Federal Court of Australia Globaltech Corporation Pty Ltd v Reflex Instruments Asia Pacific Pty Ltd (No 2) [2023] FCA 476 File number: NSD 1745 of 2019 Judgment of: NICHOLAS J Date of judgment: 16 May 2023 Catchwords: PRACTICE AND PROCEDURE - whether stay of costs judgment should be granted pending determination of appeal – whether there should be a set-off of such costs order against costs order made in other proceedings between the same parties – whether stay should be granted in aid of appeal or rights of set-off Held: enforcement of costs order stayed until further order – order for set-off of costs orders made Legislation: Federal Court of Australia Act 1976 (Cth) s 23 Federal Court Rules 2011 (Cth) r 36.08 Cases cited: Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175 Williamson v Rumsley (No 2) [2015] FCA 1246 Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Number of paragraphs: 33 Date of hearing: 11 May 2023 Counsel for the Applicant/Cross-Respondent: Mr AJ Ryan SC Solicitor for the Applicant/Cross-Respondent: Bird & Bird Counsel for the Respondent/Cross-Claimant: Ms PL Arcus Solicitor for the Respondent/Cross-Claimant: Gilbert + Tobin ORDERS NSD 1745 of 2019 BETWEEN: GLOBALTECH CORPORATION PTY LTD ACN 087 281 418 Applicant AND: REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD ACN 124 204 191 Respondent AND BETWEEN: REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD ACN 124 204 191 Cross-Claimant AND: GLOBALTECH CORPORATION PTY LTD ACN 087 281 418 Cross-Respondent order made by: NICHOLAS J DATE OF ORDER: 16 May 2023 THE COURT ORDERS THAT: 1. Enforcement of the Registrar's order 2 of 17 March 2023 be stayed until further order. 2. Subject to the outcome of the appeal against Rofe J's orders of 28 October 2022 in Proceeding NSD 1040 of 2019 and the assessment of costs by the Registrar of costs payable to the respondent by the applicant pursuant to those orders, such costs be set-off against any amount payable by the respondent to the applicant pursuant to the Registrar's order 2 of 17 March 2023. 3. Liberty to apply on 7 days' notice. 4. The applicant pay the respondent's costs of the interlocutory application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT NICHOLAS J: Background 1 Before me is an interlocutory application filed by the respondent in the proceeding ("Reflex") seeking a stay of an order for the payment of costs (order 2) made by a Registrar on 17 March 2023. That order was made after the Registrar assessed costs awarded to the applicant ("Globaltech") pursuant to costs orders made by the trial judge (Jagot J) on 12 July 2022 (order 2) and 26 July 2022 (order 9) in a patent proceeding brought by Globaltech against Reflex. The Registrar fixed the costs payable pursuant to her Honour's orders in the amount of $835,705. The final orders made by the trial judge were the subject of an appeal brought by Reflex. That appeal (Proceeding NSD 618 of 2022) was heard by a Full Court in February of this year with judgment reserved. The orders made by her Honour on 26 July 2022 included an order (order 11) granting Reflex liberty to apply for an order "to set-off its costs". 2 The first of the orders sought by Reflex in the present application is to stay the costs order of 17 March 2023 until the determination of the appeal in Proceeding NSD 618 of 2022 or further order. The second order sought by Reflex is an order that it: is entitled to set off the whole amount of its liability to [Globaltech] under order 9 of the orders dated 26 July 2022 and order 2 of the orders dated 17 March 2023 against Globaltech's liability to Reflex: (a) under orders 14 and 15(d) of the orders dated 28 October 2022 in Federal Court Proceeding NSD 1040 of 2019; and/or (b) any order for a judgment sum made in Federal Court Proceeding NSD 1089 of 2016. 3 The orders referred to in (a) are orders made on 28 October 2022 (orders 14 and 15(d)) by Rofe J as trial judge in a patent infringement proceeding between Australian Mud Company Pty Ltd ("AMC") and Reflex, as applicants, and Globaltech, Globaltech Pty Ltd, Boart Longyear Limited and Boart Longyear Australia Pty Ltd ("BLAPL"), as first to fourth respondents, respectively. Rofe J made an order (order 14) requiring the respondents to pay the applicants' costs of and incidental to the applicants' claim in the proceeding in respect of liability for infringement. BLAPL, the sole cross-claimant, was ordered (order 8) to pay the applicants' costs of the cross-claim seeking revocation of the patent. 4 The proceeding referred to in (b) is a proceeding commenced by Reflex and AMC as applicants against Globaltech and Globaltech Pty Ltd as respondents for patent infringement which was heard by Besanko J (Proceeding NSD 1089 of 2016). On 14 December 2018 his Honour made final orders including an order (order 9) that the respondents pay the applicants' costs of the proceeding to date. Those costs were subsequently assessed and paid. His Honour also ordered (order 8) that there be an enquiry as to damages or profits in respect of the respondents' infringements. An appeal brought against his Honour's orders by Reflex and AMC was dismissed. 