Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Adnunat Pty Ltd (ACN 005 816 268) v ITW Construction Systems Australia Pty Ltd (ACN 004 297 009) [2009] FCA 499

CONTRACTS – formation – approach where no discernable offer and acceptance – where party to existing contract with supplier sold entire business to a related third party – whether contract between third party and supplier to be inferred from conduct.

PRACTICE AND PROCEDURE – summary judgment – whether no reasonable prospect of successfully denying the existence of alleged contract – Federal Court of Australia Act 1976 (Cth) s 31A.

Federal Court of Australia Act 1976 (Cth) s 31A
Patents Act 1990 (Cth) s 138

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 followed
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 applied
Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd [2008] FCA 1257 cited
Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 cited
Gissing v Gissing [1971] AC 886 cited
Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 cited
Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Pty Ltd (2001) Aust Contract R 90-129 applied
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326 cited
Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 applied
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 followed
Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 cited
Tolhurst v The Associated Portland Cement Manufacturers (1900) Limited [1903] AC 414 distinguished
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 cited
White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 followed

ADNUNAT PTY LTD (ACN 005 816 268) and OLIVETTI CONCRETE LIFTING SYSTEMS PTY LTD (ACN 007 019 212) v ITW CONSTRUCTION SYSTEMS AUSTRALIA PTY LTD (FORMERLY ITW CONSTRUCTION PRODUCTS AUSTRALIA PTY LTD, ALSO FORMERLY ITW RAMSET AUSTRALIA PTY LTD) (ACN 004 297 009) and REID CONSTRUCTION  SYSTEMS PTY LTD (IN LIQUIDATION) (ACN 010 099 617); ITW CONSTRUCTION SYSTEMS AUSTRALIA PTY LTD (FORMERLY ITW CONSTRUCTION PRODUCTS AUSTRALIA PTY LTD, ALSO FORMERLY ITW RAMSET AUSTRALIA PTY LTD) (ACN 004 297 009) v ADNUNAT PTY LTD (ACN 005 816 268)

VID 884 of 2007

SUNDBERG J
14 MAY 2009
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 884 of 2007
BETWEEN:

ADNUNAT PTY LTD (ACN 005 816 268)
First Applicant

OLIVETTI CONCRETE LIFTING SYSTEMS PTY LTD (ACN 007 019 212)
Second Applicant

ITW CONSTRUCTION SYSTEMS AUSTRALIA PTY LTD (FORMERLY ITW CONSTRUCTION PRODUCTS AUSTRALIA PTY LTD, ALSO FORMERLY ITW RAMSET AUSTRALIA PTY LTD) (ACN 004 297 009)
Cross-Claimant
AND:

ITW CONSTRUCTION SYSTEMS AUSTRALIA PTY LTD (FORMERLY ITW CONSTRUCTION PRODUCTS AUSTRALIA PTY LTD, ALSO FORMERLY ITW RAMSET AUSTRALIA PTY LTD) (ACN 004 297 009)
First Respondent

REID CONSTRUCTION  SYSTEMS PTY LTD (IN LIQUIDATION) (ACN 010 099 617)
Second Respondent

ADNUNAT PTY LTD (ACN 005…

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Details
Case
[2009] FCA 499
Decision Date

CaseChat Overview and Summary

The case of Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd concerns an application by Adnunat for summary dismissal of a cross-claim brought by ITW. Adnunat, the registered proprietor of a patent for a concrete lifting anchor, argues that it has a complete defence to ITW’s cross-claim by virtue of an alleged agreement between the parties, whereby ITW undertook not to challenge the validity of, or seek to revoke, any claim of the patent. The court was required to decide whether ITW is bound by the alleged agreement, and whether ITW has reasonable prospects of defending its cross-claim.

The court found that Adnunat’s application for summary judgment would be inappropriate in this case. The court noted that the existence of a binding agreement between Adnunat and ITW could not be inferred solely from the conduct of the parties, but would require evidence from those who played a role in the relationship between the parties. The court observed that the credibility of the individuals involved on both sides could be crucial in determining whether a contract by conduct existed. The court also noted that granting the relief sought by Adnunat on this application would have the effect of determining, summarily and in its favour, an important aspect of Adnunat’s own claim, which it would otherwise have to prove at trial. The court concluded that ITW had reasonable prospects of defending Adnunat’s claim that it is bound by the Settlement Deed and therefore prosecuting its cross-claim.

