estoppel based on Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 were it not to have pleaded and pursued the latter claims. 30 ObjectiVision argued that the University and Dr Klistorner will also benefit from ObjectiVision's success in the case that ObjectiVision wishes to make against the University in respect of its allegations of breach of copyright and misuse of confidential information. It also argued that the degree of work necessary to be done in defending the latter claims had been significantly reduced by the provision of Dr Ziedman's report since the solicitors' estimates of costs had first been formulated.

Consideration 31 The courts have long recognised that there can be circumstances in which a party who is a defendant or respondent must bring a cross-claim that is substantively defensive, and, in that situation, the responding party is not in the same position as a person who brings a cross-claim that is independent. The principle initially was developed in cases involving foreign defendants who brought cross-claims for which the plaintiff sought security. Thus, in Willey v Synan (1935) 54 CLR 175 at 184, Dixon J, with whom Rich J expressly agreed, said: The principle is that a party to judicial proceedings, who resides beyond the jurisdiction, should not be required to give security for costs unless, however the parties are arranged upon the record, he is the person invoking or resorting to the jurisdiction for the purpose of establishing rights or obtaining relief. If he does avail himself of the remedies the jurisdiction provides in order to obtain affirmative relief or redress, he may be ordered to give security, although he becomes a defendant in the action. (emphasis added) 32 Importantly, Dixon J held that this principle extended to all classes of case, not merely those involving a party who did not reside in the jurisdiction. In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4, Sheppard, Morling and Neaves JJ said: In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts. (emphasis added) 33 In Australian Equity Investors, an Arizona Limited Partnership v Colliers International (NSW) Pty Ltd [2012] FCAFC 57 at [30], Jacobson, Besanko and Perram JJ said that this passage was not to be read like a statute so as to ossify the discretion, but that the "principle at play is a simple one: those who stand to share the benefits of the litigation cannot shirk its burdens". They said that they did not think that, in Bell Wholesale 2 FCR at 4 the Full Court meant to say any more, and that each case depended on its facts. In P S Chellaram & Co Ltd v China Ocean Shipping Co (1991) 102 ALR 321 at 323, McHugh J applied the same principle. And, in Madgwick v Kelly (2013) 212 FCR 1 at 20 [83], Allsop CJ and Middleton J held that it was open to a judge exercising the discretion whether to order security to take into account the unwillingness of people to contribute as a relevant factor, albeit that they were considering the different position of members of a class in a class action, who may or may not have been willing to contribute. 34 In Pioneer Park Pty Ltd (In Liq) v Australia and New Zealand Banking Group (2007) 65 ACSR 383 at 396 [51]-[52] Basten JA, with the agreement of Tobias JA and McColl JA, said that the "likelihood that an order for security would stifle or stultify proceedings, if established, is a factor that will tend against an order for security", but that factor was not made out merely by reference to a company's impecuniosity. Basten JA said that the asserted consequence required proof of the kind referred to in Bell Wholesale 2 FCR at 4. He quoted with approval what Clarke J had said in Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 at 545: … the mere fact that the corporate plaintiff is financially unable to provide security does not lead inevitably to the conclusion that the making of an order for security will stultify the plaintiff's claim. It may be that there is someone else who will satisfy the order on the plaintiff's behalf. (emphasis added) 35 Basten JA continued (at 65 ACSR at 396) [52]) to note a factor that might encourage the court to not otherwise order security is that a person who seeks to benefit from the litigation might be: …willing to step out from behind the corporate shield and offer undertakings in relation to an adverse costs order in the event of failure. 36 I discussed those principles in Top Stuff 4 Business Holdings Pty Ltd v Vodafone Pty Ltd (No 2) [2012] FCA 645. 37 The evidence does not satisfy me that these proceedings will be stultified if security for costs is ordered. I accept that each amount of security sought by both the University and Visionsearch is a very significant sum. However, Mr Cheng's late provision of information, as put into evidence by Mr Mattock on information and belief only today, indicates first that Mr Cheng and his wife are both funding this litigation and have some resources. However, Mr Cheng and his wife have not put forward any statement of their assets and liabilities, nor have they offered any guarantee of ObjectiVision's liability if it could not meet any ultimate order for costs. 