5 The enquiry into the applicants' entitlement to pecuniary relief is fixed for hearing before Besanko J in June this year. The evidence indicates that the amount to which the applicants may ultimately be entitled to receive by way of pecuniary award is in the vicinity of $7.0 million (including interest). It also seems likely, at least on the evidence before me, that Globaltech will also be liable for a significant amount in costs incurred by Reflex and AMC of and incidental to the determination of their entitlement to the pecuniary award. Further costs incurred by Reflex and AMC in connection with their claim for pecuniary relief are estimated by their solicitor to already exceed $1.0 million. 6 There is evidence before me indicating that the costs awarded to the applicants in the proceeding heard by Rofe J are in the vicinity of $2.0 million. The assessment of those costs is presently being undertaken by a Registrar. The evidence indicates that the costs in that matter are likely to be assessed and fixed by the Registrar during the course of the next few months. 7 Globaltech and the other respondents in the proceeding heard by Rofe J brought an appeal against her Honour's orders. That appeal is listed for hearing on 22 and 23 May 2023. No order has been made staying the costs orders made by her Honour. 8 There is unchallenged evidence to suggest that, following delivery of judgment by Rofe J, a US based Boart Longyear entity named Veracio Ltd ("Veracio") acquired more than half the issued share capital in Globaltech from Votraint No 1609 Pty Limited ("Votraint"). Votraint and Veracio are wholly owned subsidiaries of Boart Longyear Group Ltd. 9 On 28 March 2023 Reflex and AMC filed an interlocutory application seeking a freezing order against Globaltech and Globaltech Pty Ltd. That application was heard by Besanko J on 5 April 2023 who reserved his decision. It is apparent from correspondence exchanged between the parties in connection with the present application that Globaltech did not adduce any evidence as to its financial circumstances in the application heard by Besanko J. During the course of that hearing there were statements by Senior Counsel for those companies which appear to accept that they are, or at least may be, impecunious. The evidence of those statements has not been addressed or qualified by any evidence called by Globaltech in this proceeding. Globaltech did not call any evidence on the present application as to its financial circumstances or otherwise. 10 I was not a member of the Full Court that heard the appeal from Jagot J and the parties have not addressed me on the merits of Reflex's appeal. That said, it was not suggested by Globaltech that the appeal brought against her Honour's judgment was not commenced in good faith and on reasonable grounds. In the absence of any suggestion to the contrary, I propose to deal with the application for a stay of the costs orders made in this proceeding on that basis. Stay 11 On the question of whether there should be a stay of the Registrar's costs order, Mr Ryan SC, who appeared for Globaltech, referred me to r 36.08 of the Federal Court Rules 2011 (Cth) ("the Rules") and Abraham J's decision in Viagogo AG v Australian Competition and Consumer Commission [2021] FCA 175 in which her Honour refers to the relevant principles and authorities. The starting point is that the judgment the subject of the appeal is presumed to be correct. While it is not necessary for the applicant to establish the existence of special or exceptional circumstances in order to obtain a stay, it must establish some proper basis for a stay. As Abraham J observed at [12]: The party seeking the order bears the onus of demonstrating a proper basis for a stay, which must be fair to all parties: Alexander v Cambridge Credit Corporation Ltd (receivers appointed) (1985) 2 NSWLR 685 (Alexander) at 695. That party must demonstrate that there is a real risk that it will suffer prejudice or damage if a stay is not granted, which will not be redressed by a successful appeal: Kalifair Pty Ltd v Digi-Tech (Australia) Ltd, McLean Tecnic Pty Ltd v Digi-Tech (Australia) Ltd [2002] NSWCA 383; (2002) 55 NSWLR 737 (Kalifair) at [18]; Flight Centre Limited v Australian Competition and Consumer Commission [2014] FCA 658 (Flight Centre) at [9(f)]. This requirement will be satisfied if a successful appeal will be rendered nugatory unless a stay is granted: Ali v Australian Competition and Consumer Commission [2020] FCA 860 at [11]; Australian Competition and Consumer Commission v BMW (Australia) Ltd (No 2) [2003] FCA 864 (BMW) at [5]; Alexander at 695; Kalifair at [18]. 12 A significant issue arising on the present application concerns Reflex's delay in making the application for the orders it seeks. No application was made to Jagot J for a stay of the costs orders made by her Honour although other orders (including for delivery up) were stayed pending the determination of any appeal. 