Accordingly, the court dismissed Adnunat’s motion for summary dismissal and ordered Adnunat to pay ITW’s costs of the motion. The court found that the alleged agreement between Adnunat and ITW would require further examination at trial, and that the case was not suitable for summary judgment. The court’s decision highlights the importance of evidence in establishing the existence of a binding agreement, and the need for a full trial to determine the facts of the case.

Orders

Orders of the court

1. The cross-respondent’s motion notice of which was filed on 27 October 2008 be dismissed.

2. The cross-respondent pay the cross-claimant’s costs of the motion.

Note:

Background

Background to the litigation

This is an application by the cross-respondent (Adnunat) for summary dismissal of the cross-claimant’s (ITW) claim pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) (the Act). Adnunat is the registered proprietor of Australian Patent No. 752353 (the Patent). The Patent concerns an invention of a concrete lifting anchor (the “Lifting System”) that can be embedded into pre-cast concrete elements so as to hoist them into place in the construction of walls for both commercial and residential buildings. By its cross-claim, ITW seeks a declaration that the claims of the Patent are invalid and an order pursuant to s 138 of the Patents Act 1990 (Cth) revoking the Patent. Adnunat contends that it has a complete defence to the cross-claim by virtue of an agreement it says is in place between it and ITW, a term of which is an undertaking by ITW not to challenge the validity of, or seek to revoke, any claim of the Patent. Adnunat’s current application turns on the existence, or otherwise, of this agreement. If it exists, then it follows that ITW is in breach of the agreement in bringing the cross-claim and will be barred from so doing.BACKGROUND It is necessary to refer in some detail to the circumstances that have given rise to the current litigation and this application for summary judgment. I should emphasise that, in what follows, I make no findings of fact: see Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 at [6] (Finkelstein J); Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 at 282. Rather, what follows is a summary of the evidence adduced by Adnunat, given by way of an affidavit of Mr Marco Olivetti, its General Manager. Aside from a short affidavit exhibiting a business name extract of the second applicant, ITW adduced no other evidence.Earlier proceedings In August 2003, Adnunat commenced proceedings against the second respondent, Reid Construction Systems Pty Ltd (Reid), seeking injunctive relief and damages for alleged infringements of the Patent. Reid denied infringement and brought a cross-claim that the Patent was invalid for lack of novelty and lack of inventive step. Following mediation in December 2003, Adnunat and Reid agreed to settle their dispute and executed a “Settlement Deed” on 23 December 2003. The parties to the Settlement Deed were Adnunat, Reid and a third company registered in New Zealand, Nylex (New Zealand) Limited, against whom Adnunat had threatened similar litigation. Relevantly for present purposes, the Settlement Deed contained the following terms:·Reid would make two payments of $60,000 to Adnunat, at 3 months and 6 months following execution of the Settlement Deed: cl 2.·Adnunat granted to Reid a non-exclusive licence “for Reid … to arrange for the manufacture for Reid … to sell, supply or offer for sale or supply” three anchor products of varying lifting capacity, the “Two Tonne Product”, “Five Tonne Product” and “Nine Tonne Product”. The licences in respect of the first two were effective for 12 months, and the third, for 6 months: cl 3.1.·Reid would pay royalties in respect of sales or supplies of the Five Tonne Product (20 cents) and Nine Tonne Product (35 cents), payable at the end of each 3 month calendar period: cl 3.2.·Adnunat agreed to supply Reid with “9 tonne anchors” manufactured by Adnunat in accordance with claim 1 of the Patent, at a cost price of $5.20 per anchor until 30 June 2004 and subject to review thereafter. In reviewing the cost price after 20 June 2004, Adnunat was entitled to “in its absolute discretion, increase or decrease the price”, subject to the price being a “reasonable market price”: cl 3.4.·Reid undertook to refrain from (and to ensure its Related Bodies Corporate refrained from), among other things, selling or supplying in Australia any lifting anchors falling within the claims of the Patent or otherwise meeting the description of Reid’s then current lifting system products (the Patent Infringement Term): cl 4.·Reid undertook that neither it nor any of its Related Bodies Corporate would challenge the validity of any claim of the Patent or otherwise seek to revoke any claim of the Patent (the No Challenge Term): cl 4.1.·Adnunat released Reid from any claims or liabilities connected with or incidental to the proceedings, the parties indemnified each other in respect of any claims or loss arising out of or in connection with the proceedings and the parties agreed to discontinue each of their claims in the proceedings: cll 5.1, 5.3 and 6.1.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