38 All that Mr and Mrs Chen have done is to assert that they are prepared to pay up to $200,000 by way of further security, if ObjectiVision were ordered to provide security, and that if more than that were ordered, for reasons that they have chosen not to reveal, they, in Mr Mattock's words "would not be able to continue with the proceedings" without attempting to raise further funds. 39 I am not satisfied by that assertion. First, the assertion is completely uninformative of what, if anything, is available to Mr and Mrs Cheng. Secondly, they are not prepared to step out from behind ObjectiVision's corporate veil to offer a guarantee or their own personal liability were ObjectiVision's new breach of copyright or confidential information claims not to be stayed. I am not satisfied that that part of the case is defensive at all. 40 In my opinion, the impecuniosity of ObjectiVision was clear as at late 2007 and early 2008 as is inherent in the evidence that I have referred to above. By that time, as Mr Cheng astutely said, the development of the AccuMap 2 product could not proceed without a new investor and there were no investors then on the horizon. The mere fact that, subsequently, the University acted to turn the principal licence into a non-exclusive licence and ultimately to terminate it does not, in my opinion, establish that the University was a real and operative cause of the impecuniosity of ObjectiVision. That impecuniosity was plain for all to see when MOD withdrew its financial support. In the subsequent period of over nearly eighteen months until August 2008, when the University changed the nature of the licence, no new funds were forthcoming and, what is more, no apparent work was done to further develop the product. 41 I do not accept that there is any substantive basis for inferring that ObjectiVision was not able to pursue raising funds or its business operations because of the University's alleged conduct. The University's conduct was simply reactive to the financial collapse of ObjectiVision that had occurred prior to the change in the nature of the principal licence and its subsequent termination. 42 Nor do I accept that ObjectiVision's asserted need to bring the breach of confidence and confidential information claims is so integral to the positive defences that it wishes to make in these proceedings that ObjectiVision had no choice but to add the new claims and a new party to these proceedings. I reject its argument that, in effect, it had to include those new claims and join Visionsearch as part of its defensive assertions that it had included in its original cross-claim so as to avoid an estoppel. 43 In Anshun 147 CLR at 602-603, Gibbs CJ, Mason and Aickin JJ identified the relevant principle upon which an estoppel will arise if a party fails to raise or litigate a particular matter as follows: there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v. County of Sac [(1876) 94 US [24 Law. Ed., at p. 199]. (emphasis added) 44 Here, it would not be unreasonable for ObjectiVision to maintain the new part of its cross-claim in a separate action because of the expense in litigating it now. Indeed, I am of opinion the new amendments to the cross-claim and joinder of Visionsearch are distinct, in substance, and separate from the balance of the proceedings. It follows that the University is entitled to an order for security for its costs. 45 Moreover, Visionsearch is in a different position to the University. It has not brought any claim against ObjectiVision. It is merely being sued by ObjectiVision, as a plaintiff in a proceeding where, although Visionsearch may be a proper and necessary party, it is being exposed to litigation in which it would not otherwise need to participate. Accordingly, in my opinion, Visionsearch also is entitled to an order for security for its costs. 46 While I am satisfied that the confidential information and breach of copyright claims that ObjectiVision wishes to bring are bona fide and cannot be viewed as claims without substance, I am not satisfied that an order for security will stultify those claims or operate in a way that is unfair. In my opinion, the lack of evidence from Mr Cheng and the late attempt to raise some unwillingness of him and his wife to expose themselves beyond a further $200,000 by way of security demonstrates that he and his wife are likely to stand to gain from the pursuit of this litigation. However, they are not prepared to wear the consequences of doing so other than through the provision of a limited amount of security that they are prepared to offer and, then, only on the terms that they are prepared to put forward. 47 For these reasons, in my opinion, each of the University and Visionsearch is entitled to security for their costs of the copyright and confidential information claims part of the cross-claim.