13 With regard to the application for a stay, there is no evidence which directly explains why Reflex waited until April of this year to move for a stay of the costs orders made by Jagot J. In the meantime, both Reflex and Globaltech have participated in a not insignificant costs assessment process which culminated in the Registrar's orders of 17 March 2023. In the event that the appeal against Jagot J's orders is successful, then it is likely that the costs incurred by Globaltech in having its costs assessed will have been wasted. That said, if a stay had been applied for in July 2022 (which would almost certainly have been resisted) and refused, and the appeal was subsequently allowed, then the costs associated with the costs assessment would also have been wasted. 14 I am satisfied that there is a significant risk that Globaltech will not be able to repay any amount paid to it by Reflex pursuant to the Registrar's costs order in the event that Reflex's appeal against Jagot J's orders is successful. In the proceeding before Besanko J, Globaltech's own counsel suggested that Globaltech was or may be impecunious. There is no other evidence to indicate what would become of the sum of $835,705 if it was paid to Globaltech today and Reflex's appeal was subsequently allowed. The evidence suggests that most of Globaltech's assets are intangible assets consisting of patents and registered trade marks and that many of these are charged in favour of Votraint. There is no evidence to suggest that Globaltech will suffer any prejudice if the Registrar's costs order was stayed pending the determination of the appeal. 15 I consider this is a case in which it would be appropriate to grant a stay pursuant to r 36.08 of the Rules. However, I prefer to grant the stay sought pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) in aid of the set-off which I also propose to order for reasons I will now explain. Set-Off 16 It is common ground that the Court has jurisdiction to order a set-off of costs orders made by it in different proceedings. The question is whether the Court should in the exercise of its discretion make an order for set-off in this case. The orders made by Jagot J demonstrate that Reflex was contemplating making an application for a set-off of some description in July but that it took no steps to do so until April of this year. 17 As White J explained in Australian Beverage Distributors v Evans & Tate Premium Wines Pty Ltd (2006) 230 ALR 184 at [68]: … set-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings. The jurisdiction is explained in many cases dealing with claims by solicitors to assert a lien over a judgment for costs in favour of their client where the opposite party has obtained judgment against their client in the same or in other proceedings: Edwards v Hope (1885) 14 QBD 922 at 926–7 (Edwards); Reid v Cupper [1915] 2 KB 147; Puddephatt v Leith (No 2) [1916] 2 Ch 168 especially at 173–4 (Puddephatt); Re A Debtor (No 21 of 1950) [1951] Ch 313; [1950] 2 All ER 1129. See also Williamson v Rumsley (No 2) [2015] FCA 1246 at [15]-[16], Aristocrat Technologies Australia Pty Ltd v Allam [2017] FCA 812 and the various authorities referred to by Perram J at [11]-[14]. His Honour noted that the jurisdiction to set-off costs awards extends to costs awarded in different proceedings and, in an appropriate case, between different parties. His Honour also noted that a set-off may be available even where what is sought to be set-off is an unliquidated costs order. 18 In opposing the order for set-off, Senior Counsel for Reflex, Mr Ryan SC, placed emphasis on two matters which were said to weigh heavily against making any such order. The first was that the various proceedings heard by Besanko J, Jagot J and Rofe J did not involve either the same parties or the same patents. The second was the delay in the bringing of the present application. 19 For present purposes I will confine my attention to the application for a set-off of the costs awarded in favour of Reflex and AMC against Globaltech pursuant to order 14 made by Rofe J on 28 October 2022. As mentioned, that costs order was made in favour of Reflex and AMC, and against various respondents including Globaltech. All of those respondents are, however, members of the Boart Longyear group and, so far as the evidence shows, are controlled by the ultimate holding company, Boart Longyear Group Ltd. In my view, what is most significant in this case is that the relevant proceedings have all taken place in this Court, all involve allegations of patent infringement and invalidity, and all involve different versions of Globaltech's TruCore™ tool. Moreover, Reflex and Globaltech were parties to each proceeding. 20 In my view, there has been no material delay in seeking the order for set-off given Reflex advised Globaltech that it would seek the order for set-off soon after the Registrar made his orders on 17 March 2023. 