FEDERAL COURT OF AUSTRALIA Maxim's Caterers Limited v Magnona Pty Ltd (No 1) [2010] FCA 450 Citation: Maxim's Caterers Limited v Magnona Pty Ltd (No 1) [2010] FCA 450 Parties: MAXIM'S CATERERS LIMITED v MAGNONA PTY LTD File number(s): NSD 1475 of 2009 Judge: JAGOT J Date of judgment: 10 May 2010 Catchwords: PRACTICE & PROCEDURE – security for costs – entity incorporated in Hong Kong with no assets in Australia – O 28 r 3 Federal Court Rules – whether security for costs should relate to the costs of the proceeding or be restricted to the costs of enforcing judgment in Hong Kong Legislation: Federal Court of Australia Act 1976 (Cth) s 56 Trade Marks Act 1995 (Cth) Federal Court Rules Order 28 rule 3 Cases cited: Austin, Nichols & Co Inc v Lodestar Anstalt [2009] FCA 1228 Barton v Minister for Foreign Affairs (1984) 2 FCR 463 DS Parklane Developments Pty Ltd v Korea First Finance Ltd (SCNSW, Santow J, unreported, 20 August 1997) Energy Drilling Inc v Petroz NL [1989] ATPR 40-954 Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336 Fina Research SA v Halliburton Energy Services Inc [2002] FCA 1331 Logue v Hansen Technologies (2003) 125 FCR 590; [2003] FCA 81 Maxim's Caterers Ltd v Magnona Pty Ltd [2009] ATMO 98 MindShare Communications Ltd v Orleans Investments Pty Ltd [2000] FCA 521 PS Chellaram & Co v China Ocean Shipping Co (1991) 102 ALR 321 Date of hearing: 10 May 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 18 Counsel for the Applicant: Mr C Dimitriadis Solicitor for the Applicant: Clayton Utz Lawyers Counsel for the Respondent: Ms SJ Goddard SC and Mr PA Maddigan Solicitor for the Respondent: Mok & Associates Solicitors IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1475 of 2009 BETWEEN: MAXIM'S CATERERS LIMITED Applicant AND: MAGNONA PTY LTD Respondent JUDGE: JAGOT J DATE OF ORDER: 10 MAY 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT upon the undertaking given by the applicant through its counsel to the Court and to the respondent that the applicant will not seek security for its costs pursuant to the Foreign Judgments (Reciprocal Enforcement) Order (Cap. 319A) or Order 71 of the Rules of the High Court (Cap. 4A) in respect of any application made by the respondent in Hong Kong to register any costs order made in the respondent's favour in proceedings NSD1475/2009 in the Federal Court of Australia: 1. The applicant provide security for the costs of the respondent in the amount of $15,000. 2. The security be provided in the form of payment into an interest-bearing account of an Australian owned bank (as recognised by the Australian Prudential Regulation Authority) under the joint control of the solicitors for the parties, who have given an undertaking to the Court in the form annexed and marked "A", such security to be provided within 14 days. 3. The respondent's notice of motion dated 21 April 2010 otherwise be dismissed. 4. The costs of the respondent's notice of motion dated 21 April 2010 be costs in the cause. 5. Liberty to restore on 2 days' notice in respect of compliance with these orders. ANNEXURE "A" – FORM OF UNDERTAKING [insert solicitor's name]'s UNDERTAKING TO THE COURT 1. On [insert date], the applicant paid the sum of $15,000 (Security) into the following bank account (Account) as security for the respondent's costs of the appeal: Bank: [insert - to be an Australian owned bank as recognised by the Australian Prudential Regulation Authority] Account name: [insert] BSB: [insert] Account number: [insert] Joint signatories: Edwin Wah Sing Mok and Catherine Mary Still 2. I undertake to the Court: (a) subject to paragraph (b) below, not to withdraw the Security (and any interest thereon) from the Account unless: (i) the Court expressly authorises the withdrawal of the Security; or (ii) with the written agreement of both the applicant and the respondent; and (b) to ensure the release by me and the co-signatory to the respondent of the amount to which the respondent is entitled under a costs order made by the Court in connection with the appeal, within 7 days of the amount of those costs being determined (pursuant to either agreement or taxation). DATE: ………………………………………… [insert name] Solicitor for the [insert party] Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1475 of 2009 BETWEEN: MAXIM'S CATERERS LIMITED Applicant AND: MAGNONA PTY LTD Respondent JUDGE: JAGOT J DATE: 10 MAY 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application for security for