Insight Water Technologies, Inc v Pure Technologies US Inc

This was a Federal Court patents-area proceeding, but the judgment was not about whether a patent was valid or infringed. It was about a procedural question that can have major commercial consequences in cross-border litigation: security for costs.

Insight Water Technologies, Inc, a US company incorporated in Delaware and domiciled in California, had started proceedings against Pure Technologies US Inc in Australia. There was no dispute that Insight was ordinarily resident outside Australia and had no assets in Australia. Insight also accepted that it was susceptible to a security for costs order. That narrowed the fight to quantum and structure.

Pure asked the Court to order a first tranche of AUD $350,000 to cover its likely costs up to the close of affidavit evidence. Insight tried to keep the amount much lower. Its main argument was that security should be limited to about USD $20,000, being the estimated cost of enforcing an Australian costs order in California if enforcement was not opposed. Failing that, it argued that any first tranche should stop earlier, at the completion of Insight’s evidence in chief.

The practical setting is easy to recognise. If an overseas claimant loses in Australia and has no local assets, the successful respondent may need to enforce its costs order in another country. That can involve delay, uncertainty and extra expense. Security for costs is designed to reduce that risk by creating a fund or equivalent security within the Court’s reach.

The turning point in the judgment was not a complicated legal doctrine. It was an evidence gap.

Insight’s solicitors had said in correspondence that Insight held significant assets in the United States. At a case management hearing on 12 December 2025, counsel for Insight indicated that evidence would be filed about the company’s asset position in the United States, including an affidavit about assets and an affidavit from a US lawyer.

The Court expressly noted that this issue mattered because it could affect whether security should be limited to the cost of enforcement overseas or instead be provided in Australia.

But no evidence of Insight’s asset position was filed. The Court described the position as involving only bare assertions in submissions and correspondence that Insight held assets overseas. The financial position of Insight was not known.

Insight did file two affidavits. One was from its CEO, Mr Shenkiryk. The other was from Mr Wright, a US attorney retained as an independent expert witness. Mr Wright was asked to explain the process for enforcing an Australian costs order in California and to estimate the legal costs involved. He estimated approximately USD $20,000 where the judgment debtor did not oppose recognition.

He also expressed the view that California was the most appropriate forum for enforcement because that was the state in which Insight would hold its assets, but the Court noted that this appeared to be based simply on the assumption that Insight was domiciled in California, not on factual material about actual assets.

Mr Shenkiryk gave an undertaking that if Pure sought to enforce any costs judgment in the United States, Insight would not resist enforcement, including by not opposing any petition for recognition. He also gave evidence that Insight proposed to transfer USD $20,000 into Pure’s solicitors’ trust account as security for enforcement costs in California.

None of that answered the central question. Neither affidavit addressed Insight’s financial position in Australia, the United States or anywhere else. So the Court had no evidence that Insight had assets in California or elsewhere sufficient to satisfy a costs order.

The Court’s power came from s 56 of the Federal Court of Australia Act 1976 (Cth). The judgment says the Court has a broad discretion to order security for costs in the manner and form it directs, provided the discretion is exercised judicially.

The Court repeated several established principles. First, the fact that a party bringing proceedings is resident outside Australia and has no assets within Australia is a significant circumstance in favour of security. Secondly, the purpose of security in that setting is protective. It is meant to ensure that a successful respondent has a fund available within the Court’s jurisdiction against which it can enforce a costs judgment, rather than bearing the risk, delay and complexity of foreign enforcement.

Thirdly, there is no automatic rule that security must be ordered whenever an applicant is overseas. The Court still asks what justice requires in the particular case and whether there are any special circumstances or countervailing factors that justify refusing security.

In this case, Insight did not identify any countervailing factor against security. Its real argument was narrower. It said the amount should be limited to the cost of enforcing a future Australian costs order in California.

The judgment then highlighted the specific test for when that narrower approach may be available. Referring to earlier authorities, the Court said limiting security to the costs of enforcing a judgment in the foreign jurisdiction may be appropriate where there are arrangements in place for enforcement of Australian judgments in that jurisdiction and the Court is satisfied that the applicant has sufficient assets there to satisfy a costs order.

Another authority described the strongest case for that approach as one where there is reciprocal enforcement legislation and evidence that the foreign applicant is reputable and financially substantial.

The Court held that the absence of evidence about Insight’s assets was fatal to its argument. Because there was no evidence that Insight had sufficient assets in California or elsewhere, there was no basis to limit security to the estimated cost of enforcement in the United States. The Court said it was not even necessary in those circumstances to decide whether there was reciprocal enforcement legislation between Australia and California or whether Pure would encounter difficulties enforcing there.