SUNDBERG J
Adnunat however did not advance this matter in its submissions. I am not in a position to draw inferences either way in relation to their knowledge or intentions in connection with the parties’ relationship. In contract by conduct cases, the key individuals involved will usually provide probative and helpful evidence, both in chief and in cross-examination. In this case, I am of the view that such evidence will be necessary.CONCLUSION I do not consider that ITW has no reasonable prospects of defending Adnunat’s claim that it is bound by the Settlement Deed and therefore prosecuting its cross-claim. In so concluding, I have also taken into account the matters raised by ITW at [35]-[36] above, which will require some examination at trial. Accordingly, Adnunat’s motion should be dismissed with costs. In the result, it is not necessary that I deal with the additional submission made by ITW that the No Challenge Term is in any event invalid as an unlawful restraint of trade.

Ratio Decidendi

Legal Principle Established

Established by: SUNDBERG J

Precisely how a claim is assessed will depend on the nature of the cause of action, as well as the identity of the parties, the pleaded facts and the evidence adduced: see Jefferson Ford 167 FCR at [126] (Gordon J). Although this application is for dismissal of ITW’s cross-claim, the allegations to be assessed are not concerned with the claim of invalidity. They concern the alleged existence of a separate and distinct agreement. That agreement and its alleged terms arise in the first instance as part of Adnunat’s primary claim: see pars 14–20, esp 17–19, of the applicants’ statement of claim. As a consequence, granting the relief sought by Adnunat on this application would have the effect of determining, summarily and in its favour, an important aspect of Adnunat’s own claim, which it would otherwise have to prove at trial. It is in that context that ITW advanced no substantive evidence in response to the matters deposed to by Mr Olivetti. The thrust of ITW’s submissions appeared to be that Adnunat, bearing the ultimate onus of proving that a binding agreement exists, failed to demonstrate even a prima facie case that ITW has no reasonable prospects of successfully proving otherwise.Consideration Despite the lack of any direct written evidence of an agreement between Adnunat and ITW, Adnunat contends that one must be inferred from their conduct. A contract may in certain circumstances be inferred from conduct, even where no offer and acceptance can be identified: see Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97326; Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 (Vroon); Industrial Rollformers (2001) Aust Contract R 90-129. However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained: see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-50 (Gleeson CJ) and his Honour’s reference to Gissing v Gissing [1971] AC 886; see also Cheshire & Fifoot’s Law of Contract (9th ed, LexisNexis, 2008) at [3.5] and [3.9]. Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement: Industrial Rollformers (2001) Aust Contract R 90-129 at [137]-[138] and [142]; Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 (Pacific Brands) at [47]. As Finkelstein J observed in Pacific Brands [2005] FCA 288, it will only be in very clear cases that the courts will infer a contract from conduct in the absence of written or oral communications that evidence the exchange of mutual promises: see [2005] FCA 288 at [45] and the cases there referred to. In most instances, contract by conduct cases will involve a complex set of facts and require evidence from those who have played a role in the relationship between the parties. Necessarily, where a contract is denied, the credibility of those involved on both sides may be crucial. These considerations are in my view an obstacle to Adnunat obtaining summary relief. At its simplest, Adnunat’s case consists of the following steps:·The original parties to the Settlement Deed (Adnunat and Reid) intended that the terms of the Deed would be binding on their “successors”: cl 17 (the enurement clause). In other words, Adnunat and Reid agreed at the time of executing the Settlement Deed that a successor would take the benefit of and be bound by the Settlement Deed.·As a successor, ITW agreed with Reid that it would comply with the Settlement Deed on and from 28 February 2005 until there was a novation of the Deed or an assignment of the rights under it: cl 6.3 of the Business Agreement.·ITW’s intention to perform the Settlement Deed was made manifest to Adnunat by its dealings with Adnunat after 28 February 2005. From those dealings, it should be inferred that ITW had agreed to be bound to Adnunat by the terms of the Settlement Deed.