21 It is true that the costs order made by Rofe J in relation to the cross-claim (order 8) were not made against Globaltech. However, there was a costs order made in favour of Reflex against Globaltech (order 14) which are now being assessed. I was informed by Ms Arcus, counsel for Reflex, that of the total costs which are payable pursuant to the costs order made by Rofe J, approximately 80% of those costs will be attributable to the liability issues. Even if it is assumed that a significant proportion of the costs claimed by Reflex in respect of the liability issues was disallowed, the amount payable to Reflex and AMC following assessment of those costs is still likely to exceed those payable by Reflex under the Registrar's order of 17 March 2023 by a very considerable margin. Precisely how much is payable by Globaltech to Reflex pursuant to Rofe J's orders will be known once the assessment process has been completed and an order for the payment of the relevant amount has been made by the Registrar. Disposition 22 In my opinion, Reflex should be allowed to set-off its presently unliquidated claim to costs payable pursuant to Rofe J's order 14 made on 28 October 2022 against its liability under the Registrar's order 2 made on 17 March 2023. Assuming that the amount assessed exceeds the sum of $835,705 (which on the evidence is likely), that will be the end of the matter, subject of course, to the outcome of one or other of the outstanding appeals. The order I will make will be tailored accordingly. 23 I do not propose to make an order with respect to any set-off of the unliquidated claim which is yet to be determined by Besanko J. There are no unpaid costs orders in that proceeding. So far as the claim for pecuniary relief is concerned, while I accept that it is likely that there will be a substantial monetary award in Reflex's favour, given the order for set-off to be made based on Rofe J's costs order, I do not think there is any purpose to be served in making any further order in respect of what still remains an unliquidated claim yet to be heard and determined. 24 The orders I make will not preclude Reflex from seeking to rely on the claim being heard by Besanko J or any money judgment in that proceeding by way of set-off should it see fit. In that regard, it will be open to Reflex to make a further application for an order for set-off based on its entitlement to damages or profits the subject of the proceeding before his Honour in the event that Rofe J's orders are set aside. 25 The orders I propose to make are as follows: 1. Enforcement of the Registrar's costs orders of 17 March 2023 be stayed until further order. 2. Subject to the outcome of the appeal against Rofe J's orders of 28 October 2022 and the assessment of costs by the Registrar of costs payable to Reflex by Globaltech pursuant to those orders, such costs be set-off against any amount payable by Reflex to Globaltech pursuant to the Registrar's orders of 17 March 2023. 26 What, if any, further orders should be made can be considered once the outcome of the two appeals is known and once the costs assessment still being undertaken by the Registrar pursuant to Rofe J's orders has been completed. 27 Reflex offered to pay the amount of $835,705 into Court as a condition of any order staying the enforcement of the Registrar's costs order. The unchallenged evidence indicates that Reflex is a subsidiary of an ASX listed company, Imdex Limited ("Imdex") and that Reflex is party to a deed of cross-guarantee with Imdex. The evidence shows that Imdex had net assets of approximately $300 million as at 30 June 2022 with a net profit after tax for the financial year ending that date of approximately $45 million. 28 Although Reflex offered to make the payment into Court if required, it remains for me to determine whether it would be appropriate to impose such a requirement on Reflex as a condition of the orders I propose to make. 29 Mr Ryan SC did not submit that there was a risk that Reflex would not repay to Globaltech the $835,705 if so ordered. There are two matters that would weigh against any such submission had it been made; first, there is the financial position of Imdex as shown by the evidence and, second, the fact that Globaltech has a liability for damages and profits for what is likely to be a much greater amount. All relevant matters considered, I do not think it is necessary for the purpose of achieving fairness or justice between the parties, to impose on Reflex any requirement that there be a payment into Court. 30 For the avoidance of doubt, while the order I make will prevent Globaltech from enforcing the Registrar's costs order, interest on the relevant amount shall continue to accrue at rates prescribed under the Rules. 31 Reflex has enjoyed a substantial measure of success in this application. In those circumstances, Globaltech should pay Reflex's costs of the interlocutory application. 32 Each party will have liberty to apply on 7 days' notice. 33 Orders accordingly. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Nicholas. Associate: Dated: 16 May 2023