costs. The respondent, Magnona Pty Ltd (Magnona), seeks an order that the applicants, Maxim's Caterers Limited (Maxim's) provide security for costs in the sum of $145,950. The basis for the application is the fact that Maxim's is resident outside Australia (in Hong Kong) and has no assets in Australia. Maxim's defends the application on the ground that foreign judgments are enforceable in Hong Kong with the consequence that, at best, an order limited to the costs of enforcement in Hong Kong (not more than $15,000) could be made. 2 The main proceeding is an appeal under the Trade Marks Act 1995 (Cth) against the dismissal of Maxim's opposition to the registration of Magnona's trade mark (Maxim's Caterers Ltd v Magnona Pty Ltd [2009] ATMO 98). 3 Despite some debate in the evidence it is apparent that Maxim's has substantial assets in Hong Kong. It follows that the real issue between the parties is whether any order for security should be made where a costs order against Maxim's would be enforceable in the foreign jurisdiction and, if so, whether the order should be limited to a reasonable estimate of the costs of enforcement. 4 Maxim's submitted that three decisions (Barton v Minister for Foreign Affairs (1984) 2 FCR 463, DS Parklane Developments Pty Ltd v Korea First Finance Ltd (SCNSW, Santow J, unreported, 20 August 1997) and MindShare Communications Ltd v Orleans Investments Pty Ltd [2000] FCA 521) disclosed the principled basis for either rejecting the application or limiting the amount of security ordered to that of a reasonable estimate of the costs of enforcement in Hong Kong. According to Maxim's the discretion to order security is to be exercised judicially. Its purpose is to serve the interests of justice in a particular case. Where an applicant is resident outside the jurisdiction, as here, the respondent should not be at risk of being deprived of the benefit of a costs order in its favour. Where the foreign jurisdiction provides a clear and relatively easy method for enforcement of any costs order there is no justification for the making of an order for security. Alternatively, submitted Maxim's, there is no justification for ordering security in an amount materially greater than that which it would cost to enforce the judgment in the foreign jurisdiction (Hong Kong). 5 Magnona submitted that Maxim's residence outside of and lack of assets in Australia was a significant factor in favour of ordering security (PS Chellaram & Co v China Ocean Shipping Co (1991) 102 ALR 321 at 323). The mere fact that an Australian judgment for money can be enforced in Hong Kong, without more, is not a decisive factor against ordering security (Farmitalia Carlo Erba SrL v Delta West Pty Ltd (1994) 28 IPR 336). There is no presumption against the making of an order for security merely because Magnona could enforce a costs order in Hong Kong (Logue v Hansen Technologies (2003) 125 FCR 590; [2003] FCA 81 at [40]). 6 Section 56 of the Federal Court of Australia Act 1976 (Cth) provides that security for costs may be ordered "of such amount, and given at such time and in such manner and form, as the Court or Judge directs" (s 56(2)). Under O 28 r 3 of the Federal Court Rules, when considering an application for security, the Court may take into account that an applicant is ordinarily resident outside Australia. This reflects the principle explained by Gummow J in Energy Drilling Inc v Petroz NL [1989] ATPR 40-954 at 50-422 that the purpose for ordering security for costs against an applicant ordinarily residing outside Australia is protective, "to ensure that a successful respondent will have a fund available within the jurisdiction of this Court against which it can enforce the judgment for costs, so that the respondent does not bear the risk as to the certainty of enforcement in the foreign country and as to the time and complexity of the action there which might be necessary to effect enforcement". See to the same effect the observations of Lindgren J in Austin, Nichols & Co Inc v Lodestar Anstalt [2009] FCA 1228 at [23]-[24] that the real issue in real issue in a case of foreign residence is whether for that reason a respondent would be subject to any "unacceptable disadvantage". On this basis the principal purpose of the power is protective; to ensure that there is no "unacceptable disadvantage" to the respondent by reason of the applicant's foreign residence. 