After rejecting Insight’s primary argument, the Court turned to the amount of security. The judgment explains that security is not meant to be a complete and certain indemnity for all costs actually incurred. Nor is the exercise an exact science. The Court can take a broad-brush approach based on the information before it.

Pure sought a first tranche only, not security for the whole proceeding. It relied on evidence from an experienced principal of its solicitors, Ms Crooks, who gave evidence of costs already incurred and estimated future costs up to the close of affidavit evidence.

According to that evidence, Pure’s costs to date were $32,005 after specified discounts, and its estimated further costs to the close of affidavit evidence were about $406,000 after specified discounts, giving a total of about $438,000 in recoverable costs for that period. Pure sought security of $350,000, which represented a further 20% discount on that amount.

Insight did not challenge the reasonableness of those cost estimates. Instead, it argued that if security was to be ordered in Australia, the first tranche should stop at the completion of its evidence in chief. The Court rejected that fallback position for several reasons.

First, the Court said it made little sense to provide security only up to the completion of Insight’s evidence in chief because the first substantive tranche of Pure’s costs would be the costs of preparing its evidence in answer. Insight’s proposed cut-off would provide no security for that stage.

Secondly, the Court found that the figure Insight relied on for that alternative approach was unclear and did not appear to be correct when compared with the cost evidence.

Thirdly, the Court rejected Insight’s submission that the speculative possibility of Pure later filing an infringement proceeding against Insight was relevant to the amount of security to be ordered on Insight’s claim at this stage. That possibility might matter later, but it was not a reason to avoid ordering security up to the close of affidavit evidence now.

The Court concluded that AUD $350,000 was an appropriate and reasonable first tranche. It ordered that Insight provide that security by an irrevocable bank guarantee issued by an Australian bank in favour of Pure, or by payment into court, by 4:00 pm on 4 March 2026. If security was not provided, the proceedings against Pure were to be stayed until it was. Insight was also ordered to pay Pure’s costs of the interlocutory application.

The Court also noted that because this was only a first tranche, Pure could apply later for an additional tranche if appropriate.

For Australian businesses defending claims, this case is a practical reminder that security for costs can be an important risk-control tool where the claimant is overseas and asset visibility is poor. If the claimant has no Australian assets, ask early whether there is reliable evidence of overseas assets and whether those assets appear sufficient to satisfy a costs order. If not, a security application may reduce the risk of a hollow costs victory.

For overseas businesses bringing claims in Australia, the lesson is equally direct. Do not assume the Court will accept a low security amount just because a foreign lawyer can explain how an Australian judgment might be recognised overseas. The Court may want evidence of your actual asset position, including where assets are located and whether they are sufficient to satisfy a costs order. A promise not to resist enforcement may help on process, but it does not prove capacity to pay.

There is also a timing lesson. The Court noted that Insight had been given an opportunity to identify the assets it held in California, including after correspondence from Pure’s solicitors and after the case management hearing made the issue obvious. By the time the application was decided, the absence of that evidence was decisive. Businesses should therefore treat asset evidence as an early workstream, not something to leave until after submissions are drafted.

Finally, this case shows the practical difference between arguing about enforcement cost and proving enforceability in substance. A party may be able to show that recognition proceedings in a foreign court are relatively cheap if unopposed. But unless it also shows there are assets in that jurisdiction to satisfy the order, the Court may still prefer security within Australia.

Several practical checkpoints come out of the judgment.

First, if your argument is that security should be limited to overseas enforcement costs, ask whether you can prove the overseas asset base. The judgment indicates that the Court may consider a lower amount where there are enforcement arrangements in place and the applicant has sufficient assets in the foreign jurisdiction. Without that second element, the argument may fail at the threshold.

Secondly, think carefully about the stage to which a first tranche should run. The Court accepted a first tranche up to the completion of evidence, not merely to the completion of the applicant’s evidence in chief, because that better protected the respondent’s next major cost exposure, including evidence in answer.

Thirdly, remember that the Court can use a broad-brush approach to amount. You do not need a final taxation-style assessment at this stage. Reasoned evidence of likely costs for the relevant stage may be enough, especially if the other side does not challenge the estimates.

Fourthly, if you are offering alternatives such as undertakings or trust account payments, make sure they actually answer the risk the Court is concerned about. In this case, the Court was concerned with whether a future costs order could be satisfied, not just whether recognition proceedings in California would be unopposed.

Finally, watch the dates. Here, the judgment was delivered on 11 February 2026 and the security had to be provided by 4:00 pm on 4 March 2026. Missing a deadline like that can stop the case in its tracks.