What orders should be made? 48 The quantification of the security and the mechanism by which it should be paid requires a balance, using a broad brush approach, between the interests of justice and the parties for whom security is necessary, and the interests of the person ordered to pay that security, whose ability to conduct the litigation ordinarily will be affected by the constraints imposed upon that party by such an order. The principle that, ordinarily, an individual resident in the jurisdiction is entitled to bring litigation without providing security can be reflected in the exercise of the Court's discretion to accept an undertaking from an individual, who stands to benefit from the litigation being conducted by a corporate party that cannot provide security, to answer for the corporate party's liability for costs without the Court requiring the provision of money by way of security for costs. 49 There is no such offer here. Thus, I must fix monetary amounts that seek to balance what might fairly be recoverable if ObjectiVision fails on its new claim but do so in a way that recognises the significant financial burden that will be imposed on those standing behind ObjectiVision. Here, ObjectiVision is in the position of a respondent or defendant in the proceedings who has a cross-claim that is defensive, apart from, as is accepted, the confidential information and copyright claims, and so must necessarily expend significant amounts of money in the pursuit of that defensive part of its cross-claim. 50 During the course of argument, there was some debate as to whether it may be appropriate to order the provision of security in tranches, including an early payment of a lesser sum initially in respect of a part of the security that would be ordered for costs already incurred but with that sum being supplemented in a later tranche. That would have meant that ObjectiVision would have had to provide security for past costs in stages as well as providing security for future costs in later tranches. However, such a requirement would be capable of leading to injustice for each side. It would be unfair if ObjectiVision had to provide more security later when it realised that it may not be able to afford to do so, after initially putting up a smaller sum that it would then be liable to forfeit. That would be unfair to ObjectiVision rather than making it face that realisation earlier. Similarly, if the University and Visionsearch were required to proceed in the litigation on the breach of copyright and confidential information claims that would require them to incur substantial expenditure, and, if ObjectiVision failed to meet its later instalment for past costs, they would have incurred even more costs that might never be the subject of any actual security. 51 In my opinion, the appropriate way to proceed is to order what I must assess in a broad brush way as the appropriate amounts for security for the different stages of the litigation, bearing in mind that although the University and Visionsearch have already incurred the significant solicitor client costs that they have, they did so while the parties negotiated about the provision of security for costs. It is not clear to me that prior to the filing of the University's and Visionsearch's initial evidence in support of their applications for security that Mr Cheng and his wife were fully aware of the significant quantum of each set of those costs. 52 According to Mr Bouvier's affidavit evidence, the University has incurred about $280,000 in costs. He estimated that in the order of a further $225,000 would be incurred in preparing the expert evidence to meet the breach of copyright and confidential information claims, and that in the order of a further $450,000 would be incurred for the hearing of them. Mr Lane estimated that Visionsearch had incurred about $280,000 to date, although that included $90,000 for experts which may have been somewhat anticipatory. He estimated that to the close of pleadings another $70,000 would be needed and that at the evidence stage of the proceedings, his client would need to spend between $230,000 and $285,000, and between $310,000 and $330,000 for the trial. 53 In my opinion, it is likely that those solicitor client costs would be taxed, including counsel's fees, to arrive at a sum of about 65% to 70% of those estimates. However, I think that it is necessary to make some adjustments to take account of the burden of payment in advance of the costs by way of security. 54 Doing the best I can, I consider that it is appropriate to order ObjectiVision to pay into accounts operated by its and, respectively, the University's and Visionsearch's solicitors, the following sums as follows (i.e. the same amount for each of the University and Visionsearch) as security for costs: (a) $200,000, on or before 22 January 2016; (b) $30,000, within 28 days of each of the University and Visionsearch respectively serving its expert reports; (c) $120,000, in respect of preparation for trial not less than 60 days before the date fixed for the commencement of the trial; (d) $100,000, not less than seven days before the date fixed for the commencement of the trial. 55 Thus, ObjectiVision will need to provide security for costs in a total sum of $450,000 for each of the University and Visionsearch (i.e. a total of $900,000). I will also order that in default of compliance with any of the steps for the provision of security, that the proceedings be stayed thereafter until further order. I will order that any party can apply to review the amounts of security at any time since the shape of the litigation may change. ObjectiVision must also pay the costs of the two interlocutory applications for security for costs. I certify that the preceding fifty-five (55) numbered paragraph are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.