7 To the extent that Magnona stressed the breadth of the discretion it may be accepted that the discretion is to be exercised judicially having regard to the facts of the particular case. The difficulty for Magnona is that its submissions did not grapple with the considerations of justice underlying the discretion to order security for costs. In Farmitalia, for example, the enforceability of a costs order against the applicant in Italy was inadequate to persuade Heerey J not to make the order because there was simply no evidence that the applicant had any assets in Italy or elsewhere against which the costs order could be enforced. Accordingly, the schemes for reciprocal enforcement of judgments between Australia and Italy, as Heerey J found, could not undermine the respondent's prima facie entitlement in that case to an order for security. As Heerey J said at 342: The practical consequence of accepting Farmitalia's argument would be that a litigant ordinarily resident outside Australia would be able to resist any application under O 28 r 3(1)(a) merely by showing, that he, she or it was ordinarily resident in one of the countries specified in the Foreign Judgments Regulations. I do not think the Foreign Judgments Act or the Regulations should be treated in this way as an amendment, sub silentio, of O 28 r 3(1)(a). 8 The same cannot be said in the present case. Maxim's is not merely asserting reciprocal enforceability between Hong Kong and Australia. Maxim's has adduced evidence of substantial assets in Hong Kong, as well as evidence of the steps required to enforce a costs order against it in Hong Kong. Moreover, Maxim's made an open offer to Magnona to provide security in the amount of $15,000 (on its evidence, a generous estimate of the costs of enforcement in Hong Kong) together with an undertaking not to seek any order for security for costs in respect of any application for enforcement in Hong Kong. These factors present a different case from that in Farmitalia. 9 In Logue at [40] Weinberg J cited Farmitalia as authority for the proposition for which it stands, namely, that "a litigant ordinarily resident outside Australia cannot resist an application under O28 r3 merely by showing, without more, that he is ordinarily resident in one of the countries specified in regulations made under the Foreign Judgments Act 1991 (Cth)". In Logue the observation applied because there was evidence of the applicant having put in place a scheme to ensure his assets were outside Australia. Further, and as Weinberg J said at [55], the applicant's assets in Logue: … are not fixed, and can readily be moved beyond the reach of the respondents, should any order for costs be made against him. At any rate, the applicant has chosen not to provide the Court with any evidence regarding his current financial position. That is, of course, his right, and there may be sensible reasons from a forensic point of view as to why he would be reluctant to reveal the strength of his finances. However, it does not follow that, in a case of this type, the Court cannot take into account the absence of such evidence in determining whether to order security for costs. 10 Similarly, I note that another decision in which an order for security was made despite a capacity for reciprocal enforcement of foreign judgments, Fina Research SA v Halliburton Energy Services Inc [2002] FCA 1331, was one where, on the evidence, there was no "absolute certainty" about the procedures involved or the costs or delay likely to be suffered in seeking to enforce the judgment in the foreign jurisdiction there in question (Belgium). 11 Magnona's submissions distinguishing Barton, DS Parklane and Mindshare are not persuasive. It is true that Barton involved an applicant in person who might otherwise be barred from prosecuting his claim. Nevertheless, Morling J's analysis stressed the importance of the question whether there would be any real difference in effectiveness of a costs order against a plaintiff ordinarily resident in or outside Australia. In DS Parklane the same consideration was noted and was the basis for dismissal of the application for security. In Mindshare Katz J accepted this approach as a matter of principle (at [40]). 12 In the present case there is ample evidence that Maxim's has substantial assets in Hong Kong. Many of those assets could not be described as anything other than fixed and available for enforcement of a costs order if necessary. While there is evidence from Hong Kong counsel estimating the costs of enforcement in the range of $31,445 to $40,470, that evidence assumes the taking of various interlocutory steps which are difficult to accept as reasonably likely to be required. The competing evidence from Hogan Lovells, solicitors of Hong Kong, provides clear evidence that the enforcement procedure in Hong Kong is "straightforward and uncomplicated". For example, those solicitors can find no reported decisions of a Hong Kong Court requiring security for costs to be provided in respect of an application to register a foreign judgment. The solicitors estimated the likely costs in the amount of about $10,076 (assuming the costs all to be cumulative rather than alternative which appears likely). 13 In other words, this is a case where, on the available evidence and other than to the extent of the costs of enforcement of a costs order in Hong Kong, the fact that Maxim's is ordinarily resident outside Australia does not place Magnona at any greater risk in terms of its capacity to enforce a costs order than would be the case if Maxim's were ordinarily resident inside Australia. In this case, accordingly, the weight which foreign residency and lack of assets within Australia would ordinarily attract is largely, if not wholly, offset by the evidence that enforcement of any costs order in favour of Magnona will be able to be enforced in Hong Kong against Maxim's substantial assets in that jurisdiction with relative ease pursuant to procedures which are well defined and known. Using the words of McHugh J this is a case where, on the evidence, Maxim's "can point to other circumstances which overcome the weight of the circumstance that that person is resident out of and has no assets within the jurisdiction" (P S Chellaram & Co at 323). 14 It is true that it cannot be concluded that the making of an order for security would stifle the proceeding. It plainly would not. But that itself is not a decisive factor in favour of making an order for security where, as in this case, the making of an order for security for costs above the costs of enforcement in Hong Kong would not serve the protective purpose which underlies the exercise of the discretion. 15 Other factors (timeliness of application and prospects of success) are neutral. As to the former, timeliness is accepted but does not weigh against Maxim's. As to the latter, while deference to a specialised decision-maker may be appropriate, that principle cannot be given any real weight in this appeal at this stage. Magnona does have a decision in its favour below. The appeal, however, is to be heard and determined de novo. Similarly, Magnona's apparent concern about Maxim's good faith in bringing the appeal is not sufficient to weigh against Maxim's on this application. There is no cogent evidence that Maxim's present intention is to do other than prosecute this appeal with all due diligence and, in any event, steps can be taken to ensure that this occurs. The course of conduct to date, including whatever delay might have been suggested in Maxim's identification of the appeal grounds, is insufficient to infer any lack of genuine intention to prosecute the appeal properly and diligently. Similarly, at this stage, it cannot be inferred that Maxim's appeal lacks focus or involves unmeritorious grounds. 16 Assuming that Maxim's remains willing to undertake not to seek security for its costs in respect of any application by Magnona in Hong Kong to register any costs order made in Magnona's favour in this proceeding (which has been confirmed today by Maxim's counsel), a principled exercise of the discretion on the facts of this case calls for the making of an order for security limited to the costs of enforcement in Hong Kong (which Magnona, in its written submissions, accepted would be adequately covered by an order in the sum of $15,000). 17 As to costs, I have accepted Maxim's submissions primarily because of the evidence of and annexed to Ms Still's affidavit of 6 May 2010. But for that evidence, the necessary factual foundation for my conclusion would not have existed. As such, it seems to me that costs of the motion should be costs in the cause. I propose to so order unless the parties wish to make further submissions to the contrary. 18 For these reasons, the orders will be as proposed by Maxim's subject to the giving of the required undertakings which have been offered and will be accepted. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 11 May 2010